Governing Labour Standards through Free Trade Agreements: Limits of the European Union's Trade and Sustainable Development Chapters*

Introduction

The EU has long sought to address labour standards in its trade policy. This has been done through references to labour rights in its unilateral Generalized System of Preferences (GSP) and by failed attempts to bring a social clause into multilateral trade agreements (Wilkinson, 1999; Young, 2007). But it is in its free trade agreements (FTAs) where the most notable changes are now occurring. FTAs are the most economically significant aspect of EU trade policy. They could cover as much as two thirds of EU trade if all current negotiations are successfully concluded (EC, 2015a, p. 9). They are also the most important legally binding instruments that the EU can use in its external policy (Jurje and Lavenex, 2014). Labour provisions within EU FTAs have ‘widened and deepened’ over the past decade. This is linked in part to the 2007 Lisbon Treaty which accorded greater influence in trade policy-making to the European Parliament; an institution which has emphasized the labour and human rights dimensions of trade policy (Van den Putte and Orbie, 2015, p. 264).

A significant point of departure for labour provisions in EU FTAs was the 2008 CARIFORUM Economic Partnership Agreement (EPA). Unlike its predecessors, this agreement contained more references to social policy norms and core labour standards. It also allowed for disputes on social issues to be referred to independent experts, and institutionalized dialogue about the trade agreement within a civil society mechanism (CSM). Since the negotiation of the 2011 EU–Korea FTA such provisions have been packaged with rules around environmental protection in a Trade and Sustainable Development (TSD) chapter. TSD chapters have become an integral part of the EU's ‘new generation’ trade agreements (Bendini, 2015). Such chapters were present in finalized agreements with a further 18 countries as of July 2017, 1 with bold claims made about their efficacy. TSD chapters are meant to ensure that economic growth goes hand in hand with higher labour standards, making trade policy ‘not just about interests but also about values’ (EC, 2015a, p. 5).

It is against this backdrop that we analyze the EU's approach to protecting and promoting labour standards. We do so by drawing on research into the negotiation and implementation of labour provisions in three ‘new generation’ EU agreements, adding to debates about the projection of EU power in three respects. First we argue that to determine whether the EU's approach to the external governance of labour can be characterized as a form of (potentially significant) ‘normative power’, qualitative analysis of how FTA provisions are translated into practice is vital. Second, by empirically substantiating the weaknesses of the EU's common formulation approach across three cases, we provide a critique of the intended functions of TSD chapters and argue for greater recognition of the distinctive third country contexts that shape their operationalization. Finally, we argue that different ideas among policy-makers and interest group representatives about whom and what the trade–labour linkage is for, suggests the need for greater reflection upon the intended purpose(s) of labour provisions.

I Existing Academic Debates on Labour Standards in EU FTAs

While there is some variation across the different agreements, the TSD chapters common to EU FTAs share three key types of provisions. First there are substantive standards. All agreements require that the parties commit to upholding the International Labour Organization's (ILO) core labour standards and promote its decent work agenda. Second, there are procedural commitments. These include dialogue and co-operation between the parties, transparency in introducing new labour standards measures, monitoring and review of the sustainability impacts of the agreement, and a commitment to upholding levels of domestic labour protection. Third, there are institutional mechanisms. All agreements since the EU–Korea FTA have a tripartite format. Committees of state/EU officials from the two parties are established to oversee the implementation of the TSD chapter. These are advised by a CSM that takes the form of a Domestic Advisory Group (DAG) including representatives of business, trade unions, non-governmental organizations (NGOs) and occasionally academia, with the DAGs of the two parties meeting together on an annual basis. 2 Finally, there is an expert panel that investigates complaints made by the parties and makes recommendations on them. The implication of the agreement text is that these institutions will interact to effectively implement the TSD chapter.

