International Trade and Sustainability – What are we fighting for?

By Agnieszka Grabowska-Dubiel

Sustainable development and protecting and preserving the environment are fundamental goals for all of humanity. It is not a new perception that we cannot separate international trade from sustainability issues. In fact, the two are quite strongly connected as indicated in the Supply Chain Act where deforestation and consumption go hand in hand with global trade. It is also unsurprising and undisputed that international trade must support and protect environmental and climate goals that contribute to achieving Sustainable Development Goals (SDGs).

The belief that economic integration leads to welfare and economic prosperity lies at the heart of the European community. Trade is, therefore, a fundamental part of the identity of today's European Union. In the ecological dimension, the largely positive effect of international trade is not apparent at first. After all, international trade leads to greater prosperity, lower product prices, and more consumption. A separate chapter on sustainable development in the free trade agreements that the EU signed with third countries was implemented some time ago. This chapter stated that both parties of the agreement have committed to comply with the norms or implement standards that will broadly reflect their existing internal policies in this area. Fairtrade certification has been around for three decades, leading the global movement for fair trade and supporting and protecting businesses and governments. By choosing Fairtrade-certified products, consumers can create change through their everyday actions. A product with the Fairtrade mark means that producers and companies have met internationally agreed standards that have been independently certified.

That said, environmental protection and sustainability have played an important role in global trade for some time, but what remains is to determine a clear definition of "sustainability" in relation to trade in order to verify and evaluate how "green" and sustainable international trade currently is and how to improve it for the future using dedicated strategies. 

The EU applies trade agreements to promote sustainable procurement as well as eliminate obstacles in terms of trade and investment in renewable energy. 

Sustainability should be considered a holistic and complex concept because it includes at least three dimensions -- ecology, economy, and social issues. Therefore, it only makes sense if all the dimensions are considered equally important.

International trade, by definition, allows countries to expand their markets and access goods or services that may not have been available domestically, but it also allows them to deal with producers from other sovereign states and abide by agreed-upon rules. Unfortunately, international trade cannot directly determine how a product is produced in its country of origin, but that's a separate topic of how particular countries can contribute to sustainable growth. Ultimately, in most cases, only regional public authorities and law-making bodies can make an impact. Trade agreements provide an excellent opportunity to address climate change and sustainability issues and also offer a great opportunity for cooperation between countries that can improve environmental standards globally. Trade negotiation can improve environmental standards and have a huge impact on them. Sustainability impact assessments in the form of analyses of potential economic, social, human rights, and environmental issues are also considered during trade negotiations. Modern EU trade agreements typically contain a chapter on trade and sustainable development, and some of the rules imposed on the EU and its trade partners relate to following international labor and environmental standards. The EU also uses trade agreements to eliminate barriers and obstacles to trade and investment in renewable energy. For instance, in the EU's Mercosur agreement, we can already find the premise that increased trade should not come at the expense of the environment or labor conditions, and on the contrary, it should promote sustainable development. A separate chapter is also strictly dedicated to the Paris Agreement and its active implementation and cooperation between involved parties on the trade and climate interface.

Adding to this, it also lists several areas of potential cooperation regarding the sustainable management of responsible business practices and contains a specific dispute settlement procedure. Similarly to the EU, Mexico has received a “trade and sustainable development” chapter that includes provisions on the fight against climate change, and promotion of the positive contribution of trade to the transition to a sustainable low-carbon economy and climate-resilient development, also referring to the Paris Agreement much as the EU Mercosur Agreement does. Also, in the CETA Free Trade Agreement, both parties recognize that it is inappropriate to encourage trade or investment by weakening or reducing the levels of protection afforded by environmental law. 

It is indisputable that trading partners should cooperate on trade-related climate change issues, bilaterally, regionally, and in international fora such as the UNFCCC, the WTO, and the Montreal. For example, there is a protocol on Substances that Deplete the Ozone Layer, an international treaty designed to protect the ozone layer by phasing out the production of numerous substances responsible for ozone depletion.

EU trade policy can influence the sustainable behavior of trading partner governments. Government agencies should strictly define and monitor whether a company meets the statutory minimum requirements. In the third stage, voluntary certificates enable consumers to decide whether to take the next step and pay a higher price for a more sustainable product, such as a Fairtrade Certificate. Nevertheless, these instruments can only solve part of the problem and steer international production onto the most sustainable path possible.

Promoting green economic growth based on climate change mitigation and adaptation measures is increasingly part of modern foreign trade agreements. It includes an ecosystem-based adaptation of renewable energy and energy-efficient solutions to promote the positive contribution of trade to the transition to a sustainable low-carbon economy and climate-resilient development.

Poland plays a considerable role in international trade and, as a member of the EU, is actively involved in discussions on free trade agreements. In 2020, Poland was the 22nd largest exporter in the world. In terms of export volume, Poland has overtaken, e.g. such large economies as Brazil, Saudi Arabia, and Turkey. As a result, Polish involvement in global trade goods increased from 2001 to 2020 by about 0.9 percentage points (to 1.48%) in the case of exports.    

In general, the cooperation between countries, their commitments to the environment, and sustainable measures can provide an excellent opportunity to improve environmental standards both generally and globally. 

Nevertheless, Free trade Agreements and their instruments can only solve a part of the problem and steer international trade into the most sustainable path possible.

Therefore, clearly defined and robust, sanctioned rules are needed for international trade and the protection of our planet. The EU and its member states should continue to shape them actively. All the regulations mentioned above, the free trade agreements, and the certificates are worthless if there is a lack of approval from entrepreneurs, the business community, and the consumer to make it work.  

Agnieszka Grabowska-Dubiel Family Enterprise Initiative (IFR) expert, Proxy in the law firm Grabowski & Partners (GWLAW). She has extensive experience in many aspects of business activity in various industries, with a special focus on customs compliance management and asset reorganization, both for Polish and international capital groups and individual clients.