Protecting workers' rights in trade

Singapore – A model labour chapter to EU trade agreements and preferences commissioned by FES can pave way to stronger implementation of labour standards and greater respect for rights at work.

(from left to right) Veronica Nilsson and Henner Gött at "Making trade Benefit Wokers" working session hosted by FES at the 2017 WTO Public Forum in Geneva, Switzerland. Photo by Harold Cunningham / The Image Gate for Friedrich-Ebert-Stiftung

Social clauses in trade agreements have done little to protect workers’ rights. The respect for fundamental rights at work is still poor in many countries despite them being included in trade preferences and trade agreements of the European Union (EU).

Friedrich-Ebert-Stiftung (FES) has therefore tasked a team of researchers to come up with a proposal for a labour chapter that could be included in the EU’s future trade agreements and that would better protect workers’ rights. A first draft of this proposal was discussed together with EU Commissioner Cecilia Malmström and the chair of the European Parliament Committee on International Trade Bernd Lange (link to video) in Brussels in June 2017.

The proposal for a model labour chapter will also be discussed and presented by Henner Gött, one of the authors, at the WTO Public Forum on 27 September 2017 (<link news making-trade-benefit-workers>link to programme).

FES met with Henner Gött to talk about how the model labour chapter would improve the enforcement of workers’ rights. One of the novelties is the set-up of a collective complaint procedure, which as the chapter states “is designed to remedy one major flaw of prior FTA labour chapters: to make the implementation of labour standards dependent on the (often lacking) political will of the parties [to the agreement]”.

EU free trade agreements (FTAs) usually include a chapter on sustainable development (SD), but your model chapter only focuses on labour. You have also included a section on corporate social responsibility, which is about soft law, although the chapter is legally binding. How do you explain this approach?

Henner Gött: There are actually two questions: The question of the chapter’s focus on labour and the inclusion of a section on corporate social responsibility (CSR).

Speaking more generally, whether to have a free-standing labour chapter (like, for example, the USA and Canada have preferred in their FTAs) or to include labour into an overarching SD context (like the EU has done) is a recurring question.

From our point of view, the important point is not so much the label of a chapter in itself. Rather, it is of decisive relevance that an integrated SD approach, if chosen, still leaves sufficient room to accommodate the peculiarities of labour. As Peter-Tobias Stoll has perceptively pointed out on many earlier occasions, there is a considerable risk of distortion and obstruction of a chapter’s implementation under integrated approaches. For example, including environmental organizations in the monitoring and enforcement of the right to collective bargaining might serve neither the interests of such organizations nor of the social partners.

Only if it is ensured that the specificities of labour (and environment, culture, consumer protection etc.) are sufficiently considered and not diluted or distorted, are integrated approaches advisable.

As to CSR: We have discussed at length whether or not to include a CSR section in the model chapter. On the one hand, many actors have demanded, with good reason, that labour chapters go beyond voluntary standards for multinational enterprises (MNEs). What is more, CSR is not confined to labour matters, but covers a broad range of other aspects, which speaks against including it in a dedicated labour chapter. On the other hand, however, many contemporary FTA chapters on labour and on SD include at least some kind of reference to CSR. Completely excluding CSR from the model chapter could thus be interpreted as an intentional step back, which we wanted to avoid. Therefore, we decided to include a section on CSR to at least preserve the current status quo as laid down in the Commission’s Transatlantic Trade and Investment Partnership (TTIP) proposal and to include some realistic innovations.

For future FTA negotiations, however, we would recommend dealing with the conduct of MNEs regarding labour, environmental and other standards in a dedicated separate chapter, which could also include direct or indirect obligations for MNEs.

The model labour chapter stipulates that “each party shall promote and strive to ensure decent living wages”. What does this mean in practice? How do you define a living wage and what would a party to the agreement need to do to live up to its commitment?

HG: Living wages is one of the three “plus standards” which FES Asia and MEP Bernd Lange commissioned us to include in the model chapter. Drafting a clause on living wages faces three major obstacles. Firstly, the economic and social conditions in the EU’s various partner countries vary considerably, as they do between different economic sectors. Secondly, wages are best set through autonomous collective bargaining between the social partners, which should not be overly predetermined or compromised by clauses in FTAs. Thirdly, on a more practical note, an FTA clause on living wages cannot build on language on prior treaties, but has to be designed essentially from scratch.

We therefore decided to draft a clause which requires the Parties to pursue decent living wages for all wage earners as a goal. To achieve this goal, the Parties must ensure a robust and fair framework for collective bargaining, which must be flanked by other measures, such as a system for effective and fair minimum wages for all wage earners and easily accessible and expeditious remedies to claim back pay.

In terms of definitions and particular steps to be taken, the clause relies on prior work done by the International Labour Organization, which has, for example, published guidelines on establishing a system for minimum wages.

Social partners will be involved through the so-called Domestic Advisory Group (DAG). If the majority of the trade union and employer representatives of the DAG consider that the agreement is being violated, the parties to the agreement are obliged to request consultations with the other party. However, in cases of labour standards, the social partners usually have quite different views from each other. How realistic is it that they will agree on issues such as violations of collective bargaining, living wages and working hours?

