Unfortunately, the dairy export subsidies will make little difference to American dairymen, but they could have harsh impacts on New Zealand’s farm-dominated economy. Thus far, New Zealand has escaped the higher grain prices because they feed their cows mainly grass and turnips.

 

Our excuse on dairy export subsidies is that the EU did it first. But the real dairy problem is that both the EU and the U.S. have jacked up their own dairy production costs by diverting corn and rapeseed from feeding livestock to making biofuels. The ethanol and biodiesel games have doubled world feed grain prices and caused food riots in Mexico and Egypt.

 

The dairy export payments should be a huge red flag to the world. When push came to shove, the U.S. and the EU immediately fell into the old trap of punishing trade from innocent countries. That’s actually how we launched the Great Depression—with the infamous Smoot-Hawley tariffs of 1930.

 

People have actually been predicting the “green trade wars” for years because developing countries have no obligations under the Kyoto Protocol. All the affluent countries are thus terrified that their carbon-emitting industries will flee to less-developed countries. Energy Secretary Stephen Chu told a Congressional committee in March that America might well consider a “carbon tariff” on imports from China, India, and other developing countries if they “undercut” U.S. manufacturers. .  

 

Gary Huffbauer of the Peterson Institute for International Economics recently told National Public Radio, “Countries say, well, if we’re going to take measures [to combat global warming] we have to do something at the border to prevent the same product being produced abroad and just imported by our country. So those thoughts trigger potential for trade wars. So lawmakers here have added a provision to the greenhouse gas legislation that echoes the EU approach. It gives energy intensive companies like steelmakers, chemical plants, and paper mills the right to demand tariffs on imports if after five years they can prove unfair carbon competition” 

 

Environmentalists say the worries about China and India picking up high-carbon jobs are exaggerated—that most of America’s energy-intensive imports come from Canada or the EU. But they’re saying that today, before the carbon taxes have been imposed. With carbon taxes in place, the developing countries will look more attractive, Canada and the EU less so.  

 

Without low-cost imports from China and Colombia, meanwhile, the cost of shopping at Wal-Mart will escalate—even as U.S. exports are increasingly barred from both Kyoto member and non-member countries. Our investments in productive assets will be wasted, even as the U.S. jobs totals decline.

 

A carbon tariff would conflict with a U.S. pledge not to violate international trade rules, but Obama’s promise to cut greenhouse emission might easily override the vague “no trade war” commitment.

 

DENNIS T. AVERY is an environmental economist, and a senior fellow for the Hudson Institute in Washington, DC.  He was formerly a senior analyst for the Department of State. He is co-author, with S. Fred Singer, of Unstoppable Global Warming Every 1500 Hundred Years, Readers may write him at PO Box 202, Churchville, VA 24421 or email to cgfi@hughes.net

 

 

New Zealand’s economy is almost completely dependent on its farm exports:  lamb, dairy products, beef and high-end white wines. Half of New Zealand’s carbon emissions come from cattle and sheep. If New Zealand taxes its cows and sheep hundreds of dollars per animal for methane emissions and manure handling fees, Argentina would almost immediately displace New Zealand’s farm exports. Argentina has more grass, more cattle, the potential for more lambs, a surging wine industry—and no Kyoto obligations.

 

Based on U.S. and Australian “discussions,” a 500-cow dairy might have to pay $250,000 per year for cattle emissions and manure handling permits, plus a hefty increase in its costs for low-carbon electricity and diesel.   An Argentine dairy would pay none of these increased costs—and every dollar of cost differential would be a further incentive for Argentine dairymen to expand their exports at the expense of New Zealand. 

 

That would leave Kiwi cities like Auckland and Christchurch without visible means of support.

 

I said this recently to several New Zealand government ministers and business leaders at a private dinner in Wellington. My message was not welcomed.  John Key’s new government seems to understand that New Zealand’s economy would be at terrible risk from carbon taxes—but its voters apparently don’t realize it.

 

The Clark government told New Zealand voters that the cost of “leading the world” with a carbon tax would be about $150 per year. That figure is laughably low. The British government now admits its new carbon tax law could cost as much as $27,000 per UK family.

 

The Key government has temporarily suspended the cap-and-trade, but has not dared repeal it. Meanwhile, Australia’s Prime Minister Kevin Rudd is installing his own cap-and-trade, and playing footsie with President Obama on “solidarity” with a U.S. carbon tax. If Australia and the U.S. agreed on some benchmark carbon tax, most New Zealanders would expect their country to join in.  

 

Never mind that the earth’s global warming stopped after 1998 because the sun has gone into a startling quiet period.  That’s why New Zealand’s many glaciers have been growing recently instead of receding. Never mind that even full member compliance with Kyoto would “avoid” only about 0.05 degree C of warming over the next 50 years—by the alarmists’ own math.

 

The urbanites in New Zealand don’t really appreciate the sophisticated management that juggles pastures and feed crops that produce milk, cheese and Merino wool.  They love the wine, but don’t understand the massive per-acre investments needed to turn their grapes into award-winning vintages.

 

Meanwhile, Obama’s U.S. government has just punished New Zealand with trade-distorting dairy export subsidies–because our corn ethanol program has pushed our cost of dairy feed too high. World corn prices have doubled in real terms, and may go higher as our ethanol mandates keep rising. That jacks up the U.S. cost of “alternative fuels” even further–while New Zealand will have to file a well-justified case against America under the World Trade Organization rules.

 

Ah, what a tangled web we’re weaving, rather than admit the Emperor of Global Warming has no clothes.

 

 

Sources: 

 

British carbon law costs:  Daily Mail, May 5, 2009

 

 

DENNIS T. AVERY is an environmental economist, and a senior fellow for the Hudson Institute in Washington, DC.  He was formerly a senior analyst for the Department of State. He is co-author, with S. Fred Singer, of Unstoppable Global Warming Every 1500 Hundred Years, Readers may write him at PO Box 202, Churchville, VA 24421 or email to cgfi@hughes.net