Last week, 15 Senate Republicans signed a resolution opposing a carbon tax of any kind. It’s a laudable action for sure. Carbon taxes will only discourage manufacturing and production, move jobs overseas, and stifle economic growth.
What this likely is though, is a smokescreen for what Senator Cassidy, who led the coalition, hopes to introduce in the coming weeks: a foreign pollution fee. We will be assured that it’s not a tariff or a tax, but simply a fee on imports that don’t meet specific requirements regarding their assumed carbon footprint.
But let’s call a spade a spade.
And while this fee targets goods manufactured in other countries, it will still affect the average American consumer.
Foreign entities are likely to pay the extra fees rather than look for supply chain alternatives, many of which would likely be more expensive. But guess who ends up footing the bill? Companies will not absorb the costs; they simply pass it along to the consumer.
The intent of this legislation is to hold China accountable for its pollution sins by slapping fees on their imported goods that are produced with higher green-house gas emissions than those produced in America. In a recent editorial Cassidy wrote, “To counter China, the United States should make use of a clear competitive advantage—its ability to produce with comparatively low greenhouse gas emissions. It is unacceptable for China, or any country, to both freely pollute and export to the United States.”
Implementing a carbon border tax could lead to retaliatory measures and ultimately trade wars with China and any of our other partners around the globe. Starting a trade war with the world’s largest producer of aluminum, for instance, hardly supports the American working class. China produces nearly 60 percent of the global supply of aluminum.
We also rely on China to supply a tremendous amount of our consumer and commercial goods, medical supplies, pharmaceuticals, and vital raw materials. And they control a huge share of the world’s shipping fleet and commercial shipbuilding capabilities. A potential trade war will not be in our best interests.
Because the U.S. has no unified emissions policy in place, countries can challenge border adjustments through the World Trade Organization dispute settlement procedures. Some experts believe retaliations and challenges might “place a cloud over the legitimacy of U.S. BAs [Border Adjustments] that could damage relations with other nations in a way that further complicates both climate and trade negotiations, and such claims can take years to resolve.”
It’s no secret that China is considered one of the world’s biggest polluters. But we haven’t helped the situation; we are making it rather difficult to produce our own goods here at home while depending on others abroad.
The Biden administration stated that global demand of critical minerals will jump 600 percent—and lithium alone 4,000 percent—in the coming years, as the world “transitions to a clean energy economy.” We are heavily dependent upon China’s mineral dominance, mainly because our government officials keep us from developing them due to excessive regulation and red tape. So whereas more effective actions like permitting reform would help alleviate our mineral shortages, it is hard to comprehend how these same officials can justify taxing these products coming from abroad.
Rating products on their assumed carbon intensity is very complex and will impose burdensome compliance costs as well. Costs that are again borne by consumers.
Americans are still reeling from record-high inflation and energy prices. They don’t need additional pain. Higher prices will hurt the poorest among us the most, who are already struggling to make ends meet.
A better approach to promoting American industry should focus on reducing burdensome regulations here in the U.S. which raise the cost of doing business and make it harder for American industry to compete with countries like India and China.
Ultimately, tariffs are not a tax on foreign producers, but on domestic consumers. Companies pass their costs onto their customers. As with all other tariffs, the ones ultimately holding the bill for a border-adjusted carbon tariff would be domestic consumers. The increase in price on various products will negatively impact the economy.
Let’s hope the Senate keeps this in mind and remembers that any carbon tax, whether domestic or foreign, “would be detrimental to the families and businesses of the United States while severely harming the economic and national security of the United States.”
This article can also be found here on the Economic Standard website.
Kristen Walker is a policy analyst for the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit www.theamericanconsumer.org or follow us on Twitter @ConsumerPal.