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Letter to Minister: COVID-19, Free Trade and Sustainability

Dear Minister

Coronavirus (COVID-19)-19, Free Trade and Sustainability

Alongside fiscal and monetary responses to the COVID-19 crisis, trade will be an instrumental component to global economic recovery. With Australia’s FTA negotiations underway with the EU, UK and India this presents great opportunities for our nation to promote resilient, and ideally ambitious environmental standards abroad and in doing so strengthen its economic competitiveness through exports of low carbon goods and services.

The EU and UK are already looking at integrating environmental standards into future FTAs and we consider that this is an exciting opportunity for Australia to pivot towards a low carbon economy and in doing so align with their innovation, investment, commercialisation and marketing aspirations. This will benefit businesses, society as well as the natural systems that underpin and deliver our clean air, clean water and arable landscapes.

Future trade deals can also pose unintended risks. Australia’s environmental and climate standards could be diluted by provisions to reduce regulatory barriers, and the competitiveness of some industries being undermined by foreign industries not abiding by similar standards. To respond to these challenges, Australia’s trade policy must set an ambitious precedent that promotes a ‘race to the top’ on environmental standards and enables Australia to reach, and where possible exceed, its climate and environmental targets over the next decade.

At an FTA level, growing export opportunities for Australian business in the fast growing environmental and low carbon goods and services sector should be at the core of the Department for Foreign Affairs and Trade negotiating mandates. One example is Australia’s opportunity for exporting low carbon steel and Aluminium, as pointed out in the recent Grattan Institute report Start with steel: A practical plan to support carbon workers and cut emissions.

Meeting an Australia net zero target and growing our low carbon economy will necessitate the Australian government, working with the private sector – business and finance - to introduce more ambitious domestic standards and policies. It is therefore crucial that Australia’s sovereign right to regulate and tighten standards over time is explicitly protected in future agreements. Developing low carbon products standards will, for example, be essential to grow the market for low carbon industrial goods whilst also providing a level playing field to businesses and guarding against unintended risk of carbon leakage. In doing so, Australia can make a global impact on emissions reductions whilst strengthening the competitiveness of its industries in key areas of growth for the world economy.

At its core, incorporating environmental and climate considerations at the heart of the Australia’s trade policy is in its economic, social and environmental interests.

We therefore commend consideration of these Policy Asks:

• Ensure ambitious and enforceable trade and sustainable development provisions form part of any FTA, including all future FTAs to include reciprocal commitments to the Paris Agreement;

• Look beyond FTAs and also use bilateral trade negotiations and multilateral fora to boost low carbon trade;

• Remove barriers and lower tariffs to grow trade in low carbon goods and technologies, for example through calling for the return of WTO negotiations under the Environmental Goods Agreement (which BCSD Australia has championed for almost a decade and was involved in the APEC negotiations in 2012), as well exploring joining the Agreement on Climate Change, Trade and Sustainability (ACCTS);

• Provide the parties in all future FTAs and investment agreements with a legally binding right to regulate to increase environmental and climate standards and put in place a dispute settlement mechanism which does not threaten the Australian government’s right to regulate;

• Avoid regulatory cooperation mechanisms in FTAs which impose any kind of restrictions on Australia’s ability to set new climate and environmental targets; and

• Undertake that all Agreements receive adequate parliamentary scrutiny and stakeholder engagement well ahead of their ratification. This would enable time for in-depth impact assessments.

We would be pleased to discuss any aspect of this letter.

Andrew Petersen

CEO I Business Council for Sustainable Development Australia

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