Procedural Dimensions: ‘Transparent and Inclusive Trade’
Substantive Approaches: Safeguarding Sustainable Development Through Trade Agreements
• There are deficiencies in the Parliamentary oversight of the ‘roll-over’ of pre-existing trade agreements; the Government should address these as a matter of urgency.
• For future trade agreements, the provisions of the Constitutional Reform and Governance Act 2010 ( CRAG Act) are insufficient. The influence of the UK Parliament on the treaty ratification processes should be at least equivalent to that currently enjoyed by the European Parliament and other EU Member State legislatures, with a remit for devolved administrations.
• The UK should establish formal mechanisms for a wide range of stakeholders to feed into the process of trade negotiation.
• In addition, the UK should undertake Sustainability Impact Assessment (SIA) of new trade agreements. Certain key features should be adopted from the EU’s approach, including the use of independent consultants, an emphasis on stakeholder and public engagement and ex-post evaluation.
• The SIA process could play a greater role in shaping negotiation outcomes. Providing a role for parliamentary committees would introduce greater transparency and accountability into the UK’s trade policy.
• Through the roll-over of EU trade agreements, the UK will inherit the EU’s approach to trade and sustainable development. Implementing EU sustainable development chapters will require the UK government to replicate an array of advisory bodies currently managed by the EU.
• The UK’s degree of future regulatory alignment with the EU remains uncertain at the time of writing.
If it prioritises access to new markets over continued levels of access to the EU, this underscores
the importance of identifying and responding to the impacts of new Free Trade Agreements (FTAs) on environmental and consumer protection standards.
• Effectively addressing procedural and substantive elements of sustainable development through trade negotiations will result in trade policy that is more informed, more democratically legitimate, and benefits more of Britain.
Leaving the EU Customs Union will necessitate the UK having an independent trade policy. As part of the process of governing its external trade, the UK must consider how it will integrate its sustainable development objectives into this policy. In this briefing paper, we conceive such objectives broadly, including transparency, political participation and access and consultation, as well as obligations within FTAs to uphold labour standards and environmental protections. Among developed countries, in particular, commitments in all these areas have increasingly expanded and strengthened (see, eg, Berger, et al., 2017). In the EU’s case, for example, the past decade has seen a greater role for the European Parliament in trade negotiations, a major initiative to increase transparency and the promotion of sustainable development from listed objective to the subject of dedicated chapters. This promotion has arisen in concert with ambitions to address a wider range of issues, including regulatory standards and approval processes, intellectual property and Investor State Dispute Settlement, through Free Trade Agreements (FTAs). It also responds to public protest, and concerns about the potential competitive advantage that the EU’s FTA partners gain through low labour and environmental standards.
Here we consider potential approaches to (1) integrating sustainable development objectives into the negotiating process; and (2) reflecting these objectives through UK trade strategy. The intentis not to provide a comprehensive set of policy recommendations (though we do offer some), but rather to identify gaps which we believe require more discussion. These gaps are inextricable from the larger, and largely unresolved, question of how the UK will undertake the governance of its trade agreements. As the UK has not managed its external trade independently for many years, there are no existing procedures for scoping, negotiating and ratifying trade agreements. The UK government has indicated that more information is forthcoming (Fox, 2018) but the proposed Trade Bill provides no guidance vis-a-vis future trade agreements, and sets a concerning precedent by not providing for Parliamentary oversight of the ‘roll-over’ of existing EU trade agreements.
