The Economist - USA (2021-07-17)

The Economist July 17th 2021 Leaders 13

he shows is how out of touch he is. The protestersareyoung, mainly black and dismiss the Castros’ revolutionof 1959 against an Americanbacked tyrant as ancient history. They have plenty to complain about. The pandemichasshut off foreign tourism, aggravating the economy’s lackofhardcur rency. Raúl Castro launched economic reforms,buttheywere timid and slow, permitting only minuscule privatebusinesses. It was left to Mr DíazCanel to take the most momentousstep,by ordering a big devaluation in January. Without measurestoal low more private investment and growth, that hasmerelytrig gered inflation. As its sanctionshit oil industry collapses,Vene zuela, Cuba’s chief foreign patron over the past 15 years,has curbed its cutprice oil shipments, prompting powercutsduring the heat of summer. Chronic shortages of foodandmedicine have become acute. Despite Cuba’s prowess at publichealthand its development of its own vaccine, the governmenthasfailedto contain the pandemic. The sick are dying, abandonedathomeor on hospital floors. Two other factors explain the outburst. One isthechangeof leadership. The Castros commanded respect evenamongthe many Cubans who abhorred them. Mr DíazCanel,withouta shred of charisma, does not. And the internet andsocialmedia, allowed only in the past few years, have brokentheregime’s monopoly of information, connecting younger Cubanstoeach other and the world. They have empowered a culturalprotest movement of artists and musicians. Its message,intheunan

swerablelyricsof“Patriay Vida”,is“Yourtime’sup,thesilenceis broken...we’renotscared,thedeceptionisover.” MrDíazCanelfacesa choice:toturnCubaintoBelaruswith sunshine,ortoassuagediscontentbyallowingmoreprivateen terpriseandgreaterculturalfreedom.Thatcouldweakenthear myandtheCommunistParty,butitwouldeventuallysalvage someoftherevolution’soriginalsocialgains. Curiously,manyRepublicansintheUnitedStatesechoMr DíazCanel’sdescriptionofAmerica’sroleintheprotests.Presi dentDonaldTrumptightenedtheeconomicembargoagainst Cuba,barringAmericantourists,curbingremittancesandslap pingsanctionsonstateﬁrms,largelyreversingBarackObama’s openingtotheisland.LikeCuba’spresident,Republicansargue thattheunrestprovestheembargoisworkingatlast. Notso.True,theembargohasmadelifeharderfortheCuban government.ButitsrestrictionsmainlyhurtAmericans.There gimecanstillbuyAmericanfoodandmedicineandtradewith theworld.ThecausesofCuba’ssocialexplosionlieathome.

Openthewindows JoeBidenshoulddrawtheobviousconclusion.Sofarhehasleft MrTrump’sCubapolicyintact,soasnottoannoyhawkishCu banAmericans.Insteadhe shouldreturntoMrObama’sap proach.Thebigthreattoa closedregimeisengagementwiththe world,especiallytheUnitedStates.MrBidenshouldlifttheem bargoanddeprivetheregimeofanexcuseforitsownfailures.n

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arbonprices are the most costeffective waytofightcli mate change—but for them to work properly, emissions must be priced everywhere. On July 14th the EuropeanCommis sion unveiled its plan to levy what would, in effect,bea tariffon some carbonintensive imports which, by virtueofhavingbeen produced outside the eu, are not subject to its capandtradecar bonpricing scheme. The idea is to stop Europeanfirmsfromre sponding to the carbon price by moving productiontopartsof the world where they can pollute without penalty,toshield them from being undercut by rivals from such places and to encourage foreign firms who want to sell to Europe to go green. There are sound reasons for applying carbon prices to imports. But working out how to go about it without causing a cycle of damaging protectionism is a conundrum. Were carbon prices global, the costs of ful filling the Paris agreement on climate change could fall by 79%, according to the Environmental Defence Fund, a thinktank. Market forces would find the cheapest ways to cut emissions. Yet a worldwide carbon market is a pipe dream. (China is due to launch the world’s largest emissionstrading system on July 16th, after we go to press, but permits will be far too cheap.) Carbon tariffs are a fallback measure. Free traders like The Economist typically reject tariffs on prin ciple. Cheap imports bring lower prices, more choice, higher productivity and incentives to innovate. Firms and workers con

stantlypleadforprotectionfromforeigncompetitors,alleging thatjobsandprofitsmustbeshieldedfromunfairforeigncom petition.Liberalsrespondthattheharmdonetoincumbentsby thefreeoperationofmarkets—whateconomistscall“pecuniary externalities”—donot,unlikeothertypesofharm,justifygov ernmentintervention.“Societyadmitsnoright,legalormoral, inthedisappointedcompetitors,toimmunityfromthiskindof suffering,”wroteJohnStuartMillin1859, 16 yearsafterTheEcon- omistwasfoundedtoopposetheCornLaws,whichkeptcheap foodoutofBritaintothebenefitofitsincum bentlandowners. Carbontariffs,however,wouldnotbeinher entlyprotectionist.Theyareanattempttoex pandthereachofmarketforcesratherthanto limitthem.Theopportunitytopollutetheat mospherewithoutpenaltyisitselfa kindofdis tortingsubsidy;moresoifitexistsunevenly acrossborders.Preventingclimatechangeisa global public good, meaning every country’s citizens have a di rect interest in reducing emissions wherever they happen. Pric ing carbon at the border should therefore be viewed as a special case, and not as a precedent for using tariffs as a bludgeon with which to impose local regulations or standards abroad. The problems with carbon tariffs are thus not moral or eco nomic but practical and political. Implementing the policy fairly would mean ascertaining how much carbon has been emitted in the production of a given import, and to what extent foreign

In principle carbon border taxesarea goodidea.Inpracticetheycouldbea gifttoprotectionists

Global greenhouse-gas emissions covered by taxes* %

*Or cap and trade schemes

20 10 0 1990 2000 10 21

Carbon and capture

Climate change

The Economist - USA (2021-07-17)

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