Global value-added chains - most of which also include offshoring and outsourcing - are now accounting for three quarters of global trade. A good opportunity for multinational companies to avoid taxes as well as high labour and envorinmental standards. This makes clear rules, which are now demanded in a report of the International Trade Committee in the European Parliament, even more important.

Global value-added chains include many different actors, from multinational companies via national contractual partners up to employees, many of whom are working as subcontractors in the informal sector. In particular multinational companies increase their profits by moving jobs to low-wage countries with less strict regulations and by engaging in aggressive tax planning or even avoidance. Even though these tendencies do not represent a new phenomenon, they are still becoming increasingly important; as rapporteur Maria Arena (S&D) pointed out during the last session of the International Trade Committee (INTA) of the European Parliament: whilst only 25 percent of global trade accounts for end products, trading in raw materials as well as primary and intermediate products along the value-added chain is increasingly gaining in importance. The complexity of these trade and production relationships is huge and results in intransparency, which ultimately carries a great risk of human rights violations as well as unpunished infringements against social and environmental regulations. The EU's trading strategy, as presented in the Communication ”Trade for All”, also addresses transparency and values such as sustainability, accountability and human rights in international trade and along value-added chains.

In the International Trade Committee this week, the European Parliament debated the impact of international trade and the EU’s trade policy on global value-added chains. The report defines three levels and their specific individual challenges to actively use trade policy as an instrument for sustainable development and for enforcing higher environmental and labour standards: 1. the corporate level, 2. the national level and 3. the level of (global) trade policy. Accordingly, the recommendations, which Maria Arena has presented to the INTA Committee in her capacity as rapporteur are comprehensive and far-reaching: right at the top is the inclusion of binding and enforceable chapters on sustainable development, which have been furnished with sanctions into all trade agreements, which has been demanded by the AK for quite some time. Further demands include standstill clauses in trade agreements, which are to ensure a minimum of social and environmental standards, as well as mechanisms in the cooperation to combat illegal financial flows, such as the automatic exchange of tax information to improve transparency.

The flagship initiative for the garment industry, which was introduced last week in the AK EUROPA Newsletter, may be regarded as a first step to more accountability in global trade - even if it only concerns a specific sector; this week, it was adopted in a report of the Development Committee, urging the Commission to establish binding standards for the garment industry into EU law.

Not least because of its huge impact, the manner as to how global trade and trade policy is organised, is of vast importance. Based on its economic strength alone, the European Union befits a responsible role as is currently shown by the example of Turkey: the EU Commission proposed last December to modernise the customs union with Turkey and to expand bilateral trade relations. The EU is the largest export market for Turkey (44.5 %). These intensive trade interrelations (in particular along the value-added chain) make it clear that the European Union should also use its trading power to put a stop to the worrying developments in Turkey, which appear to threaten democracy. In its statement, the AK is particularly critical of the negotiations with Turkey. As long as the human rights situation, in particular exercising trade union rights, is not significantly improved, any trade incentives would send out the wrong signals.

Further information:

blog.arbeit-wirtschaft: Unitary taxation: a question of fairness

European Union Trade Agreements and International Labour Standards

Press release of the European Parliaments on EU-Turkey relations