Written evidence submitted by Aldersgate Group [TTE0012]

Trade and the environment inquiry

Submission from the Aldersgate Group

October 2019

1.         The Aldersgate Group is an alliance of major businesses, academic institutions and civil society organisations, which drives action for a sustainable and competitive economy. Our corporate members, who come from across the economy and have a collective global turnover of over £550bn, recognise that ambitious and stable environmental policies make clear economic sense for the UK.[1]

2.         The global transition to a zero carbon economy offers significant economic opportunities for the UK. British businesses are already leading exporters of clean technologies and services in areas such as offshore wind, ultra-low emission vehicles, energy efficient building engineering, environmental consulting, smart ICT solutions and green finance. Global investment in low carbon technologies and solutions is on the rise, with investment in clean energy exceeding $300bn for the fifth year in a row in 2018.[2] The UK is well-placed to tap into this economic opportunity and it is in our interest to use any upcoming trade deals to grow trade in low carbon goods and services and uphold high environmental standards that are in line with the UK’s domestic ambitions.

How effectively do trade and investment agreements address environmental issues, including climate change?

3.         Environmental issues are becoming increasingly reflected in Free Trade Agreements (FTAs). Environmental concerns were first considered as part of negotiations for the North American Free Trade Agreement (NAFTA). The agreement stipulated that under certain conditions, national environmental standards could be higher than those of trading partners even if this could disadvantage imports. It also stated that competitive advantages could not be created by lowering legal environmental standards, that environmental aspects had to be taken into account during dispute settlements and that the environmental impacts of trade liberalisation were to be monitored.[3]

4.         More recently, the EU-South Korea FTA commits the parties to implement multilateral environmental agreements they are part of and was the first to be subject to post ratification sustainability impact evaluations.[4] The Paris Agreement has since been mentioned explicitly in the EU-Japan Economic Partnership Agreement. This agreement also prioritises the promotion of trade and investment in goods and services of relevance to tackling climate change, such as renewable energy and energy efficient technologies, and allows parties to retain the right to regulate their own levels of protection to further policy goals relating to a number of issues including the environment and climate change.[5]

How does and should the Government approach issues of the environment and climate change in its trade and investment policy, and its work on export promotion?

Allowing flexibility for increasingly ambitious environmental standards

5.         The government’s 25 Year Environment Plan states that “environmental sustainability should be at the very heart of global production and trade” and that the UK “will be a passionate advocate for it”. The Plan also states that the government intends to “develop a trading framework that supports foreign and domestic policy, sustainability, environmental and development goals”.[6] If the UK is to deliver on its net zero target and the environmental improvement targets that should be introduced via the upcoming Environment Bill, government will need to have the flexibility to introduce gradually more ambitious environmental standards over time that are in line with its environmental and climate goals.

6.         For example, gradually tightening standards will be crucial to boost the market for zero carbon infrastructure (such as buildings), goods and services and bring emissions down in line with the UK’s net zero target. Ensuring that all infrastructure and components of that infrastructure (such as steel and cement) produced for use in the UK comply with these low carbon standards will support business innovation and help ensure that businesses investing in low carbon business models and processes are not undermined by competitors who 
are not required to meet similar standards in their home markets. It is essential therefore that the UK’s external trade policy and subsequent FTAs that are agreed provide the UK and its trading partners with the flexibility to increase their environmental standards over time in pursuit of legitimate domestic climate and environmental policy objectives.

Setting clear expectations in the UK’s external trade policy

7.         As a first step, the government should set an external trade policy governing all future FTAs that clearly expresses the UK’s intention to uphold high and gradually more ambitious environmental standards. The government should then ensure that future FTAs hold the line on environmental standards through, for example, commitments on non-regression and to multilateral agreements such as the Paris Agreement. Whilst this may be more challenging, it should also agree a principle of “environmental advancement”, whereby both parties to the FTA agree to the introduction of new, more ambitious standards over time (or at the very least, agree to provide each party with the flexibility to increase these standards over time).

8.         This approach will help drive both environmental and economic benefits. For instance, as global manufacturers tend to develop products that comply with the highest standards in place in all the markets that they operate in, the UK could have a strong competitive advantage by taking an early lead in developing strong standards and then ensuring these set the bar in international trading agreements. FTAs can also be a useful way to complement voluntary conservation related certification schemes such as FSC and MSC. Whilst voluntary certification is a useful first step to increase trade in sustainably managed goods, it ultimately needs to be complemented by legislation to ensure market-wide participation, a level playing field and a gradually tightening of standards.

Effective enforcement provisions are needed

9.         Environmental provisions in trade deals are often contained in their own environmental chapter; however, such chapters are not always enforceable in the same way that the economic terms of a trade deal might be. The government should therefore address the status and enforcement of environmental provisions in future FTAs by ensuring that environmental provisions must be enforceable in the same way as economic terms and not simply be expressions of intentions or non-binding aims.

The importance of continued parliamentary and stakeholder scrutiny

10.     The government should also ensure that sustainability impact assessments form a key feature of the process by which all new trade agreements or amendments to existing trade agreements are decided. Such reviews must be carried out sufficiently early in the negotiating process to inform both parties of the consequences of the terms being agreed so they can be amended to support environmental aims. It will be crucial that this process is as transparent as possible and incorporates comprehensive stakeholder engagement and parliamentary scrutiny, including through the involvement of specialist parliamentary committees.

11.     The impact of trade deals on the environment should also be regularly reviewed throughout the life of a FTA. The sustainability impact assessment process must be complemented following ratification by periodic assessments on the impact of the terms of trade on the environment to determine whether modifications should be made. These assessments should be made publicly available.

How might the Government seek to address environmental issues, including climate change, at the multilateral and plurilateral level as part of its trade policy post-Brexit?

12.     The government should use bilateral and multilateral partnership agreements and its role in plurilateral forums such as the WTO to drive trade in low carbon and environmental goods and services. The Environmental Goods Agreement currently under negotiation at the WTO aims to eliminate tariffs on certain environmental products and should be a priority.

13.     Furthermore, the government should continue to use its participation in international fora such as the UNFCCC and UNCBD to drive stronger environmental standards which can then be cross-referenced in future FTAs.

How can coherence be ensured between trade and environmental policy across Whitehall?

14.     There should be a cross-government working group (both at ministerial and civil service level) focused on the delivery of net zero and other environmental improvement targets. This would help ensure that all government departments are aware of the policy, regulatory and fiscal support required to achieve these goals and ensure consistency with other policy areas such as trade.

October 2019