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As Long as We Remember...

December 16, 2008

More Regulations, Less Result

Farrell Keough

When we were last together, we discussed the iconic imagery subtext replete within the film It’s a Wonderful Life. The pleonasm of this previous discussion was self-serving and self-evident, yet constructive in its perspicacious appraisal.


Alright, that didn’t actually happen – we were actually talking about the Secretary of the Treasury and the bailout money – but what kind of lead-in paragraph is that?


Now we shall pursue some little known or talked about information going on with the Treasury.


In June of this year, the United States and the People’s Republic of China signed the Ten Year Framework on Energy and Environment Cooperation in Annapolis. This was an outcome of the Strategic Economic Dialogue (SED) formed in late 2006.


This dialogue was initiated by President George W. Bush and China’s President Hu Jintao to “foster direct engagement as the optimal way to build a mutually beneficial economic relationship.” It is an interesting proposal, especially considering we are China’s biggest client – we buy from them, not the other way around.


This won’t be a problem though; it is only a dialogue. Wouldn’t that be great? Unfortunately, that is not the way it works. This represents baby-steps to begin increased government involvement. You see, after this SED was signed, it was confirmed that “productive negotiations are underway on a new Bilateral Investment Treaty.”


This proposed treaty will focus on “establishing short, medium, and long-term deliverables in five areas: electricity generation, transportation, clean water, clean air, and protecting wetlands and other natural areas.” What could be wrong with that?


Consider who is signing this proposed treaty: one government with all the necessary oversight bodies to enforce such restrictions and the other with a track record of tremendous pollution, infected food products, and horrendous treatment of its own people.


These proposals will involve partnering companies and ideas between China and the United States. For instance, the Denver, Colorado/Ford Motor Company and the City of Chongqing/Chang’an Motors will focus on “implementation of electric and plug-in hybrid vehicles, this partnership has the potential to significantly advance the global development of electric and plug-in hybrids vehicles.”


Another set of alliances connects two areas devastated by tornadoes and earthquakes which “represents an opportunity to demonstrate new models for comprehensive, eco-friendly sustainable development and is focused on economic revitalization in rural America and China.”


And a third alliance will concentrate on “pursuing the development of a sustainable business model for ‘clean energy’ in the United States and China, particularly in the area of clean coal.”


Consider this, China held the last Olympics. They had warnings of air pollution. They consistently inform their visitors to not wear white clothing due to the heavy air pollution from industry and coal plants. In short, there are virtually no environmental or other regulations in place for the nation of China.


But these small associations are test models. How can that hamper our nation? Won’t this help to move China towards more regulated and environmentally friendly business practices?


In a word, No!


China has virtually no regulation now. So, even small improvements will be portrayed as a great step forward. For instance, if China were to install a scrubber on one of their smokestacks, they may see something like a 35% reduction in certain levels of pollution. But, the remaining 65% will be far dirtier than any plant in the United States. This does not even begin to deal with the costs spent in our nation to develop these pollution controls – costs the Chinese will not have to bear.


Also, China has a track record of lying and tampering with their production. There is no way to verify their claims independently. On the other hand, the U.S. has masses of bureaucrats, regulations, and monitoring mechanisms to ensure companies are compliant. We are constantly implementing new rules – some of which may have some benefit to the environment, but many of which simply hamper business with little or no gain.


These partnerships are viewed as baby steps by our government. “By partnering at the sub-national level, ideas can be tested in targeted areas before broad introduction as a new model for sustainable growth, based on energy and environmental innovations.” Having spent a decade in environmental regulation, I can assure you this is one of the most useful methods to force new regulations.


When you hear words like “sustainable” or “innovative,” it is time to hold onto your wallets. You may believe it won’t affect you directly, but wait until you throw that light switch or start your car. These regulations and new models have a direct effect on each and every one of us. And the likelihood of improvement is slim. Can you name any other government program which has actually made business better?


We are on the precipice of change to our economy and business practices. Inviting a nation which has shown little to no regard for its own people, and even less regard for the broader global impacts, does not bode well for the future. And this occurred under a compassionate conservative administration in Washington. Imagine what the next dialogue will entail.


Note: this column was submitted before information about Nobel Prize-winning physicist Steven Chu’s nomination as the incoming Secretary of Energy was made public. Mr. Chu is a strong proponent of Global Warming, noting that while the evidence is not definitive, we need to make sweeping regulations and changes anyway.


Along with this potential appointment, long time regulator Nancy Sutley is slated to chair the White House Council on Environmental Quality, Lisa P. Jackson to head the EPA, and Carol M. Browner to oversee the energy, environment and climate change policy. This group has a reputation of not caring about business or the consumer and, hence, makes this column even more poignant.


U.S. Department of the Treasury, HP – 1308, 1309, 1310, 1311 

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