China

Climate Plans May Cut China Exports 20%


By Mark Drajem

(Bloomberg) — Proposals in the U.S. Congress and European Union to cut greenhouse-gas emissions might reduce exports of Chinese goods by 20 percent, a World Bank study said.

The exports would be reduced if the U.S. and EU enacted taxes on imports from countries that don't require curbs on carbon-dioxide emissions.

Senator Sherrod Brown of Ohio and Representative Sander Levin of Michigan, both Democrats, say any legislation in the U.S. to limit pollutants must include the so-called border measures to tax imports. A U.S. House measure passed in June would impose such taxes on some imports. The Senate hasn't yet acted on the greenhouse-gas legislation.

"People haven't thought through the full implications of those measures," Aaditya Mattoo, a World Bank economist and one of the paper's authors, said in an interview. The 20 percent drop in Chinese exports is a "worst-case scenario," in which tariffs are applied on all imports, he said.

The threat to imports should be part of what drives negotiations at global climate talks in Copenhagen this week, said Scott Paul, the executive director of the Alliance for American Manufacturing, which represents the United Steelworkers union and U.S. Steel Corp.

"It shows that the right border measures would be effective," Paul said in an interview. "So it would be in the interest of India and China to participate" in any global agreement to cut emissions, he said.

The U.S. imported $338 billion in goods from China in 2008, more than from any other country.

Steel, Cement, Plastics Advocates say the fees are needed to prevent price- undercutting by manufacturers in countries that won't match U.S. or EU climate-change standards. The World Bank study said U.S. and EU manufacturers of steel, cement, plastics, paper and chemicals have reason to be worried.

If the U.S. follows through on a pledge to cut emissions by 17 percent, "producers of energy-intensive" goods "will witness erosion in their competitiveness, reflected in export and output declines," the paper says.

Their output could fall 4 percent and exports by 12 percent, the report says.

The prospect of that decline will prompt "tremendous pressure to address the competitiveness issue," Mattoo said in an interview.

Depending on how the U.S. and EU calculate taxes on imports, the effect on China and India would be that of a 20 percent tariff, the World Bank analysis says. That new tax would cut 20 percent from Chinese exports to the U.S., and 8 percent from other developing nations, the report said.

"It would be a 'nuclear option' in terms of trade consequences," according to the World Bank paper.

If rich countries calculate the tariffs differently, based on their carbon usage, the effects would be less onerous, they concluded.

To contact the reporters on this story: Mark Drajem in Washington at mdrajem@bloomberg.net.

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