Good deals can be struck: The pursuit of FTAs that are good for trade, climate and development

03 November 2017

Phil Brown, Senior Trade Advisor

The UK Government has already signalled its intent to be a champion for free trade post-Brexit.  This includes negotiating ambitious free trade agreements (FTAs) directly with the world’s largest and fastest-growing economies, bringing together trade and aid policy to reduce poverty, and increasing the UK’s competitiveness through aligning its trade ambitions and industrial strategy.

When it comes to low carbon goods and services, as the fifth biggest economy and the ninth largest exporter in the world, the UK has world-leading capability across a range of sectors and products. It is investing heavily in the low-carbon technologies of the future such as low-emission vehicles and energy storage. And it has global research and development programmes, enabling collaboration between UK and foreign governments, companies, universities and wider civil society.

As a former head of the UK’s trade negotiations team and with responsibility for sustainable development within FTAs, I was delighted to work with PwC colleagues Lit Ping Low and Katie Booth on a report for the Climate and Development Knowledge Network (CDKN) on optimising commercial, climate and developmental outcomes through FTAs.  

When we began consulting with government colleagues on the exact focus of the paper, it was clear that there was an immense amount of trade and climate expertise within government. But many of the climate experts we spoke to said that while they knew that FTAs were important, they were struggling to identify what really mattered. We hope our paper will make a contribution to helping policymakers design the UK’s trade and complementary policies to achieve the optimal commercial, climate and poverty alleviation outcomes.  

We first reviewed the UK’s global strengths in low carbon goods and services.  We then compared these to countries’ Paris Agreement commitments,  focussing on the Nationally Determined Contributions (NDCs) of five large economies - Brazil, Russia, India, China and South Africa - plus a further five developing countries - Bangladesh, Colombia, Kenya, Indonesia and Pakistan - where CDKN has been supporting the development of climate policy.  

While the US’ planned withdrawal from the Paris Agreement raises concerns about the future of the Paris Agreement itself, there is undoubtedly a huge low-carbon structural transformation underway and this will require immense investment in low-carbon goods and services, worth perhaps £1.0–1.8 trillion a year by 2030. When comparing it against the UK’s current and potential strengths, it is clear that 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.  

While there are numerous inter-relationships between trade and climate change, we focused on eight elements, which we grouped into three categories that we believe offer the greatest potential to maximise commercial, climate and developmental outcomes:

  • Triple wins where FTAs can deliver commercial, climate and developmental outcomes with minimal trade-offs (covering tariffs, services and product standards);
  • Policy coherence - where FTA provisions can help deliver optimal commercial, climate and development outcomes alongside complementary policies and programmes (covering intellectual property and procurement); and,
  • Policy cooperation - where FTA provisions can enhance bilateral and multilateral cooperation between partner countries (applicable to sustainable development chapters, private standards and environmental taxes/subsidies).

In most cases, few trade-offs are needed when adopting a policy-coherent approach which:  (a) recognises the priority of commercial objectives in FTAs; (b) seeks to maximise synergies and avoid negative climate or developmental impact; and, (c) uses a range of complementary policy-instruments.  

This is an important message for trade policy-makers: pursuing climate and development objectives in FTAs does not need to result in a dilution of commercial outcomes or a ‘muddying’ of negotiations.  

What is more, since most negotiating partners will have ambitious climate and developmental objectives themselves, a  coherent cross-government approach to these issues may help create short-term commercial opportunities and lay the foundations for agreeing ambitious and mutually beneficial trade deals in the future.

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Contact:

Phile Brown, Senior Trade Advisor

Tel: +44 (0)77 5346 0118

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