IPPR: G7 provides opportunity to 'green' the special relationship and global trade

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The UK should seek to revitalise the ‘special relationship’ at this week’s G7 Summit in Cornwall, by working with the Biden administration to push for a “bold new trade agenda” that advances global climate action.

That is the core recommendation from a report published this morning by the IPPR think tank, which argues there is significant scope for improved trade diplomacy between the US and UK now that the Trump presidency has ended.

The report proposes that the two nations should work more closely together to reform the World Trade Organisation’s rules to ensure they explicitly work to address the climate and nature crises, arguing that the UK and US governments should lead calls for the reduction in barriers in trade of environmental goods, such as wind turbines and solar panels, and promote the idea of a ‘climate waiver’ which would give countries more leeway to take climate action, for instance by subsidising industries, without instigating trade disputes and tariffs.

IPPR associate director Marley Morris emphasised that the UK had an opportunity to take on a global leadership role on green trade issues as it is set to host the G7 and COP26 summits this year.

“The UK should make the most of this by working with the US and other trade partners to spearhead efforts to rewrite the rules of global trade,” he said. “Taking this opportunity could help liberalise trade in environmental goods, address the risks of carbon leakage, and pave the way for an environmentally ambitious trade deal with the US.”

The leaders should also seek to broker the “greenest trade deal in history” that is “unprecedented in its environmental, climate and social ambitions” as they seek to deliver a landmark UK-US trade deal in the wake of the UK’s departure from the European Union, the report argues.

Robust non-regression clauses to uphold high environmental standards, rigorous enforcement and dispute resolution mechanisms, and measures that support cooperation, transparency and civil society involvement could all establish a new gold standard for global trade deals, the IPPR said.

IPPR’s appeal for a US-UK trade deal that protects the environment and the climate comes after the government has faced months and months of pushback from the public, farmers, MPs and civil society after unveiling plans for a potential trade deal with the US that many fear would allow imports of so-called ‘chlorinated chicken’ and other food products produced to lower environmental and animal welfare standards than in the UK.

But Morris argued the election of President Joe Biden offered the UK with an opportunity to broker a world-leading green trade deal with one of its biggest trading partners.

“With a new administration in the US and the beginnings of an independent trade policy in the UK, now is the time to revitalise the ‘special relationship’ with a joint trade agenda to promote climate action, tackle inequality, and safeguard human rights,” he said.

The IPPR also argued the UK and US have a unique opportunity to work together on addressing the problem of ‘carbon leakage’ – where industries in countries with stricter climate policies relocate to countries where rules are more lax. With the EU, the two nations could collaborate on new principles for how the problem can be tackled – for instance through carbon border taxes – while minimising the risk of inflaming trade tensions, the report argued.

The issue of ‘carbon leakage’ is particularly pertinent in the UK, which is the G7’s biggest net importer of carbon dioxide emissions, the IPPR said. Analysis of World Bank and Global Carbon Project figures included in the report reveals that the UK imported roughly 2.4 net tonnes of CO2 per person between 2009 and 2018.

The figures come just a day after the UK was singled out as the second most exposed nation to the EU’s proposed carbon border mechanism regulation.

Analysis posted to Twitter yesterday by Centre for European Reform senior research fellow Sam Lowe, in the wake of a leak of the draft EU regulations, highlighted that that only Russia is more exposed to the proposed EU carbon pricing regime on imports than the UK.

The findings reveal that the UK imports more than $15bn of products to the bloc that would be affected by the planned carbon border adjustment mechanism. However, the UK is expected to be exempt from the scheme, if its own emission trading scheme is deemed to match or exceed the ambition of the bloc’s existing carbon pricing regime.

Establishing greener trading rules remains a daunting challenge, with previous efforts to agree an international trade deal covering environmental goods and services having faltered. Meanwhile, hopes of an explicitly green trade deal between the US and UK are undermined by the enormous strength of the US agricultural lobby and the US government’s insistence that any agreement would require full access for agricultural exports. However, IPPR’s report emphasises how with a new administration in the White House that is prioritising climate action a window opportunity may have opened up to advance the cause of green trade.