Content uploaded by Ondrej Svoboda
Author content
All content in this area was uploaded by Ondrej Svoboda on Jan 29, 2023
Content may be subject to copyright.
Sustainable Development Chapters in the EU
Free Trade Agreements: Searching for
Effectiveness
Kateřina HRADILOVÁ
*
& Ondřej SVOBODA
**
The objective of this article is to discuss the current practice related to trade and sustainable
development chapters (TSD) in the EU free trade agreements and compare it with the model
promoted by the US. The paper provides an analysis of primary and secondary literature on
TSD chapters and examines two cases based on the specific EU and US experiences. The major
question is whether the EU should follow the US approach in order to strengthen the enforcement
mechanism of its TSD chapters. As the case of dispute between US and Guatemala shows, the
sanction-based approach has not proved as an adequate tool to address non-compliance with
labour and environmental standards. On the contrary, cooperation between parties along with
capacity building seems as a more relevant approach when it comes to compliance with interna-
tional standards. This article argues that main challenges for enforcement of TSD chapters are
related to strengthening of civil society participation, cooperation between the Parties and
monitoring implementation.
1 INTRODUCTION
In the last few years, the European Union’s (EU) trade policy has experienced several
critical points which led to a rethink some of its attributes. The period of reflection has
brought so far some new initiatives and concepts, as presented in ‘Trade for All’
strategy.
1
The growing scepticism among civil society with respect to distribution of
benefits from trade, investment and globalization more generally calls for better
Hradilová, Kateřina & Svoboda, Ondřej. ‘Sustainable Development Chapters in the EU Free Trade
Agreements: Searching for Effectiveness’.Journal of World Trade 52, no. 6 (2018): 1019–1042.
© 2018 Kluwer Law International BV, The Netherlands
*
Serves as an officer at the Department of Trade Policy and International Economic Organizations at
the Ministry of Industry and Trade of the Czech Republic and pursues a PhD degree at the
Department of Development & Environmental Studies at the Palacky University Olomouc.
Email: hradilova@mpo.cz.
**
Serves as an officer at the Department of European and International Law of the Ministry of Industry
and Trade of the Czech Republic and teaches public international law at the Faculty of Law of Charles
University in Prague as a PhD candidate. Email: svoboda@mpo.cz. This contribution was supported
by the Charles University, project ‘Progres –Právo v měnícím se světě’. The views and opinions
expressed in this article are those of the authors and do not reflect the official policy or position of the
Ministry of Industry and Trade of the Czech Republic.
1
European Commission, Trade for All. Towards a More Responsible Trade and Investment Policy. Oct. 2015,
http://trade.ec.europa.eu/doclib/docs/2015/october//tradoc_153846.pdf (accessed 15 May 2018).
addressing societal and environmental concerns in free trade agreements (FTAs).
2
The
latest area under spotlight is the sustainable development chapters in the EU FTAs. As
these chapters are in general welcomed in demonstrating the parties’commitment to
non-trade values such as labour rights or protection of environment, they are also
criticised for being largely rhetorical and lacking enforcement mechanisms.
3
The truth
is that there have been very few cases of enforcement. One can ask if international
trade agreements are part of the problem by encouraging a race to the bottom or
rather if they are instruments mitigating undesirable consequences of global trade. It is
important to examine how the linkages between trade and other issues can be made
more effective, especially in respect of a design of dispute settlement system and
possible enforcement of Parties’obligations.
In May 2017, the European Commission published a reflection paper on
harnessing globalization that emphasises the EU commitment to a value-based
trade agenda that enhances global governance on issues like human rights, working
conditions and environmental protection.
4
This brought up a debate whether the
EU trade and sustainable development (TSD) chapters are meeting expectations
and what can be done to improve them. The EU approach in promoting trade and
sustainable development provisions in FTAs is often compared with the approach
of the US and Canada. The implementation of the EU TSD chapters is based on a
partnership and dialog with the partner countries and this approach does not lead
to imposing sanctions in case of non-compliance with the obligations. On the
other hand, the latest US and Canada FTAs allow to use economic sanctions as an
enforcement mechanism to implement these chapters.
This article seeks to explore whether the EU should follow the US approach in
order to strengthen the enforcement of the TSD chapters. The section 2 discusses
the rationale for including labour and environmental provisions in the FTAs. The
section 3 introduces the current EU approach, contents of TSD chapters and
provides a case study focusing on FTA between the EU and South Korea. This
FTA is the first EU bilateral ‘new generation’FTA and therefore the oldest EU trade
agreement with dedicated TSD chapter. The evaluation of it is thus an opportunity
for reviewing effectiveness not only for this FTA, but also for other subsequent EU
FTAs. The section 4 provides an overview of the US framework complemented by
a case study of the dispute related to sustainable development between the US and
2
OECD, Making Trade Work for All. Feb. 2017, http://www.oecd.org/TAD/events/making-trade-
work-for-all.pdf (accessed 15 May 2018).
3
Marise Cremona, UK Trade Policy,inThe UK after Brexit 258 (Michael Dougan ed., June 2017).
4
European Commission, Reflection Paper on Harnessing Globalisation. COM (2017) 240, 10 May 2017,
https://ec.europa.eu/commission/sites/beta-political/files/reflection-paper-globalisation_en.pdf
(accessed 15 May 2018).
1020 JOURNAL OF WORLD TRADE
Guatemala. The section 5 sums up the common features and distinctions between
these approaches and the section 6 provides some recommendations by authors.
As will be explained further in the paper, the TSD chapters have had limited
influence in respect of enforcement possibilities. However, sanction-based
approach has not proved as an adequate tool to address non-compliance with
labour and environmental standards. On the other hand, cooperation between the
Parties along with capacity building seems as a more relevant approach when it
comes to compliance with international standards. This article is based on an
analysis of primary materials including EU and US trade agreements, qualitative
analyses of current practice in case study and on a review of existing literature.
2 THE RATIONALE FOR INCLUDING LABOUR AND
ENVIRONMENTAL CLAUSES IN THE FTAS
In order to make the trade inclusive and sustainable, it is important to ensure that the
trade liberalisation improves the labour and environmental standards. Globalization has
opened the international markets, but free trade has been predominantly associated
with negative externalities, such as social dumping and cross-border pollution. While
trade is regulated by market prices, the later is not priced. From an economic point of
view, the labour and economic provisions in FTAs serve as an instrument against
unfair competition. In this perspective, violation of labour and environmental standards
distorts competitiveness and is considered as an unfair trading practice. There is also a
concern that trade liberalization without necessary safeguards may lead to deregulation
known as ‘race to the bottom’. Trade policy can address this issue in two ways. The
first way is to include labour and environmental clauses into the FTAs to minimize
negative social and environmental impacts. The second way is setting ad hoc forums to
address specific social and environmental problems.
5
Including labour standards in FTAs is usually regarded as a sensitive topic
in trade negotiations. Considering that a cheap labour is a comparative advan-
tage of some developing countries, one may argue that the labour clauses in
FTAs are hidden protectionist tool of developed economies. In this regard, a
compliance with the labour standards will increase the trade costs of low-
income countries. The research of Cerrere, Olarrega and Damian (2017)
6
shows that there is no statistically significant impact of labour clauses on trade
5
Ludo Cuyvers, The Sustainable Development Clauses in Free Trade Agreements of the EU with Asian
Countries: Perspectives for ASEAN?, 22(4) J. Contemp. Eur. Stud. 427–449 (10 July 2014).
