The EU’s free trade agreements and sustainable development

Ever since the adoption of the UN 2030 Agenda and the subsequent EU’s commitment to the UN Sustainable Development Goals, the European Union has made efforts to prompt responsible trade and investment policies with international partners. In the words of the Commission [1]: “EU citizens rightly expect that EU trade agreements with our international partners should support workers' rights, environmental and climate objectives and to enhance global governance in these fields.” Sustainability is therefore one of the key objectives of EU trade policy that, nowadays, is grounded on the provision of the so-called Trade and Sustainable Development (TSD) chapters. Such chapters not only bind parties to a range of multilateral environmental agreements and conventions of the International Labour Organisation (ILO), but also provide for structures to involve civil society organisations in the implementation of those commitments and dedicated dispute settlement mechanisms. Obligations are formally designed to be bilateral. Quite significantly though, there is little evidence that they have been “operationalized in a way that considers labour issues within the EU” [2].


The interest of the EU in setting social and environmental standards in free trade agreements (FTA) derives from mainly two circumstances. On the one hand, there is no way to ensure that trade is ecologically and socially sustainable unless specific commitments are undertaken. This is the necessary consequence of a production and consumption system that is based on prices that do not reflect the real costs for societies [3]. On the other hand, as to compete with European enterprises, developing countries may need to reduce labour and ecological standards to attract investments or increase their export (so-called race to the bottom: countries compete with each other to reduce costs by paying the lowest wages or giving workers the worst conditions). This not only has significant implications on the living conditions in trade partners countries, but also may distort competition on the merit and alter market equilibria.


What is highly controversial with respect to sustainability and EU trade policy is the promotional approach the European Union has adopted: compliance with obligations on labour and environmental standards is not linked to economic consequences and sanctions. Indeed, TSD chapters provide for a dispute settlement mechanism that promotes dialogue, cooperation, and/or monitoring and whose effectiveness has been under scrutiny in the last years. For instance, the lack of an enforcement system makes negotiations complicated and hardly induces compliance with obligations undertaken through the treaties.


When the opposite and sanctions-oriented conditional approach is taken into account, two considerations are generally made. In the first place, the retreat of trade preferences is regarded as unlikely to enhance sustainability in third countries. Indeed, such an instrument would lack effectiveness with regards to strong treaty partners such as China and may affect the very same people they aim at protecting. Furthermore, this sort of economic sanctions necessarily imposes a cost on the retaliating treaty partner itself and may lead to stiffening of international relations.


In the second place, it is argued that the imposition of financial sanctions whose revenue is then spent in sustainability projects may be considered an effective tool to prompt compliance and, at the same time, enhance sustainability standards. While the European Parliament supported the possibility of including financial penalties in the EU’s FTAs in 2010, the Commission excluded this possibility in its non-paper of 2018 due to a lack of consent among Member States. Yet, many scholars have proposed to introduce in TSD chapters subsidiary sanctioning power as a tool to ensure actionability of FTA when negotiations and cooperation fail [4].


Apart from the issue of sanctions, TSD chapters have been criticized for many other reasons. Among these, it was highlighted how the provision of common TSD chapters, regardless of the peculiarities of State partners, appears insufficient to address the complexity of sustainability issues within diverse countries. In addition, it was noted that the functioning of these provisions is based on the engagement of civil society and its organized manifestations (Trade Unions, Associations...). Yet, civil society mechanisms (CSM) show systematic operational failings such as lack of independence of these organisms from the Government or lack of resources. Some of these issues have been addressed in the aforementioned non-paper of 2018[5].


Picture from Pexels


Irrespective of these dysfunctions, TSD chapters resulted in concrete improvements for example in the cases of Vietnam and Georgia: the former, after the conclusion of a FTA with the EU, proceeded in the ratification of the ILO Convention 98 on collective bargaining, adopted a revised Labour Code, established a concrete timeline for ratifying the ILO Conventions on forced labour and freedom of association and undertook steps to eradicate child labour. The latter instead made amendments to the national labour legislation to ensure higher social standards.


Yet, what has not yet been fully implemented as a way to ensure compliance with social and environmental standards are commitments by State parties to support and possibly impose forms of corporate social responsibility (CSR) – i.e. the adoption by corporations of instruments and of processes to prevent or manage their negative impacts on society. In fact, TSD chapters now only dispose of aspirational clauses that encourage in general terms voluntary CSR.


Since multinational corporations and enterprises are not recognized as full subjects of international law, the involvement of countries of origin is necessary to ensure the adoption of adequate domestic legislation that holds corporations responsible for human rights and other violations. In particular, these instruments may enhance transparency on the supply and production chains and in-company activities and ensure a more effective supervision of multinational corporations.


In conclusion, the extent to which TSD concretely impact on sustainable trade is now significant but not decisive. Although in some cases their provision resulted in material steps towards a higher protection of workers and a stronger climate action, there still is room for improvement.


Cover Picture from Pexels


[1] http://trade.ec.europa.eu/doclib/docs/2017/july/tradoc_155686.pdf

[2] Labour Standards Provisions in EU Free Trade Agreements: Reflections on the European Commission's Reform Agenda. J. Harrison, M. Barbu, L. Campling, F. C. Ebert, D. Martens, A. Marx, J. Orbie, B. Richardson, A. Smith

[3] https://borderlex.net/2018/02/28/comment-tsd-chapters-in-eu-ftas-fig-leaf-or-necessary-tool-for-sdgs/

[4]See “Retooling the Sustainability Standards in EU Free Trade Agreements”,Marco Bronckers and Giovanni Gruni

[5]Trade and Sustainable Development (europa.eu)


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