A just transition is against trade rules – let’s change them

The “free trade” agenda plays a central role in our hyper-globalised economy, locking in destructive and exploitative relationships with people and planet, and has increasingly become a vehicle to further the rights of already extremely powerful corporations. We need a new, fair, climate-just and democratic approach to trade that has people and planet at its core. To tackle the climate crisis we must make swift and radical changes to our economies and societies. However, many aspects of today’s ‘free trade’ deals make these necessary changes harder to accomplish.

Trade deals today are about much more than countries exchanging goods between one another. Today’s 'free trade' deals aim at greater and greater degrees of trade liberalisation and deregulation. Anything that inhibits or distorts trade is seen as a problem – even if those things are rules that protect our public services, national resources, health, safety, climate and environmental standards, privacy, or workers’ rights.

The consequences have been devastating.

The removal of these so-called 'non-tariff barriers' in the pursuit of liberalisation has often had clear benefits for some in wealthier countries and for a small number of multinational corporations, while the global majority suffer the consequences of an increasingly unequal world. Trade liberalisation has failed to deliver on its promises of jobs and a good life to people everywhere, and instead has reproduced global inequalities rooted in colonialism. The free trade agenda has entrenched asymmetrical power dynamics between those in the Global North and South, on the back of centuries of unequal exchange and expropriation.

All of this means that people in the Global South, who aren’t responsible for causing the climate crisis yet bear the brunt of its impacts, lack the resources to address climate devastation. Trade rules also limit the actions that countries, particularly those in the Global South, can do to prevent further climate breakdown, inequality, poverty, and Covid-19.

UK trade policy must recognise and respond to the UK’s historical responsibility for carbon emissions, including by supporting poorer Global South countries to respond to the threat of climate breakdown. 

At present, UK trade rules:

1. Increase emissions and create a race to the bottom on environmental standards. The trade deals that the UK government have negotiated, and intend to join, increase carbon emissions according to the government’s own assessments; by shifting production to more carbon intensive sectors and increasing air pollution. Some deals, such as the recent UK-Australia trade deal, push down food and environmental standards by encouraging the production of lower standard carbon-intensive beef and lamb[1]; by allowing high levels of antibiotics to be fed to livestock as growth hormones[2].
   
   Trade deals are also locking in mechanisms that privilege corporate interests in trade regulation negotiations, while the public and UK MPs are locked out of trade decision making.  Trade deals the UK has signed up to, including the CPTPP and CETA, contain “regulatory cooperation councils” – mechanisms which particularly advantage corporations. In the past, regulatory cooperation has been used to water down or prevent new regulations on chemical waste, ozone-depleting substances, and aviation emissions, among others.
   
   We need to stop damaging trade deals, and we need democratic decision-making processes over trade.
    
2. Prevent the development of the renewables sector and green technology transfer. Because of their capture of most global wealth, richer Global North countries invent the majority of low-carbon technologies. Transferring low-carbon technologies to those most at risk of climate crisis is critical, among a range of other measures, to ensure that people can adapt to a hotter planet. However, trade rules at the World Trade Organisation (WTO) and in bilateral trade deals ban this technology transfer. This prevents people from being able to benefit from technological advancements made elsewhere, even where these developments were funded by the public.
   
   Just as with Covid-19 vaccines, the key technologies that make a transition to a low-carbon economy possible must be considered global public goods, and not used to deepen the pockets of a few multinational corporations which hold the patents.
   
   Other WTO trade rules on subsidies and non-discrimination have in fact thwarted the development of renewable energy, as these rules enable countries to legally challenge other countries who want to use subsidies to develop their renewable energy sectors.
   
   For countries in the Global South, at the forefront of the climate crisis, and with least historical responsibility for its impacts, we need a different set of rules[3].
   
   We need to suspend trade rules that inhibit the renewable energy sector, and transform intellectual property rules, expanding flexibilities for countries tackling the climate crisis – and make green technology a global public good.
    
3. Lock in extreme privileges for corporations through intellectual property rights and ISDS (Investor to State Dispute Settlement). 

ISDS allows investors (corporations) to sue governments for billions in private tribunals, outside of national justice systems, if government decisions impact the profits, or potential future profits, of the investor. Oil, gas and coal companies are big fans of ISDS[4] – in fact, the mechanism itself was designed by executives from Shell[5].

Currently, fossil fuel giants are using ISDS to sue governments around the world for at least $18 billion over climate action. The companies argue that phasing out fossil fuels harms their potential future profits, ignoring the fact that this is the action we most urgently need to take to stop catastrophic climate breakdown.

The mere threat of these kinds of claims – huge sums for many Global South countries – means that governments are not acting as quickly as we need them to. And the system only goes one way – governments can never take ISDS cases against corporations, and there is no mechanism for appeal. ISDS is the fossil fuel industry’s secret weapon. It threatens delays and reverses climate action, and has been used for decades to deepen a dramatic power imbalance between corporations and ordinary people, particularly those in the Global South, whose countries are most often subject to ISDS claims. 

We urgently need to abolish ISDS and remove ISDS from our trade and investment deals – not join, or leave any trade deals that include it, such as the Energy Charter Treaty (ECT).