We conclude that the UK’s ability to take leadership in this area will hinge around its ability to develop a robust framework to ensure that the negotiation process is transparent and democratically accountable, and that the impact of new trade agreements – including on the environment and vulnerable populations – is assessed and addressed. Doing so will allow the UK to negotiate based upon a more solidly grounded position regarding impacts on a range of stakeholders, such that its trade agreements benefit more of the UK, and are less likely to be undermined by public protest. UK trade agreements will be both an influential component of UK foreign policy, and also a significant determinant of its domestic economy and regulation. The UK has outlined its ambition for ‘Green Brexit’, in its twenty-five year environmental plan (HM Government, 2018), acted as a global leader on climate change mitigation through its Climate Change Act 2008, Clean Growth Strategy and Fifth Carbon Budget, and committed to the UN Sustainable Development Goals (2015). Its trade strategy should harmonise with its policy ambitions in other areas as well. For these reasons we believe that the set of issues we address here are not auxiliary concerns but rather integral to UK trade policy.
The UK has committed to ‘transparent and inclusive’ trade, stating that ‘Parliament, the devolved administrations, the devolved legislatures, local government, business, trade unions, civil society, and the public from every part of the UK must have the opportunity to engage with and contribute to our trade policy’ (HM Government, 2017). There are significant gaps in identifying, and formalising, the role that these actors will play in UK trade policy. To undertake transparent and inclusive trade policy, the UK Government will actively need to reform the approach to Parliamentary involvement and stakeholder consultation; it will need to fill gaps in some cases and go beyond its current proposals in others.
The Government has declared its intention to establish UK trade agreements that are based as closely as possible on those that partners have signed with the EU (UK Parliament, 2017, para. 38). This has been described informally as ‘rolling over’, and the process is governed by the proposed Trade Bill, which is currently being debated. The Trade Bill grants the UK Government the ability to implement the non-tariff aspects of rolled-over trade agreements (Trade Bill, Clause 2(1)).
While the term ‘roll-over’ suggests automaticity, as Gasoriek and Holmes have argued, this is not the case. Among other issues, partner countries can require that EU agreements be reopened for negotiation with an independent UK (Gasoriek and Holmes, 2017). The powers granted to the UK government under the Trade Bill, controversially, are broadly conceived: they apply even if trade agreements change from those agreed under the EU. The Trade Bill grants the government what are known as ‘Henry VIII powers’ to enable changes to primary legislation retained under EU law without normal parliamentary scrutiny. Hestermeyer concludes that this could impact upon EU labour and environmental laws inter alia and that the resulting agreements should be subject to detailed parliamentary scrutiny, including a final vote on whether to accept or reject them (Hestermeyer, 2018, at 10, 22).
We recognise that, from a pragmatic perspective, Parliament may find such a task overwhelming given the number of trade agreements at stake and the competition from other Brexit-related legislation. Even barring a full parliamentary vote, however, the Government must provide for some scrutiny and oversight of its approach to the trade agreements which will, at least initially, constitute its external trade regime, and which may be subject to substantial modifications from their current forms. One approach would be to utilise Parliamentary Select Committees to perform this function.
As has been noted by the International Trade Parliamentary Select Committee (ITC), there has been to date little transparency regarding the rollover process, such that the strategy, timeline and process by which the UK Government is negotiating with EU trade partners remains unclear. The ITC has made the sensible suggestion that the Government produce a ‘risk register’ detailing which Agreements take priority and outlining contingency plans in case a partner country change its mind about simply replicating an agreement (ITC report, p. 15).
Another consideration is that the implementation of these agreements, notably their chapters on sustainable development, environmental and labour standards, will not be seamless; it will require the UK Government to establish advisory bodies and develop other governance mechanisms. This challenge is not unique to trade; it is relevant across the entire spectrum of issues that are currently subject to EU regulation. We discuss this in more detail below.
The Trade Bill does not say anything about negotiating future trade agreements, and it remains unclear what role the Parliament and the devolved nations will have in their negotiation and ratification. This is concerning, as the default legislation applying to UK trade negotiations is the 2010 Constitutional Reform and Governance Act (CRAG Act). While it provides that the Commons can block treaty ratification indefinitely, Parliament’s powers are limited: it does not have to vote on, or even debate, ratification of treaties. (CRAG Act, Chapter 2, Part 2) The CRAG Act provides Parliament a more limited influence than, for example, the European Parliament, which has to provide or decline assent to the final trade agreement, must be kept informed during the negotiation process and can state its positions and make recommendations at any time (European Parliament, 2015). Trade agreements that include provisions on portfolio investment and Investor State Dispute Settlement also must be ratified by individual EU Member States’ Parliaments (Court of Justice of the European Union, 2017).
