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The World BusinessMirror
Saturday, November 12, 2016
www.businessmirror.com.ph
How Trump could walk away from decades of climate deals
I
t took more than two decades for nations around the world to forge an agreement to save the planet from global warming. Within one year, Donald Trump could leave it in tatters. Trump, who has said climate change is a hoax perpetrated by the Chinese, has vowed to “cancel” the Paris agreement brought into force this year by more than 190 other countries. While he can’t rip up the entire accord, the real-estate tycoon and reality-television star-turned president elect has several options for pulling the US out. A withdrawal could have significant consequences. As the richest nation on Earth and the second-largest polluter, the US’s role in the Paris accord is critical, helping to secure participation from China, India and others. A withdrawal by Trump would hobble the agreement’s effort to cut fossil-fuel emissions and could leave the US facing grave diplomatic repercussions. “There would be huge implications for how other countries view the United States,” said Jake Schmidt, director of the international program at the Natural Resources Defense Council (NEDC), a nonprofit tracking the climate talks. “The world is united behind this agreement.”
A protesters unhappy with the presidential election blocks traffic on JFK boulevard as they march between cars on Thursday in Philadelphia. The Philadelphia Inquirer via AP
Fear of recession gives way to hope for short-term economic boost in US By Don Lee | Tribune Washington Bureau
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ASHINGTON—The populist promises that catapulted Donald Trump into the White House also stoked fears that his policy proposals could severely damage the economy. Most mainstream economists saw his repeated threats to seal borders and slap massive tariffs on Mexican and Chinese goods as sure-fire prescriptions for trade wars and recession. Despite such pessimistic pre-election assessments, the early post-election sentiment among businesses and investors appears to be more of hope than fear. Business leaders are betting that Congress and political realities will temper Trump’s more extreme ideas, and the policies that survive may actually give needed fuel to an economy that many forecasters predicted would face a slowdown over the next four years, regardless of who won the White House. The question now: How long will that optimism last if the president-elect’s rosy view proves wrong and he’s unable to double the nation’s economic growth as promised? The US economy is already sluggish and fragile, even as it enjoys one of the longest-ever periods of growth. The economies of almost all the other developed nations aren’t much better and are usually worse. To many, a Trump upset on Election Day was exactly the kind of jolt that they feared would send US and global growth reeling into decline. “A volatile candidate is likely to be a volatile president,” said Paul Ashworth, chief US economist for Capital Economics. One reason for a less pessimistic view now is that Trump—in his conciliatory and measured victory speech early Wednesday—vowed
to launch a major overhaul of US infrastructure by pouring billions of government dollars into highway and other construction projects. Such a program would amount to a massive economic stimulus effort as government dollars went first to construction companies, then to thousands of workers and finally ripple out through the whole economy, as those workers spent the new dollars on cars, houses, groceries and other consumer goods.
with the world. Short of unilaterally withdrawing from North American Free Trade Agreement and other trade agreements, which the president does not have the power to do without consulting Congress, even the most hard-nosed negotiations would take time. Many remain skeptical, believing that Trump’s deep-seated beliefs—he has been complaining about unfair trade since the 1980s—and the mandate from his base to blow up the way Washington does business will inevitably lead to clashes with members of his own party and generate policy uncertainty. Fisca l-minded Republicans in particular are likely to press against Trump proposals that would add to the deficit or national debt. Prolonged uncertainty could wobble financial markets and harm the American economy as businesses put off investments and hiring. As analysts at the banking firm Nomura noted, Trump’s economic policy proposals fall into three broad areas—large tax cuts,
A volatile candidate is likely to be a volatile president.”—Ashworth Conservative Republicans in Congress rejected similar overt ures f rom President Barac k Obama. But Trump’s surprise victory may give him greater leverage with Congress, particularly since his party controls both House and Senate. And most Republican lawmakers already support Trump’s call for lower corporate taxes and less government regulation, both of which could provide more economic stimulus, at least in the immediate future. In matters that might dampen the economy, the betting is that Trump will not be able to move as quickly. On the divisive issue of trade, Trump on Wednesday did not renew his repeated campaign threats to tear up trade deals. Rather, he said he would be a president for all Americans and seek partnerships
protectionist trade measures and restricted immigration. “Although these proposals at face value could affect the US economy significantly, exactly how and to what degree they are implemented is an open question,” they write. Trump’s fiscal plan, for example, includes tax cuts of roughly $6 trillion and infrastructure spending of $1 trillion over 10 years. His policy advisers have argued that the lost tax revenue would be offset by growth generated from the stimulus of lower taxes and other policy changes involving trade, energy and government regulations. Skeptics say conser vatives have long predicted that so-called supply-side economic policies would offset higher spending but that those larger revenues have
failed to appear and deficits have gotten bigger, not smaller. Fitch Ratings on Wednesday cast doubt on whether corporations “would boost investment in response to a tax cut as investment growth has been slow despite strong profitability and a recent boom in corporate borrowing.” US corporations are sitting on billions of dollars in cash now; so far, they have been more willing to spend it on boosting dividends and buying back company stock rather than expanding operations. Whatever the outcome, w ith a Republican-controlled government, Trump has a good chance of enacting a long-elusive comprehensive ta x reform of some kind. Congressional leaders like Senate Majority Leader Mitch McConnell, RepublicanKentucky, pledged to take action, though on both taxes and infrastructure spending, no one foresees anything nearly as large as what Trump has proposed. But even if Trump can get half of his proposal for spending on roads, bridges, airports and schools, that would give some much-needed juice to an economy that in recent years has depended almost solely on stimulus from the Federal Reserve. Trump’s plan to slash the corporate tax rate to 15 percent from 35 percent—and offer a 10-percent tax on repatriated cash now kept abroad—also would provide a relatively quick shot in the arm to businesses. The Tax Policy Center has estimated that Trump’s tax cuts, if fully implemented, would boost the economy by 1.7 percent in 2017, essentially doubling growth. The gross domestic product is currently expected to expand about 2 percent a year for the foreseeable future. Longer term, however, the increased national debt would take its toll on the economy, with higher interest expenses and rising interest rates crimping private investment. The Tax Policy Center projected that the Trump tax plan would lead to a 4-percent shrinkage in the GDP after two decades.
