The UK’s decision to leave the European Union (EU), assuming the UK does not negotiate continued participation in the EU’s Internal Market and the Common Commercial Policy (on similar terms as now), will impact its existing participation in EU trade agreements and free trade access. Once the UK has withdrawn from the EU, the UK will need to commence national trade negotiations – early indicators suggest that there are already a number of countries (e.g. Australia, Canada, India and others) that would be interested in fast-tracking the process. Trade agreements strive to increase economic activity by reducing or removing barriers to trade across international borders. For example, trade agreements may negotiate reduced taxes applied to imports, reduce compliance costs associated with foreign jurisdiction regulations, and/or require signatory countries to outlaw child labour.
Typically, trade agreement objectives indirectly impact on environmental obligations for businesses and touch on a wide spectrum of environmental issues that affect consumers, including: food safety (the use of GM crops, for example); pesticides; chemical regulations; energy resourcing; and contamination liability. One of the most contentious agreements currently being negotiated is the Transatlantic Trade and Investment Partnership (TTIP), which is between the EU and the US. There are concerns that the current TTIP may stall or fail altogether due to the UK’s departure from the EU. However, if it does happen, we can expect the draft proposal to influence the content and format of many future trade agreements (including those that the UK will be looking to negotiate and enter into).
Three environmental challenges associated with the TTIP
The EU has been negotiating with the US over the TTIP since February 2015. The environmental obstacles faced in the ongoing negotiation of the TTIP is demonstrable of the significant challenges associated with managing environmental risk in trade agreements:
- Regulatory convergence. The EU’s environmental standards, particularly concerning product regulations, are often more stringent than the US. There are concerns that through seeking regulatory convergence under TTIP, the EU will be limited in developing stricter environmental regulation, for fear that such regulation may be considered an illegal impairment to trade under the TTIP.
- Conflicting goals. Trade agreements often struggle to strike a balance between the diverse economic and environmental goals of all parties. For example, leaks of the proposed drafting of the TTIP appear to suggest that mandatory requirements on the energy industry will be dropped for self-regulation, despite disagreement on whether voluntary policies can effectively regulate. Similarly, the proposed drafting also seems to prevent the imposition of feed-in tariffs and other support schemes that encourage the uptake of clean energy, conflicting with committed carbon reduction goals of the EU member states.
- Economics over environment. As trade agreements are primarily designed to boost cross-border commercial relations, economics may trump state and regional environment goals. For example, there is a suggestion that the TTIP proposed drafting promotes the idea that “parties shall cooperate to reduce or eliminate trade and investment distorting measures in third countries affecting energy and raw materials”, which arguably, may create internal pressures within the EU on resource-supply countries from resource-intensive countries to use non-renewable energy resources.
- Dispute resolution. Continued controversy regarding the provision for Investor-State arbitration in the TTIP as the means of settling disputes between investors and host States, or the establishment of a permanent Investment Court System, may influence the extent to which general principles of international law, including the extent of host States’ right to regulate, may be applied in the interpretation and application of the substantive provisions contained in the TTIP.
The TTIP negotiations are ongoing, and with the UK’s exit from the EU, many are skeptical that a conclusion can be achieved in the short-to-medium term. Nevertheless, the TTIP exemplifies the challenges of managing environmental risk in international trade agreements, which will need to be considered once the UK pursues its own trade negotiations with Europe and countries worldwide.
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