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UK Trade Deals: the High-Carbon Post-Brexit Agreements
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The UK’s exit from the European Union represents both risk and opportunity when it comes to the environmental impact of future UK trade deals. The UK Government can use the opportunity to protect and improve the natural environment by driving the international community to adopt higher standards.
However, economic concerns and pressure to secure advantageous trade deals mean that the UK is at risk of undermining its environmental efforts.
👉 In this article we’ll explore why Brexit has created a situation of both opportunity and risk with regards to the environmental impact of future UK trade deals.
First up, what are trade deals?
“ Trade agreements, or trade deals, set out the rules for buying and selling goods and services between two or more countries.They’re designed to facilitate trading by reducing restrictions on imports and exports, and usually involve the situation whereby countries agree to engage in fewer trade protections. ”
Trade agreements can be unilateral, for example where one country (usually a developed one) lowers their trade restrictions (usually for developing countries) to encourage more trade. They can also be bilateral, ie. where two countries reach a deal to lower their trade restrictions for one another. Or they might take the form of a multilateral trade agreement, which is a trade agreement involving multiple countries.
👉 Trade agreements bring with them numerous benefits, not least that they allow countries to attain rapid economic growth and attract foreign investments.
Other benefits of trade deals include:
- lowering the price of products;
- increasing a country’s exports;
- providing a greater choice of goods.
However, there can also be a number of disadvantages when it comes to trade deals, including negative impacts on the environment.
“ The resulting economic growth that a trade deal often brings can have an obvious impact on the environment by increasing pollution and carbon emissions due to expanded production, however, there is also a risk that a country inadvertently contributes towards global warming by allowing the import of products that harm the environment in some way and that would not otherwise meet the requirements of the importing country’s own standards. ”
At the extreme end of this, trade deals can encourage the specialisation of carbon intensive activities in specific countries - this is known as the pollution haven hypothesis.
The UK’s exit from the European Union represents both an opportunity and risk in terms of the new trade deals that it is seeking to establish. On one hand the UK can encourage the raising of environmental and sustainability standards with its negotiating partners, but there is also the risk that the UK opens itself up to accepting products and goods that are of a lower standard when it comes to their environmental impact.
How did Brexit impact UK trade deals?
Up until 2020, the UK was a member state of the European Union. This meant that the European Commission had exclusive competence to manage the UK’s trade and investment relations with non-EU countries on behalf of the UK Government.
“ In effect this meant that the European Commission was responsible for the development of trade policy, as well as the negotiation and conclusion of all international trade agreements undertaken at the EU level. The reasoning behind this is that by acting as one bloc, member states can benefit from the increased negotiating power of the EU, which leads to more favourable outcomes when forming trade deals with non-EU countries. ”
Another benefit is that all international trade deals formed between the EU and non-EU countries must drive sustainable growth, and are subject to EU rules on trade and sustainable development. For example, parties to EU trade agreements are required to effectively enforce their environmental laws, sustainably trade natural resources, encourage trade that tackles climate change, and agree not to deviate from environmental laws to increase investment.
These rules offer some form of protection with regards to the environmental impact of trade agreements.
👉 Following the UK’s decision to leave the European Union, the European Commission ceased to manage the UK’s international trade deals and the UK Government now has the power to form its own trade deals. This also means that the UK is no longer bound by the EU’s sustainable trade policies.
Who is responsible for the UK’s new trade deals?
“ Following the UK’s Brexit referendum, the UK Government created the Department for International Trade in preparation for the UK’s exit from the European Union. This government body was responsible for negotiating and extending trade deals between the UK and other countries. It was tasked with coordinating and delivering a new trade policy for the UK and had a target of 80% of UK trade to be covered by free trade agreements by the end of 2022. ”
Unfortunately this target was not reached and progress on trade deals has been slower than expected. This is something that has increased pressure on the UK Government, and could potentially encourage the lowering of standards in order to facilitate agreements.
In February 2023, Prime Minister Rishi Sunak announced that the department would be merged with the Department for Business, Energy and Industrial Strategy to form the new Department of Business and Trade. This new body is now responsible for business and trade both in the UK and abroad.
However, it should be noted that under the Trade Act 2021 (ie. the UK legislation governing the formation of trade deals), it is the UK’s Secretary of State who is responsible for concluding any trade deals that the UK negotiates. The act also includes provisions granting power to the UK’s Secretary of State to appoint members of the Trade and Agriculture Commission (TAC); a body tasked with ensuring that new trade agreements are consistent with UK standards relating to UK animal and plant health, animal welfare, and environmental standards.
It is the Trade and Agriculture Commissions responsibility to ensure that any UK trade deals negotiated do not undermine the efforts of the UK when it comes to climate change targets and environmental considerations. However, they have no input when it comes to negotiations of trade deals, and only scrutinise trade agreements after they have been signed.
