Trump’s tariffs error may aid climate fight
By Douglas Woodring |
China Watch |
Updated: 2018-04-25 14:31
Free trade, and the economic expansion that goes with it on a global scale, is arguably under threat from the leader of the United States, who wants to reverse the hollowing-out of US manufacturing that has taken place over the past 30 years as factories and production moved to cheaper locations overseas. This was mainly driven by the factors of capitalism that push for growth, earnings and profits, almost at all costs. The business owners may have won along the way, but as the world can see with growing earning gaps and disparity in social and environmental equity, it is not hard to witness that this development model is not sustainable. The headlong quest for growth, consumption and profits has meant that some countries have seen many of their natural resources depleted while suffering the associated environmental devastation as a consequence. Traditional jobs are disrupted and often followed by social instability.
US President Donald Trump’s move to impose tariffs on trade from China and other countries is a desperate and irrational bid to return the US to its heyday of roaring production lines under an economic model of a bygone era. The world has moved on, along with many US jobs, which re-emerged in foreign lands with lower overheads and more efficient production lines. The economics of such a domestic manufacturing revival simply do not exist, unless the US government is prepared to inject massive treasury-draining subsidies under the guise of social impact programs. Though many investors might claim to want to improve the communities they serve via environment and social governance guidelines, not many have voted with their investment wallets at scale. They have not been willing to place large discount rates on potential investment earnings for the good of the nation by bringing back industry for on-shoring.
With new tariffs imposed on Chinese manufacturing, American consumers who have survived or thrived on low-cost products from abroad will suddenly see the erosion of their tax cut gains in the form of higher product costs for previously imported items now made back in the US. Opportunities for new jobs in innovative industries — including renewable energy, where the smart money is being placed in large volumes as a long-term, safe asset class — is where the focus on economic expansion should be. In contrast, the solar industry, which has seen some of the highest job growth in the US, has been hijacked — again by a US leadership dreaming that cheap solar panels can be made competitively domestically. The burgeoning industry for domestic installation and servicing of renewable and efficient energy options, which China is providing in the form of solar panels, will suffer an abrupt and major shrinkage. And American consumers will likely have to pay more for these same products made in the US.
Trump’s unilateral actions put China in an advantageous and opportune position to negotiate against such duties with much of the world by its side, and with the environment as a concurrent beneficiary. If retaliatory threats are to be made in the act of negotiation, substantial positive goodwill and awareness will be raised by imposing “environmental” or “carbon” tariffs on goods from the US that do not meet the proper environmental standards. This may sound counterintuitive to free trade, but if tit-for-tat threats are to be made, the environment, the Paris climate agreement and all of the countries that supported the agreement to reduce carbon emissions will gain from increased exposure and focus on this space, and the innovations and opportunities that go with it. All of the countries that signed the Paris accord will likely be in full support of China’s leadership role and momentum on this topic, to the detriment of the country that seems to have chosen to go its own, greedy, self-promoting way as it tries to rectify the negative consequences of its ill-conceived economic model of its baby boom decades.
To take it one step further, President Xi Jinping can begin to build dialogue and international endorsement for global, borderless, barrier-free, clean capital markets that will greatly increase cross-border liquidity for environmental technologies, products and infrastructure development. Such barrier-free options will expand access to funds where needed, bring investment opportunities to the rapidly growing market for clean, long-term investments from asset managers and pension funds that are fuelling the assets under management in the environmental and social governance products, create jobs, and allow for the proliferation of environmentally sustainable products and services.
The creation of a “clean asset bond” class, with tax-free corporate and government bonds that finance the deployment of prequalified clean assets, will be tax-exempt for investors in any participating nation, state or jurisdiction. Each government that participates will also commit to identifying and removing other barriers to participation in the zero-waste economy, including tariffs and taxes investors pay on prequalified clean products that reduce pollution and environmental externalities. China’s commitment to pioneer the use of CABs can be made with little risk of adverse economic consequences, as CABs are merely an improvement on the well-implemented private activity bonds used successfully in the US since 1914 to finance industrial development and infrastructure. Clean capital markets, without barriers, would accelerate clean infrastructure deployment and prosperity locally, but would also spread economic freedom, participation and essential market structures globally.
If one assumes that the art of negotiation will lead to compromise, with so much at stake for all countries involved, then at least during the negotiating process the world will gain from some needed exposure and momentum for the environment in terms of focus, dialogue and new collaborations that may result in proposals that are a positive byproduct of tariff-related threats. China can lead in the innovation of barrier-free clean capital markets as part of this US-driven rhetoric, giving an incredible opportunity for the rest of the world to thrive in a new path of thoughtful, engaged economic stewardship for our environment and the communities that survive on it.
The author is a global expert on plastic pollution issues and solutions, and winner of the 2018 Prince’s Prize for Innovative Philanthropy awarded by Prince Albert II of Monaco. The views do not necessarily reflect those of China Watch.
