Environmental Regulations and Foreign Trade

Environmental Regulations and Foreign Trade: Climate change is now the world’s number one problem. Reports of forest fires, floods, extreme heat and drought are increasing daily. Countries have long recognized its adverse effects on the environment, health, the world’s future and the economy. The United Nations Framework Convention on Climate Change (UNFCCC) was first signed and brought into force in 1994. Because its enforcement powers were weak, the Kyoto Protocol, with more concrete targets, followed. It was signed in 1997 and entered into force in 2005. According to the protocol as described here, states fall into 2 groups: Annex 1 countries (developed countries) and Annex 2 countries (developing countries). Turkey is in Annex 1. When Annex 1 countries cannot meet their commitments to reduce greenhouse gas emissions, obtaining carbon credits elsewhere provides a solution, giving rise to carbon trading and exchanges.

Kyoto ProtocolThe Paris Agreement, which is also a continuation, came into effect due to the expiration of the term of validity in 2020. Turkey also became a party by enacting the Agreement in November 2021 and stated its zero emissions target/subordination by 2053.

Nearly 200 countries are parties to the Agreement, which the United States withdrew in 2020 and rejoined in 2021. The goal is to limit global temperature rise to 2 degrees Celsius compared to the pre-industrial period (reduce it to 1.5 degrees Celsius if possible).

The Paris Agreement does not have a sanction mechanism, but in the European Green Covenant, announced on 2019 (The European Green Deal) the situation is different.. This plan for economic sustainability aims to reduce carbon emissions by 50% compared to the 1990 level by 2030 and achieve zero carbon emissions by 2050.

The European Green Accord brings regulation and pricing in the importation of iron-steel, aluminum, cement, fertilizer and electricity sectors by the mechanism of carbon regulation at the border; the aim is to reduce the carbon emissions of these sectors. Therefore, we can also think of the European Green Accord as an economic consensus, a trade agreement. The arrangement will begin on January 1, 2023, after a three-year transition period, and will be fully implemented in 2026. Europe is already waiting for the regulations it implements to be followed by the countries that sell to it. Exports to Europe are being carried out from around the world. In order to achieve zero carbon emissions, Europe will impose a carbon tax on its imports.

While European Union members who carried out the industrial revolution have caused the most pollution in the world together with America, due to the fact that environmental pollution affects the whole world without recognizing political boundaries, it has initiated a much more active process by bringing environmental sensitivities to the forefront with these regulations. Different priorities are created in product designs; the al-use-horse era is left behind, with repair-maintenance-repair, and the longer-lived product use-circular economy being brought to the fore.

Even if carbon emissions are stopped all over the world immediately, climate change will unfortunately still happen. These steps will affect some countries and sectors more primarily, such as energy-intensive sectors, countries whose weight is created by Europe in its foreign trade. In addition to being a very important partner in Turkey's foreign trade, it should be taken into account the extent to which European tourists will be affected by the tourism sector by preferring hotels that use renewable energy or offer a carbon footprint document.

The Presidential Circular on the Green Covenant Action Plan in our country was published in July 2021. TIM-Turkey Exporters Assembly Sustainability Action Plan consisting of 12 main articles; Textiles and Raw Materials Exporters' Associations, Turkish Textile Sector Sustainability Action Plan was also announced.

In terms of compliance with regulations, as always, large-scale corporate firms will take steps before. However, on the SME scale, it is very important to take the road by creating awareness across the country.. Compliance efforts will increase the cost of companies in the first phase, but those who are unable to adapt will lose the market, while those who are able to adapt will have a serious competitive advantage.

Other effects that edits can have on the world scale can be summarized as follows;

• With the cyclic economy, there may be a contraction in world trade with longer use of products,
• As the greenhouse gas released in shipping increases the cost due to carbon pricing, supply chains can be collected in geographies close to each other,
• It can be seen that the countries that are able to adapt to the agreement are concentrated within themselves, and those who are unable to adapt are concentrated among themselves.
• Additional procedures may occur in customs procedures.

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