5 ms·

No, you've got comparative advantage crucially wrong. If country X can produce food a bit cheaper/better than you, but produces shoes much cheaper/better, then

by rlucas 8y ago

No, you've got comparative advantage crucially wrong. If country X can produce food a bit cheaper/better than you, but produces shoes much cheaper/better, then you end up growing at least some of your own food and importing shoes from X. https://www.econlib.org/library/Topics/Details/comparativeadvantage.html https://www.econlib.org/library/Topics/Details/comparativead...

AnthonyMouse 8y ago
Comparative advantage has nothing to do with it. The market price of a global commodity has the opportunity costs already priced in. It's the reason more prosperous countries have higher labor costs. If you and some other country are producing food for the same cost (e.g. because you pay more for an hour of labor but have better automation), adding the same cost to each doesn't affect your competitiveness. You both still have the same costs as each other. The same amount of fuel tax only affects you differently if you require a different amount of fuel to produce the same amount of food. Then the party using less fuel has the advantage and may end up producing more food while the party using more fuel produces less. But that's what we want to happen -- having the other country produce food in that case is the desired outcome, because it can do it for lower cost once the externalities of burning carbon are priced in.
- AstralStorm 8y ago
  That does not work because most of the food transportation is by ship freight and truck, which have enough range to evade your tax. And the local transport costs are identical between local and export farmer, while local production is more expensive on labor and fuel. The only thing to do is to raise duties on food and... it is risky politically. Alternatively, subsidize much more. Good luck!
  - AnthonyMouse 8y ago
    > That does not work because most of the food transportation is by ship freight and truck, which have enough range to evade your tax. Solution: If the carbon tax for the product's production and transportation is not collected by the country of origin, it is collected by customs on import. > And the local transport costs are identical between local and export farmer, while local production is more expensive on labor and fuel. If it's more expensive on labor, it was the whole time. If it uses more fuel, discouraging it is the intended outcome.

by rlucas 8y ago

AnthonyMouse 8y ago

Comparative advantage has nothing to do with it. The market price of a global commodity has the opportunity costs already priced in. It's the reason more prosperous countries have higher labor costs. If you and some other country are producing food for the same cost (e.g. because you pay more for an hour of labor but have better automation), adding the same cost to each doesn't affect your competitiveness. You both still have the same costs as each other. The same amount of fuel tax only affects you differently if you require a different amount of fuel to produce the same amount of food. Then the party using less fuel has the advantage and may end up producing more food while the party using more fuel produces less. But that's what we want to happen -- having the other country produce food in that case is the desired outcome, because it can do it for lower cost once the externalities of burning carbon are priced in.

AstralStorm 8y ago
That does not work because most of the food transportation is by ship freight and truck, which have enough range to evade your tax. And the local transport costs are identical between local and export farmer, while local production is more expensive on labor and fuel. The only thing to do is to raise duties on food and... it is risky politically. Alternatively, subsidize much more. Good luck!
- AnthonyMouse 8y ago
  > That does not work because most of the food transportation is by ship freight and truck, which have enough range to evade your tax. Solution: If the carbon tax for the product's production and transportation is not collected by the country of origin, it is collected by customs on import. > And the local transport costs are identical between local and export farmer, while local production is more expensive on labor and fuel. If it's more expensive on labor, it was the whole time. If it uses more fuel, discouraging it is the intended outcome.