Green international trade: an oxymoron?

By Ciaran Gill

Any government minister will tell you that the UK’s departure from the EU has enabled the country to realise its ambition of becoming ‘Global Britain’.

In Parliament at the start of this year, Secretary of State for International Trade Liz Truss MP partially elucidated this concept by stating that “our newly independent trade policy will create jobs, grow our slice of the global pie and unlock great swathes of the world to the best of Britain”.

The COP26 conference, which is to be held in Glasgow in November, was originally scheduled for November 2020 but was postponed on account of the COVID-19 pandemic. It is therefore a twist of fate that 2021 has seen the UK simultaneously seek to develop a more globally-focused trade policy and set out its climate credentials in the run-up to November’s vital gathering. With the environmental impact of international trade, however, is it actually possible for the UK to construct a more internationalist trade policy without sacrificing credibility as a global climate leader? 

On the face of it, the exchange of goods across the world is a contributor to climate change given that such goods are often carried on large shipping vessels running on heavy diesel oil. Moreover, as a ‘Global Britain’ trade agenda seeks to prioritise increasing the UK’s trade with far-away countries such as Australia and New Zealand, it’s reasonable to state that this recalibration will only exacerbate the problem.

Modern trade, however, extends beyond the exchange of goods. When the Government has publicised the development of its post-Brexit trading relationships, a large amount of attention has been directed towards goods such as Tim Tams. Although this attention has guaranteed media coverage, it can obscure the potential that services can play in the UK’s development of a ‘Global Britain’ agenda.

After all, services underpin a significant amount of UK economic growth, with recent House of Commons research showing that the service industries accounted for 80% of total UK economic output from January to March of this year. The workings of these industries are largely predicated upon the technological efficiencies that have enabled a multitude of workers to do their jobs from home since March 2020. As such, it is arguable that services-led trade will have less of an impact on the environment than the trade of goods provided that the energy which powers the technology used to provide services comes from renewable sources. In the first quarter of this year, renewables provided 41.6% of the UK’s electricity, with that percentage set to rise in the near future.

In June of this year, for instance, this potential was highlighted when the Government announced that it had commenced negotiations with Singapore regarding a UK-Singapore Digital Economy Agreement, building upon the fact that digitally-delivered services accounted for 70% of UK-Singapore trade in 2019. By prioritising the export opportunities for its services industry, therefore, the UK can advance a trade agenda which aligns more with its climate commitments. Many of these service industries also play vital roles within the UK’s green economy. 

One such example is the country’s offshore wind sector, which has been instrumental in the UK’s development of more offshore wind capacity than any other country worldwide. Earlier this year the government body UK Export Finance announced that it had allocated support to enable several UK offshore wind companies to provide services in Taiwan. These trading relations, which are ultimately the exchange of renewable energy know-how from the UK to Taiwan, highlight how it is possible for international trade to align with global climate goals.

Last month, the Board of Trade shone a light on this possibility and set out in detail how trade can align with environmental ambitions by publishing its report on ‘Green Trade’. It outlined how the UK can help global decarbonisation through the export of green technologies and highlighted how the UK has already taken action through its trade policy to aid green trade – by removing tariffs on over 100 green goods through the UK Global Tariff.

Even if we look at the trade of non-green goods from one part of the world to the other, there is scope for this to be made less detrimental to the environment. Analysis from the Climate Change Committee shows that shipping emissions, for instance, can be reduced via the use of low-carbon fuels such as ammonia (which is made up of hydrogen and nitrogen). The Government’s recent publication of its Hydrogen Strategy (SEC Newgate UK analysis on this can be read here) therefore highlights the potential for UK companies to contribute to the efforts to decarbonise trade.

With COP26 just 75 days away, all eyes over the next few months will be on the UK Government to see whether it can step up and provide the global climate leadership that will be necessary to make this vital conference a success. Prior to COP26, the Government will host a Global Investment Summit which will showcase the investment potential of the UK’s green industries to an international audience, complementing the Board of Trade’s recommendations in its Green Trade report. Events like this, which recognise the effectiveness of an innovative approach to trade, show that green international trade is real and that it’s here to stay.