HG: Indeed, whether or not the social partners agree on issues of implementation is highly contingent on the particular situation at hand. To account for this uncertainty, the model chapter foresees different tools for workers, employers and their organizations to participate in the implementation and enforcement of the chapter. Some of these tools—like the joint Domestic Advisory Group (DAG) request for intergovernmental consultations you mentioned in the question—can only be used jointly, in this case by a three-quarter majority in the DAG. This has the political advantage of acting in the name of the DAG, but of course requires that the DAG’s members agree on a common position.

In more contentious cases, other tools might be better suited.

In the examples you mentioned, a trade union would also have the opportunity to either make a public submission to one or both of the Parties or to commence a collective complaint procedure against the Party that has violated its obligations under the chapter.

Both tools can be used unilaterally, i.e. without obtaining the approval of other organizations or any of the governments. This combination of different tools, which have been tailored to different situations, is perhaps one of the most distinct and innovative aspects of the model chapter.

The model labour chapter also introduces a collective complaint procedure which can be used by social partners and civil society organisations to make complaints. How can you make sure that a party to the agreement implements the decision of the Panel of Experts?

HG: The Collective Complaint Procedure is designed to remedy one major flaw of prior FTA labour chapters: To make the implementation of labour standards dependent on the (often lacking) political will of the Parties.

The Collective Complaint Procedure enables those groups with a genuine interest—the social partners and other civil society organizations—to bring cases of violations directly before an independent and impartial Panel of Experts, which examines the matter both from a factual and from a legal perspective. Governments and other organizations can present their views to the Panel, but cannot obstruct or delay the procedure.

The Panel issues a final report on each case, in which it determines in a legally binding manner whether a Party has violated its obligations under the chapter. The respondent Party is legally obliged to cease all such violations. In its final report, the Panel can also award so-called just satisfaction to the complainant, which may include pecuniary damages, non-pecuniary damages and/or costs and expenses incurred by the complainant.

Compliance with the Panel’s final report is monitored by the Committee on Labour Matters. The complainant can bring any instance of alleged non-compliance before the Committee, which has to investigate the matter in its next meeting. This compliance procedure is modelled on the European Court of Human Rights. Moreover, if the respondent Party does not pay the awarded just satisfaction, the chapter foresees that the complainant can directly enforce the Panel’s report against the respondent Party and its property in either of the Parties’ territories.

Unlike the model chapter’s inter-state dispute settlement procedure, the Collective Complaint Procedure does not in itself allow the imposition of suspension of trade benefits granted under the FTA (so-called trade sanctions) in case of non-compliance with the Panel’s report. This is so because trade sanctions by their very nature have to be imposed by a state and thus cannot be imposed by the complainant organization. However, the chapter links the Collective Complaint Procedure with the inter-state dispute settlement procedure in a different way. Since the Panel in its final report determines the respondent Party’s violations in a legally binding manner, the other Party can, as it were, jump on the bandwagon. It can use this final report issued in the Collective Complaint Procedure to commence its own inter-state dispute settlement procedure against the respondent Party, which may then ultimately lead to trade sanctions.

This inter-state procedure will be accelerated and bear lower diplomatic costs, since all the contentious legal and factual issues have already been decided on by the Panel’s report in the Collective Complaint Procedure. The other FTA Party simply has to follow up on this report and restrict its own request to the latter’s faithful implementation.

Apart from compliance in each particular case, the Collective Complaint Procedure also has a significant systemic value for the implementation of the chapter. By issuing its reports, the Panel of Experts provides at the same time case studies on issues arising under the chapter, providing in-depth analyses on factual situations and applying and concretizing the legal obligations entailed in the chapter. These analyses are conducted in a neutral and mutually agreed-on procedure.

Once issued, the Panel’s final reports may be taken back to the political arena. There, they may serve to achieve greater clarity on contentious questions of law and fact and may serve as useful starting points for more nuanced and focused cooperative activities in the future.

The Collective Complaint Procedure thus fills a systemic gap that existed under prior FTA labour chapters.

To make such a collective complaint, the organization first has to exhaust all reasonably available domestic remedies. How do you define “reasonably available” given that in many countries, workers may for different reasons have difficulties getting access to justice?

HG: The requirement to exhaust available domestic remedies is widespread in international law. Its purpose is to allow for the solution of a case before the respondent Party’s own domestic bodies before shifting it to the international level. As your question rightly highlights, this presupposes that there are local remedies which are accessible also for those with limited or no resources or expertise.

To deal with this problem, we have connected the requirement to exhaust local remedies with the Parties’ substantive obligations under the chapter to provide access to justice: The model chapter requires the Parties to establish and maintain domestic procedures which are not unnecessarily complicated or prohibitively costly, do not entail unreasonable time limits or unwarranted delays, provide injunctive relief and are fair and equitable. Only if the respondent Party has fulfilled this obligation, a complainant in the Collective Complaint Procedure must exhaust local remedies. If not, the complainant may immediately bring the case before the Panel. This ensures access to justice for the complainant and at the same time sets an incentive for the Parties to provide adequate access to justice on the domestic level. ###

The model labour chapter has been produced under the framework of the regional project Core Labour Standards Plus by FES in Asia. For more information contact Veronica Nilsson, Programme Manager at the FES Office for Regional Cooperation in Asia, based in Singapore.

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