The reinforcement of parliamentary sovereignty is often cited as one of the main benefits of Brexit. For this reason, the UK Parliament’s oversight of, and influence on, UK trade policy should at least be commensurate to that enjoyed by parliaments under EU law. Nor does the EU Parliament have an unusually large degree of influence on trade negotiations in an international context; in the US, for example, the Congress has greater authority over whether trade negotiations can be authorised, and also must vote on whether to accept the final agreement.
UK trade agreements will impact upon many areas of the UK economy in which Parliament has legislative powers, such as energy, public services, agriculture and finance. Parliament should have an enhanced role in trade negotiation, including a specific remit for devolved administrations, enabling influence in setting the mandate for negotiations and reviewing their progress, as well as voting on whether to ratify the final Agreement.
Public information and consultation mechanisms in trade negotiations
As the UK government determines which new trade agreements will be beneficial for the UK, it is essential that it strengthens and clarifies its negotiating strategy by soliciting information from both businesses and civil society regarding their offensive and defensive interests in the agreement. UK industry already consults domestically on its priorities for EU trade agreements (Henig, 2018, p 3). However, a recent report from the London School of Economics (LSE) and the British Chamber of Commerce concludes that the UK’s current approach to stakeholder engagement is insufficient to guarantee that the government will have access to the scope and quality of information it will need to inform a trade negotiation. The report notes that stakeholder engagement has been ad hoc, non-transparent and focused on large businesses (LSE and BCC, 2018).
As it takes control of its trade policy, the UK must adopt a more formal and transparent approach to stakeholder engagement by establishing direct channels of influence into the negotiation process. In line with the LSE/BCC recommendation, as well as recent EU practice (European Commission, 2017), the UK should establish minimum standards of engagement for trade agreements, as well as formal bodies to facilitate this engagement. For example, an Advisory Group comprised of a wide variety of stakeholders, including civil society and small and medium enterprises, could feed in recommendations to the UK negotiating teams. The UK government must also address the need for public information, committing to making its negotiating objectives clear/explicit, publishing draft negotiating chapters and providing readable, accessible explanatory documents in a timely manner.
Sustainability Impact Assessment (SIA)
The UK should pursue an evidence-based approach to trade policy in which the impacts of trade agreements are identified and addressed. It is in the UK’s interests to develop its own SIA framework for future trade agreements. Trade liberalisation often requires trade-offs between different sectors of the domestic economy. SIA is a mechanism that not only seeks to minimise the negative impacts of FTAs, but also to maximise their benefits. In short, a robust SIA framework will lead to better trade agreements.
EU SIA is conducted by independent consultants, which are selected through a competitive process. The Commission provides an overarching framework with which all SIAs must comply (EU Commission, 2016), but consultants are expected to devise a bespoke methodology relevant to the specific issues that will be negotiated. Consultants must also produce a consultation plan, which, inter alia, identifies key stakeholders that must be formally consulted, sets out the consultation methodologies and explains how other interested parties and the broader public can feed into the SIA.
Whilst a useful foundation for the UK, EU SIAs have been criticised. There are flaws in the SIA process and SIAs have been found to have only a limited impact on trade negotiations (Kirkpatrick, 2006). The following proposals form the basis of a new UK scheme for SIA that best serves the UK’s trade policy, taking into account the weaknesses that have been identified in the EU’s framework.
As the main proponent of the trade agreement, the Government would have an obvious conflict of interest in the SIA’s findings being positive. As in the EU, UK SIA should, therefore, be conducted by independent consultants chosen through a competitive process. Due to the relatively small number of companies that are active in this area, and their desire to attract future contracts, questions can be raised over whether the consultants will be completely independent. Nevertheless, the use of an external party should still be considered preferable to the Government assessing an FTA’s potential impacts. Consideration could be given to there being an oversight role for either the ITC or another independent body. This would not completely address the concerns raised here, but it would add an additional level of scrutiny to the selection process.