In contrast to much of the literature on the EU's trade–labour linkage, which concerns itself with internal policy formation and the question of why labour standards provisions have been addressed by the European Commission (see, for example, Bossuyt, 2009; Lechner, 2016), we focus on external dynamics. Two inter-related debates are central: (1) the form of external governance which the ‘EU model’ represents and seeks to project beyond its borders; and (2) the effects of that model in the EU's trading partners.

In the first debate, two positions can be identified. One sees the EU's labour provisions as a weak form of ‘market power’ (Damro, 2012). Such claims are based on the ‘best endeavour’ language of many of the provisions and the use of ‘soft law’ enforcement to back them up, delinked from economic sanctions (Adriaensen and González-Garibay, 2013; Bartels, 2015; Vogt, 2015; Young, 2015) Moreover, since the reference points are the internationally-agreed core labour standards of the ILO this is not seen as an externalization of EU regulation per se (see Damro, 2012; Young, 2015).

Another position takes issue with this characterization of the EU's approach, suggesting that it does not give sufficient weight to the communicative or ‘network-based’ forms of governance through which standards are promoted and which give it a European dimension distinct from the supposed ‘sanctions-based’ approach of the US. From this perspective, the potential for improvements in labour standards is said to reside in the mechanisms of dialogue and co-operation institutionalized through EU trade agreements (Oehri, 2015; Postnikov and Bastiaens, 2014; Van den Putte and Orbie, 2015). Rather than evaluating the model's effectiveness by looking solely at the legal obligations placed on third countries towards immediate regulatory convergence, this position allows for the possibility that improvements in labour standards may emerge through longer-term change in political norms and processes resultant from learning and socialization. TSD chapters can in this sense be understood as an exemplar of ‘normative power Europe’ wherein ‘persuasion, argumentation and the conferral of shame and prestige’ rather than ‘coercion or solely material motivations’ effect more sustained change in third countries (Manners, 2009, p. 793).

Informed by this debate on how the EU governs labour standards is a second set of claims about what its effects have been. Postnikov and Bastiaens (2014, p. 931) offer a mixed methods study of EU bilateral trade agreements in force prior to 2010, concluding that those ‘with labour provisions have a positive and statistically significant impact on workers’ rights in signatory nations’. Regression analysis is used to demonstrate the impact, while interviews in Brussels and with one informant in Chile are used to buttress the claim that what causes this positive effect is the way state officials are educated about, and normalized into, upholding labour standards. Also based on interviews in Brussels, Garcia and Masselot (2015) argue that the EU's insistence on the importance of core labour standards during its FTA negotiations with Malaysia during 2010–12 created the opportunity for the country to ratify the ILO conventions on freedom of association and discrimination.

Other assessments cast doubt on such conclusions. Under the EU–Peru FTA Orbie and Van den Putte (2016, p. 19) found that in Peru there were ‘serious shortcomings’ in the implementation of core labour standards and that standards of labour protection on health and safety at work had actually been lowered since the agreement came into force. Likewise Marx et al. (2016, p. 606) found that, with regard to the TSD chapter in the EU–Colombia FTA, there was a ‘shared notion among stakeholders that the EU's approach constitutes little more than “window dressing”’. Other studies have challenged the EU's purported mechanisms of influence. They find that labour standards provisions have not been accompanied by increases in development assistance for labour-related activities (Ebert, 2016), that the functioning of the CSM in the EU–South Korea FTA has been impaired (Van den Putte, 2015), and that in negotiations with Vietnam the EU watered-down its requirement for the country to ratify the ILO convention on freedom of association (Sicurelli, 2015). Collectively these critical evaluations pose questions about the causal impact and lasting influence of the EU model of labour provisions. Indeed, in response to similar concerns raised by actors within the EU – including Members of the European Parliament and trade unions – in July 2017 the European Commission acknowledged that some reform to the model might be necessary, initiating ‘a thorough stocktaking of the EU TSD provisions’ (EC, 2017c, p. 5).

