Three ideas to align trade policy with climate action
The new Labour government has a valuable opportunity to reset and modernise the UK’s approach to international trade.
In recent years, the country’s trade policy has focused on signing as many trade agreements with other countries as possible. Not only has this approach largely failed to produce results, it has exposed a moral and ideological vacuum.
The government under Conservative prime ministers Boris Johnson, Liz Truss and Rishi Sunak had no sense of what broader purpose free trade agreements serve, and how they contribute to international priorities on things like human rights, sustainable development and climate change.
Climate issues provide a clear demonstration of the inconsistencies of the non-strategy that has been followed during the past five years.
Successive Conservative governments recognised the existential threat posed by climate change, and made some strong commitments to reach net zero. Yet in 2022, the UK signed an FTA with Australia that is set to increase emissions, according to the government’s own estimates.
And in 2023, the UK joined a transpacific trade agreement, which — via its controversial investor state dispute settlement chapter — grants the right to companies from Canada and Japan to sue the UK if its climate policies bite into their corporate profits. The risks related to this ISDS were highlighted by a letter signed by 57 UK and Canadian academics.
Sorting out the mess
Business and trade secretary Jonathan Reynolds has committed to sorting out this mess by publishing a trade strategy that guides the UK’s approach to trade negotiations and lays out how trade policy will support the government’s priorities and obligations.
This is very welcome. At the Trade Justice Movement, we have set out what we want to see from a UK trade strategy. To return to the climate agenda, a trade strategy carries exciting opportunities.
The UK is an influential mid-sized power with an independent trade policy. It can be a leader on the world stage, demonstrating how international trade can support a transition to a cleaner and greener global economy.
Three-step plan
Here are three ideas to align trade policy with climate action that we would hope to see in any trade strategy.
First, and most obvious, the UK should only sign new agreements with strong environmental chapters. Commitment to the Paris Agreement should be a precondition for beginning any trade negotiation. The agreements themselves should include provisions that establish and enforce high levels of environmental protection.
A move in this direction would be a huge step forward from the status quo in which climate commitments — if they are even included in an agreement — tend to be framed in vague and non-binding language.
The UK should also reject ISDS. Our analysis shows this mechanism has been used by fossil fuel companies 261 times from the beginning of 1998 until December 2023, with a sharp rise in recent years. The country is signatory to more than 80 trade and investment agreements containing ISDS.
A new trade strategy is the perfect time to announce a blanket ban on new agreements containing ISDS, and to begin the process of terminating or renegotiating existing deals.
It is not all about bilateral trade agreements. The UK should show global leadership by supporting proposals for an international climate waiver. This would prevent trade rules being used to obstruct climate action, and the government should push for its adoption in multilateral spaces such as the World Trade Organization, the G20 and the OECD.
These are only three suggestions. Our model trade strategy contains a full set of recommendations for how the UK government can open a new chapter of progressive and modern trade policy.
This op-ed by Tom Wills, Director of the Trade Justice Movement, originally appeared in Sustainable Views on 22 June
