Protectionist threats a lot of hot air

This outcome implies the WTO is ineffective. (Given inaction against current breaches by most members the G20 - the so-called new driver of the global policy agenda - of their own pious communiqués preaching the evils of protectionism, this might be plausible.)

But let’s be more realistic.

Assume instead all countries decide stronger world growth - ASAP - takes priority over trying to force some to adopt policies they don’t want to adopt.

That is, governments decide to trade off gains in near-term employment recovery against early action reducing greenhouse gas emissions. (The national politics are obvious. Large reductions in greenhouse gas emissions wrought by the global recession are a convenient excuse.)

What will governments do on climate policy?

The easiest courses are (a) to implement “emissions watch” climate policies, or (b) do nothing. The first option has symbolic appeal, but does little or nothing to reduce global greenhouse gases. For those adopting option (a), international competitiveness is not undermined (or at least not much). There is little need to violate WTO rules by imposing “punitive” border taxes on imports.

In this case, the “punitive tariff” threat is empty, and the climate policy adopted is pusillanimous. Interested in spin rather than substance? This policy is for you.

Option (b) is just the status quo for many.

There’s another option: comply with WTO rules and put a serious price on emissions, initially unilaterally.

Do border tax adjustments (BTAs) have a place here? Absolutely.

Australian taxes differentiate between different products already.

The GST is not uniform. Some food, health and education products are GST-free. So are imports of these products. Some are input-taxed under the GST, including imports. Most products are taxed at 10 per cent, including imports.