Trade-offs and trade deals: climate policy and the UK/Australia trade agreement

UK Policy Net Zero

Trade-offs and trade deals: climate policy and the UK/Australia trade agreement

Posted on: 9th September 2021
Tim Lord
Associate Senior Fellow | Net Zero

They say a week’s a long time in politics. Well, that’s nothing compared to a month in the world of international trade agreements.

Because it was only in August that the Prime Minister wrote that the UK’s trade deal with Australia would "reaffirm commitments to multilateral environmental agreements, including the Paris Agreement".

But yesterday, we discovered – on the basis of emails leaked to Sky News – that the UK had bowed to Australian pressure to remove reference to the Paris Agreement’s temperature goals from the two countries’ trade agreement. 

The Government claims that this is actually a win – because Paris will still be referenced, and the goals will be “implicit”. 

But you don’t need to be a trade expert to know that to count a reference to an existing, high profile, international agreement as a “win” is to stretch credulity; and that an implicit reference in a trade agreement isn’t worth the paper it’s not written on.  This isn’t just a watered-down reference: it’s homeopathic.

This is particularly the case when dealing with a country with the climate record of Australia. Australia is a long-term laggard on climate: it has set unambitious targets; repeatedly failed to increase ambition; is the second biggest coal exporter in the world; and is among the world’s highest emitters on a per capita basis, with emissions per person three times higher than the UK.

Why it matters

This might seem a storm in a teacup – a detail when set against the importance of securing a post-Brexit trade agreement with a key ally. But it could be a canary in the (Australian) coal mine when we look at what it tells us about UK climate and trade policy.

First, it lays bare the limitations of Boris Johnson’s assertion that net zero is a “cake have eat” agenda.  In fact, delivering rapid emissions cuts means making decisions and trade-offs.  This is one such case. And it appears that the UK has, when confronted with a decision on whether to use negotiating capital to secure more ambition on climate from a key country, chosen to run up the white flag.

This is worrying in itself, but particularly so when set against the much harder decisions to come. If the UK is serious about leading the world on climate – as ministers are fond of claiming – it has to make emission reduction a priority not only in itself, but when set against other things.

In domestic policy, ministers have been reluctant to prioritise climate change when it risks impacting delivery of other objectives. Whether it’s continuing subsidies for oil and gas extraction, or funding decarbonisation of our homes, the message to date has been: we’ll pursue climate action when it’s easy, but not when it’s hard.

Ministers’ apparent willingness to sacrifice reference to its temperature goals in a trade agreement of this size tells a similar story. From an economic perspective this trade deal is worth little – forecast to provide a GDP boost of as little as 0.01%. The sense is that the PR win of a post-Brexit trade deal, however small the impact, outweighs the need for coherent climate policy.

This is at best mixed messaging in advance of COP26 – but perhaps most important is the signal that this sends to companies considering their own decarbonisation commitments, and looking to government for clear signals. If the UK government is willing to sacrifice climate objectives in the pursuit of more trade, why would they do different?

Second, this approach risks selling out British industry.  Australian proponents of the removal of the Paris temperature goals from the trade agreement argue that it isn’t for the UK to set Australian domestic policy – which is of course true. What the UK can and should be doing is protecting its industry from competition from countries which are not doing their fair share on global emission reduction.  British farmers already fear being undercut by meat produced to lower welfare standards; British companies required to meet higher standards on emissions will legitimately have similar concerns.

Third, it contains a hard lesson for British soft power.  When it comes to the crunch the UK is, it seems, a rule-taker – not a rule-maker – in its trade agreements. With the EU, this has led to an agreement which the UK authors now seek to disown, only months after implementation. With Australia, it means acquiescing in the removal of reference to a top UK priority. If the UK will concede to Australia – 1.5% of global GDP – on this point, what will it sacrifice to secure trade agreements with bigger global players?

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