Free Trade Cigarettes
There's been a bit of a hullabaloo about banning clove cigarettes (and not menthols!) because those pesky cloves come mostly from Indonesia. Some argue (including repugs in Congress) that such a ban has a disproportionate impact on foreigners and, therefore, much be protectionist and in violation of our WTO commitments.
The general rule of Free Trade is that governments must treat "like" (similar) products the same way, no matter where they come from. However, regulators can get away with trade-restrictive regulation that impacts "like" products differently (e.g., those pesky environmental laws) so long as the interest being protected is compelling enough and so long as the regulation is applied evenly across the board. If you don't implement evenly, it's likely to be (according to the WTO) protectionism in an envrionmental-protection costume. As an example: under the GATT, you *can* slap a quota on indonesian tuna if indonesian fisherman don't adequately protect dolphins -- even though the indonesian tuna is "like" American dolphin-safe tuna.
However, if you ban fossil fuel product x because it has toxic chemical y, and y only comes from canada, but you DONT ban toxic chemical z (which is just as toxic as y) which comes from the US, the WTO is likely going to find that you're implementing illegal protectionism.
Okay, fine. So hypocrisy is not tolerated by GATT or NAFTA. But we seem to get tripped up on those incremental measures that *do* have a disproportionate impact on a foreign industry but, had we the time and polictical momentum, would be bigger, better and more widely applied -- and then would smell less like protectionism. We can't, for example, ban all fossil fuel vehicles all at once, but maybe we can ban luxury cars that use too much fuel. Well, let's say all those luxury cars come from Germany. You can't really say that this is protectionist--it's just a first step that happens to have a disparate impact.
Or so the argument goes. I would suggest a change in the treaty language that allows for this slipperyness in domestic politics.
















Kate,
You say:
"We can't, for example, ban all fossil fuel vehicles all at once, but maybe we can ban luxury cars that use too much fuel. Well, let's say all those luxury cars come from Germany. You can't really say that this is protectionist--it's just a first step that happens to have a disparate impact."
My view is that a ban on luxury cars in this situation is not, on its own and in all cases, proof of protectionism. However, it is an indicator of protectionism. That is, it is a factor to be taken into account along with other factors. For example, I would take into account the degree of discriminatory effect on foreign products. If it were the case that 100% of "luxury cars" came from Germany (or other foreign countries) this would be better evidence of protectionism than if it were, say, 60%.
Simon
June 19, 2009 2:15 PM | Reply | Permalink