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    Protectionism: Another Reason To Kill Waxman-Markey Energy Tax Bill

    06/29/2009

    If the taxes the Waxman-Markey bill would effectively levy on Americans were not enough to delight you, then a provision this bill contains that would further alienate China - just as several pieces of recent news suggest a trade war with China might be brewing - ought to do the trick.

     

    First, The Guardian reported on June 23rd that:

     

    “China [has imposed] restrictions, including minimum export prices and tariffs of up to 70%, on a range of raw materials of which it is a major producer….these not only break general WTO rules on world trade, but specific promises China made when it joined the organization [WTO] in 2001…”

     

    Late last week the BBC reported that:

     

    “Access to Google has been disrupted in some parts of China, amid a row over what Chinese citizens should be allowed to view over the internet.”

     

    According to ZDNet:

     

    “Google says it’s investigating the outage…. many see [the Chinese government’s censorship of Google] as part of trade war to boost Chinese search engine Baidu over Google”

     

    This comes just as China transitions to install Green Dam software, which would filter pornography, on all computers in China. The article goes on to note that:

     

    “The U.S. says Green Dam violates World Trade Organization free trade rules.”

     

    On top of all this, the Waxman-Markey bill – passed last Friday in the House of Representatives and primarily intended to curb carbon dioxide emissions - includes a provision that, according to the Wall Street Journal:

     

    “would impose tariffs on goods imported from countries that don't match U.S. carbon-dioxide restrictions -- a slap at China and India that some business interests fear could provoke a trade war.”

     

    One iron law of economics is that free trade generally permits mutually beneficial trade. Just like any individual, every country has a set of comparative advantages across sectors that determine the industries it is best fit for specializing in.

     

    Whenever barriers to mutually beneficial trade are instituted, individuals lose the ability to (legally) maximize their utility through trading.

     

    Considering the enormous volume of products the United States imports from China at relatively cheap prices and the financial crisis Americans are struggling to recover from, now would probably not be the best time to experiment with protectionism. This is yet another reason for the Senators to kill the Waxman-Markey energy tax bill.