In our embrace of globalisation, we have taken advantage of lower social and environmental standards in other parts of the world to keep our consumer prices low. We have justified that on the basis that we were ‘helping’ those countries develop their economies and thereby improving the lives of their citizens. Our rewards have been to profit from the financing and to keep costs lower than they would have been if production adhered to standards we use for ourselves domestically.
The result has been the decimation of domestic production capacity, the same amount of global pollution, and a rise in economic activity, living standards and pollution in producing countries.
As global energy supply and economic growth slow, the UK’s need to secure its domestic and sovereign capacity arises in contradiction to the historical trajectory of globalisation to date. As a country, we no longer have the global clout to secure preferential trade terms for essential goods with our international trading partners. Maintaining control over our national priorities requires a rebalancing of domestic and traded production to secure our essential needs.
Two policies can help us achieve our national security in a fair and balanced way with our global trading partners. A policy that seeks to ensure equal environmental protection responsibilities, and a policy that seeks the same for social protection responsibilities.
Environmental Border Levy
To ensure that domestic production is not disadvantaged by external production that excludes costs that would have to be borne if the production occurred on shore, the UK should introduce border adjustment pricing. However, this policy needs to be closely coordinated with our trading partners, especially the EU, and so projections of effects and revenues are highly contingent. We have not included revenue estimates in this report.
See Appendix for discussion of the possibilities for the UK to introduce Environmental Border Adjustment Mechanism pricing (EBAM) in coordination with the EU over the 2030s.
Social Border Levy
Similarly, domestic production should not be disadvantaged by external production that excludes social costs the deem essential. To protect against those practices, the UK should introduce social border adjustment pricing.
The remedy would be a Social Border Adjustment Mechanism (SBAM).
This would be a revenue neutral policy instrument that encouraged all trading partners to provide the same levels of social safety and security as the UK. Levies would apply to imports of products and services where the origin country did not provide similar services, such as universal health care and education. The cost of providing those services in the country of origin would be assessed, and differential pricing applied to the imports as if those services were being provided. The revenues would then be returned to the original country so that they could provide the services. This would largely become self-affecting, as every country would realise that they could avoid the levy by simply providing the services in the first place.