CAP & TRADE OR CAP/TAX

Obama Warns Dems on 'Protectionist' Tax in Climate Change Bill

President Obama warns lawmakers to think twice about a provision in the cap-and-trade bill that would allow the U.S. to impose tariffs on other countries, raising questions about whether the package can pass Congress without it.

By Judson Berger

Tuesday, June 30, 2009

After a "Buy American" provision in the stimulus bill triggered a tit-for-tat with Canada, President Obama is warning fellow Democrats to think twice about another "protectionist" measure in the House-passed climate change bill.

The climate bill that passed the House last week on a 219-212 vote includes a provision to impose tariffs -- starting in 2020 -- on imports from countries that don't have a system for limiting global warming pollution.

The provision was pushed as a way to keep the U.S. competitive with other countries that haven't imposed rules to reduce carbon emissions and promote clean energy.

Obama told energy reporters that, while he is "very mindful" of wanting to ensure a "level playing field internationally," Congress should consider alternatives to tariffs.

"At a time when the economy worldwide is still deep in recession and we've seen a significant drop in global trade, I think we have to be very careful about sending any protectionist signals out there," Obama said, according to a transcript of the Sunday session with reporters. "I think we're going to have to do a careful analysis to determine whether the prospects of tariffs are necessary."
With the White House predicting that the Senate version will ultimately look different than the House version, the disagreement over the trade measure raises questions about whether the package can pass Congress without it.

"It's very clear it was put in there to get it over the finish line" by attracting Rust Belt Democrats, said Don Stewart, spokesman for Senate Minority Leader Mitch McConnell, R-Ky. "If you take it out, you're shy of some members."

Forty-four Democrats voted against the bill last week. Just eight Republicans voted for it.
Rep. Sander Levin, D-Mich., who pushed Rep. Henry Waxman, D-Calif., to include the trade provision, said Friday that it was needed to protect U.S. jobs.

"As we act, we can and must ensure that the U.S. energy-intensive industries are not placed at a competitive disadvantage by nations that have not made a similar commitment to reduce greenhouse gases," he said during House debate.

It's unclear whether congressional Democrats will budge on the measure going forward. Levin could not be reached for comment Tuesday.

Stewart, whose boss opposes the climate bill with or without the trade measure, said he'd be "surprised" if the provision stays in the final Senate version, warning that the language could spark a "trade war" with key partners, and big polluters, like India and China.

"We're already seeing the effects of (the Buy American provision)," he said. "Why would we want to increase that with two of our largest trading partners? Would it even be legal?"

The "Buy American" language in the economic stimulus, though watered down in its final version, required projects funded with stimulus dollars to use U.S. steel, iron and manufactured goods.
Canadian officials in particular bristled at the measure. In early June, Canadian mayors passed their own resolution in response, which reportedly could shut out U.S. bidders from local contracts.
Keith Rockwell, spokesman with the World Trade Organization, was reluctant to draw comparisons between the backlash over the stimulus provision and the potential for a similar response to the climate bill provision.

He said it's "very, very difficult" to tell whether such a provision could draw any complaints more than a decade down the road, when rules could be different. He noted that nations could reach a climate agreement anyway at the summit in Copenhagen later this year, which he suggested might be preferable.

"A multilateral approach is always better and safer than a unilateral approach," Rockwell said, adding that nations are in the meantime taking a "wait-and-see" attitude to the U.S. tariff measure.
Rockwell said the legality of the measure ultimately depends on whether it is challenged in a WTO court.

"Really nobody would know unless there's a challenge," he told FOXNews.com, speaking from Geneva. "People are watching and paying attention, and people saw what President Obama had to say on this particular element."

Rockwell said that when it comes to environmental measures, individual countries have the flexibility to pass trade-restrictive measures provided they are intended to protect the safety of humans, plants and animals.

But such measures cannot be discriminatory, meaning they can't single out certain countries for stricter treatment than others. And they can't be "protectionist" measures masquerading as health-and-safety measures.

Though Obama has suggested the climate bill provision is protectionist, Rockwell said a WTO court would be the judge of that.

The White House apparently does not want to tempt any trading partners into testing the provision in international trade court.

Asked about the provision Monday, White House Press Secretary Robert Gibbs said the president has "concerns" and that the bill will probably look "a little different coming out of the Senate."
"Those ... will I think be reconciled and the president will have something to sign that he's comfortable signing later this year," Gibbs said.

Meanwhile, Republicans continue to take to the airwaves to rail against the "cap-and-trade" bill as a vehicle for a massive tax increase -- in the form of higher utility bills.

"When this president talks about, 'Oh I don't want to raise taxes on the middle class,' that's not exactly what this administration's all about," Republican National Committee Chairman Michael Steele told FOX News Tuesday. He ripped the House for passing what he calls "cap and tax."
Obama predicted "tough negotiations" ahead for the House and Senate.