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  • Dusan Mijailovic

Clean-tech transatlantic trade could be a result of EU's Brexit Deal

Brexit proved to be lengthy and turbulent. The United Kingdom had to negotiate a deal covering multiple areas of trade in goods and services to maintain doing business with the European Union, its primary economic partner. There followed ten agonizing months of negotiation. However, after several twists and turns, the talks not only yielded a bilateral agreement between the EU and the United Kingdom, but also an unprecedented bit of hope for transatlantic trade in renewable energy technology.

Particularly, the deal signed on 24 December gives substantial exemptions that would allow the United Kingdom to continue to export electric vehicles without being subject to tariffs. The concession by the EU on this point was not based on the Christmas spirit, but on firm promises reached by both sides to tackle climate change. The EU intends to create an economic turnaround based on renewable technology through its European Green Deal. In the meantime, the United Kingdom has established itself as a global climate diplomacy pioneer, organizing this year's UN COP26 summit, and has introduced its ambitious vision for a "green industrial revolution." In this sense, it would have been a political mistake to enter a trade deal that would place barriers in the way of clean-tech trade.

The incredibly flexible approach of EU trade negotiators to the UK, which would exclude (some) clean technology from tariffs, could now open the door to an EU-US clean-tech agreement. It would be difficult for European leaders to object to a similarly flexible approach to boosting transatlantic clean-tech trade, given the Biden administration's approach to the climate agenda.

The EU's standard "rules of origin" was a crucial problem in the Brexit deal, which could have killed UK automakers' prospects of exporting EVs to Europe by hitting them with a 10 percent tariff. Usually, zero-tariff access to European markets would demand most of each vehicle to be produced in the UK. However, this standard can not be reached today by UK manufacturing companies because so much of the value of an EV comes from its batteries, which are mainly imported from Asia. For now, the generous tariff exemption included in the deal evades this issue, giving the UK time to build up a domestic EV battery industry that it has committed to creating.

The EU negotiators did not want to make this exception at first. Such inflexibility, however, would have led to a politically unreasonable barrier to trade in renewable technologies by establishing an illogical scenario in which traditional vehicles would count for zero tariffs while EVs would not.

Likewise, the EU's flexibility paves the way to transatlantic collaboration. EU trade negotiators will have a mandate to reach the United States and other partners with similar deals to cut tariffs and open markets for clean alternatives with the Brexit EV agreement on the record. In the aftermath of the unsuccessful and politically controversial "Transatlantic Trade and Investment Partnership" (T-TIP), no one expects a new major trade deal to be established, but the EU and the United States have the room to pursue less controversial "sectoral agreements" to promote EVs and other clean-tech goods.

The Transatlantic Clean-Tech Agreement would send a strong message that the EU and the US can collaborate globally on shared goals. Considering measures to cut tariffs and non-tariff barriers under the Environmental Goods Agreement, which stalled in 2016, it would align with the World Trade Organization's request for more action on trade and climate change. At a critical point, a clean-tech deal would also turn the EU away from China and toward the United States. It could be a step in establishing a "climate-tech club" that other partners who support fair, rule-abiding, and non-mercantilist trade and industrial policies, could be invited to join. If home-grown clean tech is to be scaled into feasible global solutions to the climate challenge, fair trade is vital.

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