Labour standards in trade agreements: A long view on the level playing field

Why Brexit negotiations on the level playing field should be seen in light of the EU’s experience with Free Trade Agreements and the criticisms of its labour standards provisions

A sub-plot of the Brexit negotiations has been the opposing positions on workers’ rights. The 2019 Political Agreement that set out the framework for a future EU-UK relationship referred to the need to create a ‘level playing field’ in a range of policy areas including social and employment standards. Both parties have since accepted that they should not weaken or reduce existing labour law, but diverged on whether this applies to future laws, and, relatedly, to what extent the UK should align with any legislative changes in EU standards over time. They are also split on how labour provisions should be governed. The EU have emphasised the need for joint mechanisms to ensure ‘effective enforcement’ whereas the UK has steered away from such arrangements, insisting that labour provisions ‘should not be subject to the Agreement’s dispute settlement mechanism’.

These disagreements should be seen against the backdrop of the EU’s recent experience with Free Trade Agreements (FTAs). Since its FTA with South Korea signed in 2010, the EU has packaged provisions on labour and environmental standards in a Trade and Sustainable Development (TSD) chapter, arguing that these help deliver a ‘values-based’ trade policy that works for all. TSD chapters require signatories to comply with the core labour standards of the International Labour Organization (ILO), uphold existing labour protections, and create civil society mechanisms to monitor adherence. Yet they have been subject to repeated criticism for their lack of effectiveness, leading the Commission to adopt a ‘revamped approach’ on implementation, and, for the first time ever, invoke an FTA clause allowing a panel of experts to settle a dispute on workers’ rights – in this case with South Korea.

In our new book Free Trade Agreements and Global Labour Governance: The European Union’s Trade-Labour Linkage in a Value Chain World my co-authors and I explain why the EU’s approach has been beset by problems. In part this can be ascribed to the legal design of the TSD chapters, which have continually invited criticism for their lack of enforceability. The panel of experts can only make advisory adjudications, unlike other provisions of EU FTAs which are backed up by arbitration panels and the potential suspension of agreement obligations. This non-binding model is what the UK government has sought to replicate in its negotiations with the EU, and has already put in place in its recent FTA with Japan. In fact, the TSD chapter in the UK-Japan agreement was an exact copy of the EU-Japan agreement, with the sole exception that the clause allowing the parties to review the dispute settlement mechanism was cut from the text.

While the absence of sanctions provided an easy target for critics, by researching the domestic interpretation and application of labour standards provisions over the lifespan of EU FTAs, we identified other reasons why they were ineffectual. One reason was because state officials saw the provisions as the preserve of civil society organisations, which were both divided between themselves and shorn of any political power to hold the state parties to account. This seems unlikely to change in the context of UK trade policy. For instance, the Strategic Trade Advisory Group set up by the Department for International Trade has accorded only one of its 25 seats to representatives of labour and has already been criticised for restricting its members through non-disclosure agreements. Another reason why labour provisions were not prioritised was because of a belief among many stakeholders that workers’ rights were not being violated, or that, if they were, it was only in ‘developing countries’. This ignored the systematic gaps between the de jure and de facto standards applied to labour, as seen in the way that EU member states and the UK are continually cited by the ILO for non-compliance with conventions they have already ratified, including those relating to the core labour standards.

Understanding the particular approach taken by the EU also involved tracing the longer evolution of the trade-labour linkage. In contrast to those accounts which depict workers’ rights as a ‘non-trade’ issue, confirmed by the failure to include a social clause in the negotiating agenda of the World Trade Organization (which was rejected by the UK’s Conservative Party government, among others) this historical analysis reveals how labour provisions have repeatedly featured in attempts to liberalise trade flows. From the beginning of the twentieth century onwards, trade-labour linkages can be located in a variety of policy guises across multilateral treaties, sectoral agreements, preferential trade arrangements, regional integration projects and bilateral FTAs.

The recent EU FTAs have been influenced by its internal trade policy, specifically the attempt to inject a ‘social dimension’ to the Single Market project in the 1990s. The commitments to social dialogue, state welfare and fundamental labour rights that arose began to be articulated as a European social model, considered by the European Trade Union Confederation as ‘an example for the rest of the world’ to follow, and were slowly incorporated into external trade policy. The notion of the ‘level playing field’ also has its origins in internal EU policy. In the late-1990s the Commission identified the need for ‘an external dimension to its competition policy’ to be pursued through various international treaties and initiatives, with DG Trade subsequently referring to the need for a level playing field in relation to the protection of intellectual property rights and foreign investment.

The contemporary inclusion of labour standards onto the level playing field agenda is another feature of the trade-labour linkage disclosed by historical analysis, namely the way that, at certain times, labour advocates have advanced their interests by grafting them onto the rhetoric and policies designed to protect capital. A further example can be found in the repurposing of EU trade defence instruments, which now include the costs of complying with international social commitments in any anti-dumping duties applied on imports and also allow trade unions, as well as firms, to trigger investigations. In the UK context, trade unions have also called for representation on the imminent Trade Remedies Authority, seeing this as a way to provide assurance that ‘adequate measures will be taken to protect thousands of jobs in manufacturing from dumping’.

A long view on the level playing field thus shows the historical importance of labour standards provisions in mediating class conflict over free trade. While much commentary on Brexit has presented this aspect of negotiations as an idealistic clash between competing visions of sovereignty, the EU’s position can also be read as reflecting its evolving experience with FTAs and need to accommodate internal criticism from organised labour and their allies in European Parliament. The long view also reminds us that trade-labour linkages are not inherently about ‘exporting’ standards: they can be utilised to enable advocates of labour to pressure their own government and domestic employers for change, and to better protect workers who move across national borders. To this end, whatever the outcome of the EU-UK talks on labour provisions, the real test will be in how they are implemented.