Sustainability Clauses: Standard in Modern Trade Agreements

Europe actively promotes the global implementation of social and environmental standards at multilateral institutions such as the International Labour Organization (ILO), the World Trade Organization (WTO), and the World Climate Conference. But through unilateral trade measures and bilateral free trade agreements (FTAs), it also contributes to ensuring that employees’ rights enjoy more widespread respect and environmental-friendly technologies are more frequently used. Thus, under the EU’s Generalized Scheme of Preferences, developing countries have particularly significant customs advantages for their exports to Europe if they have accepted and are implementing the core international agreements on human and labour rights, environmental protection, and good governance.

Sustainability Chapters in EU Trade Agreements are Norm, not Exception

EU FTAs usually include chapters on labour and environmental standards as well as on sustainable development (TSD). In such agreements, all the parties involved undertake, among other things, to apply the relevant international standards and treaties and not to create economic advantages for themselves through lenient employee or environmental protection. In recent FTAs of the EU – such as those with South Korea and Colombia/Peru – the negotiating partners provide for bodies composed of representatives of the governments and civil society that are mandated to ensure the effective im-plementation and monitoring of agreements on labour and the environment.

The need for greater determination in implementing social and environmental standards is undisputed. But what is disputed is the extent to which the EU should use trade agreements to force other partners to undertake certain international commitments in the area of sustainability. A non-paper on the implementation and enforcement of EU TSD provisions published by the European Commission in July examines possible ways of dealing with violations in the area of sustainability; these include the improvement of approaches to date towards complying with the TSD chapter and the introduction of economic sanctions in the form of market access restrictions.

Hard Sanctions Do not Lead to Success

Imposing economic sanctions to force compliance with standards is controversial – and rightly so. First, they constitute considerable interference in the legal systems of third countries. Second, it cannot be ruled out that they are damaging for far more people than are violations of sustainability standards. For many partners of the EU, trade offers an opportunity for economic and social development. If market access to the EU is restricted, there will be fewer sales opportunities and thus less production and fewer jobs. Finally, it is likely to be difficult to determine exactly the extent of damage to trade that could be used as a yardstick for imposing sanctions.

More promising is a cooperative approach, like the one pursued so far in the EU: namely, through dialogue and capacity-building measures. Such an approach takes into account the respective situation of the partner countries and facilitates agreements between equal partners.

Existing approaches in this direction should be improved and expanded. With its detailed proposals on how to improve the implementation of the TSD chapter, BusinessEurope has demonstrated the readiness and voluntary commitment of the business community. The proposals foresee, among other things, an improvement in impact assessment studies and capacity-building in the monitoring of voluntary commitments.