These debates on labour provisions in EU FTAs resonate with the wider EU studies literature about external influence and the conditions under which ‘rules travel’ (Lavenex, 2014). Three insights are particularly useful. First is the functionalist argument by Lavenex (2014) that even when looking at ‘coercive’ rules affecting access to the EU market such as regulatory standards, close attention must still be paid to the trans-governmental and technocratic networks through which regulatory convergence is enacted. Second is the recognition by Lavenex and Schimmelfennig (2009, p. 804) that third-country actors are more likely to accept modes of external governance that resonate with their domestic institutional mechanisms and are seen as normal and legitimate. And third is the point by Bicchi (2006, p. 293) that this is unlikely to take place when the EU bases its external policy on routine behaviour and ‘exports its own norms unreflexively, with a single model promoted to all its partners regardless of their context’ – an ‘our size fits all’ approach. Countering the more uniform and uni-directional ‘diffusionist’ approaches to external governance (see Börzel and Risse, 2012) these insights suggest the need to interrogate the ways in which the EU's TSD chapters articulate with different third country contexts, via the networks intended to enact the processes of dialogue and co-operation on labour standards (Campling et al., 2016). Our methodology for interrogating this phenomenon is outlined next.

II Methodology

While existing research on the impact of EU labour provisions has relied on single case studies and/or interviews with Brussels-based actors to generate data on causal mechanisms of influence, our approach examines three cases, selected both because of their diversity and because they reflect the most likely cases for labour provisions to have an impact. These cases are the CARIFORUM EPA (2008), a trade agreement with a stated development dimension, partnering the EU with 15 small Caribbean states; the EU–South Korea FTA (2011), a bilateral trade agreement with a country that is geographically remote from the EU and at a comparable level of development on a per capita income basis; and the EU–Moldova ‘deep and comprehensive trade area’ agreement (DCFTA), part of an Association Agreement (2014) with a small eastern European country on the EU's border.

In terms of most likely cases, the CARIFORUM agreement is the oldest of the ‘new generation’ FTAs and thus gives the best chance for longer-term change to become evident. This is important since ‘network-effects’ can take time to emerge; a point often made by the European Commission regarding the perceived lack of impact of the TSD chapters to date (DG TRADE, 2017). The EU–Korea FTA has been the agreement in which the European Commission has invested most energy on TSD issues, and has been touted accordingly as the success story with respect to dialogue. Meetings between the two parties purportedly demonstrate that ‘the provisions are having a positive impact to promote sustainable development’ (EC, 2015b). Finally, Moldova is geographically proximate to the EU and is dependent on trade with the EU. In 2016 the EU accounted for 49 per cent of Moldova's imports and 66 per cent of its exports; more than any other ‘new generation’ FTA signatory (EC, 2017a). 3 This material influence, of the sort routinely cited in the literature on the EU as external power, makes the Moldova agreement the one in which the EU has the most political leverage. If the TSD chapters do not appear to be affecting labour standards in these most likely cases, then it is unlikely that that they will have significant influence in other countries either.

The diversity of cases, meanwhile, allows us to reflect on the way in which third country context matters to the operationalization of the EU's consistent approach. In particular, where similar conclusions are reached about the functioning of labour provisions despite such diversity, the generalizability of findings concerning any inherent limitations is strengthened. Put another way, lack of variation in the selection of case studies can ‘inhibit the discovery and development of theories, models and concepts that are broadly applicable’ (Vaughan, 1992, p. 174). By comparing accounts across the three cases, we can also begin to explore how and why the domestic structures of third countries matter to the EU's attempts to govern labour standards.

The following analysis has a primary focus on the institutionalized practices of dialogue and co-operation which are meant to flow from the implementation phase of the TSD chapter, and where there is most debate regarding the potential for impact on labour standards. That said, in line with our ‘most likely’ case selection, we also take into account the negotiating phase of FTAs. Research on the trade–labour linkage has identified that during the negotiating period pressure upon trading partner governments can lead to increased support for, and positive changes in, labour rights; a point reflected by a number of EU representatives in our interviews (see also ILO, 2013).

