Enforcing labour standards via EU free-trade agreements

Free-trade agreements have raised huge controversy over clauses allowing of corporate challenge. But they can be used to enforce labour standards.

The European Union is an extremely active international actor in the area of trade, being widely involved in the negotiation and conclusion of free-trade agreements (FTAs) with partner countries.  Many of them, such as the CETA with Canada, the now aborted transatlantic TTIP or the EU-Japan FTA, made the news and spurred intense social debate.

All new-generation free-trade agreements include a sustainable-development clause between the parties promoting, among other things, a set of labour standards as well as conventions of the International Labour Organisation. For instance, most of the EU’s FTAs contain provisions to protect the right to collective bargaining and freedom of association, even to forbid discrimination at the place of work. Legal enforcement has been the object of an institutional and political debate, with the European Parliament calling for years for better enforcement of environmental provisions. The French president, Emmanuel Macron, and the ruling German coalition, among others, have also called for stronger obligations and better enforcement.

On December 17th 2018, for the first time in history, the European Commission sought consultations with a partner state, South Korea, for failure to respect a labour-standard obligation in an EU FTA. This is a welcome development, which comes almost ten years after the entry into force of the agreement and the prolonged failure of the Asian EU partner to ratify and implement four of the eight fundamental ILO conventions.

Labour standards

But there is still a long way to go to rebalance the discrepancy between the enforcement of labour standards and the other obligations, concerning trade, investment and intellectual property, contained in the EU’s FTAs. Under the EU Trade Barrier Regulation (TBR), EU companies can file a complaint to the European Commission when a country is not respecting an obligation under such an agreement. This leads to a commission  investigation and a number of actions can follow against the state concerned. Such a system allows private parties to be actively involved in the enforcement of commitments made under FTAs—although it has the advantage of allowing enforcement at EU level before triggering the more burdensome and diplomatically scarring international-dispute-settlement mechanism in the agreement itself. Labour standards and environmental obligations are however now excluded from the set of rights which can be enforced via the TBR.

This is the case even where EU FTAs already contain precise obligations to ratify and implement the relevant ILO conventions, including concerning core labour standards. This situation greatly damages the capacity of the EU to uphold labour standards and leaves most labour violations unaddressed.

In a recent paper, Marco Bronckers and I put forward a proposal to allow labour standards to be enforced, via a private complaint procedure under the TBR, in front of the commission. This would provide representative social partners with the legal standing necessary to file a complaint whenever a state  is violating a labour obligation in an EU FTA.

Only when the procedure at EU level did not lead to compliance would we then envisage a fully-fledged third-party adjudication system in the FTA itself. In the case of persistent violations we also propose a system of financial penalties and trade sanctions, as an instrument of last resort which is not now available in any of the EU’s FTAs.

The Court of Justice of the European Union has recognised that labour standards in EU FTAs are entirely part of the EU commercial policy and have the same legal standing as any other FTA obligation. By allowing the enforcement of labour standards via a private complaint procedure, the EU would increase the coherence between its trade policy and its social and human-rights policies, as mandated by article 21 of the Treaty on European Union. In addition, it would endow labour standards with the same capacity of enforcement as the other obligations contained in EU FTAs.