Anyone’s guess
While Trump has made it clear he plans to walk away from Paris, his precise exit strategy remains unclear. “I don’t think that’s been decided,” Myron Ebell, the head of Trump’s Environmental Protection Agency transition team, said in an interview. “Your guess is as good as mine.” Trump has at least four options. First is to exit the Paris deal, which was signed in December. Yet, the exit clause of the agreement means the US would still be bound by it until 2020. Trump must now wait three years to formally submit his intention to withdraw and then another year before the US can exit. There is a quicker way. Schmidt of the NRDC referred to it as “the nuclear option,” which would allow the US to leave by early 2018. That would entail withdrawing from the United Nations Framework Convention on Climate Change, a treaty that established the entire process. That deal was unanimously adopted by the US Senate and signed in 1992 by President George H.W. Bush. Trump could pull the US out with one year’s notice, Dan Bodansky, an Arizona State University law professor who studies international environmental agreements, said in an interview. While faster, that option would raise the diplomatic stakes. “It will negatively impact his ability to get the cooperation of other world leaders on issues he cares about, such as trade and terrorism,” said Alden Meyer, director of strategy
at the Union of Concerned Scientists, an advocacy group in Washington. “Climate change has become a geopolitical issue of the top order.”
Marrakech talks
Trump’s election comes as environment and energy ministries from around the globe gather in Marrakech, Morocco, for two weeks of talks on how to implement the Paris deal. Their meeting is organized by the United Nations and established by the 1992 framework convention that Bush signed. The Paris deal calls for 197 countries to limit global warming to below 2 degrees Celsius (3.6 degrees Fahrenheit) and work toward net zero greenhouse-gas emissions. While Trump’s victory sent shockwaves through the corridors of the conference center, Salaheddine Mezouar, a Moroccan minister of foreign affairs who is presiding over the meeting in Marrakech, said he was hopeful that the US wouldn’t pull out of the accord. “The climate change question transcends politics and concerns the preservation of our livelihood, dignity and the only planet on which we all live. We are convinced that all parties will respect their commitments and stay the course in this collective effort,” Mezouar said in a statement.
Senate option
Trump could dispose of the accord by sending it to the Senate, where it would be dead on arrival in the hands of Republican lawmakers, said Myron Ebell, a director at the Washingtonbased Competitive Enterprise Institute. W hen President Barack Obama’s administration negotiated the Paris deal, his envoys avoided structuring it as a traditional treaty, bypassing the need for approval from two-thirds of the US Senate. “There has been a tradition of shared power in the Constitution,” said Ebell, who has also pushed for the US to stop funding UN Framework Convention on Climate Change. “President Obama has broken that precedent. So it seems to me the Senate can also break the precedent and simply take it up now.” Finally, Trump could simply ignore the US’s climate goal under the Paris agreement. He could kill Obama’s Clean Power Plan. And he could refuse to take any steps to reduce emissions. There is nothing in the agreement that would penalize the US for flouting its commitments. Yet that, too, could hurt the US diplomatically. Countries are required to report their progress annually to the international community. If the US isn’t making good on its promises, other nations will know. There’s also the issue of momentum and the growing global acceptance of a need to act, even among countries that still promote the burning of coal. Bloomberg News
The climate change question transcends politics and concerns the preservation of our livelihood, dignity and the only planet on which we all live. We are convinced that all parties will respect their commitments and stay the course in this collective effort.”—Mezouar