Associate Director, Climate, Environment and Sustainability,
The planet is facing a multitude of environmental threats from expanding greenhouse gas emissions to biodiversity loss and resource depletion. Policy makers and the public are rightfully concerned about the impact of our activities on the planet. In this piece, we examine how trade policy can be a vehicle to deliver environmental goals.
Trade develops markets, increases competition, lowers prices and encourages growth. It is a force for good, having lifted over 1.1 billion people from poverty since 1990. While there is a perception that trade is inherently at odds with sustainability goals, recent OECD data shows that the volume of global trade has grown more rapidly than the carbon emissions embodied in it, pointing to a decoupling of economic growth and CO2 emissions.
But with pressing environmental and climate challenges, more to use the power of trade policy to support the low carbon transition and delivery of Sustainable Development Goals: in short, we need to rethink trade to align it with the challenges of the 21st century.
Environmental provisions frequently feature in Free Trade Agreements (FTAs). 630 FTAs signed between 1947 and 2016 include environmental provisions: exceptions to trade for the conservation of natural resources, the protection of plants or animals, or provisions to tackle illegal trade-related practices, including fishing, mining and logging. But these have generally been vague statements of ambition and not legally binding. There have been calls in the past for legally enforceable environmental standards but these have rightly been rejected. They are a heavy-handed mechanism that risk alienating partners and increasing trade tensions. A more collaborative approach is needed.
- Green tariffs: World Bank research found that the top 18 developing countries ranked by greenhouse gas emissions would be able to import 63% more energy-efficient lighting, 23% more wind power equipment, and 14% more solar power equipment if the trade barriers these very countries maintain on these goods were abolished. Whilst there have been pockets of good progress, for example in 2012 the Asia-Pacific Economic Cooperation economies agreed to cut tariffs to 5% or less on 54 environmental goods covering around $300bn of annual trade in the region, more can be done globally. The EGA has seen 18 WTO members – accounting for most global trade in environmental goods – examine tariff elimination for over 300 environmental products. Zero tariffs would provide government and business with the ability to acquire more and better-quality environmental technologies at lower costs, andwould diffuse innovation and technology around the world. These discussions must become more inclusive of other WTO members and then accelerated.
- Develop fora for discussions alongside FTAs. Consultation, transparency and cooperation remain the best means to encourage third countries to increase their environmental standards. Joint governmental and non-governmental committees could be established to work with international partners to deliver more concrete and measurable environmental commitments. This could ensure international standards can be promoted and enforced, while FTA partners remain free to define policies adjusted to the labour and environmental standardsthey deem most appropriate for their domestic market. In this way, buy-in to enhanced domestic standards may be more easily assured from third country producers, as additional obligations will not be imposed upon them externally, but rather built with in-market national experts who are closer to the concerns and priorities of local producers.
- Support small companies in international supply chains: Help smaller companies in developing countries get access to finance. Technology, and in particular blockchain, has a role to play here as greater data accessibility for lenders and producers enables greater business certainty. This is already occurring as Sainsbury’s and Unilever worked together to develop a distributed ledger system that offers Malawian tea growers cheaper finance if they use certifiably sustainable production methods. Technology could therefore be the helping hand that smaller companies and those from developing regions require in order to operate more sustainably and to take advantage of the burgeoning green market. Governments could launch platforms, both within and without FTAs, with guidance, technology support and access to finance to push for common standards or certificates for green products, mutual recognition of said standards and procedures, and a broader commitment to work together to facilitate trade in green goods.
- Climate check existing trade deals and green international institutions. We need to see systematic WTO-UNFCCC dialogue via the WTO’s Trade and Environment Committee and the consideration of national trade policy’s consequences for existing climate change commitments in national Trade Policy Review.
These suggestions could help to ensure that the breakthrough technologies and standards that are being developed in the developed countries can be more rapidly applied around the world. It is possible to reorientate and harness the power of free trade to help address our global sustainability goals.
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