Funded Projects

Two projects have been awarded funding in the first round of the Centre for Inclusive Trade Policy's Innovation Fund.

Designing Credible Leakage Border Adjustments To Promote Compliance. Theory and Empirics
PI: Chiara Forlati (University of Southampton)

By 2022, the EU should approve the Carbon Border Adjustment Mechanism (CBAM). Many countries, including the UK, are considering similar measures. CBAM is designed to prevent carbon leakage due to the Emission Trading System (ETS) by taxing imports according to their carbon content. However, since estimating import carbon content is very complex, CBAM will be applied only to a few sectors, and it is likely not to be effective in eliminating leakage.

This project proposes an alternative route towards leakage prevention: the Leakage Border Adjustment Mechanism (LBAM). LBAM offsets ETS-induced cost disadvantages of domestic producers relative to foreign competitors and requires knowledge only about product-specific import demand, export supply and output-to-emissions elasticities. This approach will enable computation of Leakage Border Adjustment Taxes that prevent leakage induced by ETS and then comparison of these with CBAMs in terms of welfare and emissions.

Treaty Scrutiny: The Role of Parliament for UK Trade Agreements
PI: Holger Hestermeyer (Kings College, London)

Parliaments play an important role in the democratic legitimation of international agreements, including trade agreements. In many jurisdictions they possess an up-or-down vote on trade agreements and their norm-creating and -legitimating functions are used for developing trade policy through collaboration between government and parliament.

In the UK, Parliament’s role in treaty-making is limited to scrutinizing treaties under CRAG 2010. The need to replace the EU’s trade agreements has incentivised a reform of internal parliamentary procedures. However, scrutiny is still found badly wanting, as a House of Commons International Trade Committee report dated 27 October 2022 concluded.

This project sets out to describe the development and current state of affairs of UK treaty scrutiny and from there develop realistic proposals for improvement, allowing for a greater involvement of parliament in treaty-making and thus for a more inclusive policy.