Like the EU, the UK should develop an overarching framework for SIA, setting out its core principles and certain basic requirements, but consultants should be required to develop bespoke methodologies and consultation plans that best suit the agreement being negotiated. This would ensure that SIAs both meet the needs of the UK’s negotiators and are directly relevant to the agreement in question. It would not be necessary for every SIA to cover every issue. If an FTA is solely concerned with improving access to financial services, for example, there would be no need to assess its impacts on fisheries.
Equally, UK SIA should also consider a broad range of environmental, social, economic and human rights impacts, but these should reflect the UK’s own national and international development priorities. There are certain factors not considered in the EU that the UK may wish to include, for example, whether a trade agreement could lead to regulatory reform in the UK and the impacts the agreement may have on different regions within the UK. How different issues are categorised should be consistent across all SIAs to facilitate comparisons of different trade agreements.
It is essential that mechanisms are put in place to enable dialogue between stakeholders and consultants, and consultants and the negotiators, and the wider public should also be given opportunities to feed into the process. A dedicated SIA website, on which all relevant information is made publicly available, would be an efficient way in which to facilitate this. There is extensive research highlighting the benefits of stakeholder participation in decision-making processes. It can provide decision-makers with information that might otherwise be unavailable and can help to build public support for decisions (for example, see Steele, 2001).
Parliament should, therefore, be involved in the SIA process so that it can hold the negotiators, i.e. the Government, to account as it develops and exercises the UK’s new trade policy. Trade negotiations will often involve potentially controversial trade-offs between equally legitimate policy goals and the Government must be made to publicly account for these.
Parliamentary committees should be established to oversee the SIA process. Consultants should be required to go before the committee at key points in the process, equivalent to the three stages in the EU SIA process, to explain their methodologies and findings. Equally, negotiators should go before the committee to outline how the SIA’s findings are being used in the negotiations. At the end of the negotiations, the Government should publish a position paper similar to that prepared by the Commission. Again, a minister should be required to go before a committee to explain how the results of the SIA and stakeholder feedback have been taken into account. This will enhance the influence that SIA has on the trade negotiations as the Government would have to defend decisions they make before Parliament.
Given that the UK intends to agree a large number of trade agreements in a short period of time, consideration should be given to establishing different committees to oversee individual SIAs. In the future, when the political and economic imperative for rapidly adopting large numbers of trade agreements in a short period of time is reduced, this work could be taken on by the ITC.
These measures should be separate from Parliament’s role in ratifying any new trade agreement. The proposals here are intended to enhance transparency and accountability within the SIA process by requiring the Government to show how it has responded to specific concerns that may become lost in wider parliamentary consideration of the merits of the final trade agreement.
Finally, the role of the judiciary in the SIA process should be clearly defined. If rights of participation are being created, either for formal stakeholders, the wider public or both, there must be an effective means of recourse if these rights are violated. Due to the issues relating to standing, time and costs (Bell and McGillivray et al, 2017, 331-349), establishing a specific statutory right of appeal or other expeditious procedure would be preferable to relying on judicial review.
The UK should develop independent objectives for integrating sustainable development into its trade agreements. However, through the roll-over of EU trade agreements, it will de facto inherit the EU approach. Whilst this approach differs from agreement to agreement, it contains cross-cutting and distinct features. Most notably, EU FTAs are normally made conditional on trade partners upholding human rights and democratic principles. In contrast, commitments to uphold labour and environmental standards are often characterized as ‘soft’ or ‘cooperative’ – countries have no recourse to formal dispute settlement mechanisms, and they function through the FTA’s establishment of monitoring bodies (see Bartels, 2013).
