Voice

Will the EU ground its flying carbon tax?

For several years now, a conflict has been brewing between the European Union and many of its largest trading partners over European attempts to control carbon emissions. The specific issue has been the vast quantities of carbon dioxide generated every year by the world's aircraft. With global negotiations aimed at addressing aircraft emissions stalled, the EU  took action of its own:

As air travel becomes cheaper, EU emissions from aviation are increasing fast. Someone flying from London to New York and back generates roughly the same level of emissions as the average person in the EU does by heating their home for a whole year. In order to mitigate the climate impacts of aviation, the EU has decided to impose a cap on CO2 emissions from all international flights – from or to anywhere in the world – that arrive at or depart from an EU airport....From the start of 2012, emissions from all domestic and international flights that arrive at or depart from an EU airport will be covered by the EU Emissions Trading System.

The move inspired howls of protest outside the EU, and the extraterritorial reach of the tax has been the focus of the anger: aircraft landing in Europe are compelled to pay for the emissions generated even outside European airspace. The EU contends that skyrocketing aircraft emissions--and the failure of international efforts to control them--justify the measure.  For non-Europeans, however, the policy has been cast as unacceptable, and probably illegal, regulatory overreach. A European Union that loves multilateralism stands accused of abandoning international negotiations for a unilateral approach. 

The trick for livid non-Europeans has been finding an international forum that can back up their complaint. A trade association representing U.S. airlines challenged the measure in the European Court of Justice, but lost. The UN's International Civil Aviation Organization (ICAO) is the most obvious forum, but it doesn't have a strong record of adjudicating disputes between its members. The World Trade Organization does have a binding dispute resolution system, but the EU measure may not violate existing international trade law (which has special rules that cover aviation).

The absence of an international ruling against the directive hasn't quieted the EU's critics, some of whom have threatened noncompliance (the first payments under the system don't come due until early 2013). The U.S. Congress has considered legislation making it illegal to comply with the EU law. In February, more than twenty governments opposing the measure met in Moscow to hone a set of counter-measures. Perhaps most importantly, China appears to be deploying its massive buying power to encourage European reconsideration.

The strategy may be yielding results. Key players in the European aviation industry just sent a stinging letter to EU leaders warning that the tax may spark a trade war and damage their sales:

European aviation bosses have urged political leaders to stop an escalating global row over an EU carbon levy, warning it is seriously threatening their industry.

Airbus CEO Tom Enders said that China -- at the forefront of opposition to the EU Emissions Trading Scheme (ETS) - had suspended orders for aircraft worth $12 billion, putting at least 2,000 positions at risk.

Alongside Enders, eight chief executives of airlines and engine makers wrote to the leaders of Britain, France, Spain and Germany saying they expected "suspensions, cancellations and punitive actions to grow as other important markets continue to oppose ETS."

EU officials have left open the option of altering the directive if some broader international agreement is reached on aviation emissions. But that kind of complex, multilateral agreement remains distant, and few of the major players appear inclined to negotiate seriously while the offensive EU directive is pointed at them.

The Multilateralist

Chinese national gets senior spot at the IMF

A personnel announcement from the International Monetary Fund arrived in my inbox this morning:

“I have informed the Executive Board of my intention to appoint Jianhai Lin as the Secretary of the Fund,” Ms. Lagarde stated. “Jianhai has had a wide-ranging Fund career in both country and policy work. This breadth of experience has been of particular benefit to the IMF, where Jianhai's skill in building consensus among staff, Management and our global membership has been essential for the productive work of the Executive Board during one of the most challenging periods in the Fund's history.”

Mr. Lin, a Chinese national, studied at the University of International Business and Economics in Beijing, China, and University of California at Berkeley, and earned his doctorate in international finance from the George Washington University. Before coming to the Fund, he worked in the financial sector and academia.... 

The Secretary’s Department has operational responsibility for the 24-member Executive Board of the IMF, and also serves as the regular point of contact with the Fund’s 187 member countries on institutional matters. This includes responsibility for working with the IMF’s Board of Governors, and the policy-guiding International Monetary and Financial Committee.

I'm not certain how important this particular post is, but it does continue the trend of growing Chinese influence at the World Bank and the IMF. Chinese nationals already occupy the World Bank chief economist slot and one of the several deputy managing director positions at the IMF. This is part of a broader--and, to my mind, very salutary--trend of increasing Chinese engagement with international organizations.

But growing Chinese influence in the upper reaches of international organizations does raise a question: what is the informal relationship between these individuals and the Chinese government? When they take on international responsibilities, officials are supposed to shed any professional loyalty to their home state and work solely on behalf of the organization (and, more broadly, the international community). The standards of conduct provided to UN officials make very clear that they must be free of government influence:

If the impartiality of the international civil service is to be maintained, international
civil servants must remain independent of any authority outside their organization; their
conduct must reflect that independence. In keeping with their oath of office, they should
not seek nor should they accept instructions from any Government, person or entity
external to the organization. It cannot be too strongly stressed that international civil
servants are not, in any sense, representatives of Governments or other entities, nor are
they proponents of their policies.

That's the theory. In practice, that line has not always been respected. Nor is it always easy to do so even when intentions are good. Imagine, for example, the situation of David Lipton, who recently became the number two official at the IMF. In moving the few blocks from the White House (where Lipton served as a special assistant to the president), Lipton was being asked to work on many of the same issues but to switch his allegiances from the U.S. government to the Fund almost overnight. His boss, Christine Lagarde, had to make the same rapid transformation from national official to international civil servant.

For those accustomed to moving in and out of government in open societies (and perhaps particularly for lawyers used to representing different clients), this psychological transition is feasible. My sense is that governments in liberal democracies usually try to respect the independence of international officials. But the historical record shows that authoritarian governments have a hard time wrapping their mind around the concept of independent international civil servants. It was an open secret, for example, that Soviet officials working for the United Nations reported directly to and took orders from Moscow. Other senior UN officials knew it and devised work-arounds when necessary.

I'd imagine that the current situation with Chinese officials at international organizations is much more nuanced than that. But how much more? 

More: The always insightful Bruce Jones sends along this comment:

UN officials stress their independence from their original member state, and for good reason. But in some contexts, including the IMF, a vital qualification of senior staff is their ability to pull their ‘home’ government along with multilateral decisions. Take David Lipton, the number two man at the IMF. For the first two and a half years of the Obama Administration, he was Mike Froman’s right hand man in navigating the global financial crisis, and a key advisor to Obama. They know and trust him; and this is a huge asset for the IMF. So the question is less whether the senior Chinese officials at the IMF are independent of Beijing; it’s are they plugged in enough to pull Beijing along in key IMF strategies. 

This is a very smart point; the question it begs though is to what extent there can be an independent IMF strategy (or point of view) if senior staff are so plugged in that they are channeling the mindsets of their home states. The ability to "pull in" key member state governments is only valuable, it seems to me, if what these states are being pulled toward is more than just a reflection of their own views.