In June 2020, Business Europe, member of the GBC, issued a position paper proposing a number of measures and areas of action on multilateral, bilateral and unilateral level that can contribute to the promotion of climate action through trade policy.

” European businesses support the EU ambition to reach net-zero greenhouse gas emissions (climate neutrality) to reach the objectives of the Paris Agreement. Business Europe published its energy and climate strategy1 in April 2019 to explain the five key framework conditions and related actions on how this could be achieved by around mid-century, the last condition of which concerns the climate actions taken by other major economies.

The publication came amidst intense ongoing discussions on how the EU could better leverage its trade policy to achieve its climate policy objectives. Not only should this be seen in the context of the potential effects that global trade can have on emission levels2; it is essential to also promote the positive contributions from bilateral and multilateral trade on reaching climate objectives. This paper lists several ways in which trade agreements could contribute to the global climate agenda. European businesses support high standards in the environmental area and pursuing these standards also in our trade agenda can boost the competitiveness of European businesses and make trade more climate-friendly.

That said, it is important that the European Green Deal takes a systematic and holistic approach to the trade and climate agenda. The sustainability triangle of climate action, competitiveness, and security of supply of energy and critical resources remains central. Furthermore, in order to enable the distribution of European state-of-the-art technologies globally, the market access element in trade policy is of paramount importance. It is therefore essential that the design of policy options linking the trade and climate agendas strike a careful balance between ensuring a global level-playing field to support European competitiveness and enhancing access to foreign markets while effectively complementing domestic climate-related measures.

The risk that production is transferred from the EU to other countries with lower ambitions for emission reduction, or because EU products are replaced by more carbon-intensive imports (“carbon leakage”) as well as the threat of more companies deciding to gradually favour investments outside of the EU (‘investment leakage’) is real as long as global actions are not aligned and is impacting the European economy and the labour market. Such leakage effects also have a negative impact on overall global emissions, given that production standards in many other regions are not as high as in Europe.

Highlights:

  • Environmental Goods Agreement (EGA): Renewed efforts should be focussed on resolving the conceptual and political deadlock in the negotiations of the WTO Environmental Goods Agreement. Furthermore, including services embedded in environmental goods would make a future EGA more efficient and should therefore be seriously explored. The design of the EGA must avoid new administrative burden for companies, e.g. in customs procedures and in view of rapid technological development. The list should therefore be regularly reviewed.
  • Industrial subsidies and the role of SOEs as one of the main factors leading to overcapacities need to be well framed and effectively disciplined at WTO level. Sectoral negotiations, e.g. in the steel and aluminium sectors, are welcome to address the most critical sectors.
  • An agreement on Article 6 under the Paris Agreement’s Rulebook on carbon markets should be concluded as soon as possible. The UNFCCC negotiations should also continue to be used by the European Commission to share experiences on other aspects such as policy frameworks and standards.
  • The EU should work together with third countries to harmonise standards, labels and regulatory frameworks in order to boost the functioning of global value chains and facilitate the commercialisation of green products and services.
  • Future bilateral agreements could explore options on targeted provisions on trade in “environmental goods and services”, including non-tariff barriers, and aim to reach more ambitious commitments in this area providing that these measures go hand in hand with a guarantee of effective market access and an environmental level playing field. The scope of such provisions should adjust to the needs of the negotiating partner, work on the basis of rewarding rather than punitive actions, and reflect their real level of economic development and climate ambition.
  • In the ongoing process towards an update of the negotiating mandates and broadening of the agreements a trade and sustainable development chapter should be foreseen with specific attention to the needs of the respective partner countries.
  • Businesses stand ready to explore possibilities on how companies can be involved in specific capacity building exercises and projects for technical assistance in developing countries.
  • BusinessEurope supports the strengthening of enforcement of existing scope and content in TSD chapters. A dialogue and incentive-based approach with the established system of dedicated government bodies (TSD Committee and Trade Committee) and the civil society structures (Domestic Advisory Groups and Civil Society Forums) should be maintained. Further efforts can be made to make the procedure more effective by including specific timelines for each of the actions.
  • The Commission should also consider additional options on how to use public procurement to boost climate action both inside and outside of Europe and assess criteria on how environmental and climate standards in procurement offers can be taken into account in a coherent approach also within Europe. The initiative to develop instruments to calculate the lifecycle costs for certain products is welcomed.
  • Climate change and sustainable development aspects should be enhanced in the upcoming revision of the EU GSP Regulation, together with measures to strengthen implementation of existing provisions.”