We conducted interviews with an extensive range of key informants: those involved in the negotiation and implementation of agreements in the case study countries as well as in the EU (such as civil servants, politicians and spokespeople of prominent interest groups); members of the institutional mechanisms set up through the agreements (the joint committees, expert panels and CSMs); and knowledgeable ‘outsiders’ from business, civil society and trade unions who ought to be affected by the respective provisions, thus testing the reach of the TSD chapter beyond its immediate constituents. In 2015 and 2016, 121 key informants were interviewed; around 30 in each case study and in Brussels. 4 To protect their identity, interviewees are referenced anonymously according to an alphanumeric system (K23, E12 for example). The letter represents the location of the interview – C for Caribbean, K for South Korea, M for Moldova, E for EU – and the number a unique interviewee. In order to minimize the dangers of interviewee bias affecting key conclusions, interviews were triangulated across multiple interviewee types and/or by verifying with documentary evidence. Any significant differences in opinions between key informants are explicitly identified.

The methodology adopted here is important in that it seeks to isolate the impact of labour provisions within FTAs from other factors, thereby interrogating the causal relationship between particular policy instruments and changes in third countries. In many existing studies on human and labour rights provisions in trade agreements, including those contained in the EU GSP and in US trade agreements (see, for example, Hafner-Burton, 2005; Kim, 2012), it is commonplace to assess the change over time of the ‘average’ civil/labour rights situation of entire countries, typically via quantified interpretations of reported rights violations aggregated from a limited range of textual reports. Pinpointing and substantiating the precise mechanisms at work is beyond the scope of that form of analysis. Such methods also miss the fact that, insofar as they are operationalized at all, labour provisions tend to privilege certain actors by virtue of the issues prioritized and the groups that mobilize around them, for instance focusing on freedom of association more than poverty wages, and involving trade unions rather than informal worker networks. By speaking with informants cognizant of these differences and involved in the negotiation and implementation of the TSD chapters, our approach allows us to investigate their contrasting understandings of what the trade–labour linkage is for, and who it is intended to benefit.

III The Negotiation and Implementation of Labour Provisions

IV Common Framework, Different Limits

Our argument thus far is that the EU has arrived at a common approach to the governance of labour standards in its FTAs that has failed to have substantive effects within three most likely cases. Given the diversity of the cases selected, we can also suppose that the context in which the EU model is deployed does not matter greatly to the outcome. This raises a further question: could the TSD chapters be effective if they were better operationalized, or are there inherent limits to what they can achieve? The evidence from our three cases sides firmly with the latter.

In the Caribbean context, the vast majority of interviewees did not consider ILO core labour standards, which are at the heart of the EU's model, to be the most pressing problem and pointed to the near universal ratification of the fundamental conventions in the region as evidence of this (C2, C3, C9, C10, C11, C21, C28, C33). Similarly, European trade unionists thought violations of core labour standards were much more systematic in neighbouring Central America, meaning that support for Caribbean labour movements was not a priority (E23, E25). This is not to say there are no rights violations or labour disputes involving organized labour, but what many academic and NGO interviewees were at pains to point out was that small-scale farmers, informal traders, the self-employed and those working on daily contracts had been worst affected as a result of the region's changing trade relationships (C3, C17, C18, C26). For instance, it was suggested to us that ‘hucksters’ – petty traders who are predominantly female and often operate outside the formal economy – were being adversely affected by the tightening up of customs operations, partly as a result of the CARIFORUM agreement's trade facilitation provisions (C17). Consequently, for Caribbean civil society actors in the CSM, the main focus was to try to understand what impacts the EPA was having on employment and working conditions in the region, and it was for this reason that concerns were raised over inadequate monitoring (C20). All TSD chapters contain an obligation to monitor the social and environmental impacts of the agreements, but resources for the CSMs to carry this out are very limited (E14). Eight years after coming into force the first efforts at developing a methodological approach for monitoring the social impacts of the CARIFORUM agreement were only just beginning (E8, E25).