6
Céline Carrère & Marcelo Olarreaga and Damian Raess, Labor Clauses in Trade Agreements: Worker
Protection or Protectionism? (Aug. 2017). CEPR Discussion Paper No. DP12251. http://www.ferdi.fr/
sites/www.ferdi.fr/files/publication/fichiers/p200-ferdi-_c.carrere-m.olarreaga-d.raess_.pdf (accessed
15 May 2018).
SUSTAINABLE DEVELOPMENT CHAPTERS IN THE EU FREE 1021
flows. However, exports of low-income countries benefit economically from
the introduction of labour clauses in North-South trade agreements. This can
be related to the fact that concerned consumers in the North are demanding
the products that were made in adequate working conditions. Moreover, the
effect is stronger when these provisions are accompanied by enhanced coopera-
tion mechanism. In other words, for low-income exporting countries, the
labour clauses facilitate rather than hamper a market access to developed
countries.
3 EU APPROACH
Under its Founding Treaties, the EU is to define and pursue common policies
and actions in order to ‘foster the sustainable economic, social and environ-
mental development of developing countries’. As such, TSD is one of the EUs
common commercial policy’s guiding principles.
7
Accordingly, the EU FTAs
increasingly contain ‘non-trade-issues’to reflect political significance of the
concept of sustainable development. The historically first type of such non-
trade-issues was compliance with international human rights obligations, the
rule of law and democratic principles.
8
Since 1995, the EU has included
‘human-right clauses’into its trade agreements. This approach is anchored in
various EU’s development cooperation tools, such as Generalized System of
Preferences (GSP), mechanism which allows developing countries to export to
the EU under the preferential tariff system, providing the fact that they comply
with the key UN human rights principles.
However, the first trade and sustainable development chapters appeared in the
Economic Partnership Agreements (EPAs), trade and development treaties nego-
tiated between the EU and African, Caribbean and Pacific countries (ACP). The
objective of sustainable development was set out under the Cotonou Agreement.
9
The pioneer EPA was concluded between the EU and Cariforum countries in
2008. Nowadays, there are seven such agreements but the state of play of their
negotiations and their further implementation varies.
10
The current practice of the EU’s trade policy gives a high importance to
include TSD chapters in FTAs, where labour and environmental issues are expli-
citly addressed. In 2011, the trade agreement between the EU and South Korea
7
Art. 21(2)(d) Treaty on European Union; Art. 205 Treaty on the Functioning of the European Union.
Consolidated versions of the Treaty on European Union and the Treaty on the Functioning of the
European Union, 2012/C326/01, signed on 13 Dec. 2007.
8
Billy A. Melo Araujo, The EU Deep Trade Agenda: Law and Policy, 68 (Oxford University Press 2016).
9
The ACP-EU Partnership Agreement, signed in Cotonou on 23 June 2000.
10
European Commission, Overview of Economic Partnership Agreements, http://trade.ec.europa.eu/
doclib/docs/2009/september/tradoc_144912.pdf (accessed 15 May 2018).
1022 JOURNAL OF WORLD TRADE
was the first FTA to have a dedicated TSD chapter.
11
Consequently, each sub-
sequent FTA concluded by the EU contains a relevant TSD chapter. This includes
the EU trade agreements already provisionally applied with Central America,
Andean community (Colombia, Peru and Ecuador), Moldova, Georgia, Ukraine
and Canada. Similar chapters are part of the finalised but not yet ratified FTAs with
Singapore, Vietnam or Japan. The proposals for TSD chapters are also a subject of
ongoing FTA negotiations with countries such as Indonesia, the Philippines,
Mexico, Mercosur countries etc.
3.1 CONTENT OF THE EU TSD CHAPTERS
Under current FTAs, the EU and its trade partner countries are obliged to take up major
international labour and environmental principles and implement them effectively to
prevent a ‘race to the bottom’. In addition, these chapters also refer to fair and ethical
tradeaswellasCorporateSocialResponsibility (CSR) and Responsible Business
Conduct (RBC) standards. When it comes to the institutional structures, the EU TSD
chapters rely on the work of bodies that facilitate the dialogue between the European
Commission and government of the partner country and engage the civil society on the
both sides. The TSD chapters in the EU FTAs have a specific mechanism for dispute
resolution based on consultations and they are not subjected to the general dispute
settlement mechanism of the concerned FTA. These topics are further analysed below.
3.1[a] Labour Standards
The EU TSD chapters are aligned to the concept of ‘decent work’.
12
There is a
provision asserting the Parties’commitment to the 2006 Ministerial declaration by
the UN Economic and Social Council on Full Employment and Decent Work as
well as International Labour Organization (ILO) Declaration on Social Justice for a
Fair Globalization from 2008. According to the ILO Declaration, the Parties shall
promote occupational safety and health, decent working conditions for all, labour
inspection and non-discrimination in respect of working conditions. The most
recent chapters more broadly refer also to the UN 2030 Agenda for Sustainable
Development that was adopted in 2015 and consists of seventeen Sustainable
11
Ch. 13, The EU –South Korea free trade agreement. http://eur-lex.europa.eu/legal-content/EN/ALL/?
uri=OJ:L:2011:127:TOC (accessed 15 May 2018).
12
According to the ILO (2018) decent work involves opportunities for work that is productive and
delivers a fair income, security in the workplace and social protection for families, better prospects for
personal development and social integration, freedom for people to express their concerns, organize
and participate in the decisions that affect their lives and equality of opportunity and treatment for all
women and men.
SUSTAINABLE DEVELOPMENT CHAPTERS IN THE EU FREE 1023
Development Goals (SDGs). When it comes to labour issues, the SDG 8 promotes
full and productive employment and decent work for all.
Usually, the labour provisions in the EU TSD chapters correspond to mini-
mum labour standards developed by the ILO, particularly the ILO Fundamental
Conventions. Parties are obliged to ratify and effectively implement these conven-
tions. There is also a reference to the implementation of ILO Declaration on
Fundamental Principles and Right at Work from 1998.
13
Furthermore, the Parties
shall make an effort to ratify the ‘other ILO Conventions’. The ILO Declaration
on Social Justice for a Fair Globalization from 2008 particularly underlines the
significance of the ILO governance (priority) conventions. The governance con-
ventions cover increasingly important topics such as labour inspections, employ-
ment policy or tripartite consultations. Finally, an increased attention is paid to the
responsible supply chains. The main tool are internationally recognized principles,
including the OECD Guidelines for Multinational Enterprises.
14
3.1[b] Environmental Standards
The latest EU TSD chapters include a broad range of environmental standards.
There is an explicit reference to number of multilateral environmental agreements
(MEAs) related to areas such as climate change,
15
biological diversity,
16
chemicals
and waste
17
etc.
18
However, these chapters go further as they include thematic articles on
sustainable management of natural resources in areas such as low carbon develop-
ment, biodiversity, timber or fisheries. The Parties should encourage trade in
sustainable goods and services that facilitate the transition to a low-carbon econ-
omy. A special attention is paid to promotion of trade schemes that leads to
conservation of biodiversity, which involves also cooperation on eco-labelling
schemes. The EU and trade partners are required to combat illegal trade in
endangered species of fauna and flora as well as illegal logging. Another issue to
13
The four fundamental principles based on all eight fundamental conventions of ILO
(Conventions No. 29, No. 87, No. 98, No. 100. No. 105, No. 111, No. 138, No.182) are: the
freedom of association and right to collective bargaining; the elimination of forced and compulsory
labour, the abolition of child labour; and elimination of discrimination in work.
14
OECD Publishing, OECD Guidelines for Multinational Enterprises, 25 May 2011. http://www.oecd.
org/corporate/mne/48004323.pdf (accessed 15 May 2018).
15
E.g. United Nations Framework Convention on Climate Change (UNFCC), Kyoto Protocol,
Montreal Protocol, Paris Agreement.
16
E.g. Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES),
Nagoya Protocol.
17
E.g. Rotterdam Convention, Stockholm Convention, Basel Convention.
18
For one of the latest texts see Ch. 16 of the EU-Japan Economic Partnership Agreement, http://trade.ec.
europa.eu/doclib/press/index.cfm?id=1684 (accessed 15 May 2018).
1024 JOURNAL OF WORLD TRADE
address is illegal, unreported and unregulated fishing that contributes to overfishing
of global fish stock and impairs the functioning of sea ecosystems.
