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WORKING PAPER: UK trade policy and climate change – maximising commercial, climate and development outcomes

This working paper assesses the challenges and opportunities between UK trade policy and climate commitments.

As the UK prepares to leave the EU, it will need to re-evaluate its trade policy. This coincides with both the submission of Nationally Determined Contributions (NDCs) and the Paris Agreement on climate change, signed by over 190 countries, which will require huge investment in low-carbon goods and services worth
£1–1.8 trillion a year by 2030. The UK is well placed to service this demand, with world-leading capability across a range of low-carbon, climate-resilient sectors and products, and investments in future low-carbon technologies.

For many years the UK Government has placed a strong emphasis on ‘policy coherence’, the systematic promotion of reinforcing policy actions across government departments towards a set of objectives. At the juncture of Brexit (Britain’s exit from the EU) and increasing climate action, the UK has the opportunity to design its trade and complementary policies to achieve the optimal commercial, climate and poverty alleviation outcomes for itself and its partners.

The UK’s policy on free trade agreements (FTAs), which is currently being formulated, offers significant scope for supporting climate and development outcomes. In many places win–win outcomes can be achieved. Where there are trade-offs, a policy-coherent approach can help manage any negative impacts or unintended
consequences.

A structured approach to designing FTAs that deliver trade, climate and developmental outcomes requires establishing: (1) policy objectives and potential synergies and trade-offs; (2) UK strengths against potential market opportunities; and (3) an approach to the commercial provisions within FTAs and complementary policies that deliver the optimal outcomes.

FTAs contain multiple elements that could impact on climate change and development, with eight offering the greatest potential to maximise commercial, climate and developmental outcomes. These can be grouped into three categories.

  • Triple wins: scope for FTAs to deliver commercial, climate and developmental outcomes with minimal
    trade-offs in tariffs, trade in services and establishment, and product standards and technical
    regulations.
  • Policy coherence: a policy-coherent approach to FTA provisions in intellectual property rights and
    procurement can help deliver optimal commercial, climate and development outcomes alongside
    complementary policies and programmes.
  • Policy cooperation: where FTA provisions in sustainable development chapters, private product
    standards, and environmental taxes and subsidies can enhance bilateral and multilateral cooperation
    between partner countries.

An FTA Trade and Climate Checklist is developed to support trade policy-makers to identify the provisions within FTAs and the complementary measures most likely to deliver the optimal commercial, climate and developmental outcomes.

Countries that are actively pursuing climate action and improving development outcomes are likely to see benefits of a trade deal which also offers them access to the skills and goods that the UK can offer, supplemented by other forms of cooperation and support provided by the UK. A collective and coherent suite of bilateral cooperation in trade, climate and poverty alleviation is far more likely to achieve the outcomes desired by the negotiating parties. Good deals can be struck – not just for trade, but also for climate and development.

Read the full paper here.

Photo: Dana Smillie / World Bank

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