Free trade, and the economic expansion that goes with it on a global scale, is arguably under threat from the leader of the United States, who wants to reverse the hollowing-out of US manufacturing that has taken place over the past 30 years as factories and production moved to cheaper locations overseas. This was mainly driven by the factors of capitalism that push for growth, earnings and profits, almost at all costs. The business owners may have won along the way, but as the world can see with growing earning gaps and disparity in social and environmental equity, it is not hard to witness that this development model is not sustainable. The headlong quest for growth, consumption and profits has meant that some countries have seen many of their natural resources depleted while suffering the associated environmental devastation as a consequence. Traditional jobs are disrupted and often followed by social instability.
US President Donald Trump’s move to impose tariffs on trade from China and other countries is a desperate and irrational bid to return the US to its heyday of roaring production lines under an economic model of a bygone era. The world has moved on, along with many US jobs, which re-emerged in foreign lands with lower overheads and more efficient production lines. The economics of such a domestic manufacturing revival simply do not exist, unless the US government is prepared to inject massive treasury-draining subsidies under the guise of social impact programs. Though many investors might claim to want to improve the communities they serve via environment and social governance guidelines, not many have voted with their investment wallets at scale. They have not been willing to place large discount rates on potential investment earnings for the good of the nation by bringing back industry for on-shoring.
With new tariffs imposed on Chinese manufacturing, American consumers who have survived or thrived on low-cost products from abroad will suddenly see the erosion of their tax cut gains in the form of higher product costs for previously imported items now made back in the US. Opportunities for new jobs in innovative industries — including renewable energy, where the smart money is being placed in large volumes as a long-term, safe asset class — is where the focus on economic expansion should be. In contrast, the solar industry, which has seen some of the highest job growth in the US, has been hijacked — again by a US leadership dreaming that cheap solar panels can be made competitively domestically. The burgeoning industry for domestic installation and servicing of renewable and efficient energy options, which China is providing in the form of solar panels, will suffer an abrupt and major shrinkage. And American consumers will likely have to pay more for these same products made in the US.
Trump’s unilateral actions put China in an advantageous and opportune position to negotiate against such duties with much of the world by its side, and with the environment as a concurrent beneficiary. If retaliatory threats are to be made in the act of negotiation, substantial positive goodwill and awareness will be raised by imposing “environmental” or “carbon” tariffs on goods from the US that do not meet the proper environmental standards. This may sound counterintuitive to free trade, but if tit-for-tat threats are to be made, the environment, the Paris climate agreement and all of the countries that supported the agreement to reduce carbon emissions will gain from increased exposure and focus on this space, and the innovations and opportunities that go with it. All of the countries that signed the Paris accord will likely be in full support of China’s leadership role and momentum on this topic, to the detriment of the country that seems to have chosen to go its own, greedy, self-promoting way as it tries to rectify the negative consequences of its ill-conceived economic model of its baby boom decades.
To take it one step further, President Xi Jinping can begin to build dialogue and international endorsement for global, borderless, barrier-free, clean capital markets that will greatly increase cross-border liquidity for environmental technologies, products and infrastructure development. Such barrier-free options will expand access to funds where needed, bring investment opportunities to the rapidly growing market for clean, long-term investments from asset managers and pension funds that are fuelling the assets under management in the environmental and social governance products, create jobs, and allow for the proliferation of environmentally sustainable products and services.
The creation of a “clean asset bond” class, with tax-free corporate and government bonds that finance the deployment of prequalified clean assets, will be tax-exempt for investors in any participating nation, state or jurisdiction. Each government that participates will also commit to identifying and removing other barriers to participation in the zero-waste economy, including tariffs and taxes investors pay on prequalified clean products that reduce pollution and environmental externalities. China’s commitment to pioneer the use of CABs can be made with little risk of adverse economic consequences, as CABs are merely an improvement on the well-implemented private activity bonds used successfully in the US since 1914 to finance industrial development and infrastructure. Clean capital markets, without barriers, would accelerate clean infrastructure deployment and prosperity locally, but would also spread economic freedom, participation and essential market structures globally.
If one assumes that the art of negotiation will lead to compromise, with so much at stake for all countries involved, then at least during the negotiating process the world will gain from some needed exposure and momentum for the environment in terms of focus, dialogue and new collaborations that may result in proposals that are a positive byproduct of tariff-related threats. China can lead in the innovation of barrier-free clean capital markets as part of this US-driven rhetoric, giving an incredible opportunity for the rest of the world to thrive in a new path of thoughtful, engaged economic stewardship for our environment and the communities that survive on it.
The author is a global expert on plastic pollution issues and solutions, and winner of the 2018 Prince’s Prize for Innovative Philanthropy awarded by Prince Albert II of Monaco. The views do not necessarily reflect those of China Watch.