3.1[c] Institutional Structures and Enforcement
The institutional structure of the EU TSD chapters is based on the work of
three main bodies that are involved in the process of monitoring and enforcing
of the obligations. Namely Sub-Committee on Trade and Sustainable
Development, Domestic Advisory Group (DAG) and Joint Civil Society
Dialogue. The TSD Sub-Committee is an inter-governmental working group
made by experts on trade, labour and environment from each Party. The TSD
Sub-Committee usually gathers once per year and reports to Trade Committee
of the respective FTA. This constitutes a multi-layered cooperation and con-
sultation mechanism within the treaty framework.
The civil society plays an important role in collecting information and
monitoring the compliance of sustainable development commitments. EU TSD
chapters establish two types of mechanisms for involvement of civil society.
First, the DAG brings in the EU and partner countries together environmental,
labour and business organizations. At the side of the EU DAG, the secretariat’s
assistance and logistical support is provided by the European Economic and
Social Committee (EESC).
19
Second, Joint Civil Society Dialogue is an open
forum composed by civil society (including DAGs) from both sides and the
governments that on the EU side are represented by the European
Commission. The meetings are usually held once per year, together with
TSD Sub-Committee meetings. The views of the Joint Civil Society
Dialogue may be submitted to TSD Sub-Committee. These institutional
mechanisms are contained also in the EU-Vietnam FTA which is according
to the European Commission ‘a new model for trade policy with developing
countries’.
20
The TSD chapters in the EU FTAs are not subjected to a general sanction-
based dispute settlement mechanism of the FTA due to a lack of consensus
within the EU on this matter. Instead, there is a special procedure based on a
common dialogue between the Parties which also comprises the civil society.
Thefirststageoftheprocessaregovernment consultations. If a mutually
satisfactory resolution is not reached, a Party may request an establishment of
19
European Economic and Social Committee, Monitoring of EU Free Trade Agreements, http://www.eesc.
europa.eu/monitoring-eu-free-trade-agreements (accessed 15 May 2018).
20
European Commission, Memo: EU and Vietnam reach agreement on free trade deal (4 Aug. 2015),
http://trade.ec.europa.eu/doclib/press/index.cfm?id=1358 (accessed 15 May 2018).
SUSTAINABLE DEVELOPMENT CHAPTERS IN THE EU FREE 1025
the Panel of experts on trade, labour and environment. In the next step, the
Panel of Expert submits a report that is made publicly available. Finally, the
implementation of recommendations made by Panel of Experts as well as
enforcement of the TSD Chapter is reviewed through regular TSD Sub-
Committeemeetings(seeFigure1).
In addition to that, the TSD chapters build a framework for a mutual
cooperation. The EU and the partner countries are setting the priority areas of
cooperation and conducting specific projects. Usually, these projects concern the
implementation of ILO conventions, or multilateral environmental agreements or
other trade related topics, including development in CSR practice.
21
Figure 1 Dispute Settlement Mechanism in the EU TSD Chapters
Government
consultations Panel of experts Report
TSD
Subcommittee
Review
3.2 CASE STUDY:RATIFICATION OF ILO CONVENTIONS UNDER EU –SOUTH KOREA FTA
The EU TSD chapter under EU–South Korea FTA
22
has put in place functioning
institutional structures including a civil society monitoring mechanism which allows
civilsocietytoparticipateindebateontraderelatedmatters.Onbothsides,thereisan
advisory body consisting of two Domestic Advisory Groups (DAG).
23
Further, every
year a meeting of TSD Sub-committee is organized back-to-back with the Civil
Society Forum.
24
This has been associated with regular dialogues among the Korean
government, the EU Commission and the civil society on both sides covering broad
range of topics, including sensitive issues such as ratification of remaining ILO con-
ventions by South Korea. One of the joint cooperation projects focuses on the
implementation of Convention No. 111 on discrimination in employment and
occupation, where especially gender discrimination is seen as a common challenge.
21
European Commission, Trade and Sustainable Development (TSD) chapters in EU Free Trade Agreements
(FTAs), 11 July 2017, http://trade.ec.europa.eu/doclib/docs/2017/july/tradoc_155686.pdf (accessed
15 May 2018).
22
The agreement has been after its signature provisionally applied since 2011 and formally ratified in
2015.
23
Ch. 13, Art. 13.12, The EU South-Korea free trade agreement, http://eur-lex.europa.eu/legal-content/
EN/ALL/?uri=OJ:L:2011:127:TOC (accessed 15 May 2018).
24
Ch. 13, Art. 13.13, The EU South-Korea free trade agreement, http://eur-lex.europa.eu/legal-con
tent/EN/ALL/?uri=OJ:L:2011:127:TOC (accessed 15 May 2018).
1026 JOURNAL OF WORLD TRADE
Up to this day, Korea has not ratified four out of eight fundamental conventions
of the ILO (No. 87, 98, 29 and 105)
25,26
The Civil Society Forum has many times
raised these questions in the period 2012–2017 and has repeatedly called for the
acceleration of the ratification of the core ILO conventions.
27
The Commission has
used multiple channels to communicate its concerns regarding labour rights situation
in Korea which is not in line with the stipulations of Article 13.4.3 of the TSD
chapter Multilateral labour standards and agreements and the TSD chapter in general to
the Korean government. These concerns were repeatedly raised at the TSD Sub-
committee, through correspondence of Commissioner Malmström to her Korean
counterpart and also through number of bilateral contacts.
28
Van Roozendaal (2017) points out that South Korea as a democratic and devel-
oped country should potentially have the political will and means to maintain a high
level of labour standards. However, her research shows that labour provisions in FTAs
between South Korea and its trade partners including the EU and the US have had a
limited influence on actual level of labour standards.
29
Nevertheless, it seems that the
situationinKoreagoesinpositivedirection when it comes to the working conditions.
The current president of South Korea, Moon Jae-in, who took office in May 2017, is
a former human rights lawyer and ratification of remaining ILO conventions was part
of his campaign pledges and policy goals. Finally, on 14 November 2017, the Korean
government announced that it will accept 85 of 218 recommendations of the UN
Human Rights Council’s Universal Periodic Review (UPR), including the ratification
of key ILO conventions.
30
So far, it is premature to speculate to what extent the EU has contributed to
this development. On the Korean side, a lack of determination to tackle serious
problems in compliance of labour standards represented a serious obstacle and the
government crackdown on trade unions called into question the usefulness of an
25
Convention No. 87 on Freedom of Association and Right to Organize, No. 98 on Right to Organize
and Collective Bargaining, No. 29 on Forced and Compulsory Labour and No. 105 on Abolition of
Forced Labour.
26
International Labour Organization, NORMLEX Ratifications for Korea, http://www.ilo.org/dyn/norm
lex/en/f?p=NORMLEXPUB:11200:0::NO::P11200_COUNTRY_ID:103123 (accessed 15 May
2018).
27
European Economic and Social Committee, Opinion: EU-Korea Free Trade Agreement –Trade and
Sustainable Development Chapter, REX/479, 18 Oct. 2017, para. 6.4, https://www.eesc.europa.eu/en/
our-work/opinions-information-reports/opinions/eu-korea-free-trade-agreement-trade-and-sustain
able-development-chapter (accessed 15 May 2018).
28
European Commission, Annual Report on the implementation of the EU-Korea Free Trade Agreement,
COM/2017/0614 final, 20 Oct. 2017, https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?
uri=CELEX:52017DC0614 &from=CS (accessed 15 May 2018).
29
Gerda Van Roozendaal, Where Symbolism Prospers: An Analysis of the Impact on Enabling Rights of Labour
Standards Provisions in Trade Agreements with South Korea. Politics and Governance, 14 Dec. 2017,
https://www.cogitatiopress.com/politicsandgovernance/article/view/1087 (accessed 15 May 2018).
