A new front of trade war may open up over the Atlantic. The U.S. and the European Union have already had many major economic disputes over the past few years, and now the so-called carbon tax is added to it. We are talking about buying special quotas for importers of various products in the EU. The White House believes that the relevant payments directly infringe on American producers and threaten to retaliate. Other participants of the world market may also come into the game, who may consider the measures taken as hidden duties.
This is exactly what Von der Leyen had in mind when he said last week: “What’s the point of reducing greenhouse gas emissions at home if we increase CO2 imports from abroad? It’s not just a question of climate, but also of fairness to our businesses and our employees. We will protect them from unfair competition”.
Perhaps the measure was designed to restrict supplies from developing countries like China, India and Russia. Although all of them have signed the non-binding Paris Agreement, the need to develop rapidly and catch up with developed countries inevitably puts environmental issues, especially abstract ones such as the fight against global warming, on the sidelines. One way or another, the von der Leyen project will affect all suppliers of goods to Europe, including the United States.
The tax on the hardworking
For the current Washington, such a statement of the issue is unacceptable. At the World Economic Forum in Davos, U.S. Treasury Secretary Stephen Mnuchin clashed with ECB Chairman Christine Lagarde over climate change and ways to combat it. In his view, the “carbon tax” is essentially a tax on “hard-working people”.
Added to this is Donald Trump’s confrontation with Greta Tunberg, the main symbol of the environmental struggle of our time. The U.S. government is willing to support some environmental initiatives (e.g. forest planting), but it does not like ideas related to additional taxation of business. Especially if this business comes from the United States.
Europe, for its part, is in a much less advantageous position. Firstly, the EU is not a state but a group of states united by common policy. In order to make a decision about something, one must first agree among themselves. It is precisely the introduction of the “carbon tax” in its current form that will require consensus among all EU member states, which may prove to be a very difficult task. Secondly, the measure proposed by Von der Leyen is, by all means, protectionist. Therefore, it will be easy for Europe’s opponents to assemble a coalition to pressure Brussels under the slogan of protecting free trade. Ten years ago, a similar proposal to tax flights arriving on the European continent was met by the rest of the world in bayonets, after which Europe had to retreat.
Champagne is under threat.
Ursula von der Leyen promised that the tax will be introduced only after consultation with the WTO. However, as last year has shown, the influence of this organization disappears literally in front of our eyes. America demanded that the principle of consensus be applied when appointing judges to the organization’s court of appeal, but it is almost impossible to achieve it between 160 members. The absence of new judges in fact means paralysis of the institution, which at the best of times had limited influence on world trade.
In general, the situation around the “carbon tax” once again shows that globalization as it stands cannot ensure unity of opinion among global players on any significant economic issue. Multilateral agreements and institutions are becoming meaningless, and any state is primarily targeting its own benefits.
Moreover, a situation that could be resolved in favour of all parties was becoming increasingly difficult to imagine. And the acuteness of conflicts is increasing, despite a period of relative economic prosperity (the last recession in Europe was recorded seven years ago, and even more so in the USA). One can only guess what will happen when the real crisis comes.