Brexit: Implications for trade and environmental policies

EU leaders want phase 1 of Brexit over: but we need to make sure we set the right precedents for trade and environment. Martin Nesbit sounds a note of alarm.

There is a palpable sense of frustration and weariness in Brussels over Brexit. At a time when the EU wants to focus on the installation of a new Commission and setting priorities for the 5 years ahead, leaders are instead having to adjust repeatedly to accommodate the increasingly baffling lurches of British politics. There is a strong temptation to move quickly to end this phase of the process, and then make rapid progress in the negotiations on the future relationship, which start once the Article 50 process ends. But it matters that we get things right. There are real risks to the EU’s future ability to make environmental progress, particularly on the radical changes to the economy that will be needed to meet ambitious targets.

What has changed in the Withdrawal Agreement?

The previous version of the Withdrawal Agreement included a number of detailed commitments on environmental legislation, including text in the Northern Ireland Protocol on non-regression on environmental protection “law, regulations and practices”; there was also a commitment to effective enforcement and monitoring. Because the approach to the backstop then covered the whole of the UK, these provided a degree of confidence that they would make it more difficult for the UK to weaken environmental standards. And, significantly, the accompanying political declaration, which set out the shared ambitions for the negotiations on the future relationship, explicitly referred to “building on” these provisions in order to provide for fair trade and a level playing field.

The new Withdrawal Agreement does not include non-regression provisions for the UK as a whole

However, the new Johnson Government has been explicit with EU negotiators that it sees a divergence from EU legislation as being part of the point of Brexit. So, the new Withdrawal Agreement, in addition to a radically changed approach to the backstop, does not include non-regression provisions for the UK as a whole; and the new political declaration has a much looser description of level playing field ambitions, noting that “The precise nature of commitments should be commensurate with the scope and depth of the future relationship and the economic connectedness of the Parties”. While there is a new statement that the UK and the EU “should” uphold the common high standards applying at the end of the transition period, this has no more than declaratory force. Moreover, there are no commitments at all on robust enforcement and governance.

Should EU environmental stakeholders worry?

How much should we be worried by this? The UK’s stated enthusiasm for divergence from EU standards, and the pressure they are likely to come under from trade negotiators from the US and other potential partners to do so, are clearly cause for concern. Of course, EU negotiators could apply the approach implied by the political declaration, and insist on clear and binding commitments to maintaining standards, and to the governance improvements necessary to deliver, in exchange for any level of trade access to the EU market that goes beyond to terms. But we know that trade integration, and the economic benefits postulated for it, is a tempting prize for trade negotiators; and that not reaching a deal with the UK risks real economic damage. So there is a risk that EU negotiators will be insufficiently stringent on environmental standards in order to reach a deal – perhaps particularly if the deal is a relatively unambitious Canada-Minus option. And we also know that provisions on effective enforcement are very difficult to make operative. 

UK politics is highly uncertain at the moment; and it is genuinely very difficult to predict the future shape and direction of Government

So how much can we rely on the UK in practice? UK politics is highly uncertain at the moment; and it is genuinely very difficult to predict the future shape and direction of Government. The current administration has at least taken one step forward, by putting before Parliament a new Environment Bill, which sets out a system of targets for implementing the Government’s environmental commitments, and a new enforcement body with relatively strong powers. But, as environmental stakeholders have been quick to point out, it makes no commitments on non-regression; the system of targets it puts in place is not going to cover all aspects of the EU regulatory acquis; and in any case it does not guarantee that adequately stringent regulatory requirements will be introduced to meet those targets. The UK could provide some reassurance by committing to continued membership of the European Environment Agency, and to providing it with continued detailed reporting – but it has chosen not to do so.

Tellingly, in its efforts to persuade opposition MPs to back the Withdrawal Agreement, the Government has agreed to insert into the legislation implementing the agreement a set of provisions requiring regular reporting and parliamentary consent to divergence from EU employment standards, there are no equivalent commitments (yet) on environmental standards. There, the Government simply points to its proposed Environment Bill as providing all the guarantees necessary – and, as we have seen, it provides no guarantees on the risk of regression (and covers only England). In any case, with the likelihood of a General Election in the UK in the coming months, it seems unlikely that the Environment Bill will become law in its current form, even if some form of improved governance is widely accepted as essential.

Finally, we also know that some UK sectors are lobbying for specific changes to current EU standards after Brexit – for example, the British Ports Association has called for a review of the nature directives, a move away from the precautionary principle, and changes to environmental impact assessment requirements. Given the deregulatory political instincts of much of the current Government, pressure from other trade partners, the economic downsides of weaker integration with the EU’s internal market, and the likelihood of pressure from a range of industry voices identifying what they regard as “unnecessary” costs of regulatory standards, it is hard to feel confident that the environmental acquis the UK inherits from EU legislation will not be weakened in some areas.

The risk of handicapping EU environmental ambitions

We should be worried by the risks that level playing field provisions in the future trade agreement will not be strong or enforceable

So, on balance, yes, we should be worried by the risks that level playing field provisions in the future trade agreement particularly if it is negotiated at the breakneck speed implied by the end date of 31/12/2020 for the transition period – will not be strong or enforceable, and that the UK will be tempted to weaken environmental standards in a number of areas. This clearly matters for environmental standards in the UK. But it also matters for standards and ambitions in the EU. While the level of real damage to competitiveness caused by high environmental standards is generally much lower than industry lobbyists argue, it can have an impact – and particularly if weaker environmental standards in the UK are specifically designed to create a competitive advantage. More importantly, weaker standards in neighbouring economies can have a chilling impact on political willingness to be ambitious: if industry bodies can point to nearby competitors benefiting from a less ambitious regime, it becomes more difficult to assemble the political coalitions necessary to take ambitious steps on decarbonisation and wider environmental goals.

We also risk a situation where an agreement with the UK sets upper limits on the EU’s policy on using its trade negotiations weight to lever greater global ambition on climate and the environment. It is becoming clearer, with the incoming Commission’s commitment to developing a Carbon Border Tax, that getting trade and environment issues right is critical to making real progress internationally. But if we fail at the first hurdle, with loose commitments in a deal with an economy which has the same standards as the EU, and a high level of existing economic integration, it is hard to see how the EU would persuade other partners to be more ambitious.

What next?

This post is being written on Monday 21 October, with further developments likely in the UK parliament. Entertaining as the exercise of UK democracy has been in recent months, it has also been exasperatingly hard for observers to predict. But it seems likely that the Government will be able to win over nearly all of both the Brexit extremists and those more cautious on Brexit in its own Party; and while it has probably lost the votes of the Ulster Unionists, it may be able to persuade enough Labour and independent MPs to back both the current deal, and the legislation to implement it. There is scope for writing a non-regression commitment on the environment into that legislation; but also a real fear that a future Government would simply change any such commitment as soon as it had the votes to do so.

Whether all this happens before October 31 is less clear, but a delay until January would not significantly change the parameters of the problem from the point of view of environmental stakeholders. For those who are concerned about the risks to the environment, now is the time to sensitise decision-makers in the Commission, the Parliament and the Council to the problem, and get clear commitments on how the EU should play the negotiations on the future relationship.

Photo courtesy James Newcombe/Unsplash