30
Hankyoreh, South Korea set to ratify four key ILO conventions, 21 Nov. 2017, http://english.hani.co.kr/
arti/english_edition/e_international/820059.html (accessed 15 May 2018).
SUSTAINABLE DEVELOPMENT CHAPTERS IN THE EU FREE 1027
approach based on dialogue and cooperation.
31
However, there is no doubt that
the cooperation with the EU in the framework of TSD chapter has strengthened
the position of Korean civil society, provided political pressure on government as
well as capacity building on the TSD issues through the joint projects. According
to the European Economic and Social Committee ‘[t]he civil society mechanisms
in the Trade and Sustainable Development (TSD) chapter of the EU-Korea FTA
have been strengthened continuously over the last five years […]’and ‘the con-
sistency and quality of the dialogue between the EU and Korea have been
significantly improved […]’.
32
It seems that there was a positive synergy between
several elements: engagement of number of stakeholders, role of international
organizations and political will at the Korean side. This issue requires certainly
more in-depth attention in coming months.
3.3 CRITICISM AND CURRENT DEBATE
Recently, the promotion of sustainable development has occupied an increasingly
prominent place in the EU’s common commercial policy’s agenda. The EU
institutions realise the importance of this issue. In the context of the FTAs, the
European Parliament advocated the inclusion of social and environmental standards
and a compliance with these standards to be subject to a dispute settlement
mechanism already in 2010.
33
Since that time, the issue has been regularly dis-
cussed also within the European Council and has attracted attention of the civil
society in the EU. Despite the Parliament’s call for a shift to a stricter attitude, the
Commission did not follow recommendations regarding legally binding approach
and enforcement system and rather decided to pursue already existing model based
on the Commission’s Communication ‘Global Europe’.
34
In fact, only the EU-Cariforum EPA includes a dispute mechanism applicable
to disputes concerning sustainable development provisions. In this regard the EU-
Cariforum EPA differs from other EU FTAs because it establishes a specific
31
International Trade Union Confederation, Korea: Major Government Crackdown Against Unions,21
Nov. 2015, https://www.ituc-csi.org/korea-major-government-crackdown?lang=en (accessed 15
May 2018).
32
European Economic and Social Committee, Opinion: EU-Korea Free Trade Agreement–Trade and
Sustainable Development Chapter, REX/479, 18 Oct. 2017, para. 1.4; 1.7, https://www.eesc.europa.
eu/en/our-work/opinions-information-reports/opinions/eu-korea-free-trade-agreement-trade-and-
sustainable-development-chapter (accessed 15 May 2018).
33
European Parliament, European Parliament Resolution of 25 Nov. 2010 on human rights and social and
environmental standards in international trade agreements (2009/2219(INI)), http://www.europarl.europa.
eu/sides/getDoc.do?type=TA&language=EN&reference=P7-TA-2010-434 (accessed 15 May 2018).
34
European Commission, Communication from the Commission to the Council, the European Parliament, the
European Economic and Social Committee and the Committee of the Regions –Global Europe: Competing in the
world. A contribution to the EU’s Growth and Jobs Strategy, COM(2006) 567 final, 4 Oct. 2006, https://
eur-lex.europa.eu/procedure/EN/194745 (accessed 15 May 2018).
1028 JOURNAL OF WORLD TRADE
consultation procedure and as a second step the general dispute settlement proce-
dure. If the Party is found in breach with international commitments and it fails to
comply with the ruling of dispute settlement body, it must provide a financial
compensation to the complaining Party. It is worth noticing that trade sanctions
are explicitly ruled out.
35
In this regard, the possible action might be a suspension
of development aid.
36
As described above, in the rest of EU FTAs and current negotiations, different
institutional framework is used for dealing with eventual disagreements concerning TSD
provisions. In this regard, the cooperative and consultation-based process is perceived as
a more effective tool to address labour and environmental concerns and enforce inter-
national standards. Considering a different level of development of trade partner coun-
tries, the TSD chapters should not impose strict rules on them, but rather bring forward
the institutional structures for dialogue and compliance with these standards.
However, the described dispute settlement mechanism in the EU TSD
chapters has so far never been put into practice. This has brought up the
debate, whether the EU model without any enforcement instruments such as
economic sanction is effective. The main burden of raising labour and envir-
onmental standards is associated with civil society structures within the institu-
tional framework. The EU approach lets only governments, rather than civil
society actors, to initiate formal consultations.
37
In addition to that, the capacity
of civil society to effectively address alleged breaches is weak due to the lack of
formal complaint mechanism requiring the Parties to follow up on submissions
from the civil society. Civil society mechanisms are also impeded due to
restricted resources, infrequent meetings and limited influence on the state-
led committees to which they report.
38
The unsatisfactory state of affairs hasinvokedareneweddebatewithin
the EU. Shortly after the signature of the Comprehensive Economic and
Trade Agreement (CETA) with Canada Dutch trade minister Ploumen
announced launching investigation into how sustainable development
35
Art. 213(2) CARIFORUM-EU Economic Partnership Agreement.
36
Martin Gallie, Le droit international du travail dans la cooperation Européene au développement
(2009: at 195) in Axel Marx and Franz Eber and Nicolas Hachez and Jan Wouters, Dispute Settlement in
the Trade and Sustainable Development Chapters of EU Trade Agreements. Leuven Centre for Global
Governance Studies, 18 Nov. 2004, https://ghum.kuleuven.be/ggs/publications/books/final-report-
9-Feb.-def.pdf (accessed 15 May 2018).
37
Axel Marx & Franz Eber and Nicolas Hachez and Jan Wouters, Dispute Settlement in the Trade and
Sustainable Development Chapters of EU Trade Agreements. Leuven Centre for Global Governance
Studies, 18 Nov. 2004, https://ghum.kuleuven.be/ggs/publications/books/final-report-9-february-
def.pdf (accessed 15 May 2018).
38
European Commission, Trade and Sustainable Development (TSD) chapters in EU Free Trade Agreements
(FTAs), 11 July 2017, http://trade.ec.europa.eu/doclib/docs/2017/july/tradoc_155686.pdf (accessed
15 May 2018).
SUSTAINABLE DEVELOPMENT CHAPTERS IN THE EU FREE 1029
standards incorporated in this FTA can be strengthened, particularly concern-
ing their enforceability.
39
In May 2017, the trade ministers of Belgium,
Sweden, Luxembourg, Finland and theNetherlandssentalettertoEU
trade commissioner Cecilia Malmström calling for ‘improving the implemen-
tation of TSD provisions’in EU trade policy.
40
Also the French government
proposes improvements of TSD chapters including an introduction of sanc-
tions in case of non-compliance with the sustainable development provisions
which would allow the EU to remove the preferential tariff rates and to
restore a level playing field for the EU companies.
41
Responding to these calls
the Commission published a discussion paper on the implementation and
enforcement of sustainable development provisions in July 2017.
42
The
paperwasastartingpointforconsultationswithMemberStates,the
European Parliament andwithstakeholderson‘whether the current TSD
chapters are meeting expectations, and what could be done to improve
them.’
43
In her speech in October 2017, Commissioner Malmström outlined the
state of mind in the European Commission at that stage. The commissioner
said that two scenarios are possible: a ‘more assertive partnership’based on the
current enforcement mechanisms; or moving towards ‘a sanctions-based
enforcement model’that still needs to be defined.
44
Some stakeholders
pointed out that the EU approach should include more assertive dispute
resolution procedures, including dispute settlement mechanism. For instance,
Transport & Environment, environmental NGO, in its recent study called for
application of ‘the same state-to-state dispute settlement as violations of the
commercial clauses’.
45
BusinessEurope, an employer’s lobby organization in
39
Wybe T. Douma, The Promotion of Sustainable Development through EU Trade Instruments, 28(2) Eur.
Bus. L. Rev. 216 (2017).