A very different situation is apparent in South Korea, which has only signed and ratified four out of the eight fundamental ILO conventions. During the first five years of the FTA, the Korean government stood accused of cracking down on trade unions in a way that severely undermined freedom of association, attested to by complaints submitted to the ILO in 2013 and 2015 by coalitions of domestic and international trade unions. This was accompanied by conflict between government, trade unions and businesses about proposed relaxation to existing labour laws. Insofar as they speak to prominent concerns in Korea then, the standards and procedures contained in the FTA provisions are apt. However, trade union and business actors in Korea have called into question the use of social dialogue to achieve these ends, not least because of the antagonistic state-society relations that characterize labour governance, which is in turn linked to the influential political role played by the family conglomerates known as chaebols (K3, K5, K10, K30, K31). These problems are exacerbated by the fact that, in the eyes of well-placed interviewees, the EU has insufficient political influence over the Korean government to induce policy change, further aggravated by the aforementioned reluctance of the European Commission to take a strong stance on labour rights (E29, K25).

In Moldova, the government has signed and ratified all the fundamental conventions. ILO reports and interviews indicate there are problems with regard to child labour, especially in the agriculture sector, and with the labour inspectorate, which is covered indirectly in the procedural commitments of the TSD chapter to uphold domestic labour law (M1; see also ILO, 2016, Smith et al., 2017). But it proved difficult to retain focus on these labour issues when the political landscape was dominated by the profound governance problems mentioned above (M7) and when the predominant labour issues in Moldova relate to poor wages and conditions of employment – aspects not captured adequately in the ILO core labour standards framework. It may therefore be more productive to concentrate on the broader range of labour provisions contained in the Association Agreement, since these include obligations to introduce legislation influencing the quality and quantity of employment as part of the convergence of Moldovan legislation to meet the requirements of the EU's acquis communautaire. During the agreement's negotiation, these obligations were considered far more demanding and important than labour provisions in the TSD chapter (M2, M3). Indeed, in 2015, Moldova passed laws to transpose European Directives on fixed-term work and on obligations to inform employees about their conditions of work. Others including those pertaining to occupational health and safety, remain outstanding (Moldovan government, n.d.). However, the institutions of the TSD chapter are not designed to engage with issues outside the trade chapter of the Association Agreement.

This examination of the ways in which labour provisions are utilized (or not) and the elucidation of the concerns of key constituencies in our three case studies reveals the differentiated limits of the common formulation adopted by the EU. What we find is that the appropriateness of the EU model is brought into question in terms of substance (for instance, should the focus always be on ILO core labour standards?), process (for instance, what are the possibilities and limitations of dialogue in the context of particular political situations and relationships?), and scope (such as, should there be a focus on labour-related obligations beyond those contained in the TSD chapter?). At root, we suggest that the failure to design labour provisions to better articulate with third-country contexts has limited the possibilities for EU FTAs to protect and promote labour standards. Coupled with the challenges facing the operationalization of TSD chapters as identified earlier – presented summarily in Table 1 – we therefore conclude that a serious reconsideration of the EU's trade–labour linkage is required.

Conclusions

A superficial account of labour provisions within EU FTAs tells a positive story. Trade agreements have been negotiated with relatively extensive substantive standards and procedural commitments. Representatives of the respective parties are meeting with their international counterparts and civil society meetings are occurring. But in terms of addressing substantive labour standards issues, this article has shown that TSD chapters have delivered little. Scholars have already argued that the EU has not sought to ‘aggressively’ export labour standards through its trade agreements (Young, 2015). We show that neither have state officials in trading partners readily imported them. Rather, they have reluctantly accepted – or even actively softened – minimalist obligations around core labour standards. The weight of expectation has been loaded instead onto processes of dialogue, particularly via CSMs, widely considered as the key institutions for making progress on labour issues. However, CSMs are seriously hampered by various operational deficiencies as well as political marginalization within the broader institutional mechanisms and processes of the FTA. Overall, we found no evidence that the existence of TSD chapters has led to improvements in labour standards governance in any of our case studies, nor did we find any evidence that the institutionalization of opportunities for learning and socialization between the parties was creating a significant prospect of longer-term change. These findings thus offer the most robust refutation to date of the hypothesis that labour provisions in EU FTAs are actively advancing workers’ rights. And in contrast to more optimistic assessments, they also suggest that future normative influence is unlikely to be realized via TSD chapters in their current form.

