What is green trade?

Last week, the government set out its green agenda on trade in a speech made by the Trade Secretary, Anne-Marie Trevelyan. Her speech outlined how the government will set sustainability into their trade policy. The initiative is based on 4 key principles: 1) Building a domestic industrial base; 2) boosting exports; 3) liberalising green trade, and 4) greater alignment of trade and environmental policy.

Positioning the initiative as a desire to “promote free and fair trade”, the idea is that by boosting the export potential of our domestic green tech industry the UK can also contribute substantially to the ability of other countries to operate sustainably as well as our own. While expanding on our own sustainable infrastructure and tech domestically, we can springboard homegrown innovation into global markets. The issue of sustainability is one that does not have borders, and therefore one that requires international collaboration. The proposed mechanism is removing tariffs on exports of environmental goods for example through Free Trade Agreements (FTA) so allowing the UK to not only help other countries reach their net zero targets, but also to reduce barriers to green trade for businesses.

The government is committed to financing business’ green projects through UK Export Finance, which will support low carbon trade and create jobs across the country. Finally, the Trade Secretary promised greater alignment in future on trade and environmental policies more generally.

At the IoD we welcome the Green Trade initiative. It is positive that there is now a direction of travel that provides a landscape for businesses to trade sustainably. But we feel that it lacks detail. Much of what the Trade Secretary outlined is high level, with not enough on what businesses can practically do to support the agenda.

Firstly, it would be helpful to have a definition of what the government classes as ‘green trade’. Businesses need a framework against which they can measure their sustainable imports and exports, which is aligned internationally for consistency among businesses wherever they are located in the world. A good first step will be for the government to publish its green taxonomy, which it is developing to clarify which investments it considers sustainable, and we encourage the government to align this closely with taxonomies already developed in other countries in order to facilitate seamless green trade.

More guidance will also be needed from government to assist businesses as they plan for the transition to trading sustainably. Greater incentives will be needed to ensure that all firms make the changes required to products, packaging, and transport. For example we recently published a paper on how to incentivise businesses to focus on net zero, which you can read here.

But beyond what a business can do itself, there needs to be more focus on how the government and business can work together to make supply chains sustainable. Transportation is a huge contributor to climate change, and so there needs to be clearer direction on how businesses can decarbonise their transport links.

We are keen to hear the details of how the government plans to take this agenda forward, particularly on how they will turn these policy aims into practical solutions for business.

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