Federal Liberal leader Stéphane Dion’s carbon tariff proposal almost certainly would face a trade challenge, says one of Ottawa’s most prominent trade consultants.
However, there also is a chance Canada could win by appealing for a more liberal interpretation of existing trade rules, Peter Clark of Grey, Clark, Shih and Associates wrote in an early 2008 assessment of the trade implications of imposing carbon tariffs on food imports from countries that do not have credible climate change policies.
The 1994 General Agreement on Tariffs and Trade included a little-tested exemption from protectionism restrictions if the goal was environmental protection.
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“We consider that Canada could impose some form of border adjustment, but the current international trade rules are largely unsupportive and unpredictable,” Clark wrote in a Feb. 28 report for the Cement Association of Canada, a high carbon emitter worried about Canadian rules that would make domestic production more expensive than imports from countries with less stringent rules.
“The best hope is in evolving international attitudes and more liberal interpretation of an existing exclusion in GATT (rules).”
Clark also raised the possibility that if Canada does not impose tougher rules on carbon emissions, other countries including the European Union could try to impose carbon tariffs on Canadian imports.
In response to a question about how farmers would be able to absorb the higher costs of their carbon-based inputs while competing with countries that do not impose a carbon tax, Dion said Canada should protect farmers by putting a tariff on imports from what he called “the free-riders of climate change.”
Some trade experts including Michael Hart of Carleton University’s Centre for Trade Policy and Law quickly said imposition of new import tariffs would violate Canada’s international trade obligations under World Trade Organization and North American Free Trade Agreement rules.