40
Letter to EU trade commissioner Cecilia Malmström http://www.politico.eu/wp-content/uploads/
2017/06/20170511155157994.pdf?utm_source=POLITICO.EU&utm_campaign=e95ace0190-
EMAIL_CAMPAIGN_2017_06_27&utm_medium=email&utm_term=0_10959edeb5-e95ace0190-
189774485 (accessed 15 May 2018).
41
France Diplomatie, Mise en oeuvre du CETA: Le plan d´action du gouvernement, 25 Oct. 2017, https://
www.diplomatie.gouv.fr/IMG/pdf/plan_action_ceta_du_gouvernement_cle0c5b74.pdf.
42
European Commission, Trade and Sustainable Development (TSD) chapters in EU Free Trade Agreements
(FTAs), 11 July 2017, http://trade.ec.europa.eu/doclib/docs/2017/july/tradoc_155686.pdf (accessed
15 May 2018).
43
European Commission, Report on Implementation of Free Trade Agreements, at 9, 9 Nov. 2017, https://ec.
europa.eu/transparency/regdoc/rep/1/2017/EN/COM-2017-654-F1-EN-MAIN-PART-1.PDF
(accessed 15 May 2018).
44
European Commission, Speech by EU Trade Commissioner Cecilia Malmström: Trade and Sustainable
Development, Brussels, 6 Oct. 2017. http://trade.ec.europa.eu/doclib/docs/2017/october/tradoc_
156137.pdf (accessed 15 May 2018).
45
Transport & Environment, Trade and Sustainable Development: A chance for innovative thinking, at 10, 20
Oct. 2017, https://www.transportenvironment.org/sites/te/files/publications/2017_10_Trade_sus
tainable_development_final.pdf (accessed 15 May 2018).
1030 JOURNAL OF WORLD TRADE
the EU, was of different opinion. It preferred to improve the existing model
labelling sanctions approach as ‘problematic and seemingly inefficient’.
46
After an extensive deliberation and discussion with different stakeholders,
the European Commission has published in February 2018 a follow-up non-
article on this issue.
47
The Commission pointed out that the absence of
consensus on a sanction-based model makes it impossible to move in such
direction. The non-article details fifteen action points that should be introduced
in order to revamp TSD implementation and enforcement. These recommen-
dations are categorised in four groups: Working Together, Enabling Civil
Society, Delivering, Transparency and Communication. The first group of
recommendations suggests strengthening the partnership with the Member
States, the European Parliament and international organizations. Next, attention
is put to civil society, especially when it comes to the monitoring role. The
third category of recommendations aims to deliver better results. This involves
focus on country priorities in TSD implementation, improving the functioning
of the available monitoring tools, making more assertive use of dispute settle-
ment procedures etc. The last area emphasises the transparency and commu-
nication, including time-bound respond to TSD submissions.
4 US APPROACH
The US approach is similarly dynamic and each of the US FTAs negotiated since
NAFTA contains TSD chapter. Currently, four different models or phases were
identified since the 1990s.
48
The latest approach is based on 2007 Bipartisan Trade
Deal (May 10
th
Agreement)
49
between the leadership in Congress which revised
the former policy of the Bush administration. One of its main shift was on an issue
of enforcement of labour and environmental standards for which it sets criteria of
enforcement provisions in future FTAs. Concepts agreed upon in this agreement
were subsequently incorporated into US trade agreements with Peru (2009),
Panama (2011), Colombia (2012) and South Korea (2012) and represented an
46
BusinessEurope, Trade and Sustainable Development chapters in EU FTAs, Position Paper, at 5–6, 6 Nov.
2017, https://www.businesseurope.eu/sites/buseur/files/media/position_papers/rex/2017-11-06_sus
tainability_and_ftas.pdf (accessed 15 May 2018).
47
European Commission, Feedback and way forward on improving implementation and enforcement of Trade and
Sustainable Development chapters in EU Free Trade Agreements, 26 Feb. 2018, http://www.borderlex.eu/
wp-content/uploads/2018/02/2018-02-26-TSD-non-paper-FINAL.pdf (accessed 15 May 2018).
48
Mary Jane Bolle. Overview of Labor Enforcement Issues in Free Trade Agreements. Congressional Research
Serie, at 2, 22 Feb. 2016, https://fas.org/sgp/crs/misc/RS22823.pdf (accessed 15 May 2018).
49
Office of the United States Trade Representative, Bipartisan Agreement on Trade Policy, May 2007,
https://ustr.gov/sites/default/files/uploads/factsheets/2007/asset_upload_file127_11319.pdf (accessed
15 May 2018).
SUSTAINABLE DEVELOPMENT CHAPTERS IN THE EU FREE 1031
initial position for the Trans-Pacific Partnership (TPP).
50
The enforcement issues
are analysed in detail below.
4.1 LABOUR STANDARDS
Whilst the EU underlines the implementation of the ILO conventions, the US
stresses the effective implementation of national labour legislation. The US have
not ratified six out of eight fundamental conventions of the ILO,
51
due to domestic
political constraints as the ratification would imply the changes to US State and
federal labour law.
52
This includes Conventions number 87, 98, 29, 138, 100 and
111.
53
In fact, the US approach is restricted to the ILO 1998 Declaration on
Fundamental Principles and Right at Work, which the US is obliged to respect
and promote as a member of ILO.
According to the US approach the Parties must adopt and maintain in domestic
laws and policies principles as stated in ILO 1998 Declaration. Similarly as the EU
TSD chapters, the US chapters stress the non-derogation principle. In this regard, the
Parties shall not waive or derogate from labour laws in a manner that affects
commerce.
54
In addition to that, the TPP proposal also includes an article dedicated
to promotion of CSR and commitment to discourage importation of goods that are
produced by forced labour or contain inputs produced by forced labour.
55
When it comes to enforcement of the labour chapters in the US FTAs, there
is an obligation to effectively enforce labour laws through sustained or recurring
action or inaction, in a manner affecting trade or investment between the Parties.
The chapter also sets an institutional framework with a Labour Affairs Council as a
main body. The Council is comprised of officials from the labour ministries and
appropriate agencies of each Party. From the EU perspective, this corresponds to
the TSD Subcommittee. The Council oversees the process of implementation of
the Chapter and priority areas of cooperation.
50
Although the US actively participated in TPP negotiations and the final text of TPP closely followed
the US approach, the US finally withdrew from the negotiations and they did not became a
contracting Party to this FTA.
51
ILO, Ratifications for United States, http://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:
11200:0::NO::P11200_COUNTRY_ID:102871 (accessed 15 May 2018).
52
USCIB, US Ratification of Core Labour Standards, Apr. 2007, http://www.uscib.org/docs/US_
Ratification_of_ILO_Core_Conventions.pdf (accessed 15 May 2018).
53
Convention 87 on Freedom of Association and Right to Organize, Convention 98 on Collective
Bargaining, Convention 29 on Forced Labor, Convention 138 on Minimum Age, Convention 100 on
Equal Remuneration and Convention 111 on Discrimination.
54
KORUS: U.S Korea Free Trade Agreement, Ch. 19, https://ustr.gov/trade-agreements/free-trade-agree
ments/korus-fta/final-text (accessed 15 May 2018).
55
TPP: Trans-Pacific Partnership, Ch. 19, Art. 19.7, https://ustr.gov/trade-agreements/free-trade-agree
ments/trans-pacific-partnership/tpp-full-text (accessed 15 May 2018).
1032 JOURNAL OF WORLD TRADE
The US approach does not provide specific institutional structures for invol-
vement of civil society as it is the case of the EU chapters, however there is a
reference that each meeting of the Council shall include a session in which
members of the Council have an opportunity to meet with the public to discuss
matters related to implementation of this Chapter.
56
This can be related to Joint
Civil Society Dialogue established in the EU FTAs. In addition to that, each Party
may establish national labour advisory committee comprising general public,
including members of its labour and business organizations and other stakeholders,
to advice on the implementation of the Chapter. This can be associated with the
DAGs in case of the EU FTAs. In terms of the frequency of meetings, the Council
meets ‘as necessary’.