Should the EU therefore seek to put more of its market power behind its labour governance strategy? Such an approach could in part be realized by the most common suggestion for reform from European interviewees involved in the labour movement, namely to increase the enforceability of the TSD chapter by giving the EU the ability to withdraw preferential access to its market if labour standards are violated (E17, E19, E20, E25, E26). This would make the labour provisions more coercive, and in the shadow of sanctions, perhaps persuade trading partners to engage in more earnest dialogue and responsive action. Yet some interviewees in case study countries averred from this approach, with unionists and allied researchers expressing concern about the dangers of labour standards being utilized as a form of disguised protectionism (C7, K10). We agree, then, with the comments made by one labour representative who noted that more must be done to assuage such concerns and explain how specific forms of conditionality could benefit labour struggles in trade partners (E33). This demands consideration of a range of complex design issues including how a dispute is initiated, who it targets in relation to what labour-related allegations, who investigates those allegations, who decides on the kinds of corrective action and penalties, and what form of sanctions or fines are available to do this. Appropriately nuanced, a crude social clause founded on economic nationalism could thus be avoided.

But tackling enforceability issues will not by itself attend to the deficiencies identified above. In contrast to an ‘our size fits all’ model, Bicchi has argued that the EU needs instead to ‘critically analyse the expected consequences of norm promotion for all parties involved and adapt … accordingly’ (2006, pp. 289–290). In the Caribbean context, this could have been achieved by recognizing and responding to the aspirations of civil society to monitor the impacts of the EPA on employment and working conditions. In Korea, by developing alternative strategies for engaging key government officials with responsibilities for labour rights. And in Moldova, by giving the TSD chapter the remit to address labour obligations contained in the wider Association Agreement, as this would begin to address issues like health and safety at work that go beyond the ILO's core labour standards. In the same way that the EU has addressed context-specific commercial issues in a bespoke manner (such as in the annex to deal with non-tariff barriers in automobile parts under the Korea FTA), it ought to extend the same treatment to fundamental labour rights by designing provisions that articulate with the most pressing labour issues in each trade partner.

Stepping back from the question of efficacy, our final reflection is more scholarly in orientation. It concerns the underlying purpose of labour provisions. In the academic literature on the trade–labour linkage it is assumed that such provisions are intended to raise ‘the national average’ of labour rights protection in third countries, however measured and regardless of whether those jobs are connected to tradable goods and services. Yet the analysis presented here reveals that the groups and individuals central to the operationalization of the EU's TSD chapters had very different understandings of what they were meant to achieve – from monitoring trade impacts to reforming state institutions like the labour inspectorate. Further diversifying that sense of purpose is the notion that TSD chapters are ways of regulating global supply chains, as exemplified by the promotion of East Asian CSR in the Korea case and elaborated in the European Union's (2015) proposed text for the Transatlantic Trade and Investment Partnership and in speeches by the EU Trade Commissioner (Malmström, 2015). 6 This explicitly reorients labour provisions toward jobs in transnationally-organized export industries and away from those within discreet national economies. Lastly, we note that at the 2017 civil society forum of the EU–Korea FTA some participants turned the discussion toward inadequate protection of workers within the EU, complicating the assumption that such provisions are essentially externally orientated. While such alternative trade–labour linkages could create new possibilities for improving labour standards, they also demand new methodologies to scrutinize them along the lines we have developed here, paying more attention to causal mechanisms and intended beneficiaries.