Home
/
RELIGION & LIBERTY ONLINE
/
Pulling out of Paris agreement is a ‘market distortion’: European leader
Pulling out of Paris agreement is a ‘market distortion’: European leader
Oct 18, 2026 7:51 PM

The G20 summit in Hamburg e to an end, and the dominant story remains America’s withdrawal from the Paris climate agreement. It’s been less reported that some European leaders have implied that the EU should take economic revenge on the U.S. because – in their words – limiting government intervention in the economy is a “market distortion.”

Germany currently holds the presidency of the G20 summit, with Chancellor Angela Merkel overseeing the violence-plagued event. The final declaration notes the U.S. withdrawal, and Merkel haschided President Trump over his decision. But her rival in Germany’s election for chancellor later this year, Social Democratic Party candidate Martin Schulz, has hinted the EU should launch something approaching a trade war in retaliation.

Last month, just before Trump made his final announcement, Schulz said that leaving the Paris climate agreement would give the U.S. economy petitive advantage over nations that kept its terms – and he viewed this as most unfair. “If Mr. Trump wants to leave the climate pact, then we must talk openly about trade relations and market distortions,” Schulz said. (Emphasis added.)

That wording is significant. It uses the economic term “market distortion” in theopposite sense of its denotative meaning.Investopedia defines a market distortion as:

an economic scenario that occurs when there is an intervention in a given market by a governing body. The intervention may take the form ofprice ceilings, price floors, or tax subsidies. Market distortions create market failures, which is not an economically ideal situation.

The Paris climate agreement would set limits on carbon dioxide emissions, with changes in developing nations offset by funding from the U.S. and other developed nations. It is, in brief, a market distortion.

As Investopedia states, “There is a tradeoff that regulators must make when deciding to intervene in any given marketplace.” Many American leaders and the “G19” believe the benefits of reduced carbon emissions justify the economic costs.

However, if we are to advance the public discussion in any meaningful way, we have to speak truthfully. Withdrawing from a market distortion does not create a market distortion. It averts one.

It is important that we tell the truth, not just because honesty and economic literacy demand that we use the linguistic equivalent of “just balances, just weights.” It is vital in order to assess European leaders’ outlook and the treaty’s impact for good or ill.

All politicians believe in market distortions to a degree. Merkel, for instance, regardscertain policies as prerequisites for international trade deals. “A modern trade agreement has to be about more than cutting tariffs,” she said in May before the Labour 20, a conference of international trade unions in the G20. “It should also be about environmental and consumer standards.”

But between the words of Schulz, who is running to Merkel’s left, lies the unspoken assumption that the laws of economics are written by experts in political tribunals, free from the vagaries of supply and demand, consumer choice, or firms’ capacity. Their policies take precedence over the market, which “distorts” their preferences. And those who demur from their decrees, wherever they live, deserve to be punished.

Using proper economic terminology is also important to analyze the agreement’s real impact on the human person. “The free market is an institution of social importance,” according to the Compendium of Catholic Social Teaching, “because of its capacity to guarantee effective results in the production of goods and services.” Market distortions are not merely bad in the abstract, because they cause theoretical and mathematical inefficiencies. They impose a real social cost. Nations that reduce carbon emissions, for example, may have to divert resources they would have used to produce goods or services into retooling plants, in order to abide by the agreement’s terms. Or they may simply continue using current technology and reduce overall production levels. In either case, the result is fewer goods being created to fill human needs and desires, creating shortages or raising prices.

mitted to seeing people harness their God-given talents to thrive through innovation want to minimize market distortions. But to oppose them, we must first accurately understand what they are.

Schulz sits next to Angela Merkel. Courtesy of Erlebnis Europa. Public domain.)

Comments
Welcome to mreligion comments! Please keep conversations courteous and on-topic. To fosterproductive and respectful conversations, you may see comments from our Community Managers.
Sign up to post
Sort by
Show More Comments
RELIGION & LIBERTY ONLINE
PowerBlog top 5 of 2005
Here are the Top 5 Acton Institute PowerBlog posts of 2005 (by number of visits): The Ethics of ‘Price Gouging’, Monday, August 29, 2005Benedict XVI on Markets and Morality, Thursday, May 5, 2005Bono: Aid or Trade?, Thursday, June 2, 2005Puggles, Malt-a-Poos, and Labradoodles, Oh My!, Tuesday, August 23, 2005Museum of Plastic Cadavers, Friday, May 20, 2005 ...
One man’s trash…
Sometimes one man’s trash is just trash. “Most people have no clue what’s involved with taking a garbage bag of stuff and getting it to the person who needs it,” said Lindy Garnette, executive director for SERVE Inc., a Manassas-based nonprofit that operates a 60-bed homeless shelter and food bank. According to this story, “Eager for Treasure, Not Trash: Charities Sort Through Piles of Donated Goods, Some of Which They Can’t Use,” by Michael Alison Chandler in The Washington Post,...
The glory of socialized health care
A newly certified Guinness World Record, presented without ment. ...
Acton podcast updated for iTunes
For those of you who enjoy listening to podcasts, Acton has updated its own podcast to be more iTunes friendly. We’ve added an iTunes graphic to the feed, updated our description tags, and categorized it on the iTunes music store. For those interested in checking it out, please follow this link to the iTunes Music Store (iTunes is required). ...
Timber!
Today’s Wall Street Journal has yet another example of what happens when good intentions fail to connect with sound economics (or in this case, sound science). Thanks to the nation’s housing boom, business has been good for the West’s sawmills for the past three years. But Jim faced an insurmountable problem: He couldn’t buy enough logs to keep his mill running. This despite the fact that 10 times as many trees as Jim’s mill needed die annually on the nearby...
The moral dilemmas of end-of-life care
I’ve written about the narrower problem of generational conflict as it relates to social security policy, here and here. From a perspective that passes the broader, related cultural, economic, and moral issues, Eric Cohen and Leon Kass write in Commentary the most thoughtful and thought-provoking piece I’ve read on the matter of intergenerational responsibility and end-of-life care. Credit to Stanley Kurtz at The Corner. ...
Subsidiarity isn’t just another big word
My little home town of Seminole, Oklahoma, has been scorched by the wildfires sweeping through parts of Oklahoma and Texas. My mother’s beloved horse riding trails in the rural area around Seminole are either smoldering or threatened. I talked to an old high school friend about our response to the disaster. He said, “Karen, we paid attention after those hurricanes. We’re not looking to the government for help. The churches and people all around here have been helping since the...
Prayer for the future
O God our heavenly Father, you have blessed us and given us dominion over all the earth: Increase our reverence before the mystery of life; and give us new insight into your purposes for the human race, and new wisdom and determination in making provision for its future in accordance with your will; through Jesus Christ our Lord. Amen. –U.S. Book of Common Prayer, “For the Future of the Human Race,” (1979), p. 828 I cannot pass up this prayer...
The stewardship of space
As the newly-burgeoning field of space tourism takes the first steps towards reality, elements of the federal government are already pushing for stringent regulation. In a 60 Minutes report last night, the Ansari X Prize, “an petition created in 1996 to stimulate private investment in space,” has spawned the new space race. This new field is “a race among panies and billionaire entrepreneurs to carry paying passengers into space and to kick-start a new industry, astro tourism.” Part of the...
Happy new year!
From all of us here at the PowerBlog, please accept our best wishes for a happy, healthy and prosperous 2006! Care to make any predictions for the new year? Feel free to leave them in ments. ...
Related Classification
Copyright 2023-2026 - www.mreligion.com All Rights Reserved