57
The US TSD chapters set up a mechanism for a labour cooperation. In this
regard, the Parties may undertake joint projects on any labour matter they consider
appropriate. For instance, the TPP addresses issues including job creation, decent
work, work-life balance, SMEs, promotion of ILO Declaration, CSR etc.
4.2 ENVIRONMENTAL STANDARDS
The US environmental chapters include commitment to effectively enforce
domestic environmental laws and not to waive or derogate from them in
ordertoattracttradeorinvestment.Inaddition to that, these Chapters require
the Parties to implement MEAs they have both joined. On the US side, this
includes CITES, Montreal Protocol banning chlorofluorocarbons, Convention
on Marine Pollution, Ramsar Convention on Wetlands, International Whaling
Convention, etc.
58
This network of multilateral environmental agreements is
the main vehicle for environmental obligations.
59
Next, the US chapters out-
line voluntary mechanisms to enhance environmental performance. In particu-
lar multi-stakeholder partnership, voluntary guidelines for environmental
performance, voluntary sharing information among authorities, interested par-
ties and public, market-based incentives etc.
On the institutional side, the main body that oversees the implementation of
this chapter is Environmental Affairs Council that is comprised of appropriate
senior officials from each Party. The Council shall promote public participation
56
KORUS, Ch. 19, Art. 19.5.2.
57
Ibid.
58
Office of the United States Trade Representative (USTR), Bipartisan Agreement on Trade Policy, May
2007, https://ustr.gov/sites/default/files/uploads/factsheets/2007/asset_upload_file127_11319.pdf
(accessed 15 May 2018).
59
Edward Gresser, Labor and Environment in Trade since NAFTA: Activists Have Achieved Less and More than
They Realised, 45 Wake Forest L. Rev. 508 (2010), http://wakeforestlawreview.com/wp-content/
uploads/2014/10/Gresser_LawReview_04.10.pdf (accessed 15 May 2018).
SUSTAINABLE DEVELOPMENT CHAPTERS IN THE EU FREE 1033
in its work and shall engage the public in cooperative environmental activities.
60
Contrary to the US labour chapters, the chapters on environment include a specific
article dedicated to opportunities for public participation. Each Party shall establish
a national advisory committee made by experts in business or environmental
matters providing the Council with its view on implementation of the Chapter.
Every meeting of the Council should be followed by the Joint Committee, co-
chaired by the USTR and Trade minister of respective partner country. The Joint
Committee supervises the overall implementation of the FTA and the work of all
committees and other bodies established under the Agreement.
61
After 180 days of
entry into force of the FTA, the Council shall submit to the Joint Committee a
written report on implementation of the article concerning public participation in
environmental matters.
62
When it comes to environmental cooperation among the Parties, the joint
activities refer to environmental protection, practices and technologies. In FTA
with Peru the Parties have agreed to specifically address the issue of illegal logging
and to restrict imports of products that are harvested and traded in violation of
CITES. Moreover, the TPP text covers also specific provisions concerning wildlife
trade, marine fisheries, transition to low-emission economy, environmental goods
and services, CSR, voluntary mechanisms to enhance environmental performance
etc. In some respects, the coverage of TPP in environmental matters thus went
beyond the scope of the current EU TSD chapters.
4.3 DISPUTE SETTLEMENT MECHANISM
Both labour and environmental chapters set up the procedural matters that commit
the Parties to ensure the access to fair administrative or judicial proceeding and to
impose appropriate sanctions or remedies for violations of their labour and envir-
onmental laws. However, the US approach also provides elaborated dispute set-
tlement mechanism (DSM) containing several stages (see Figure 2).
The US FTAs foresee enhanced consultation mechanism. Firstly, complaining
Party must submit a written request for labour or environmental consultations
under the respective chapter. If mutually satisfactory resolution is not found, the
complaining Party may request consultations under the horizontal DSM chapter in
the FTA. Also under DSM chapter it is necessary to try settling dispute in
cooperative manners first. Dispute mechanism is open for obligation to ‘not fail
to effectively enforce labour or environmental rights’.
63
If the issue is not resolved
60
See below the examples of such activities.
61
See KORUS, Ch. 22, Art. 22.2.
62
See KORUS, Ch. 20, Art. 20.7.
1034 JOURNAL OF WORLD TRADE
through consultations, Parties may refer the issue to the Joint Committee. In the
next step, Party may refer the matter to DSM panel that has three panellists. Each
Party shall propose one panellist and agree on the third panellist that will serve as a
chair. The panel subsequently presents a final report with an appraisal of the
situation.
DSM includes State to State process which is the same as in case of obligations
in the trade agreement. A possibility of sanctions can make an impression of an
influential instrument. Besides immediate economic consequences, their applica-
tion will likely have a serious effect on the reputation of the country in violation.
64
When it comes to sanctions in case of non-implementation, the Parties should find
a mutually acceptable compensation. There is a cap on monetary penalties.
Remedies are subjected to annual monetary assessment. An important aspect of
the mechanism is wide discretion for Parties what kind of steps should be taken.
However, it is not perhaps surprising that to date, no complaint has led to any
sanctions. This scenario thus remains largely theoretical with amicable dispute
resolution preferred. Probably the most elaborate case was a dispute initiated by
the US against Guatemala in 2011 under the Dominican Republic –Central
America –United States Free Trade Agreement (CAFTA-DR) discussed below.
Figure 2 Dispute Settlement Mechanism in the US Labour and Environmental
Chapters
Request for
consultations
(under labour or
enviro. chapter)
Request for
consultations
(under DSM chapter)
Joint Committee
DSM Panel Panel Report Possibility of
sanctions
63
Art. 16.2.1(a): A Party shall not fail to effectively enforce its labour laws through a sustained or
recurring course of action or inaction in a manner affecting trade between the Parties, after the date of
entry into force of this Agreement.
64
Franz Christian Ebert & Anne Poshuma, Labour provisions in trade arrangements: current trends and
perspectives, ILO International Institute for Labour Studies, 2011, at 21, http://www.ilo.org/
wcmsp5/groups/public/-dgreports/-inst/documents/publication/wcms_192807.pdf (accessed 15
May 2018).
SUSTAINABLE DEVELOPMENT CHAPTERS IN THE EU FREE 1035
4.4 CASE STUDY:THE US –GUATEMALA DISPUTE UNDER CAFTA-DR
This dispute between the US and Guatemala is the first dispute concerning trade
and labour provisions and thus provides precious lesson learned about enforce-
ment of labour and possibly environmental provisions. The concerned provision
was the Article 16.2.1(a) of the CAFTA-DR requiring that ‘a Party shall not fail
to effectively enforce its labour laws […] in a manner affecting trade between the
Parties.’
The dispute started in April 2008 when the American Federation of Labor
and Congress of Industrial Organizations and six Guatemalan labour unions
filed a submission with the Office of Trade and Labor Affairs (OTLA). On that
basis issued findings and recommendations by OTLA from January 2009, the
US formally requested consultations in July 2010 arguing that Guatemala had
breached its obligations under CAFTA-DR This marked the end of ‘pre-panel’
stage. After a failure to settle dispute amicably, or rather after the US dissatis-
faction with Guatemalan effort the formal panel proceedings begun with the
US request of establishment of an arbitral panel under Article 20.6.1 in August
2011 and a panel was constituted fifteen months later. Subsequently, proceed-
ings were repeatedly suspended which caused further delays until the panel
report was issued in July 2017, nine years after the commencement of the
proceedings.
65
The US complained in its panel request that Guatemala failed to secure
compliance with court orders requiring employers to reinstate and compen-
sate workers wrongfully dismissed, to properly conduct investigations under
the Guatemalan Labour Code and to impose requisite penalties. The first
claim essentially concerned Guatemalan ineffectiveness to enforce labour
laws related to the right of association and the right of collective bargaining.
