In Negotiating Trade After Brexit, the Tories Missed a Key Opportunity to Accelerate Climate Goals

The impact of the pandemic has forced us to face fundamental questions around the operation of the economy: how it is run, who benefits from it, and who does not.

Covid-19 has sent shockwaves across the global economy, with supply and demand disruptions upending international trade. The pandemic response generated almost 100 export restrictions in key supply chains worldwide, leading to shortages in medical equipment, among other things. Yet even before the coronavirus crisis, global trade was facing a multiplicity of problems against a backdrop of sluggish economic recovery, concerns about the distributional consequences of global value chains, World Trade Organisation (WTO) governance gridlocks, and heightened trade tensions between global powers.

Amid these crises sits Brexit. Having gone from being part of the world’s largest single market to navigating trade deals alone, the UK will have a significantly weakened negotiating hand. And far from a simple exchange of goods and services, trade and investment encroach on domestic policy space for everything from public services to labour rights and climate regulations, coded in legal frameworks that can deepen global imbalances: between wealthy and poorer countries, and between multinational corporations and workers in their supply chains and on the frontline of climate breakdown.

Despite Brexit dominating headlines, and despite the UK’s rhetorical ambition to become a global leader in tackling climate change, climate and environmental justice have been largely absent from the public debate on future trade. This is even more surprising considering the current trajectory for post-Brexit trade strategy: a deregulated race-to-the-bottom for social, labour, climate and environmental standards in the name of ‘attracting investment’. The domination of the free trade paradigm has weakened critical engagement with conventional wisdom, with debate on future trade locked between a choice of accelerating or protecting the status quo. The reality is that making a ‘success’ of Brexit in the interests of workers and climate here and around the world requires us to break out of this false choice to urgently advocate for an overhaul of trade and investment regimes.

The existential threat of climate breakdown must accelerate what many leading voices in the Global South, feminists, and indigenous groups have been calling on us to do for decades: to transform trade in the interests of people and planet. Having contributed to the majority of current and historic carbon emissions, including through colonial exploitation and resource extraction, there is an enhanced onus on wealthy states like the UK to rapidly decarbonise and build a reparative agenda of climate and economic justice.

A systemic response to a systemic crisis: Reimagining UK trade.

In a recent report by Common Wealth, we recommend a new approach to help secure a just, sustainable and thriving future for UK trade. The first step is to accelerate our national commitment to net-zero before 2035, explicitly orienting trade policy as a tool to deliver a rapidly decarbonised economy and more equal society. Such a commitment must be accompanied by the creation of a UK independent trade monitoring body to fundamentally shift how we measure our success in trade, no longer only considering export deficits and ‘competitiveness’, but prioritising the number and quality of jobs created, the labour share of GDP and emissions reductions.

Following this is the urgency to secure policy space to respond to the pandemic and advance the ambitious scope of a comprehensive Green New Deal. It is indefensible that governments are unable to take necessary actions to protect people for fear of WTO disputes and corporate lawsuits. As immediate steps, the UK should advocate for a ‘peace clause’ on trade and investment rules on pandemic-related actions to overcome barriers to emergency measures, and support a climate waiver at the WTO for targeted exemption from trade rules for action commensurate with the Paris agreement. Additionally, future UK bilateral trade agreements must have a climate carve-out that prevents disputes on climate justice policies, freeing up policy space to take bold and ambitious climate action.

The post-Brexit trade strategy has largely focussed on barrelling ahead with free trade agreements (FTAs) with economies multiple times our size. In this unchartered territory, there remains a danger that securing trade deals will be regarded as more important than the details in them. Instead, the UK should seek temporary continuity agreements to ensure a smooth transition while preparing a more robust strategy of how trade and investment will be utilised to achieve domestic and international goals.

The UK must carry out a systemic climate retrofit of trade policy in service to a Green New Deal, but the design is key. For example, while there is a growing consensus from the EU and the incoming Biden administration to explore a border carbon adjustment (BCA), any such measure must recognise the role of wealthy nations in locking poorer nations into trade deals and other economic relationships that facilitate fossil fuel exploitation, like the EU-Mexico modernised FTA. Further, initiatives from wealthy states on a just global transition must be connected to a mechanism of climate reparations, which can provide a means of adequately financing mitigation, adaptation and loss and damage for those already at the sharp end of both an unequal economic system and the climate crisis.

As demonstrated by the dossier showing the US seeking “total market access” to parts of the NHS, trade and investment can impact public services, for example by limiting governments’ ability to use public procurement and opening up services to privatisation. Protecting public services against trade liberalisation means excluding them from trade deals, which will entail bold but necessary action, like not joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

One of the central ways trade the trading system has safeguarded corporate interests is through the investor state dispute mechanism (ISDS), which enables investors to legally challenge countries for perceived violations of their rights to profits, resulting in the watering down of climate and environmental regulation, and foreign companies suing governments. The UK should follow the lead of countries such as South Africa to revise bilateral investment treaties and exclude ISDS, as well as follow Italy in withdrawing from the Energy Charter Treaty altogether. At the same time, we should create new mechanisms that rebalance power in the interests of workers rights, supporting exploitation-free supply chains by, for example, energising the United Nations Binding Treaty on Business and Human Rights.

The pandemic has further revealed how the intellectual property rights (IPRs) upheld by the WTO delivers monopoly rights for pharmaceutical giants. Instead, the UK should immediately support the waiver on IPRs for the Covid-19 vaccine, as proposed by South Africa, India and other low and middle-income countries at the WTO, as well as seek further reform for these rules.

Guiding all of our trade and investment approach should be a green industrial strategy to decarbonise our economic activities, change consumption to reduce emissions, scale green jobs and industries across the UK, and root out intersectional inequalities with stronger social protections and rights. While the UK Government recently announced a ‘Green Industrial Revolution‘, critics recognised it as lacking the scale of ambition needed to rapidly and justly decarbonise our economy. As we have learned from the pandemic, we must protect and expand our health and care workforce – disproportionately staffed by women and migrants – where millions of green jobs are to be found, while a new deal for workers can root out insecurity in our labour market and strengthen our industrial strategy.

The UK should harness an independent trade policy as one part of an integrated Green New Deal agenda, reframing trade and investment as tools for climate justice; building a green industrial strategy; safeguarding and enhancing public services; reining in corporate power to achieve climate justice, and retrofitting multilateral trade and investment architecture to create the conditions for a global green and just transition. It is time now to demand a transformative trade regime that secures a climate-just world where everyone can thrive.

Miriam Brett is director of research and advocacy for Common Wealth. 

Katie Gallolgy-Swan is policy coordinator for the UNCTAD and Boston University GDP Centre partnership on a Global Green New Deal.