EU trade and environment in the post-COVID era

A recent online event moderated by IEEP’s Marianne Kettunen and hosted by the EU office of the Heinrich-Böll-Stiftung Foundation discussed the role of trade policy in the European Green Deal in the post-COVID-19 context. The event provided insights from experts from the European Commission, the European Parliament, and the European Climate Foundation.

The event was organised on the back of the IEEP report An EU Green Deal for trade policy and the environment, produced earlier this year in collaboration with the EU office of the Heinrich-Böll-Stiftung Foundation. The report explores what a truly green trade policy under the European Green Deal should look like.

The event looked at the some of the difficulties EU trade will face in the aftermath of the COVID-19 crisis. In reaction to the global supply chain disruptions and amid increased calls for deglobalisation, some governments, for instance, are looking to close their borders or transition to a self-sufficient production economy. Given the crisis and its impacts, the EU’s increased ambition to green trade under the Green Deal requires closer reflection.

Watch the full recording of the online event organised on 28 May

Insights from the panel

Niall Lawlor from DG Trade spoke on issues surrounding the EU’s Trade and Sustainable Development (TSD) chapters and environmental integration in free trade agreements, shedding further light on the role of the future Chief Trade Enforcement Officer (see Background for more).

Background

The EU Green Deal promises to continue strengthening the mainstreaming of social and environmental sustainability concerns in EU trade agreements. 

For example, the EU aims to become a driving force for climate and environmental standards in the future, such as through product regulations as foreseen in the Circular Economy Action Plan. Moreover, the European Commission plans to bolster the role of climate action in its trade policy by appointing a Chief Trade Enforcement Officer tasked to step up monitoring and enforcement of third countries’ commitments to the provisions stipulated in the Trade and Sustainable Development (TSD) chapters of EU trade agreements as well as by implementing a carbon border adjustment mechanism. 

Also, the recent Farm to Fork and Biodiversity strategies commit to the importance of tackling deforestation. The strategies both pledge to avoid or minimise placing products on the EU market that are associated with deforestation and forest degradation and promote forest-friendly imports and value chains.

Stepping up EU policy action is welcomed as the existing track record shows there is room for improvement when it comes to negotiating and implementing free trade agreements (FTA). For example, TSD Chapter provisions – meant to reaffirm existing (inter)national commitments on sustainable development and stipulate cooperation in policy areas – are not implemented as effectively as they would need to be, due to insufficient monitoring, lack of clear goals, and in the absence of effective mechanisms to address non-compliance. 

According to Mr Lawlor, TSD chapters “work as an important platform” to engage with trade partners and civil society. In the area of environment, they are based in part on the enforcement of the multilateral environmental agreements (MEA) to which trade partners are a party. Each MEA has its own rules on reporting, rules on non-compliance and dispute settlement. The Chief Trade Enforcement Officer, who is expected to be appointed shortly, will monitor and enforce these and other TSD chapter provisions.

Mr Lawlor highlighted the creation of a new knowledge centre for biodiversity, as announced in the recent EU Biodiversity to 2030 communication, which would – amongst other duties – help track and assess progress by the EU and its trade partners on the implementation of biodiversity-related instruments.

Elina Bardram from DG Climate Action highlighted that trade agreements can be important tools to support climate action globally. Recent agreements include a wide range of climate change-related provisions, including provisions to effectively implement the Paris Agreement and to maintain a level playing field by not lowering environmental standards to attract trade or investment.

Ms Bardram also drew attention to dedicated initiatives in the implementation of trade agreements, such as workshops for supporting stakeholders interested in accelerating low-carbon transformation, helping to share experience and establish networks and pursuing the dissemination of sustainable trade practices. She also pointed to the role of trade in disseminating EU standards and norms globally, which may support the transition to a low carbon economy amongst trade partners.

Looking to the future, Ms Bardram said, the EU Green Deal sets an ambitious agenda towards climate neutrality by 2050, which will require a gradual but significant transformation of our economies and societies. Trade will be key in allowing fair access to and dissemination of the necessary technologies and raw materials required for a low carbon economy. Supply chain disruption as a result of the COVID-19 crisis has reconfirmed the need to ensure the resilience of trade flows, Ms Bardram added.