The US submitted evidence of eight different companies about workers
wrongfully dismissed because of their union activities. In its submission, the
US claimed that at least 402 individual instances of Guatemalan labour law
violations that together represent a ‘sustained or recurring course of inaction
affecting trade between the parties’were in breach of CAFTA-DR
obligations.
66
The panel recognized that the US proved that on ‘eight worksites and with
respect to 74 workers Guatemala failed to effectively enforce its labour laws by
65
USTR, Guatemala –Issues Relating to the Obligations Under Art. 16.2.1(a) of the CAFTA-DR, Final
Report of the Panel, https://ustr.gov/issue-areas/labor/bilateral-and-regional-trade-agreements/guate
mala-submission-under-cafta-dr (accessed 15 May 2018).
66
ICTSD: International Centre for Trade and Sustainable Development, US, Guatemala Square Off as
FTA Labour Dispute Advances, 12 Feb. 2015, https://www.ictsd.org/bridges-news/bridges/news/us-
guatemala-square-off-as-fta-labour-dispute-advances (accessed 15 May 2018).
1036 JOURNAL OF WORLD TRADE
failing to secure compliance with court orders.’
67
However, the findings were not
sufficient for the panel and they did not represent ‘sufficient failures to adequately
conduct labour inspections to constitute a course of action or inaction.’
68
In other
words, the failure of enforcing labour laws needs to be in a manner affecting trade
between the Parties and this was not a case.
The conclusion can be considered as a crucial interpretive issue of the case.
The US adopted a broad approach in interpreting of labour clauses. Such inter-
pretation was rejected by Guatemala which claimed that it was needed to show
that prices were changing or flows of goods and services were modified. The panel
adopted ‘middle-of-the-road’approach according to which ‘action must confer
some competitive advantage of an employer or employers engaged in trade
between the Parties.’The panel thus set a strict requirement of linkage between
dismissals of unionist and actual comparative advantage.
69
Consequently, it is
potentially very difficult to be successful in such case if a claimant does not have
empirical evidence of direct effect on mutual trade.
70
It may seem that a possibility of sanctions leads to more effective enforcement.
However, the analysed case has not fulfilled expectations initially arising from the US
government’s decision to initiate the dispute, a decision which was called ‘a
milestone’.
71
This case shows that effects of including labour standards in CAFTA-
DR have been until now limited. The dispute settlement with sanction mechanism
has actually brought a less tangible change than its advocates might have hoped. There
may be several explanations for this such as politicization of the dispute or difficult
adjudication for panel under the FTA’s regular dispute settlement mechanism envi-
saged for trade disputes. The other reasons are ambiguity of sustainable obligations
often referencing to general instruments, quantification of damages or a requirement to
prove a link between the violation of a sustainable commitment and the effect on trade
between parties as demonstrated in the US –Guatemala dispute.
72
67
USTR, Guatemala –Issues Relating to the Obligations Under Art. 16.2.1(a) of the CAFTA-DR, Final
Report of the Panel, para. 431, https://ustr.gov/issue-areas/labor/bilateral-and-regional-trade-agree
ments/guatemala-submission-under-cafta-dr (accessed 15 May 2018).
68
USTR, Guatemala –Issues Relating to the Obligations Under Art. 16.2.1(a) of the CAFTA-DR, Final
Report of the Panel, para. 594.
69
This approach was criticized by a number of trade lawyers such as J. Pauwelyn who found that the
panel dismissed in this case traditional way to assess measures affecting trade used in WTO cases.
ICTSD, Talking Disputes: The Guatemala –US Labour Enforcement Dispute under CAFTA-DR, 19 Sept.
2017, https://www.ictsd.org/themes/trade-law/events/talking-disputes-the-guatemala-us-labour-
enforcement-dispute-under-cafta (accessed 15 May 2018).
70
Nature of the obligation which is negative obligation –‘failure to enforce domestic labour law’which
requires different kind of evidence submitted to the arbitral panel.
71
Jeffrey S. Vogt, The Evolution of Labour Rights and Trade –A Transatlantic Comparison and Lessons for the
Transatlantic Trade and Investment Partnership, J. Int’l Econ. L. 846 (2015).
72
National Board of Trade, Implementation and enforcement of sustainable development provisions in free trade
agreements –options for improvement,at13–14, 27 May 2016, https://www.kommers.se/Documents/
SUSTAINABLE DEVELOPMENT CHAPTERS IN THE EU FREE 1037
5 COMMON FEATURES AND DISTINCTIONS
Both the US and the EU FTAs incorporate specific provisions on compliance with
the labour and environmental standards. The first US FTA containing these
provisions has become NAFTA in 1989. On the EU side, the first FTA with a
dedicated TSD chapter was EU-Korea FTA in 2011. Nowadays, the EU TSD
chapters are broader in terms of scope, but they do not include the possibility to
employ the sanctions in case of non-compliance with the provisions. In terms of
substance, there are four main distinctions between the EU and the US model,
notably with respect to dispute settlement process, scope of labour provisions,
scope of environmental provisions and institutional structures.
Firstly, there is a notable difference between how the EU and how the US
deal with institutional disputes settlement processes in sustainable development
chapters. In general, labour as well as environmental provisions envisaged to ensure
that effective implementation can be divided into two categories: promotional and
conditional.
73
Promotional provisions combine binding and non-binding commit-
ments accompanied with cooperation activities, dialogue and monitoring. On the
other hand, the conditional provisions are linked to economic consequences, in
the form of sanctions, or less frequently incentives and other trade benefits.
74
The
US approach including a sanction-mechanism is an example of the latter while the
EU focuses on supervision, capacity building and dialogue first and foremost.
Secondly, the scope of labour provisions differs significantly under the EU and
the US approaches. While the EU underlines implementation of ILO conventions,
the US stresses national labour legislation. Furthermore, an extent of commitments
under the EU chapters is broader as it goes beyond the ILO 1998 Declaration.
More specifically, the EU chapters refer also to eight fundamental conventions of
ILO and the other ILO conventions. Moreover, the ongoing EU negotiations also
cover provisions on topics such as occupational safety and health, working condi-
tions, labour inspection or responsible management of supply chains.
As far as environmental provisions are concerned, both the EU and the US
approaches require the Parties to implement certain MEAs. The latest EU TSD
chapters include also a reference to the Paris Agreement on climate change
mitigation. While the EU TSD chapters contain specific articles related to sustain-
able management of natural resources that are based mainly on international
dokumentarkiv/publikationer/2016/publ-implementation-and-enfocement-of-sustinability-provi
sions-in-FTAs.pdf (accessed 15 May 2018).
73
Franz Christian Ebert & Anne Poshuma, Labour provisions in trade arrangements: current trends and
perspectives, ILO International Institute for Labour Studies, 2011, at 3, http://www.ilo.org/wcmsp5/
groups/public/-dgreports/-inst/documents/publication/wcms_192807.pdf (accessed 15 May 2018).
74
ILO, Social dimension of free trade agreements, 6 Nov. 2013, http://www.ilo.org/global/research/
publications/WCMS_228965/lang-en/index.htm (accessed 15 May 2018).
1038 JOURNAL OF WORLD TRADE
standards, the US approach outlines an overview of voluntary mechanism to
enhance environmental performance.
Finally, when it comes to institutional structures, both approaches set up a
comparable framework comprising governmental as well as advisory bodies.
However, the important distinction is that the US labour chapters do not provide
specific institutional mechanisms for involvement of civil society. The environ-
mental chapters in the US model, on the other hand, make more emphasis on
public participation. Last but not least, joint cooperation projects on wide ranges of
topics are embodied in both the EU and the US approach. These projects are
meant to foster the implementation of labour and environmental provisions.
