Out of Sight

Just because it’s out of sight and doesn’t show up on the evening news night after night after night doesn’t mean it’s gone away. Consider the case of air pollution:

Pollution from China travels in large quantities across the Pacific Ocean to the United States, a new study has found, making environmental and health problems unexpected side effects of US demand for cheap China-manufactured goods.

On some days, acid rain-inducing sulphate from burning of fossil fuels in China can account for as much as a quarter of sulphate pollution in the western United States, a team of Chinese and American researchers said in the report published by the US National Academy of Sciences, a non-profit society of scholars.

Cities like Los Angeles received at least an extra day of smog a year from nitrogen oxide and carbon monoxide from China’s export-dependent factories, it said.

“We’ve outsourced our manufacturing and much of our pollution, but some of it is blowing back across the Pacific to haunt us,” co-author Steve Davis, a scientist at University of California Irvine, said.

In the 1960s and 1970s we solved our environmental problems with a series of clean air and water laws. Those cleaned up our air and water but, ultimately, drove manufacturing to China where the environmental problems are beyond our direct control and intractable because China does not have a robust system of civil law.

There have been a few articles in recent weeks about the Germans reconsidering their own environmental strategy

Germany must reduce the cost of its switch from atomic energy toward renewables to protect growth, Economy and Energy Minister Sigmar Gabriel said.

German companies and consumers shoulder as much as 24 billion euros ($32 billion) a year for renewables because of subsidy payments, Gabriel told an energy conference in Berlin.

“I don’t know any other economy that can bear this burden,” Gabriel said today. “We have to make sure that we connect the energy switch to economic success, or at least not endanger it.” Germany must focus on the cheapest clean-energy sources as well as efficient fossil-fuel-fired plants to stop spiraling power prices, he said.

What goes unmentioned is that most of the greening of Europe hasn’t been accomplished by conservation, by weatherizing their homes and offices, or by the “cap and trade” system they put into place. It’s been accomplished by offshoring their heavy manufacturing to China. That doesn’t solve the problem. It just moves it to China and, as the article cited above suggests, eventually back to us and makes the problem much harder to address.

The environment isn’t the only area in which “out of sight, out of mind” is a hopeless strategy. When our troops left Iraq, it meant that our news media stopped covering the news in Iraq. It didn’t mean that the war ended. When we leave Afghanistan as we surely will, it won’t mean that the war has ended there, either. Just because we’re not bombing Libya today, it doesn’t mean that the civil war there has ended.

There are solutions we could implement that would, at least marginally, address the problems that Chinese environmental recklessness are wreaking on our air and water even if they’re measures that would make free trade advocates tear out their hair. For example, we could impose an environmental surcharge on products imported from China as long as the pollutants originating in China remained over some established level.

Solving the problems caused by our “bull in the china shop” approach to foreign policy will be significantly more difficult.

8 comments… add one

  • ...

    When we leave Afghanistan as we surely will, it won’t mean that the war has ended there, either.

    Come on, Dave. It’s not like the war in Afghanistan is going to stop in any event. They’ve been going strong for several decades now and the grandchildren of people not yet born will also be fighting the war in Afghanistan at some point in the future. That’s why it was stupid to occupy the damned place in the first place: War is their national pastime.

  • TastyBits

    The US should have imposed an environmental surcharge a long time ago. The importer should be required to provide paperwork that the manufacturing process is adhering to US EPA standards. Any non-compliance would result in the importer being fined as if they were the manufacturer.

    Free-Trade, Free-Market, Free-Credit Score, Free-Whatever, somehow it is only free for one side. Interestingly, many of the free trade advocates are also big environmentalists. By now, everybody should know what they mean by “green”.

  • @ Tasty Bits

    That’s always the big government solution, isn’t it? Impose a tax, a new regulation, a surcharge, a fine…

    Except it doesn’t work out as planned,because here a secret: Businesses don’t pay taxes, or surcharges, or pay for regulations. Their customers do, because the new cost is simply figured into what they charge for goods and services. Government gets the goldmine, and the consumer gets the shaft, to paraphrase and old country song.

    Perhaps we should have thought of that before we allowed big government to strangle business, off shore our manufacturing and essentially import unemployment.

    It would be far better to make taxes and costs competitive ( with just a hint that tariffs might be coming) and cut red tape and regulations to encourage the Chinese to build plants here ( to our standards) and employ Americans. That’s exactly what happened with Japan, back in the 1980’s when idiots were actually writing books suggesting we were going to go to war with them again. Remember that?

