The overwhelming message in the media is that success at the climate-change summit in Copenhagen would be a good thing. "Success" is defined as a global regime to limit carbon dioxide emissions, using an alleged market mechanism called cap-and-trade.
What we are not being told is that this approach is being managed by American protectionists, and that if adopted at the Copenhagen conference, cap-and-trade will pose the greatest danger to Canadian jobs and prosperity in 80 years.
Back in the 1930s, the U.S. Smoot-Hawley Tariff Act, driven by the same kind of protectionist sentiment, reinforced the ruin of the Great Depression, placed a high border tax on our exports and devastated Canadian industry across the board. Unemployment reached 25 per cent and our standard of living plunged.
Substitute "cap-and-trade" for "Smoot-Hawley Tariff Act" and one can begin to understand the current situation.
Cap-and-trade is nothing but an old-fashioned quota system of the sort we used to have on shoes and still have on dairy products - the net result is high-priced farmland and costly milk. The trouble is that energy, what carbon is all about, is a lot more pervasive than dairy. It permeates every corner of our lives.
How will the Americans implement this? Imagine the country deciding that paper clips, say, were an environmental menace, and usage had to be reduced by 50 per cent. Under cap-and-trade, they would institute a system that says that for any paper clip you sell in the United States, you must have a quota allowance. You begin by giving American distributors (and only American distributors) enough quota to cover all paper clip sales. You then gradually ratchet it down by half over, say, 10 years. Mission accomplished.
What would happen to Canadian exporters of paper clips in this game? To sell anything in the United States, they would have to buy quota from Americans. This effects a massive transfer of wealth at the border, NAFTA-proof because it is "protecting the environment." Prices rise in the United States; wages and profits tumble in Canada.
This hurts the American consumer, of course, but few understand that. Just look at the softwood lumber battles we always lose. Washington is controlled by producers, not consumers. The United States has the very best Congress that money can buy, and the purchasers are the lobbyists for business and labour. They are loving cap-and-trade as they come to see the protectionist possibilities.
And those possibilities are phenomenal, because remember, energy is in just about everything. Vancouver economist Aldyen Donnelly notes in a recent study that under this system, "revenues are essentially expropriated from the owners of production assets in the exporting nations (i.e. Canada)." We're talking about oil and gas, electricity, cement, iron and steel, pulp and paper, wood products, beef and pork, grain, glass and industrial chemicals.
"The sole objective of the U.S. style 'cap and trade' is to effect a wealth transfer - through the quota market - to the world's energy, building product and food importing nations at the sole expense of the largest exporters of these commodities," Ms. Donnelly says. Again, read "Canada." Who are the world's big commodity-importing countries? The United States, China, Japan and South Korea, with a side game in India. Together, they have enough market power to make this stick on a global basis. So it is not strange that in recent weeks, all of these players have made announcements of their intentions to set carbon quotas.
Ms. Donnelly states that a successful launch of the cap-and-trade cartel will cause a massive devaluation of our food production, building product and energy assets (including the oil sands should that please any local opponents) as economic rents shift out of Canada and into the hands of U.S. quota owners.
For example, the oil we sell to the United States may still be at the same price (although U.S. planners foresee a drop), but much more of that price will stick to the hands of U.S. quota owners and much less to Canadian producers. This is just one more reason why we must invest in a massive expansion of pipeline capacity to the Pacific coast, giving us at least some alternative to the American market.
As we then write down the value of our assets, they will become cheap pickings for the cartel countries. Our dollar will drop to help our exports, but there is no more comfort in that than a storekeeper cutting his wages to pay protection to organized crime.
This scenario is not imaginary. It is a replay, on a vastly larger scale, of the same technique the Americans used to have foreign producers finance their costly shift to lead-free gasoline.
Those who criticize our government for being wary on Copenhagen should instead stand up and cheer. This is not about the environment. There are other ways of solving that issue. This is about Yankee traders skinning us, again.
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