Tax Terror

David Frum has a new idea for an old approach---tariffs. Not a trade tool I usually favor, but consider this:

If we are concerned that oil comes from the wrong places, we should be developing policies that bring new oil to market from the right places. One way to achieve that would be for the oil-consuming democracies to form a cartel of their own. Aside from third-ranking China, the top 10 oil importers are all democracies. Six of them--the U.S., Germany, France, Italy, Spain and India--have been targeted victims of Islamic terrorists. Together, these democracies could reshape the world oil market by setting criteria for responsible international behaviour--and then imposing a tariff (say US$12 a barrel) on any oil exporter that failed to live up to those standards.

That inbuilt price advantage for oil producers who co-operate against terrorism and weapons of mass destruction would not much affect an Iraq or a recalcitrant Saudi Arabia when markets are tight, as they are now. But as markets inevitably slacken, a US$12 advantage would gradually redirect oil production away from bad actors to good global citizens- while providing a permanent incentive to oil companies to develop sources like Canada's oil sands and Mexico's offshore fields.

The goal of energy policy should not be to pressure consumers to buy less. Market forces alone will see to that. The policy goal should be to constrain the most dangerous producers to sell less. Over the longer run, policy should seek to alter the behavior of those dangerous producers.

For ultimately it is not America's alleged addiction to oil that threatens the peace of the world. It is the Persian Gulf region's all too genuine addiction to authoritarianism, extremism, violence and terror.