There is nothing "secret", as suggested in a recent article by Kevin Gaudet, about new global tax proposals being discussed in draft treaties at Copenhagen. Every one of the new taxes outlined in the article was included in a set of options appearing in brackets in the draft Copenhagen agreement for negotiators that was published in October and I circulated and commented on in early November. 

What is happening now is that a number of different revised drafts—each containing one set of proposals—are circulating in Copenhagen. They are all labeled "secret" simply because none of them are officially sanctioned negotiating text. Each revised draft has its proponents, and few of the proponents for any one draft appear willing to consider alternatives to their draft.

This is the ultimate negotiating break down.

The single largest concern is that our negotiators are now focused on one task—finding ambiguous enough language to put in one document that parties who cannot agree on key principals can create the appearance of an agreement, of some sort, by the end of the week. It is exactly this kind of "treaty-making" strategy that led us into the Pacific Salmon War and the Softwood Lumber Dispute.

When the negotiators shift from trying to reach agreement to trying to put text in place that fakes the appearance of agreement, serious and costly future trade disputes are the inevitable result.

In the Copenhagen context, one VERY large problem is the conflict between how US/Japan and EU/China will read the wording regarding international taxation and Official Development Assistance ("ODA", "aid"). Any final test will suggest that nations must keep their pre-existing ODA commitments and any new global agency-administered taxes and developing nation assistance agreed to in the Copenhagen agreement shall be in addition to those pre-existing aid commitments. This provision was included in the Kyoto Protocol—but immediately after ratifying the Kyoto Protocol, Japan cut US$4 billion out of its long-standing international aid commitments and created:

• a US$2 billion budget set aside for Japanese government CER (developing nation credit) purchases

• a US$1 billion budget set aside for new international Human Resource development initiatives and

• a US$1 billion budget to finance domestic tax credits to reimburse Japanese companies for their CER purchases.

Japan openly cut back their ODA budget to offset 100% of the international cost component of their Kyoto Protocol commitments (see this Japan Times article). The UN then failed to declare that Japan was breaching the Kyoto Protocol.

The US has learned from that history.

Every US contact I have assures me that every dollar that the UN/World Bank picks up in new revenues from any final Copenhagen agreement will be deducted from existing US commitments to the UN and other ultra-national development initiatives.

The huge challenge for Canada is that the implied incremental costs of the new global taxes are so large, relative to our current ODA spending, that we will be the only G8 nation unable to offset the new costs with ODA cuts—even though we already dedicate a higher percentage of our GDP to ODA than the US does. Almost 100% of EU27 ODA is tied to European direct investment in developing nations or Asian consumer product sales, particularly in the chemicals, pharmaceuticals and auto industries. Europe’s auto sector is much larger than North America’s, largely due to Asian and African export sales.

For these reasons, the quotation attributed to Alberta Minister Renner in today’s Edmonton Journal is a cause for concern: "As long as there’s limits on the amount of funds that would flow into an open market, I think we could live with that," Renner said. "There’s been talk all along to the degree of which we would participate in a North American or national market." 

Not sure what this means, but it could mean that Renner is now aware of what the Japan/US play really is.

Anyway, I can assure you that if/when the US and Japan cut existing ODA to offset any new commitments outlined in a final Copenhagen agreement, the EU27 and China will immediately deem that a breach—even though they let Japan get away with it so far.  This will launch trade wars which will have massive and potentially uncontrollable implications for Canada.

As an aside, Canadian negotiators should also note that President Obama has publicly stated his intent to design the US domestic offset system to ensure that it generates new revenues for large US agri-business. The President notified the industry of his desire to cut direct government subsidies to these businesses, while assuring them that they will not experience revenue losses—because the new US domestic cap and trade and offset system will replace government subsidies with offset credit revenues. 

By definition, this means that:

• The US GHG Offset credit market will be dominated with "hot air", because the offset market will simply maintain funding for activities that are already underway and funded, at this time, by direct government subsidy. Most of the subsidies that Obama hopes to replace with GHG offset credit revenues are from programs that essentially pay US farmers not to farm.

• The President simply proposes to shift agriculture subsidy costs form the US Treasury to families’ utility bills.