6 RECOMMENDATIONS
This study has found that the TSD chapters have limited influence in respect of
enforcement possibilities. The EU agreements do not foresee usual litigation
procedures and the instance of the EU –South Korea FTA showed shortcomings
and challenges which need to be addressed. In the latest set of US agreements, the
sanctions for non-compliance with sustainable development provisions are avail-
able only as a last resort. The application of sanctions is conditioned with sub-
stantial limitations, such as trade impact test, that impede the practical use.
Moreover, as the US–Guatemala case has shown, this type of dispute settlement
proceedings are potentially time consuming, costly and inefficient. Based on
limited experience and only one unsuccessful State to State dispute, the prevailing
opinion about whether sanction-based approach is adequate to address insufficient
compliance regarding labour and environmental standards is rather pessimistic.
The EU should therefore not follow the US approach. The US approach
would not fit easily with the EU’s model which is based on broad range of
international standards. It is not clear, how a breach of social or environmental
standards would be translated into economic compensation.
75
On the other hand,
new frameworks of interaction of stakeholders and their involvement may offer
more promising means for implementation of TSD which can be described as ‘soft
enforcement’. Moore and Schrerrer (2017)
76
argue that the power and the role of
civil society was identified as essential to both implementation and enforcement of
TSD chapters. Strong domestic civil society, in particular trade unions and NGOs
75
European Commission, Feedback and way forward on improving implementation and enforcement of Trade and
Sustainable Development chapters in EU Free Trade Agreements, 26 Feb. 2018, http://www.borderlex.eu/
wp-content/uploads/2018/02/2018-02-26-TSD-non-paper-FINAL.pdf (accessed 15 May 2018).
76
Madelaine Moore & Christoph Scherrer, Conditional Promotional Trade Agreements –Is Enforcement
Possible? CLS+ Study, Friedrich-Ebert-Stiftung, 2017, at 7, http://library.fes.de/pdf-files/bueros/
singapur/13446.pdf.
SUSTAINABLE DEVELOPMENT CHAPTERS IN THE EU FREE 1039
can enhance social legitimacy of FTAs via effective engagement. From this per-
spective, it is desirable to build confidence of the local civil society in TSD
mechanisms. The EU should therefore enhance the participation of civil society
in the process of enforcement and implementation of the TSD chapters. It is also
important to strengthen the capacity of civil society to effectively address alleged
breaches and duly adapt a complaint procedure in the TSD chapters to ensure that
the submissions from the civil society actors are properly treated.
There is evidence that sustainability provisions based on trade incentives
encourage trade partners to improve sustainability standards. For instance, incen-
tive-based labour provisions under the EU GSP have been a significant factor to El
Salvador’s ratification of ILO Conventions No. 87 and No. 98.
77,78
When it
comes to enforcement of international standards, cooperation along with capacity
building projects is perceived as a more effective tool compared to sanctions. The
EU should therefore further build on this mechanism. There is generally recog-
nized need for venues where trade, social and environmental linkages can be
discussed among respective officials. It is not ‘a one-off exercise, but it involves
repeated interactions among the officials and typically long-term periods to set the
priorities, negotiate, and strike a bargain, which often accompanies the side
payments.’
79
Last but not least, the whole process of implementation of TSD chapters
should be rigorously monitored. This involves inputs from the international
organizations, national parliaments and civil society. Especially cooperation with
international bodies remains underutilised.
80
Bearing in mind that the labour
provisions in the EU FTAs refer to ILO instruments, it is important that the EU
strengthen the existing cooperation with the ILO. The expertise of ILO is used
mainly in implementation phase through the EU-ILO joint projects in the partner
countries. Nevertheless, ILO can be more involved also in pre-implementation
phase and in monitoring. Finally, it is important to analyse the relations of the FTA
and sustainability issues in a more complex manner. So far, the assessment of FTAs
sustainability implications has primarily focused on ex-ante assessments in order to
support the trade negotiations. However, less attention has been put to the ex-post
77
ILO Convention 87: Freedom of Association and Protection of the Right to Organise, ILO
Convention 98: Right to Organise and Collective Bargaining.
78
National Board of Trade, Implementation and enforcement of sustainable development provisions in free trade
agreements –options for improvement, 27 May 2016, https://www.kommers.se/Documents/dokumentar
kiv/publikationer/2016/publ-implementation-and-enfocement-of-sustinability-provisions-in-FTAs.
pdf (accessed 15 May 2018).
79
Tae Yoo & Inkyoung Kim, Free trade agreements for the environment? Regional economic integration and
environmental cooperation in East Asia, 16 Int’l Envtl. Agreements 724–725 (2016).
80
European Commission, Report on Implementation of Free Trade Agreements, 9 Nov. 2017, https://ec.
europa.eu/transparency/regdoc/rep/1/2017/EN/COM-2017-654-F1-EN-MAIN-PART-1.PDF
(accessed 15 May 2018).
1040 JOURNAL OF WORLD TRADE
assessments of sustainability impacts.
81
This process is underway. In November
2017, the European Commission has published the first report assessing the
implementation of all existing trade agreements and the respective part of the
report relates to implementation of TSD chapters.
82
All these actions are possibly
important steps in the right direction.
7 CONCLUSION
The new generations of FTAs include developed and relatively detailed TSD
chapters almost as a matter of fact. They can be ambitious and closely linked to
international standards. However, issues of implementation and enforcement of
their provisions raise many questions. In trying to find an answer, different
approaches have been developed, the most influential of which are based on the
EU and the US models.
While the current EU TSD chapters are broader in terms of scope, the US
environmental and labour chapter contains a sanction mechanism in case of non-
compliance with the provisions. When it comes to the content of labour and
environmental standards, the EU model is based on compliance with international
standards. On the other hand, the US stress rather domestic legislation (in case of
labour standards) and voluntary mechanisms as a complement to selected multi-
lateral environment agreements (in case of environmental standards). Finally, as far
as institutional structures are concerned, the US labour chapters do not provide
specific institutional framework for public participation.
Under the both approaches, the labour and environmental provisions have had
limited influence in respect of enforcement possibilities. The case study of Korea shows
that in spite of FTAs concluded with both, the EU and the US, the labour and
environmental provisions did not have a large impact on improvement of the situation
in the country. However, it seems that a new political direction of Korea and strength-
ened civil society structures might bring a positive change. In this regard, the EU
approach had certainly contributed to the latter element. The example of Guatemala
shows, that neither sanction-based approach has yet proved to be an adequate tool for
addressing non-compliance with labour and environmental standards.
Bearing in mind the shortcomings of sanction-based model and the specific
character of EU TSD chapters, the authors do not recommend the EU to follow
81
National Board of Trade, Implementation and enforcement of sustainable development provisions in free trade
agreements –options for improvement, 27 May 2016, https://www.kommers.se/Documents/dokumentar
kiv/publikationer/2016/publ-implementation-and-enfocement-of-sustinability-provisions-in-FTAs.
pdf (accessed 15 May 2018).
82
European Commission, Report on Implementation of Free Trade Agreements, 9 Nov. 2017, https://ec.
europa.eu/transparency/regdoc/rep/1/2017/EN/COM-2017-654-F1-EN-MAIN-PART-1.PDF
(accessed 15 May 2018).
SUSTAINABLE DEVELOPMENT CHAPTERS IN THE EU FREE 1041
the US approach. On the contrary, cooperation, dialogue and capacity building
seems as a more relevant approach when it comes to compliance with international
standards. The authors suggest that more extensive involvement of civil society can
serve as a ‘soft enforcement’mechanism. It is therefore desirable to strengthen the
participation of civil society in implementation of TSD chapters. Another impor-
tant aspect is mutual dialogue and cooperation between the Parties that involves
regular interactions between the officials in the long-term horizon. In order to
make this process efficient it is important to set cooperation as a priority. Finally,
there is a need for a rigorous monitoring and seeking inputs from various stake-
holders, including international organizations.
1042 JOURNAL OF WORLD TRADE