    Or we could even (gasp!) slash taxes and regs enough to encourage American entrepreneurs to build plants here and import less.

    That won’t happen under the current regime, but it’s a worthwhile thought for the future.

    Regards,
    Rob

  • TastyBits

    @Rob Miller

    Here is the fairy tale: businesses pass along taxes, surcharges, or regulation costs to customers. Here is the reality: if it were that easy, businesses would have raised prices long before.

    The reason that businesses do not raise prices to whatever they want, whenever they want is because they want to sell their goods. Many variables go into a company’s price decision among them are competitive strategies.

    The increased costs will more than likely be spread across operating budget, capital budget, profit, and price increases.

    Many of the regulations that big government used to strangle business were designed by other businesses to strangle the competition. Other regulations are environmental, and most people agree the country is better off with them.

    As to the CO2 nonsense, I have been through this multiple times. I do not have time for it now, but I am not going to engage a list of talking points anyway. The “green” in CO2 regulation is the money to be made.

    There is no reason why a US manufacturer should be required to compete with a Chinese manufacturer on an unlevel environmental playing field. The US manufacturer must incur costs to contain any pollutants, but the Chinese manufacturer is free to dump these into the river and fields.

    If Apple were to manufacture the iPhone in the US, there would be additional environmental and labor costs. If Apple chooses to manufacturer in China, Apple should be charged the difference. This would solve the problem of Apple keeping their profits offshore, and they would not be taxed on the surcharge.

    If you want free-trade, you need a single currency, a single set of laws, and a single government.

  • Something I think should be kept in mind: free trade agreements can be written on the back of a napkin. When a free trade agreement runs to hundreds or thousands of pages of closely-written text, it’s not a free trade agreement. It’s a managed trade agreement.

    My objection to our managed trade is that it’s being managed in such a way that, at the very least, the playing field is not level. In many cases it’s being managed to the advantage of some U. S. vendors and customers to the disadvantage of many more.

  • TastyBits

    Many of the OECD countries are all fired up about AWG and CO2. If all OECD countries slapped an environmental surcharge on Chinese goods, China would fix the problem fast.

    Maybe the smartest people in the whole world have not figured this out, or some of them are going to lose money. I am going with door #2.

  • @TastyBits

    If widgets cost you $100 to make, (and that includes all costs, including complying with government regulations) you need to recoup that cost as well as ensure yourself a profit. If you can’t because of the market, or for whatever reason, you liquidate and put your capital to work elsewhere where you CAN make a profit.

    It’s really that simple. And if you don’t, your investors will do it for you and/or you will simply spiral into bankruptcy eventually. Unless, of course, you’re part of government with the police power to seize other people’s money.

    Again, to use your scenario of a surcharge, government would collect the gold while consumers get the shaft and simply buy less.

    Give manufacturers incentives to build plants here and it’s a different story.

    I prefer growth to shrinkage, thank you.

  • TastyBits

    @Rob Miller

    What you describe is a textbook fantasy. In reality, companies can and do run in the red for years. Profits do not matter. Somebody will always lend you money, and as long as you pay the interest, everybody’s happy. If the interest payments are a problem, somebody will always lend you money, and …

    With a surcharge on imported goods not adhering to US manufacturing regulations, the capital can remain in China producing cheap goods, but the US is a huge market. Much of that production will be sitting in warehouses waiting for buyers. I guess a smart investor could invest in warehouses.

    The dumb ass investor is going to realize that most of the raw materials are in the US. The technology is in the US. The productive workers are in the US. The retail outlets are in the US. The consumers are in the US. The US workers have jobs to buy stuff. The dumb ass investor is able to make a profit. The government does not get that windfall.

    Is it simple? Yes and No. If the EPA can slap CO2 regulations on coal plants and put them out of business, there is no reason why the same regulations cannot apply to foreign coal plants.

    Let me buy you a clue. The same people behind the US “free trade” agreements are the same people behind the US environmental regulations (among others). Warren Buffett, Jamie Dimon, Jon Corazon, Jeffrey Immelt, etc. never push for regulating the worst offenders in the world, and they never complain about US regulations. Well, except for H1B visa limits.

    Again, free trade requires a single currency, a single set of laws, and a single government. The EU is missing the single government, and they cannot implement the single set of laws. Therefore, the single currency is strangling half of the members.

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