Social Europe

  • EU Forward Project
  • YouTube
  • Podcast
  • Books
  • Newsletter
  • Membership

Are social clauses really just hidden protectionism?

Damian Raess 18th June 2021

Social clauses in trade deals are sometimes represented as a premise for denial of market access to developing countries. The evidence suggests otherwise.

social clauses,trade agreements,trade deals
Damian Raess

The European Union can look back on a great success in foreign policy. At the end of February, the South Korean parliament ratified International Labour Organization conventions 87 (freedom of association), 98 (the right to organise and collective bargaining) and 29 (forced labour).

In spite of three decades of incessant campaigning by the Korean trade unions, successive governments had failed to adopt internationally recognised labour standards, due to opposition from business and conservative groups. In 2018, under increased pressure from civil-society organisations, particularly the European Trade Union Confederation, the EU called for the ratification of the fundamental ILO conventions, claiming that non-compliance could constitute a violation of the free-trade agreement (FTA) between the two sides.

Following deadlock in political consultations, in the summer of 2019 the EU called for a panel of experts to examine the dispute. This was the first use of such a procedure under the Trade and Sustainable Development chapter of ‘new generation’ EU FTAs—of which that with South Korea, signed in 2010, is the prototype. In late January of this year, the panel confirmed that Seoul was not meeting its labour commitments under the trade agreement.

The case of South Korea is significant: it is the ninth largest trading partner of the EU, is the object of one of the longest standing complaints of trade-union rights violations before the ILO’s Committee on Freedom of Association and regularly receives one of the highest scores—that’s worst for violations—on the Labour Rights Indicators and the International Trade Union Confederation’s Global Rights Index. This has fuelled the charge that oppressive labour practices have conferred an unfair advantage in export trade.

Level playing-field

The EU’s approach to promoting core labour rights through trade policy has now delivered an important victory. It helps to create a level playing-field—notwithstanding the opposition, from left and right, to policies linking trade and social (and environmental) issues.

The progressive (or leftist) criticism is that social clauses are ineffective, because the political will to enforce the commitments is lacking or the mechanisms are inadequate. The absence of unilaterally enforceable trade sanctions in case of violations is most often bemoaned. While not monolithic in this respect, the EU approach does emphasise monitoring and implementation through social dialogue and capacity-building.

Some on the right think trade agreements are not an appropriate instrument to promote social standards—a task for the ILO but not the World Trade Organization. This is however to forgo an essential lever for improving working conditions throughout the world.

Impact on trade

What about the impact of labour clauses on trade flows? Led by economists, developing countries generally consider social clauses a form of hidden protectionism, resulting in a decrease in their exports to developed countries. The argument is twofold. First, the increased labour costs associated with the implementation of social clauses may be detrimental to the competitiveness of economies whose comparative advantage is based on low wages and otherwise low production costs. Secondly, advanced economies can use strongly enforceable clauses to suspend preferential market access for developing countries which violate their obligations.

Surprisingly, this question has long awaited a convincing answer. This is crucial because it concerns developing countries’ material incentives to engaging in the developed countries’ agenda of linking trade and labour issues. My recent co-authored study addressed it.

Using the Labor Provisions in Trade Agreements (LABPTA) dataset—the most detailed and comprehensive, with about 450 agreements signed since 1990—we found that social clauses have a positive effect on exports of manufacturing goods from developing countries with low labour protection in north-south agreements. This effect is mostly driven by social clauses accompanied with strongly institutionalised co-operation mechanisms, such as those in the dominant EU approach.

Social clauses with sanctions-backed enforcement mechanisms, by contrast, have no statistically significant impact on bilateral trade. The correlation is however mildly negative, suggesting that such clauses might pave the way for institutional capture by lobby groups in developed countries for protectionist purposes.

Supply and demand

In sum, from the perspective of developing countries, there is a ‘business case’ for labour clauses with strong co-operation mechanisms in north-south agreements.

These results can be explained by supply-and-demand mechanisms—on the one hand, by productivity gains linked to better working conditions on the supply side and, especially, on the other hand, by increased demand in northern countries for goods produced under worker-friendly conditions. Although further research is needed, they also suggest that the co-operation approach is probably more effective at improving labour practices in developing countries than the sanctions-based approach, providing a more credible signal regarding adequate labour standards and thus helping increase demand for products not produced by sweatshops.

WTO rules and practices must be updated and improved to reflect global challenges, in particular environmental and social sustainability and economic development. This overhaul can only be based on the common objectives of member states.

The introduction of a social clause at the multilateral level would respond to this double imperative. If well-conceived, its implementation would contribute to an open, sustainable and equitable trade policy and thus give the WTO a new lease of life. It is an idea whose time has come.

A shorter French version of this previously appeared in Le Temps

Damian Raess
Damian Raess

Damian Raess is a professor at the École supérieure en études internationales (ESEI), Université Laval, and the holder of the research chair Couche-Tard on global value chains. His research interests include, but are not limited to, the private and public governance of labour standards through international trade.

Harvard University Press Advertisement

Social Europe Ad - Promoting European social policies

We need your help.

Support Social Europe for less than €5 per month and help keep our content freely accessible to everyone. Your support empowers independent publishing and drives the conversations that matter. Thank you very much!

