NewStatesman | 23 January 2020
How a trade deal with the US could destroy the UK’s climate change goals
by Adrienne Buller
In his speech following the Conservatives’s general election victory, Boris Johnson vowed to make the UK the “cleanest, greenest country on Earth” and reaffirmed his government’s commitment to carbon neutrality by 2050 – a target which 70 per cent of voters support. But that Holy Grail of post-Brexit sovereignty – a free trade agreement with the US – risks thwarting these promises.
Concerns about divergence from the EU and a trade deal with the US have been raised consistently throughout the Brexit debate, ranging from food standards to NHS privatisation to the threat to the British automotive industry. But less attention has been devoted to the consequences for the UK’s climate change goals.
The most immediate danger is the collapse of environmental and climate regulations: almost 80 per cent of the UK’s existing regulations originate from the EU. The imperative of diverging swiftly and firmly from these standards to pursue a US trade deal will likely create years of chaos for safeguarding the climate and nature in the UK – years we don’t have to spare.
Many have rightly argued that freedom from certain EU laws in theory provides an opportunity for the state to act far more radically over climate change. Under Johnson’s government, however, it seems unlikely that opportunities such as the loosening of state aid rules will be used to make the fundamental economic changes that are needed.
Earlier this week, the government passed a new Agriculture Bill containing welcome steps to mitigate farming’s impacts on the environment, such as soil degradation and biodiversity loss. However, there remained a glaring omission: protections for food standards and farmers in future international trade agreements. The omission was alarming, but unsurprising; it followed Chancellor Sajid Javid’s proclaimed intent for the UK to diverge from European regulations after Brexit.
Even if the government’s stance were different, on the battlefield of international trade, its intentions would quickly collide with the investor-state dispute settlement mechanism (ISDS). Most bilateral or plurilateral trade agreements employ this mechanism, which entitles private investors to sue states for discrimination against their business, whether that be support for domestic industry or environmental protections. As New Republic journalist Kate Aronoff has noted, close to 40 per cent of ISDS arbitration cases brought by investors against states relate to the environment and energy.
The recently passed US-Mexico-Canada agreement offered little hope for change in this respect; though its apparent elimination of ISDS rules has been widely applauded, startling exceptions remain for the oil and gas industry. More troubling still is the complete exclusion of the phrase “climate change” from the 250-page agreement, despite it governing energy exchange between some of the world’s foremost fossil fuel producers.
Again, this omission will be of little surprise to those who recall the leak of documents recording conversations between US and UK trade representatives by Labour during the 2019 election. While attention focused on risks to the NHS, the document also contained an alarming passage from an American representative, who stated that the mention of emissions reductions in trade agreements is forbidden.
What if, in lieu of a US trade deal, the UK were to follow World Trade Organisation rules? Here, too, the US is prolific at challenging other states under the dispute settlement process. It has successfully sued both the Indian and Canadian governments over support for domestic solar energy products, on grounds ranging from local procurement rules to feed-in tariff schemes. And as the tariff war between the US and China has shown, the US is unbothered by a fight – even when it hurts domestic industry.
Compared to the vast domestic economies and resource wealth of China, India and Canada, the UK is on a remarkably weak footing. As a comparatively small country in which services account for 80 per cent of GDP, the UK has few chips with which to bargain. Recent pressure for Britain to abandon fishing rights in exchange for EU access for the financial services industry is emblematic of this.
Similar sacrifices will no doubt be on the table in any future trade negotiations, putting the UK at risk of signing away not only fishing rights but also the right to preserve ecosystems, intervene to support a struggling domestic renewables industry, or curb carbon emissions. Indeed, in stark contrast to its strong negotiating hand as part of the EU trading bloc, the UK may now find itself vulnerable to the punitive trading arrangement that the global North has long inflicted on the global South.
What, then, for the UK’s ability to combat climate change? Ahead of the UN conference (COP26) this November in Glasgow, and with public concern over the climate emergency at an unprecedented high, the government cannot wish this issue away. Rather, in solidarity with those already harmed by the unjust multilateral system, the UK should use this moment to push for a radically different trading system – one that doesn’t demand austerity and environmental degradation in exchange for “liberalisation”.
As with the founding of the original Bretton Woods institutions after the Second World War, a new system of international institutions, fit for tackling the climate crisis, could just emerge from this moment of crisis (as lofty as this dream may appear).
This week, as bank heads derailed early hopes of climate action at the World Economic Forum in Davos, the need for an overhaul of existing international institutions has been made abundantly clear. “Climate change is a global problem, but no global solution is in sight,” a conference document by JP Morgan declared. Perhaps this diagnosis is correct; but if there is to be a solution, a transformation of our international economic system will be at its heart.
Adrienne Buller is senior research fellow at Common Wealth.