Saturday, June 11, 2016

Even Climate Change Has a Silver Lining

For years I've written that climate change would be the death knell of globalism. It's really simple. The global economy depends on a fabric of nations operating collectively. That requires a high degree of stability all the way along the chain. Climate change will seek out the weakest links on those supply chains and destabilize them.

Bloomberg, it seems, agrees.

Within a century of Henry Ford's first assembly line, the entire world economy has become a single, virtual conveyor belt. And that belt is getting hot.

When weather catastrophes hit, the big-ticket damages tend to come not from heat waves but from floods, hurricanes, and wildfires. Natural disasters caused billions of dollars in damagelast month alone, according to a recent report, from Canadian wildfires ($3.1 billion), to European flooding ($4.6 billion), to U.S. storm damage ($1 billion).

...Manufacturing these days involves facilities in multiple countries, each of which has a sequential role in taking raw materials a step closer to being finished products. Imported materials may remain unfinished, even after they're exported to the next station on the international assembly line. This “vertical specialization,” it turns out, may have a blind spot when it comes to climate change, according to new research from the Potsdam Institute for Climate Impact Research. Manufacturing is only as strong as the weakest, or in this case hottest, link in the supply chain.

..."We usually think that trade will allow us to adapt to climate change," said Solomon Hsiang, a public-policy professor at the University of California-Berkeley who has studied the effects of climate change on economic performance, "but this analysis highlights ways in which vulnerability to climatic events might actually increase our exposure to climatic risks."

Hsiang said that, similar trends in the U.S. amplified the economic impact of hurricanes on inland states by raising the cost of capital nationwide.

...With hotter temperatures looming, researchers have studied what that means for whole economies. An average annual temperature of about 55 degrees Fahrenheit (13 degrees Celsius) may be optimal working conditions. When the mercury rises past about 80F, workers start to become less productive in industries like mining, construction, or forestry, where there’s no escaping into an air conditioned offices.

While this Potsdam paper looked at the effects of heat, Levermann said he expects that other meteorological wallops getting the most attention—floods, drought, storms—will be shown to have a similar effect on what may be an increasingly fragile global manufacturing bucket brigade.

Which begs the question of why Canada or any other state is entering into long term trade deals when there are so many emerging climate threats that could destabilize our trading partners? What if we cannot meet our obligations to them? What if they fail us? This Trans Pacific Partnership mega-deal, for example. Has anyone done an environmental assessment of this deal including a climate change stress test for the signatory nations? Why not? Should any country be getting into 30 or 20 year deals without a clear idea of how the world will change by then?

We have to start looking at this seriously before we sign any new trade deals. The 80s are over. They're not coming back. Let's face facts.

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