What should a climate compatible trade policy look like for the UK?

Posted on February 23, 2023
Aerial view of shipping containers

Last year, I joined the UK Climate and Trade Commission (CTC), convened by the Trade Justice Movement and Queen Mary University of London. It was set up to develop practical proposals for how the UK government can align its trade policy to support its climate ambitions, something the government has consistently failed to do. Indeed, it has consistently refused to set out a trade strategy. The closest it has come to a strategy is the aim of striking as many free trade agreements (FTAs) as quickly as possible, almost regardless of how they serve wider government aims, including the net zero goal and nature restoration.

But what would a trade strategy fit for a decarbonising world look like? What would it mean for the new FTAs? And what can the UK do, post-Brexit, to improve the world trade system? The CTC brought together an impressive group of experts to grapple with these questions and develop practical proposals for climate friendly UK trade policies. The breadth and depth of experience around the table was apparent in all our discussions. We did not agree on everything – this stuff is difficult – but we did agree that international trade can and must help tackle the climate crisis and accelerate the global transition to net zero carbon.

The commission had 20 recommendations

Our final report, Towards a fair and strategic trade and climate policy reflects our assessment of half a dozen areas where the government should focus its efforts to ensure trade policy is a driver rather than a blocker of climate action. Among its 20 recommendations (see pages 1-2 of the report) are the following:

  • The UK should develop a trade strategy that aligns trade policy with climate goals as part of a joined up economic strategy.
  • The government should facilitate a national conversation about trade, listening to stakeholders and parliament. In its short life, the Department for International Trade often ignored the rest of government, let alone MPs and civil society. The new Department for Business and Trade must be more open.
  • The UK should champion multilateralism and work with others, including in the global South, to reform World Trade Organization (WTO) rules.
  • It should support co-ordinated, inclusive global co-operation on carbon pricing and leakage. This was the most contentious area in our discussions. Policies such as carbon border adjustment mechanisms (CBAMs), supported by environmentalists in the EU and UK, can look discriminatory to those in the global South: “you exported your polluting industries to us; now you plan to hit us with penalties while you invest in high tech, low carbon solutions to boost your own economies.” We know the urgency of the climate crisis and that the world’s poorest people are already suffering most from it. And we know how slow multilateralism can be, particularly in trade. But climate solutions must support, not undermine, global justice.
  • Partly with this in mind, the UK should develop a climate and development programme that combines genuinely concessional finance, investment at scale and meaningful technology transfer.
  • We should exit the Energy Charter Treaty and exclude Investor State Dispute Settlement (ISDS) provisions from future trade and investment agreements. Polluting corporations must not be given the means to override national net zero policies.
  • The UK should ensure that joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) does not undermine action on climate and nature.
  • To address consumption emissions and avoid carbon leakage, the government should consider a range of policy levers to support the UK and its trading partners to decarbonise in parallel.
  • The government should consider measures to improve the climate impact of FTAs, including stronger non-regression clauses, pro-climate exemptions and positive incentives.

These recommendations come at a critical time as governments, including our own, begin to consider the connection between trade and climate change. Trade policy must help deliver net zero and nature’s recovery, rather than offshore environmental damage.

Trade’s impact on nature mustn’t be ignored

It is also important to consider the impact of trade on nature, which is too often the poor relation of climate policy. This was beyond the remit of the commission.

There are no easy solutions and creating the level of alignment and cohesion we need will not happen overnight. Trade policy is both deeply complex and deeply political. It cannot be seen only through the prism of the economy or the climate. Policy must also be rooted in the principle of trade justice. But, as the UK takes to the stage as an “independent trading nation”, it cannot continue to underplay the links between climate and trade.

Too many worthy commission reports sit unread on the shelf. I am not confident that the trade secretary, who has previously described net zero as “unilateral economic disarmament”, will heed this one. But she should. And if she will not, I hope it will inform the evolving policies of Labour, which has hosted a discussion of this report, and the other opposition parties.

This opinion piece by Shaun Spiers originally appeared in Inside Track on 23 February 2023. Shaun Spiers Executive director of Green Alliance (www.green-alliance.org.uk) and sits on the UK Climate and Trade Commission.


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