This has significant implications for the UK. First, UK external trade will enshrine human rights as a pre-eminent FTA objective, with scope for the UK to unilaterally withdraw benefits of the Agreement on the basis of violations of human rights or democratic process. Second, in the actual implementation of rolled-over agreements, the environmental and labour standards chapters will entail specific practical challenges. In this respect, the roll-over of EU trade agreements is not ‘automatic’. For example, the CETA Comprehensive Trade and Economic Agreement between Canada and the EU (CETA) establishes a Committee on Trade and Sustainable Development (CTSD) of high-level officials from both countries who monitor the implementation of CETA provisions on labour and environmental protection, including through holding public sessions. A Civil Society Forum promotes dialogue on the sustainable development elements of CETA and receives reports from the CTSD. CETA also establishes Domestic Advisory Groups (DAGs) of NGO, academic, business and trade union representatives. The European Economic and Social Committee provides a Secretariat for DAGs that the EU has established for this and other trade agreements (CETA, Articles 22.4.3, 23.8.3, 24.13.3; see also European Parliament, 2017). Finally, while sustainable development chapters are not enforceable through the dispute settlement mechanism, if a Party complains that they have been violated, a Panel is provided in order to find a ‘mutually satisfactory plan’ (CETA, Articles 23.10.12 and 24.15.11). Other trade agreements, such as EU-South Korea, take a similar approach.
To implement these chapters, the UK must replicate these bodies and functions. The UK may wish to take a different approach to trade agreements that does not provide such a strong emphasis on human rights or that provides more enforceability for labour and environmental obligations (Harrison et al., 2017). However, if it seeks to roll-over existing agreements, it will de facto adopt EU external policy priorities embodied in these trade agreements, which it must imminently make operational.
The majority of UK environmental regulation derives from EU law. The UK will leave the EU with a high degree of harmonisation, having transposed the EU acquis into domestic law. Arguably the most important issue regarding the UK’s future trade and sustainable development strategy is the extent to which it will maintain this regulatory alignment. The UK government has repeatedly reassured the public, as well as EU negotiating partners, that it will uphold as high levels of environmental and worker protection as those found in the EU. Prime Minister May further elaborated in March 2018 that ‘The UK will need to make a strong commitment that its regulatory standards will remain as high as the EU’s. That commitment, in practice, will mean that UK and EU regulatory standards will remain substantially similar in the future.’ (HM Government, 2018b)
Leaving the Customs Union will give the UK freedom to conclude FTAs independent of the EU. Trade agreements provide a motive for regulatory reforms in order to pursue more ‘frictionless trade’ in the absence of EU Membership. In particular, ‘deep’ trade agreements might provide for increased alignment in the regulatory process, the content of regulations and standards and/or the process of verification of regulatory compliance. Of most immediate relevance is the prospect of a UK-US trade deal, for which President Trump and Prime Minister May have agreed to lay the groundwork (BBC, 2018). The US has long complained of the EU’s approach to food safety, which has led to bans on a number of US exports, including some food additives, meat treated with hormones and beta antagonists, meat washed with pathogen reduction treatments (for example, ‘chlorinated chicken’) and tallow. The US has also expressed concern about the EU’s increasingly cautious approach to endocrine-disrupting pesticides and slow approval process for genetically modified organisms (US Trade Representative, 2017, pp 147-156).
These regulatory barriers stem from the EU’s application of the precautionary principle, which provides a lower threshold than the US for banning or limiting new products on the basis that they are likely to be hazardous, even when scientific data do not allow for full risk assessment (European Commission, 2000). The US complaints referenced above make clear that it would exert pressure on the UK to remove product bans and adopt risk assessment that conforms more closely with the US approach. To some extent, the UK will have to choose whether to maintain harmonised standards with the EU or re-negotiate these with US (or other third country) markets in mind. This, in turn, will help determine whether the UK maintains the status quo with respect to its product-related environmental and consumer protection standards or adopts an approach that the EU would consider constitutes a lower level of protection.
