The EU has for a long time failed to reform the Sustainability Chapters (TSD) of its trade agreements. However, the continued criticism of the European civil society has now prompted the Commission - after an initial non-paper on possible approaches regarding the improved implementation of labour and environmental standards - to present a second document on 26 February 2018, which contains “15 concrete und practicable actions”.

More effective implementation, but without sanctions

Even though labour rights and environmental protection are written into so-called Sustainability Chapters in general terms, their compliance is by no means guaranteed. Due to the lack of sanctions and timing, their implementation only depends on the voluntary commitment of the contracting states. In the first “non-paper” on Sustainability Chapters in trade agreements, which was presented on 11 July 2017, the European Commission introduced two options, as to how the chapters, which determine environmental and labour standards, might be structured: one option provides for sanctions, the other does not. However, an assessment of the options showed that the Commission prefers a model without sanctions. To refute a sanction model, the Commission frequently quotes the so-called Guatemala Case (2010), where the sanction mechanism, provided for in the Trade Agreement (with the USA) was triggered by the USA. This happened on the occasion of serious infringements of agreed labour standards, revealed by two trade unions. However, after investigations lasting over two years, the court of arbitration decided against imposing sanctions. The reason: it had not been possible to clearly prove a causal relation between the Trade Agreement and the non-compliance of the labour law in Guatemala.

However, from the AK's point of view, the problem lies in the inadequate wording of the said Agreement between the USA and Guatemala (CAFTA-DR), and not in the allegedly excessive complexity of the facts, as the Commission time and again claims. For instance, a Study by Warwick University reaches the conclusion that - compared to other chapters - Sustainability Chapters are given significantly less priority even during the negotiation phase. This is also confirmed by a Study of the Friedrich Ebert Foundation based on questions regarding the effectiveness of sanctions. Apart from that, the Study shows that Sustainability Chapters, which provide for sanctions, are yet more precisely worded and set higher standards than those who are based only on voluntary cooperation. However, the lack of the EU’s political will is also shown with regard to the implementation of current EU Agreements: The here applied voluntary dispute settlement mechanism with mediation character has not been triggered once, even though for example in the case of South Korea serious violations occurred, such as the arrest of trade unionists and a violent restriction of the right of trade unions to assemble.

15 Commission proposals for a more effective implementation of Sustainability Chapters

The “15 concrete and practicable actions” in the new document of 26 February 2018 still do not include sanctions. According to the Commission, the feedback on the first proposal had revealed that a large part of the respondents rejects the application of sanctions based on infringements against the contents of the Sustainability Chapter. In spite of this, from the AK’s point of view the new non-paper includes some positive steps, which could potentially improve the implementation of the Sustainability Chapter: for example, the intention is to expand the monitoring function of the civil society and to allow their representatives to be involved in the entire agreement text including the actual trade issue. Previously, their role was purely limited to the Sustainability Chapters. Also positive is the now concrete reference to the Paris Climate Agreement, whereby in the Document of July 2017 the climate aspect wasn’t a real concern. Also to be welcomed is the proposal of a so-called “Review Clause”, which allows - however on a voluntary basis - the resharpening of trade agreements every five years.

Still not provided for are deadlines, for example during the dispute settlement procedure, which means that it can be seriously prolonged to the disadvantage of claimants, as there is not enough pressure to spur the defending contracting states into action. The European Commission also did not comment on a concrete time schedule, from when on and for which of the circa 30 Agreements currently under negotiation, the proposals should apply. Even though the Commission requires the contracting partners to “early ratify” the environmental and social agreements, included in the new proposal, such as the ratification of fundamental Core Labour Standard Conventions of the International Labour Organisation (ILO), it does not make it an actual condition for trade agreements. Only minor reference is made to higher standards, such as the ILO Core Labour Standards Plus. Apart from that, the Commission overlooks the fact that many organisations, for example trade unionists and NGOs, who have long been dealing with the effects of trade policy at expert level, are still not sufficiently supported and integrated. This is particularly true for third countries, where a civil society according to European understanding does still not or only partly exists. The Commission adheres to an extremely diffuse understanding of a “balanced civil society”, which also includes the in any case well represented financially strong multinational corporations.

AK: Fundamental reforms are still necessary

Summarising, the new non-paper on Sustainability Chapters still concentrates on a more assertive application of already existing mechanisms but avoids a fundamental reform of the Agreement, as demanded by the Chamber of Labour. If one for example compares the current proposal on the Sustainability Chapter with the Investor-State Dispute Settlement (ISDS) of current trade agreements, it becomes clear how casual, noncommittal and subordinate the sustainability issue -politically as well as legally - has been treated. Hence, the Chamber of Labour supports the following reforms: effective financial penalties or trade sanctions, direct action for the affected of civil society, and fast and compulsory dispute settlement procedures, which come to bear in case of violations to internationally recognised agreements - as it has been the case a long time with regard to investment protection; however, with the difference that this time labour rights and environmental protection benefit at last.

Further Information:

Integrating conditional labour standards in Trade agreements at last!

AK Position Paper: Sustainability in EU Trade agreements

Commission: Working Paper 11 July 2017: Two options for implementation

Commission: Working Paper 26 February 2018: 15 practicable Proposals

Study of the Friedrich Ebert Foundation: Conditional or promotional trade agreements?

Study of Warwick University: Governing labour standards through free trade agreements

MEPs slam labour rights in EU-Korea trade deal review (EUROACTIV Article)