The European Commission continues to pursue its trade agenda. Its latest venture is the opening of negotiations with Australia and New Zealand with regard to two new trade agreements. Even though for the time being, both agreements do not include an Investment Protection Chapter, there are however, numerous shortcomings. From the employees' point of view, the adherence as well as the expansion of labour, social and environmental standards should be stipulated. Only then, fair trade for all will become reality.


During the course of the State of the Union Address by Commission President Juncker, the Commission published a wide-ranging package on trade. Apart from proposals on investment screening and on the structure of a Multilateral Investment Court, the package also contains two drafts on opening negotiations for bilateral trade agreements between EU and Australia and New Zealand respectively. Hence, both agreements will take their place in the number of EU trade agreements of the new generation, which are characterized by comprehensive liberalisations of a wide range of sectors as well as by the inclusion of a sustainability chapter.


The detailed analysis of the drafts on the trade agreements with Australia and New Zealand by AK experts reveal a number of weak points. As in previous EU trade agreements, the phrasing of the provisions on regulatory cooperation is inadequate. Consequently, it has to be feared that any harmonisation of rules, will possibly result in a lowering of standards. In this context, it is vital that the European precautionary principle is firmly established and that social partners and civil society organisations are integrated in the regulatory cooperation. In the area of liberalising services, the exemption of sensible sectors, such as public services, has to be guaranteed. Here, the so-called positive list approach shall be applied. This provides for the explicit listing of those public services, which shall come under the scope of trade agreements. Apart from that, the draft for the sustainability chapter also shows serious shortcomings. As already pointed out in a AK Position Paper on the Discussion Paper by the Commission on the possible future structure of sustainability chapters, in concrete terms, the main points of criticism concern the lack of a sanction mechanism as well as the mandatory ratification, implementation and application of all eight ILO Core Labour Standards by the contractual partners prior to opening the negotiations. Finally, the trade mandates are lacking a comprehensive impact analysis. Currently, the Commission is only estimating long-term growth of 0.02%. This is not a strong argument for the economic benefit of these agreements.


Investment protection - left aside for the time being

So far, investment protection has been explicitly excluded from the drafts for both trade mandates. The reasons of the Commission not to include an Investment Protection Chapter, on the one hand have their origin in the experiences made during the ratification process for CETA, and in the so-called Singapore ruling of the ECJ on the other. The latter brought legal clarity concerning the distribution of competences when signing EU trade agreements. Investment protection is clearly a shared competence between EU and Member States. Hence, all national Parliaments have to ratify trade agreements with Investment Protection Chapters, so that these can become applicable. Due to the fact that this, as can be seen on the example of CETA, is a lengthy undertaking fraught with conflict, the Commission, in the case of Australia and New Zealand, pursues the path of “Split Agreements”. In doing so, investment protection is taken out of the agreements and might possible be taken care of in a separate agreement at a later date. Hence, the actual trade agreement comes under the exclusive competence of EU institutions and does not require ratification by national Parliaments.


However, one has to question the general necessity of a supranational arbitration court, outside the national legal framework. Even if the EU prioritizes a Multilateral Investment Court instead of the old ISDS mechanism, the Commission does not depart in the new system from granting multinational corporations privileged rights of action and to prize rulings of this court of justice above democratically legitimised laws under certain circumstances. From the AK's point of view, what is primarily needed in general are effective enforcement options for fundamental rights at international level, but not any further solidification and expansion of privileged rights of action for corporations.



Further information:

AK EUROPA: European trade policy – Wrangling over the enforceability of employment rights

AK EUROPA: CETA and the future of European free trade agreements

AK EUROPA: Integrating conditional labour standards in trade agreements at last!

AK Position Paper: Non-paper of the Commission services on Trade and Sustainable Development (TSD) chapters in EU Free Trade Agreements

AK Position Paper: Multilateral reform of investment dispute resolution

Blog Arbeit & Wirtschaft: Post Singapore architecture of European trade policy