/ 9 November 2008

What price a green Obama?

Get ready for a green tariff. The United States has thrown its weight behind Europe, which has proposed possible tariffs on imported goods that carry a high carbon content, or give off high emissions through their manufacturing process.

President-elect Barack Obama is both seen to have protectionist tendencies and to favour environmental controls.

As such his administration could introduce new green tariffs on imports deemed to have a high carbon content.

South Africa, with its energy-intensive economy, could find itself charged new green import duties when it ships to the US.

Along with other developed countries, the US is under pressure to implement cap and trade schemes, which could see heavy industry being transplanted to developing nations which at this stage are not required to commit to such schemes.

The issue of climate change will be a pressure point for the new Obama presidency, says Peter Draper, research fellow and head of the Development Through Trade project at the South African Institute of International Affairs.

Should the US decide on a carbon cap or trading strategy, Obama’s Democratic Party is worried that this will see the relocation of US heavy industry to the developing world.

This could result in the movement of American jobs to developing nations and will not necessarily deal with carbon emissions – a ”zero-sum game” for the US, says Draper.

In a bid to address this, the European Union and the US have argued for tariffs on imported ”high carbon content products” – or duties on products that are dependent on the carbon emissions involved in their manufacture.

This could have serious implications for the access of developing world countries to the markets of the developed world.

But one problem with such tariffs is how you measure carbon content, says Draper.

”It means taking a microscope to the entire value chain … and has the potential to get very messy.”

Another concern is deciding what countries should be targeted. Under the previous Bush dispensation, a list of the biggest carbon-emitting countries was drawn up, which included South Africa.

”These measures are unlikely to target sub-Saharan Africa, except South Africa,” he points out.

Draper says that Obama’s platform, in accordance with his position as a Democrat and the widespread support the party receives from unions, will be more inward-looking than the Republicans when it comes to trade policy.

The Democrats have tried to put labour rights and environmental protections on the agenda of all negotiations the US is involved in, says Draper. When it comes to talks with a country like South Africa, the question of labour rights is not of concern given South Africa’s labour policies.

It is, however, an issue in the multilateral arena and within the World Trade Organisation, where countries like China and India, with far more flexible labour markets, have increasing power.

”This is a key issue and he will probably push this matter harder on the multilateral stage,” says Draper

The effect of the global financial crisis could put further pressure on Obama to increase protection measures. Unemployment rates in the US by some projections may rise to 10%, levels not seen since the 1970s.

Should the crisis become a sustained slump and more jobs are placed at risk, Obama could well feel further pressure from his union constituents.

But much of the policy detail will depend on the make-up of the US Senate and Congress, Draper says. The individuals, particularly in the US Congress, their positions on issues, and who chairs key committees will determine the ease with which Obama can push his policies through.

Nevertheless, while Obama may represent ”change”, ”we need to take the blinkers” off now and interrogate what that means, says Draper.