Social Europe Membership

Click here to become a member

Most Recent Articles

09d21a9 The Future of Social Democracy: How the German SPD can Win AgainHenning Meyer
u42198346 How Trump’s Tariff Regime Fuels Global OligarchyGabriel Zucman
u421983462 041df6feef0a 3 Universities Under Siege: A Global Reckoning for Higher EducationManuel Muñiz
u4219836ab582 af42 4743 a271 a4f423d1926d 0 How Trade Unions Can Champion Solidarity in Europe’s Migration DebateNeva Löw
u421983467298feb62884 0 The Weak Strongman: How Trump’s Presidency Emboldens America’s EnemiesTimothy Snyder

Most Popular Articles

u4219834647f 0894ae7ca865 3 Europe’s Businesses Face a Quiet Takeover as US Investors CapitaliseTej Gonza and Timothée Duverger
u4219834674930082ba55 0 Portugal’s Political Earthquake: Centrist Grip Crumbles, Right AscendsEmanuel Ferreira
u421983467e58be8 81f2 4326 80f2 d452cfe9031e 1 “The Universities Are the Enemy”: Why Europe Must Act NowBartosz Rydliński
u42198346761805ea24 2 Trump’s ‘Golden Era’ Fades as European Allies Face Harsh New RealityFerenc Németh and Peter Kreko
startupsgovernment e1744799195663 Governments Are Not StartupsMariana Mazzucato
u421986cbef 2549 4e0c b6c4 b5bb01362b52 0 American SuicideJoschka Fischer
u42198346769d6584 1580 41fe 8c7d 3b9398aa5ec5 1 Why Trump Keeps Winning: The Truth No One AdmitsBo Rothstein
u421983467 a350a084 b098 4970 9834 739dc11b73a5 1 America Is About to Become the Next BrexitJ Bradford DeLong
u4219834676ba1b3a2 b4e1 4c79 960b 6770c60533fa 1 The End of the ‘West’ and Europe’s FutureGuillaume Duval
u421983462e c2ec 4dd2 90a4 b9cfb6856465 1 The Transatlantic Alliance Is Dying—What Comes Next for Europe?Frank Hoffer

Foundation for European Progressive Studies Advertisement

Spring Issues

The Spring issue of The Progressive Post is out!


Since President Trump’s inauguration, the US – hitherto the cornerstone of Western security – is destabilising the world order it helped to build. The US security umbrella is apparently closing on Europe, Ukraine finds itself less and less protected, and the traditional defender of free trade is now shutting the door to foreign goods, sending stock markets on a rollercoaster. How will the European Union respond to this dramatic landscape change? .


Among this issue’s highlights, we discuss European defence strategies, assess how the US president's recent announcements will impact international trade and explore the risks  and opportunities that algorithms pose for workers.


READ THE MAGAZINE

Hans Böckler Stiftung Advertisement

WSI Report

WSI Minimum Wage Report 2025

The trend towards significant nominal minimum wage increases is continuing this year. In view of falling inflation rates, this translates into a sizeable increase in purchasing power for minimum wage earners in most European countries. The background to this is the implementation of the European Minimum Wage Directive, which has led to a reorientation of minimum wage policy in many countries and is thus boosting the dynamics of minimum wages. Most EU countries are now following the reference values for adequate minimum wages enshrined in the directive, which are 60% of the median wage or 50 % of the average wage. However, for Germany, a structural increase is still necessary to make progress towards an adequate minimum wage.

DOWNLOAD HERE

S&D Group in the European Parliament advertisement

Cohesion Policy

S&D Position Paper on Cohesion Policy post-2027: a resilient future for European territorial equity”,

Cohesion Policy aims to promote harmonious development and reduce economic, social and territorial disparities between the regions of the Union, and the backwardness of the least favoured regions with a particular focus on rural areas, areas affected by industrial transition and regions suffering from severe and permanent natural or demographic handicaps, such as outermost regions, regions with very low population density, islands, cross-border and mountain regions.

READ THE FULL POSITION PAPER HERE

ETUI advertisement

HESA Magazine Cover

What kind of impact is artificial intelligence (AI) having, or likely to have, on the way we work and the conditions we work under? Discover the latest issue of HesaMag, the ETUI’s health and safety magazine, which considers this question from many angles.

DOWNLOAD HERE

Eurofound advertisement

Ageing workforce
How are minimum wage levels changing in Europe?

In a new Eurofound Talks podcast episode, host Mary McCaughey speaks with Eurofound expert Carlos Vacas Soriano about recent changes to minimum wages in Europe and their implications.

Listeners can delve into the intricacies of Europe's minimum wage dynamics and the driving factors behind these shifts. The conversation also highlights the broader effects of minimum wage changes on income inequality and gender equality.

Listen to the episode for free. Also make sure to subscribe to Eurofound Talks so you don’t miss an episode!

LISTEN NOW

Social Europe

Our Mission

Team

Article Submission

Advertisements

Membership

Social Europe Archives

Themes Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

Miscellaneous

RSS Feed

Legal Disclosure

Privacy Policy

Copyright

Social Europe ISSN 2628-7641