Man Without Qualities

Friday, May 09, 2003

Free Trade For Energy?

President Bush is reportedly proposing a "free trade" agreement among the Uniited States and countries in the Middle East within 10 years.

It's an interesting idea - but I'm not sure exactly what it would mean.

Most of what some Middle East countries (such as Iraq, Saudi Arabia and faithful Qatar) produce and sell to the United States is "energy": oil and gas. Of course, this is not true of Israel and Jordan, with which the United States already has free trade agreements. One continually hears calls - especially from certain types of environmentalists, some on the left (such as Al Gore) and even farm state representatives - for different types of "engergy taxes" specifically supported by arguments that such taxes would discourage American "dependency" on foreign (especially Middle Eastern) energy sources and encourage development and use of domestic energy sources, such as coal, wind, geothermal reserves, grain alchohol and even hydrogen. But a "free trade" agreement with any country doesn't mean much if the main products of that country (or the counsumption of such products) is subject to high taxes - if the stated point of the taxes is (or is allowed by the "free trade agreement" to be ) to free the United States from dependency on the products supplied by the nominal "free trade partner." And that is still true even if the taxes apply to all such products, not just those actually imported from that "free trade" partner. So, is the United States still to be allowed to tax all oil if the point of the tax is largely to shift American consumption away from "foreign energy sources" to, say, consumption of US-raised corn alcohol? Or US geothermal deposits? Or US-created hydrogen or coal?

Would a "free trade zone" with the Middle East end the possibility of "carbon taxes" and the like whose aim is to reduce American dependency on Middle East energy sources? Would such a "free trade zone" prohibit by federal treaty efforts by states to shift energy use away from Middle Eastern products towards US products with no envoronmental advantage such as alcohol or coal?


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