Javier Arribas Quintana from DG Environment recognised the need to build back better in the recovery from the COVID-19 crisis with a positive agenda for a responsible and sustainable economic growth model – including trade – that works for the 2030 Sustainable Development Goals. Substantial international cooperation is needed to deliver EU Green Deal objectives such as the transition to a global circular economy and the lessening of the EU’s consumption footprint.

Several steps currently under consideration might help in this regard, Mr Quintana said. These include working towards a global agreement on plastics, defining a safe operating space, launching a global circular economy alliance, and designing measures that help to shift towards deforestation-free supply chains. EU free trade agreements function as important means to boost this cooperation, Mr Quintana added.

He also noted that to improve the effectiveness of free trade agreements, TSD provisions could be “unboxed” and mainstreamed to become more integral to the sector-specific provisions of trade agreements. To support this, he added, the use of trade impact assessments (both ex-ante and ex-post) could be improved by integrating their conclusions horizontally throughout the whole free trade agreement – and this should be further encouraged.

Anna Cavazzini, Greens/EFA MEP and member of the Parliamentary Committee on International Trade (INTA), advocated for greater policy coherence between trade and climate policy, to ensure that ambitious national climate policies cannot be challenged in the trade or investment tribunals.

Moreover, Ms Cavazzini supported the idea of mandatory due diligence to ensure adherence to environmental and human rights standards throughout the whole supply chain. Finally, she emphasised that the European Parliament should be more involved in the EU’s ongoing and future trade negotiations.

Emmanuel Guerin from the European Climate Foundation drew attention to the capacity issues civil society faces in the space of bilateral trade policy framework. He highlighted the burden that following multiple bilateral negotiations puts on civil societies’ capacity to react in time, compared to multilateral negotiations.

Also, in reaction to the support of a carbon border adjustment mechanism (CBAM) from the other panellists, Guerin cautioned that – alongside ensuring a bulletproof design of a CBAM – the unilateral implementation of this measure should be thoroughly considered in the current (geo)political context.

See also Making trade work for EU climate policy: Carbon border adjustment or product standards

Views from the audience

The panellists received some food for thought from the audience on the means to green trade policy. How the EU chooses to green its trade policy will ultimately impact global trade flows. In terms of trade policy tools, the audience put forward potential tariff liberalisation conditional on the attainment of climate objectives. Another suggestion was to reflect on the use of product standards as the way forward if these regulations have the potential to reduce carbon leakage.

At the bilateral level, the audience wondered if previously negotiated trade deals could be revisited if provisions were considered harmful to the environment. Another consideration was that free trade agreements could be reopened if their impact assessments do not include robust environmental criteria.

Besides free trade agreements, the EU could reignite dialogue at the multilateral level at the World Trade Organisation (WTO), said some members of the audience. An alliance of like-minded members of the WTO could open the door to the advancement of concrete action on climate and Sustainable Development Goals in a more multilateral space.

A final suggestion, while not a trade policy tool in itself, was to spread awareness of the impact that European consumption habits have on the environment in- and outside the EU, which would also end up impacting international trade.

Moving forward

The inputs across panellists made it clear that concrete efforts are underway or are being planned by the respective DGs at the European Commission to take the trade-related promises of the EU Green Deal forward. The implementation and enforcement of these efforts will eventually determine the “shade of green” that the EU trade policy will take.

For example, the Chief Trade Enforcement Officer could be one of the turning points for the EU’s trade policy. The Paris Agreement has become a fundamental element in TSD chapters, however, there are no sanctions for non-compliance, and enforceability remains a moot point. In this case, the key future question will be whether the Chief Trade Enforcement Officer will have a mandate to take action – and what kind – if partner countries do not meet their nationally determined contributions.

On a multilateral level, the EU should also reflect on how it will present its Green Deal at the WTO. By focussing on building bridges to meet apprehensive members concerns instead of imposing unilateral measures, constructive multilateralism could further forward the EU’s climate agenda and build a broader consensus on environmental sustainability and trade.

The full event recording is available to watch on IEEP’s YouTube channel.