6.6  International trade

1093.  Trade can support economic growth opportunities by increasing the availability of green technologies and low-carbon goods. By eliminating tariffs and non-tariff barriers on, for instance, certain clean energy technologies and energy efficiency products could increase their trade volume by 14% and 60% respectively.777 Working with other governments to increase the trade of environmental goods and services would send a positive signal to markets and could support emerging technologies by providing access to markets overseas. Green trade can contribute to the growth of the UK economy by securing critical imports to build the capability of green businesses in the UK, lowering the cost of green technology, accelerating the transition by exporting green products overseas and through this create green jobs across the UK.778

1094.  Since leaving the EU, the UK has negotiated new Free Trade Agreements (FTAs) with the EU, Australia and New Zealand, as well as transitioning existing EU agreements with more than 70 partners. In new agreements, the Government has included an 'Environmental Goods and Services' article with a high-level commitment to promote and facilitate trade and investment in environmental goods and services. While these articles serve to signal the Government's support for trade in green goods and services and create a mechanism to identify and remove barriers to it, only few have included definitions or prioritised addressing barriers to trade in specific goods or services.

1095.  The FTA with New Zealand went a step further by including an illustrative list of environmental goods - such as wind turbine towers and blades and solar panel cells- on which tariffs are set at zero. Alongside renewable energy, clean transport and energy efficiency and storage, the list includes goods aimed at transitioning to a more circular economy and pollution abatement. The agreement encourages parties to address non-tariff barriers, including, on an ongoing basis, through an Environment and Climate Change sub-committee. The agreement also includes text encouraging parties to transition towards a circular economy, including by cooperating to facilitate and promote trade in used and remanufactured goods. Nonetheless, beyond the New Zealand FTA, there is a missed opportunity to further trade in environmental goodsxliii which could expand UK exports in these goods.

1096.  Promoting environmental goods and services should be a top priority for the Government. In recent years there has been growing momentum on this issue at the WTO as a way to support meeting international climate commitments, despite previous multilateral discussions on this subject having been met with some resistance. The Government should continue to advocate at the WTO on improving market access and facilitating trade in green goods and services, through both liberalisation and addressing non-tariff barriers. This would further facilitate reducing trade barriers to environmental goods, providing further export opportunities for UK producers. Within the Trade and Environmental Sustainability Structured Discussions (TESSD), the Government should proactively engage WTO members to work towards launching a wide, plurilateral negotiation, pushing for substantive outcomes as soon as possible.

1097.  In order to maximise the potential of FTA to make a positive difference for the net zero transition and remove the barriers to trade in climate change products and services, the Government should establish a minimum threshold for the environmental provisions which all new FTAs should adhere to.

1098.  Finally, minimum climate provisions in FTAs can help create a more even playing field between domestic production and imports, reducing climate action disparities,779 and such the risk of carbon leakage (see above on carbon leakage). From this perspective, it is an issue that the in vast majority of FTAs the UK has concluded since leaving the EU, the environmental and climate provisions are not subject to the same dispute mechanisms as in the rest of the agreements. Having created weak incentives to comply, increases the risk of non- compliance780 and as such the risk of UK businesses complying with UK regulation to become uncompetitive.

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xliii  The World Economic Forum report referred to above suggests this should include alternative refrigerants, goods needed for renewable energy and energy efficiency, materials and technologies improving energy efficiency of buildings, low-carbon fuels, electric vehicles and trains, and carbon capture and storage technologies. See World Economic Forum (2022), 'Accelerating Decarbonization through Trade in Climate Goods and Services, Insight report', https://www.weforum.org/reports/accelerating-decarbonization-through-trade-in-climate-goods-and-services/