Horween: Free Trade Explodes Emerging Markets' Massive Pollution

Editor's Note: This article was originally published on Real Money on March 5. To see the latest Real Money commentary as it's published, sign up for a free trial of Real Money.

NEW YORK ( Real Money) -- This week President Obama castigated his own country for not doing enough to control greenhouse gasses while at the same time not saying one word about the real polluters of this world. I am talking about the entire emerging markets world led by China who is exempt from doing anything about carbon emissions or any other kind of pollution.

Environmentalists have the same head in the sand attitude and never protest what the emerging market is doing to foul their own air and water and to increase their greenhouse gas emissions. Instead environmentalists endlessly badmouth the industrialized world which has done a huge amount of pollution control while losing millions of jobs to the emerging markets since NAFTA and the Kyoto Protocol came into existence and the emerging markets joined the World trade Organization.

Does free trade coupled with the Kyoto Protocol actually make global warming worse overall? I think they do. I think that ignoring the massive polluters in the emerging markets created a situation where no matter how hard the industrialized countries try to limit their emissions the overall world situation gets worse and more people in the industrialized countries will stay unemployed.

This is why Canada withdrew from the Kyoto Protocol in December 2011. The Canadian government said at the time that they were not going to lose any more jobs because of the ridiculous goals in the Kyoto Protocols and they were not going to pay any fines to the emerging markets for not meeting their goals.

I suggest that the EU, U.S. and Canada put a carbon tax on all products manufactured in the emerging markets unless they reduce their greenhouse gas emissions and reduce their other forms of pollution. Now the emerging market countries like China are demanding that we pay to clean up their pollution because they are poor.

The emerging market countries are not just gigantic greenhouse gas emitters but they also are destroying rain forests and polluting rivers and of course their air. The industrialized world is heavily in debt now and cannot afford to pay for cleaning up the pollution that the emerging market countries have created over years since they joined the WTO.

Auto production and light vehicles in China will exceed that of Europe this year. Jobs and pollution have gone to the emerging markets under the Kyoto Protocol and free trade that exempts the emerging market countries from having to do anything about global warming or other forms of pollution.

The efforts to reduce global warming gasses in the industrialized world under the Kyoto Protocol coupled with free trade has made the overall situation worse in the world because of the massive increase in greenhouse gasses in the emerging market countries and also their much higher birth rates.

The more we increase the cost of energy in the industrialized world the more overall pollution will rise in the world because people in the emerging markets who use very little carbon are now using much more carbon based fuels at work and for their own personal use.

Our leaders and all green groups seem blind to what's happened and what is happening every day now. In fact the greens protest all the time against the Keystone pipeline and against Canada for its development of shale oil and tar sands oil while they NEVER protest in front of the Chinese embassy or the Mexican embassy about the massive pollution in those two countries and the degradation of life itself from massive regular pollution plus global-warming gas pollution.

The emerging market countries have become our creditors and have run up gigantic trade surpluses with the U.S. due to many factors including unlimited capacity to pollute, very weak labor laws, child labor, close to slave labor in the North Korean special manufacturing zones that South Korean companies utilize, manipulated currencies, special rules for them under the WTO rules that allow them to control investments in their countries and percentage ownership by outsiders and to block our products while we cannot easily block their products.

Other than that, we have a perfect Free Trade regime with the emerging market countries. You have to wonder why our political masters here and in Europe have gone along with the present system and why the labor unions, environmental groups and academia have not complained much about the system either.

This could not have happened without the WTO agreement and other bilateral trade agreements starting with NAFTA with Mexico that went into effect in 1994 and the WTO agreements with most of the emerging market countries in 1995.

China, after excruciating negotiations that gave China many advantages over the USA and Europe, entered the WTO in 2001. I might point out that I know of not even one bilateral trade agreement that we have entered into for the past 30 years that resulted in the U.S. ending up with a trade surplus with that country.

My theory contains a multiplier effect that no one else has ever mentioned. The effect is obvious. Not only do the electric generation plants in the emerging markets have less or no anti-pollution equipment on them but also they run on coal and have internal combustion engines running on diesel or gasoline.

As people moved to the cities for jobs in factories and then were able to buy motor vehicles the combination of more motor vehicles and electricity generation and construction equipment to build out the infrastructure created a gigantic increase in greenhouse gasses in the world.

As the industrialized world sent more and more production to China and the rest of the emerging markets it kept its displaced workforce on generous welfare plans that kept them using carbon based fuels while they were unemployed. So, as the industrialized world did more to reduce its greenhouse gases, worldwide emissions grew worse.

Industry runs on electricity. If you raise the price of electricity because of carbon taxes or very high cost wind power or solar power you drive production to the emerging markets like China that have low cost electricity and very few pollution standards on regular pollution.

It was after most of the emerging markets entered the WTO in 1995, NAFTA in1994 and the Kyoto Protocol came into effect in 2005, that the specter of massive air pollution in China and Mexico and other emerging market countries came about.

To reiterate the vicious cycle of more jobs, more production, and more vehicles on the road means more pollution of all kinds worldwide until the industrialized world wakes up and puts carbon taxes on the real polluters in the emerging markets and not on themselves as they have been doing since the U.S. has lost millions of jobs due to the massive movement of production to China, Mexico and other emerging market countries. However, our electricity rates are mostly lower than Europe's and we have not subsidized our conversion to alternative energy as much as Europe.

The U.S. has also avoided a national carbon tax scheme and now has abundant cheap natural gas to power electric generation plants. This has already lowered greenhouse gas emissions tremendously. Of course, the loss of production in the industrialized world has lowered its emissions as well.

The U.S. is fast becoming much more productive than Europe as our conversion to natural gas as a feedstock for many industries grows and as our electricity generation switches to low cost natural gas. This has alarmed the EU and they want to force us to adopt carbon taxes or to make new trade agreements with them to level the playing field.

The EU has ignored the greenhouse gasses that are coming from China and instead flogs itself to death with more and more carbon schemes and unaffordable alternative energy. One reason for the gigantic budget deficits in the EU states are the subsidies for alternative energy and the endless welfare for the people who cannot find work.

Even with unemployment at record high levels in the southern states of the EU that rely heavily on tourism, the EU wants to implement a carbon tax on airlines which is really a carbon tax on tourism. All the emerging market countries are against this carbon tax on airlines and the U.S. is against it as well. The amazing thing is that none of the southern countries in the EU has protested against this silly tax on tourism.

The EU of course could care less, as it is a bureaucracy second to now in the world and answers only to itself until very recently when the British forced a slight cut in its budget.

Matt Horween is a certified public accountant and served as a commissioned U.S. foreign service officer for the U.S. Agency for International Development from March 1981 to March 1998. He served in Burkina Faso, Senegal, Egypt, Honduras and Barbados, spending about 15 years overseas. He ended his career stationed in Washington, D.C. as the financial controller for the bureau that controlled the foreign aid program for Europe, including all of Eastern Europe and the former Soviet Union and its former satellite countries. Horween also worked as an auditor for Price Waterhouse & Company in New York City and held various financial management positions for several publically listed corporations. Early in his career, he served as a radio intercept analyst for the U.S. Air Force Security Service and was stationed in Greece.

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