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EU FTA partners to be asked to sign up to sanctionable climate, labour obligations

The European Commission today announced that it will introduce sanctions as a last resort in cases where free trade agreement partners persistently violate core international labour conventions as well as the Paris climate agreement.

In a communication entitled ‘The power of trade partnerships: together for green and just economic growth’, the EU executive said that such sanctions would be temporary and proportionate and could include a suspension of tariff preferences.

Such remedial measures would only be introduced once a panel of experts has found a violation and after the losing party has failed within an “arranged time period” to remedy the situation.

In the EU’s current trade agreements there is no recourse to sanctions or any other punitive measures when it comes to breaches of the TSD chapters, and the emphasis is rather on continued political dialogue with the FTA counterpart.

The review of the EU’s TSD chapters was brought forward from 2023 by commission executive vice-president and commissioner for trade Valdis Dombrovskis during his confirmation hearing in 2020.

“Our trade agreements give us clout on the world stage and support economic growth and sustainable development – but as of now, we want to make them an even bigger driver of positive change,” Dombrovskis said today.

The EU trade chief continued: “We will engage and support our partners to make this happen. We will step up our enforcement, and we will resort to sanctions if key labour and climate commitments are not met.”

There are currently eight core international labour conventions covering forced labour, child labour, freedom of association, discrimination in the workplace, and occupational health and safety.

The communication states that in the case of the Paris Agreement, “the intention would be to capture failure to comply with obligations that materially defeats the object and purpose of the agreement. With regard to the ILO fundamental principles and rights at work, trade sanctions would be warranted in serious instances of non-compliance with the principles, and rely on the fact that the ILO monitors developments in all members”.

The new chapters will be tabled to partners in the ongoing negotiations with New Zealand in the first instance, followed by those with Australia, Indonesia, and India. But negotiations which are concluded will not be reopened.

The European commission considers that agreements where negotiations have been concluded but not yet ratified, such as with Chile, Mexico, Mercosur, and the investment agreement with China, should not be affected by the planned change

Tailored to need of partner

The content of the TSD chapters would be tailored to the trade partner and based on its sustainability priorities.

During the negotiations, the parties would agree “tailored objectives” and “time-bound” roadmaps to enable the country to put in place the necessary standards, with the EU executive also providing financial and technical assistance where required.

A commission official had earlier confirmed that cooperation and dialogue will remain the “guiding light” in working with partners on the TSD.

“Our FTAs are like a platform where we continuously improve sustainability over time, anchored on internationally recognised standards,” he explained.

The EU executive also wants to open new markets for import and export of green goods and services and raw materials, which it argues is “particularly important to reduce dependencies in the current geopolitical climate”.

One action outlined in today’s communication is to prioritise “market access for environmental goods and services, in particular in the area of renewable energy and energy efficiency, for instance through addressing tariff and non-tariff barriers, as well as access to and investment into raw materials and goods needed for the green transition”.

More support for civil society

The commission is also calling for a more “coordinated approach” to promote TSD provisions involving partners on the ground, such as EU delegations and member state embassies, as well as the European Parliament.

It is planning more involvement of, and more financial and logistical support for, civil society – and notably the domestic advisory groups which monitor the implementation of trade agreements.

The commission says that it will now be easier for the DAGs to lodge complaints on violations of sustainability commitments.

The operating guidelines for the recently established Single Entry Point for complaints will be amended to “make clear that DAGs can also submit collective complaints and that an EU-based complainant can represent the TSD-related concerns of an entity located in a partner country”.

The communication continues: “The update includes greater transparency and clarity on how and within what timeframes the SEP can handle the initial stages of a complaint on TSD violation.”

Today’s announcement also mentions extending the remit of the DAGs beyond TSD to “cover the entirety of trade agreements, as it is already foreseen in the EU-UK Trade and Cooperation Agreement”.

Responding to requests from stakeholders during the consultation process, DAG representatives will now be invited to TSD Member States’ Expert Groups and have more opportunities to interact with partner countries’ DAGs. There will also be greater transparency regarding their composition.

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