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Don't you think that the Obama adminstration's pursuit climate change policy, both within a hostile US Congress, as well as with major, oil-dependent trading partners such as China, is an aggressive means of transitioning from oil and other limited fossil energy sources?  He is picking up where Clinton and Gore left it after brokering the Kyoto accord, and he is finding substantial domestic and international opposition to that project, particularly from China and India, where increase in oil consumption has grown the most, I believe.

The US has accounted for approximately 27% of world GDP for decades (essentially unchanged over the last 40 or more years, which compares to an EU-27 decline in percentage of world GDP from 40% to just over 30% and an increase in Japanese, and later Chinese and Indian, proportions accordingly). If you're correct that the US accounts for 25% of consumption of total world oil production, it means that the US already uses less oil than its proportion of economic output, and this means that capping oil use by rising economic powers in China and elsewhere is likely to be a more important factor in smoothing the transition from oil to more sustainable energy sources.

In order to do that, Obama will have to abandon his "pro" rhetoric on free trade, which the WTO has already done, and begin to open a discourse which allows greenhouse gas reduction compliance to be a part of domestic trade policies -- that tariffs can be placed on exports from countries that don't do enough to reduce emissions of GHGs. That is what will produce that smoothest and fastest transition from oil to other energy sources and use infrastructures.  But that project also entails co-opting former colonial areas to once again surrender their interests to those of former imperial powers, and that's not an easy political objective, even for a whiz like Obama.

by santiago on Mon Aug 3rd, 2009 at 01:38:20 PM EST
But US GDP also contains the largest fraction of fictional cash flows and funny bookkeeping in any of the major trading blocs. What does it look like when you deduct Wall Street, London and Singapore from the GDP figures?

A large part of the Chinese GHG pollution goes towards producing stuff for The WestTM. What about proposing that as long as they cut GHG pollution but a set target (say 3 percent of 2010 levels every year), we'll make them whole on any current accounts losses they might incur.

And, of course, the most important thing we could do vis-a-vis China would be to give them unfettered access to state-of-the-art European energy conservation technology (possibly subject to export restrictions), rather than putting up artificial barriers to technology transfer.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Aug 3rd, 2009 at 01:53:16 PM EST
[ Parent ]
Both of those are potentially really good ideas. (I'm not a fan of extensive intellectually property rights, period, particularly in technologies with substantial social and environmental benefits such as energy efficiency and medical technologies. The claims of the need for monopoly incentives in these areas is way overblown, in my opinion.)  

However, if they have to reduce their exports, it means that they can't lend much money to the West to cover our current account deficits, which means that our capacity to help them with their current account losses is pretty restricted, so I think it might be a catch-22. I think they'll be smart enough to see through the shell game and just say, "hey, maybe we can just reduce trade with you and still increase our automobile usage through domestically-oriented growth at the same time, so go screw yourselves."

by santiago on Mon Aug 3rd, 2009 at 04:58:07 PM EST
[ Parent ]
Europe does not have a current accounts deficit with China.

Besides, the whole point of making China whole on a loss to their current accounts would be to keep the current system running, except with less production of junk that's shipped to The West. If China can afford to lend us money to cover our current accounts deficit with them by exporting, then they can also afford to lend us money to cover our current accounts deficit with them if we pay them for not exporting.

All these cash flows are just bookkeeping - what matters is the flows of resources and products. If we use fewer Chinese-made toasters and cars, then there is a slack in the resource flow that can be put to more productive use. The bookkeeping can always be juggled around to make it work, if there is a serious political will to do so.

And the Chinese are not stupid - they know that global warming will smash their political system - their population is concentrated on the coast, and migrating upwards three quarters of a billion people in-land is not going to be a trivial exercise.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Aug 4th, 2009 at 02:01:46 AM EST
[ Parent ]
Europe may not have a current account deficit, but "the West" in its entirety does.  And that means there are limits to how much the West can possibly compensate the Chinese for their loss of trade income, particularly since the only real net value to having a positive current account is to buy things in other countries instead of domestically. Compensation in that case entails giving the Chinese free stuff, and depending on what that stuff is, it might hinder domestic economic development as much as help it, and, because they're not foolish, Chinese authorities know that.  

Also, it makes sense, strategically, for the Chinese to slow their own transition to more costly forms of greener energy as long as they know that others are doing it more quickly and that they can expect lower costs of such transition in the future as technologies and methods become more mature. The problem, of course, is that it creates a prisoner's dilemma situation between the Chinese and already industrialized countries that can jeopardize any progress.

by santiago on Fri Aug 7th, 2009 at 11:58:44 AM EST
[ Parent ]
In the case of the West vs. China, the stuff we give them via our current accounts deficit is largely the colonial tribute that we're extracting from the Southern Hemisphere.

From the perspective of The WestTM, that train has sailed. If the dollar crashes, we'll lose the third-world debt service colonial tribute just as surely as if we simply hand it to China.

From the perspective of China, keeping the US$-based system, even beyond its useful life as a trading framework, allows them to kick the Weimar-style currency meltdown in the US a little bit down the road. And, probably more importantly, avoid being seen as the people who pulled the trigger on that meltdown.

As for green technology being expensive... well, that depends on what you mean by expensive. If they get the production licenses gratis from Europe, then the only resource in which high-tech energy sources are more expensive is man-hours. In terms of basically everything else - steel, coal, copper, rubber, etc. - rail is cheaper than car, efficient power plants are cheaper than inefficient, wind is cheaper than coal, solar is cheaper than oil, and so on and so forth and etcetera. And China has a lot of man-hours to go around.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Aug 7th, 2009 at 07:40:49 PM EST
[ Parent ]
What about proposing that as long as they cut GHG pollution but a set target (say 3 percent of 2010 levels every year), we'll make them whole on any current accounts losses they might incur.

It is not clear that the US Govt. can even make our own banksters whole for the losses they generated, so why should the Chinese believe we can make them whole?  Are they to believe we will put them before the banksters?

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Aug 3rd, 2009 at 11:42:54 PM EST
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