What new trade deals has the UK negotiated?
The UK has over 70 trade agreements in place, however, many of these are ‘continuity’ or ‘roll-over’ agreements, ie. agreements that were in place before Brexit and that continue to remain effective until a new trade agreement is negotiated.
There are however, four new comprehensive trade deals that the UK has managed to secure: these are with Japan, the EU, New Zealand, and Australia.
In addition to these agreements, the UK is currently negotiating the formation of new trade deals with Canada, Israel, India, Mexico and the Gulf Co-operation Council (operating on behalf of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE).
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What’s the concern?
Differences in environmental standards and regulations between the UK and negotiating partners open the UK up to the possibility of causing indirect environmental harm, or lowering UK environmental standards.
The ongoing trade negotiations between the UK and both Canada and Mexico have been flagged as cause for concern due to the potential harm from the import of high-carbon beef from Mexico and low-welfare pork from Canada. Allowing trade deals that permit the import of such produce will compromise the UK’s own carbon emissions targets as well as allow the sale of meat from animals subjected to welfare standards that are far lower than that of the UK.
And it’s not just these potential new trade agreements that have come under scrutiny. The trade agreement governing trade between the UK and Australia has also proven to be contentious when it comes to the environment. Critics are quick to point out that if we replace food from the UK (or the EU) with food from Australia, we’ll be increasing carbon emissions due to increased distances involved with transporting the goods.
However, this isn’t the only point of concern, the trade deal provides no safeguards when it comes to environmental conditions for imports, nor does it sufficiently address the differences in regulatory standards between the UK and Australia’s food and farming sectors.
Farming practices in Australia tend to be much more industrially intensive and by importing produce that is produced with such farming methods, small farms in the UK will no longer be able to compete. This means that they’ll either be forced out of business or forced to lower their own standards, which could cause the UK’s farming system to become less environmentally sustainable in the long run.
Another area of concern when it comes to UK trade deals, is that they tend to limit a government’s ability to intervene by prohibiting action that can be deemed ‘discriminatory’ to overseas companies. Where the UK Government is limited in its ability to regulate environmental and sustainability standards, it will be increasingly difficult to decarbonise the UK economy.
“ While signing trade deals is intended to remove obstacles to the free movement of goods, services and money, often these ‘obstacles’ are important environmental and sustainability standards and practices. The UK Government’s apparent focus on signing the most economically advantageous trade deals places the UK in conflict with its commitments to reduce emissions and decarbonise its economy. ”
How can the UK better protect the environment through UK trade deals?
The UK has only negotiated a total of 4 new major trade agreements, and so it’s still very much at the beginning of its journey when it comes to negotiating new trade deals. This means that there is time to take stock and learn lessons from the trade deals that have already been negotiated.
👉 The UK should look to implement mechanisms to safeguard UK environmental standards and to ensure that they don’t unwittingly contribute to overseas emissions.
The Environmental Audit Committee (EAC) is a UK Government committee that is tasked with examining how government department policies and programmes affect the environment and sustainable development. It released a report on the UK’s footprint on global biodiversity and made a number of recommendations with regards to future international trade agreements. Let’s take a look at their findings in more detail:
- International trade agreements should incorporate the highest environmental and social standards, work towards the transition to sustainable supply chains, and protect the sustainability of the UK farming sector from the effects of cheap and low-quality imports.
- Sustainability impact assessments, carried out for all trade agreements, would help to ensure that trade deals signed by the UK provide benefits to biodiversity and would also limit the threat to the UK’s environment.
- The environment and biodiversity should be a mainstream consideration in all UK trade agreements. Leaving the EU represents an opportunity for the UK to become a global leader when it comes to the promotion of the highest environmental standards in trade.
By embedding these principles into all future trade deals the UK Government will be able to better safeguard the environment while simultaneously sending a strong message to trading partners that environmental considerations must be prioritised.
Looking forward
The UK’s failure to safeguard environmental standards through its trade agreements with Australia and other countries is problematic and introduces concerns with regards to other future trade deals. The potential trade agreements currently being negotiated with Canada and Mexico are another example of how the UK Government is falling short when it comes to preventing environmental harm - it’s not enough that the UK has adopted higher environmental regulations and standards, if we import low-quality, high-carbon products we’re still part of the problem.
The UK Government is now at an important juncture, it still has time to correct course and to adopt environmental protections into future trade deals. By standing firm on these considerations the UK can position itself as a global leader and may even be able to encourage the uptake of stricter standards in other countries.
What about Greenly?
At Greenly we can help you to assess your company’s carbon footprint, and then give you the tools you need to cut down on emissions. Why not request a free demo with one of our experts - no obligation or commitment required.
If reading this article has inspired you to consider your company’s own carbon footprint, Greenly can help. Learn more about Greenly’s carbon management platform here.
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