This decision may well be binary. The approach by which the UK will maintain regulatory alignment with the EU is a key remaining area of disagreement. The EU has ruled out regulatory alignment on a sectoral basis that would allow for future divergence (see Institute for Government, 2018). If it maintains this position, as Magntorn and Winters (2018) have argued, the implication for the UK is that it must either adopt a trade agreement close to Norway’s, with Single Market membership and near full regulatory alignment, or close to Canada’s, which has little regulatory harmonisation at all.
In this Briefing Paper, we argue that the UK should approach sustainable development objectives as integral to its trade policy, through procedural and substantive dimensions. With respect to the former, the Government has identified the involvement of certain actors as important to ‘transparent and inclusive trade’, notably Parliament, devolved regions, businesses and civil society (HM Government, 2017), but there are a number of gaps in formalising their involvement. Redressing these will lead to better-informed and indeed more successful trade policy. A recent analysis by Henig underscores this point. He identifies elements that enable successful FTA negotiations; these include ensuring that agreements take account of a wide array of different interests, and provide for transparency and consultation (Henig, 2018, pp 10-12). The Government should not be complacent about public support for FTAs, and ensure, to the extent possible, that governance of its external trade does not deepen domestic divides.
With respect to the substantive commitments made through FTAs, liberalising UK trade should not lead to the weakening of UK objectives in other areas, such as environmental and consumer protection and high labour standards. The Government has committed to upholding its current levels of standards and protections through the Brexit process (HM Government, 2018b). Integrating this objective into its future trade agreements will simply ensure that it is able to uphold and operationalize this commitment.
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This document was written by Dr Emily Lydgate and Dr Rob Amos. The authors are grateful to Dr Brigid Fowler, Dr Sylvia de Mars, Dr Max Mendez-Parra, L. Alan Winters and other fellows of the UK Trade Policy Observatory.
Discussions with them have substantively informed our arguments in this Policy Brief. Any errors of course remain our own. This Brief was also informed by discussions that took place at a Roundtable on Trade, Standards and Brexit hosted at the University of Sussex in June 2017.
The funding that made this Brief possible was provided by the Sussex Sustainability Research Programme.
The authors assert their moral right to be identified as the authors of this publication. Readers are encouraged to reproduce material from UKTPO for their own publications, as long as they are not being sold commercially. As copyright holder, UKTPO requests due acknowledgment. For online use, we ask readers to link to the original resource on the UKTPO website.
 Even if it maintains a customs union with the EU, the UK will need to pursue agreements with the same trade partners in parallel, so many of the issues outlined in this Briefing still pertain. At the time of writing, the UK Government does not intend to negotiate a customs union with the EU after leaving, though it is possible that a cross-party rebellion on the Trade and Customs Bills will lead to a change in its position.
 Here we focus solely on the regulation on human, animal and plant life and health, or Sanitary and Phytosanitary measures; there are many additional areas of EU regulation we do not consider. For a useful discussion of UK labour standards and its future trade agreements see Harrison et al., 2017.
 Parallel to the rollover of EU trade agreements, the transposing of EU environmental law and regulation will not provide an automatic transition. EU agencies, the Court of Justice of the European Union and the European Commission all play a key role in the development, review and enforcement of environmental standards and regulations. Key to the UK’s maintenance of high levels of domestic environmental protection will be its ability to provide similarly robust domestic enforcement mechanisms and replicate the scientific and technical expertise embodied in EU agencies. See, for example, Client Earth (2017).
 These differences can be made explicit even in trade agreements that do not succeed in harmonizing the specific sectoral regulations in question. CETA lists the precautionary principle as an accepted justification for regulation to protect workers or the environment (Articles 23.3.3, 24.8.2). In contrast, the Trans-Pacific Partnership regulatory coherence chapter, which the US effectively developed before withdrawing from the Agreement, affirms that partners should base regulation on scientific information (TPP Article 25.5 (2)d).