Why the UK’s trade must align with its climate commitments

Comment piece by the Fairtrade Foundation Policy Team

One of the uncomfortable truths about trade is that producing goods and trading them uses energy, and results in carbon emissions. That is always going to be the case, and it presents a difficult task for policy makers.

Trade is required to bring people the things they need, and it is vital for building economies – but its contribution to global emissions is huge. As the recent IPCC report tells us, if carbon emissions aren’t halved by 2030, the world will go past tipping points and the damage to us all will be irreversible. So, every area of government needs to be working hard to transition to a low-carbon future, and this includes trade.  

It is a matter of concern that the UK’s trade agreements are not properly aligned with its climate commitments, and that trade policy is at odds with climate action. For example, the provisions within the UK’s trade deals with Australia and India are predicted to increase environmental harm and greenhouse gas emissions, due to higher levels of transport and the intensification of industrial activity. Surely this is going in the wrong direction at a time when we need to be setting up efforts to tackle the climate crisis. 

Trade rules can hinder climate action in more direct ways. For example, agreement at the World Trade Organization (WTO) on fossil fuel industry subsidies has not been reached, and the sharing of climate technologies is often limited through strict trade rules. When trade is opened up, there is also a need to make sure that we don’t see businesses relocating their operations to countries with lower environmental regulations, resulting in an increase in their emissions and environmental harm.

Why this matters to Fairtrade 

Change in trade was already much needed. At Fairtrade, we’re aware that there is a big power imbalance in trade. Our farmers in low-income countries across the world often find themselves battling with unfair purchasing practices and persistently low prices. Farmers and workers can be chronically underpaid and unable to afford basic needs, such as a nutritious diet and adequate healthcare.  

The impact of climate change on agriculture makes this vulnerability worse. More intense and frequent droughts and floods are making it harder to grow crops and are increasing production costs. There is an increased risk to the livelihoods of producers and the viability of farming in the future: not surprisingly, earning a low income makes it very difficult to invest in sustainable production methods or adaptation measures.  

Fairtrade wants to see trade working as hard as possible for farmers, and that means trade policy pulling its weight to tackle the climate crisis.

Why this matters to the UK 

Food imported from overseas makes up 45 percent of the UK’s food supply, with 10-15 percent coming from low-income countries. So, we ignore the wellbeing of farmers overseas at our peril. The more that farms struggle with the impacts of the changing climate and the existing challenges of poverty and human rights, the more UK consumers will be vulnerable to shortages and price increases for the food that they have come to enjoy and expect, such as bananas, chocolate and coffee. This is about keeping UK food supplies secure and ready for the future. 

And of course, the UK is legally obliged to meet our international climate commitments, both the national net zero target and the Paris Agreement. Although the UK is making important progress in reducing domestic emissions, this good work could be undone by the carbon emissions embedded in our imports. In fact, as much as 46 percent of the UK’s carbon footprint comes from emissions released during the production of goods overseas to meet the UK’s consumer demands.  

However, it is not all bad news: there are opportunities too. Transitioning towards a net zero economy also poses significant economic opportunities for the UK, in terms of growth and job creation in sustainable industries.

What needs to change? 

The alignment of trade with climate change action can be achieved through two main channels: collectively with other countries at the WTO and within the UK’s own trade agreements.  

Here are five practical suggestions for better alignment between trade and climate policy: 

1. Trade policy should encourage the trade of goods and services that are sustainable and important in mitigating and adapting to climate change 

The UK could work with other countries to finalise the Environmental Goods and Services Agreement at the WTO. This is a complex agreement, but reaching consensus could lower taxes on the import of environmental goods and services, to encourage an increase in their trade. The right agreement could make it easier for lower income countries to get hold of renewable energy technology, or specialist environmental expertise. Even without the WTO, the UK can move forward to support trade in environmental goods and services in its own trade agreements. 

2. The UK government should ensure that trade agreements do not result in an increase in emissions  

It simply isn’t right to sign new trade agreements that do not include a clear plan for reducing emissions. To support the UK’s legally binding emission reduction targets, comprehensive and timely environmental impact assessments are required, to identify the potential environmental harm of different trade measures. Negotiators should then use these assessments to determine which trade provisions to include in an agreement, to make it as sustainable as possible.    

3. Trade policy should incentivise the achievement of greater environmental protection 

The introduction of trade standards that require goods imported into the UK to show that proper environmental growing conditions have been met, could encourage more sustainable production and consumption. A carbon border adjustment mechanism, which places a tax on the import of goods with high carbon footprints, should also be explored to discourage the trade of high emission goods. However, care should be taken to ensure that any such measures do not unintentionally have an adverse effect on vulnerable farmers and workers. 

4. Trade policy should support the transition to renewable energy 

At the WTO, current rules on subsidies should be reformed to phase out support for fossil fuels and increase backing for renewable energy. The UK should also work to address the inappropriate use of investor protection rules within trade agreements, which allow investors to sue governments for introducing stronger environmental regulations against fossil fuels. 

5. The UK government should publish an overarching strategy outlining how the UK’s trade policy will align with its environmental commitments 

Surprisingly, there is no published strategy in which the government explains its approach to linking up trade and climate policy. A trade and climate policy could encourage businesses to invest in sustainable trade and provide a framework for our trade agreements which makes them a positive instrument for change. Surely that’s good news for everyone.