Carbon Tariff along with the Carbon Tax

[AgentofGaming]

So what does everyone think? protectionism or a way to balance out countries that won't abide by environmental regulations?

Supposedly if only a carbon tax were implemented it would adversely affect domestic industry's global competitiveness;creating another incentive to move to developing countries. Therefore to balance this they proposed a carbon tariff that would be simultaneously implemented.

The tariff's goal is to encourage other countries to up their environmental standards as well as provide more business to the growing domestic green industry (in Canada) and bring business back from the developing countries at the same time.

[Aronnax]

It's very likely any tariff along those lines would be struck down in international court under conditions imposed by free trade agreements.

If for some reason the carbon tariffs weren't struck down the affected nations would just raise retaliatory tariffs. These kind of policies typically end up creating an effective trade embargo.

[Ool]

It's very likely any tariff along those lines would be struck down in international court under conditions imposed by free trade agreements.

If for some reason the carbon tariffs weren't struck down the affected nations would just raise retaliatory tariffs. These kind of policies typically end up creating an effective trade embargo.

Would that be so bad? No more exports or imports would mean less greenhouse gases from production and global transportation…

[Aronnax]

Would that be so bad? No more exports or imports would mean less greenhouse gases from production and global transportation…


This is one of those cases where the treatment would be worse than the disease. International trade grinding to a halt would increase suffering on a massive scale and very likely trigger wars. The level of economic interdependence is staggering: from financial markets and food distribution to raw material and finished goods. We'd have to restructure most of the developed nations on the planet before you could do something like that without catastrophic effects.

[AgentofGaming]

The trade retaliation is the most significant thing holding this back. Supposedly it would be quite difficult to come to a "reasonable" assessment of carbon without the other country calling it arbitrary.

I wonder though how effective retaliatory tariffs would be against import-based economies. Considering the countries whose goods they want to apply the tariff to are low-consumption, export based economies, one side seems to be hit harder.

[thod]

If you impose a tariff on another country they will pay it. They will raise the cash to pay it by imposing an equal value tariff on your goods entering their country. The goods they raise tariffs on will be totaly unrelated to what you charge it on. Thus you cannot punish them because you are not in a position of power, but are equal partners. All that you achieve is a lessening of cross border trade which is bad for all.

[Aronnax]

I wonder though how effective retaliatory tariffs would be against import-based economies. Considering the countries whose goods they want to apply the tariff to are low-consumption, export based economies, one side seems to be hit harder.

"Import based" or "export based" as a definition oversimplifies the trade system, there's a lot more going on than net values.

If 2 nations trade and one imports 500 billion dollars in materials/goods from the other and exports 250 billion dollars back in materials/goods you'd define the relationship as a 250 billion dollar trade deficit with one nation as an "import based economy" and the other as an "export based economy". The reality is both nation's economies are heavily dependent on imports and exports to function. If you stopped trade between the two there wouldn't be a 1 way loss of 250 billion dollars, there's be hundreds of billions of dollars lost on both sides.

Suddenly factories would be short specific parts needed to manufacture finished products and they'd shut down entirely. Raw materials specific to certain regions may become more expensive or unavailable, making certain good impossible to create even if the factories to create them all exist within one nation. Export markets for those same raw materials may dry up because extracting them becomes too expensive due to tariffs. Certain regions may go hungry because the tariffs price some food out of their range and lower/untaxed food from other trading partners would be put under heavier demand, driving the price up. The net food exporter can't afford to even harvest it's crops because they won't sell so they rot in the field while people go hungry. Now you've got regions that have unemployed factory workers and miners who have problems purchasing food, much less finished goods. The drop in disposable income drags the parent economies down even farther.

This isn't just a thought exercise, something similar has already happened. The great depression was exaggerated by protectionist tariffs and the nations of the 1930's weren't nearly as interdependent as they are now.