Ensuring compliance with sustainable development provisions in EU FTAs
The trade and sustainable development chapters included in recent EU FTAs have been criticized for lacking an effective enforcement mechanism, and in particular for the absence of sanctions to ensure compliance. This has been blamed for the poor implementation of their commitments by partner countries.
Minding the compliance gap
We argue instead that the compliance gap is best addressed by refining and thereby strengthening the ‘managerial’ approach to compliance currently reflected in the TSD chapters, in particular by enhancing the transparency, institutionalization and accountability of the enforcement mechanisms in these chapters, rather than by resorting to counterproductive sanctions.
The EU, trade and sustainable development
In the current climate of popular dissatisfaction with economic globalisation, and the increasing realisation of the importance of sustainable development, the EU has taken up the challenge of ensuring its trade agreements are also socially beneficial. As a powerful market player, and one that has developed strong and cooperative relationships with its FTA partners, the EU is well placed to push forward in its efforts to be a global leader in governing through trade by using its market power as leverage to obtain concessions in this area. The trade and sustainable development (TSD) chapters in its new generation FTAs represent first steps in this direction, as they include not only aspirational provisions but also binding obligations on parties.
However, whether the TSD chapters live up to their promise will depend on the level of implementation of their obligations and thus on the mechanisms available to secure compliance. The TSD chapters are carved out of the regular dispute settlement mechanism available in the EU FTAs and are enforced instead by dedicated mechanisms that include monitoring, dialogue and cooperation between the parties in the TSD Committees, stakeholder involvement through Domestic Advisory Groups and bilateral Civil Society Forums, and, as a last resort, binding dispute settlement by a Panel of Experts with which compliance is jointly achieved.
A ‘managerial’ approach to securing compliance with sustainable development obligations
The enforcement mechanisms incorporated into the TSD chapters have been subject to much criticism, in particular due to the absence of sanctions to enforce compliance. It has been argued that an effective enforcement mechanism is lacking. However, a recent study by the Swedish National Board of Trade points to a widening of the traditional concept of enforcement in respect of both the scope of actors involved and the types of mechanisms used, and identifies two approaches, the 'managerial' approach and the 'sanctions' approach to enforcement. The TSD chapters in EU FTAs arguably reflect the 'managerial' approach to enforcement, being cooperative in nature and managing the causes of non-compliance though positive means, including transparency, continuing dialogue between the parties, civil society involvement, cooperative dispute settlement and capacity building.
The managerial approach is well-suited to complex, long term relationships between states, in which reputation and goodwill are important to ensure continued collaboration. As international commitments in TSD chapters deal with regulatory standards and violations may result from capacity constraints, a sanctions approach may be counterproductive. Instead, collaborative mechanisms have the potential to create strong incentives for compliance and can therefore be regarded as a useful tool for to secure compliance, albeit one that relies on mechanisms of persuasion, leverage and political pressure rather than economic penalties.
Nevertheless the ‘compliance gap’ that exists between the TSD chapters’ obligations and the implementation reality demonstrates that, as currently designed and implemented, the TSD chapters fall short of their promise and improvements are needed. This concern has been recognized in three recent Commission documents that form the background for this study.
‘Minding’ the compliance gap
We argue that the EU should continue to resist the pressure to incorporate sanctions into the dispute settlement mechanisms in the TSD chapters. While this would give the appearance of a strong commitment to furthering TSD goals, and may appease its critics, it has been argued that in reality such a mechanism would be difficult to use due to the particular nature of TSD provisions and their regulatory context. It would also damage the collaborative relationship essential for promoting improvement in environmental protection and labour standards by its FTA partners, and, if used, may harm those it aims to protect.
Instead, we recommend that the EU further develop the progressive and innovative cooperative mechanisms in the TSD chapters to lead to greater compliance by its FTA partners, while not undermining their 'managerial' characteristics. In particular, we argue that refining the design of the mechanisms for transparency, monitoring, dialogue, stakeholder participation and dispute settlement is necessary in three main interrelated areas.
First, for managerial mechanisms to work well, transparency must be enhanced through ensuring their openness to participation by stakeholders and the accessibility and understandability of information regarding implementation and enforcement efforts. Second, the operation of the collaborative and participatory mechanisms must be firmly institutionalized, through obligatory and detailed procedural requirements that ensure their effectiveness. Finally, accountability to stakeholders must be ensured by creating formal feedback mechanisms that ensure that input and complaints of stakeholder representatives in DAGs and Joint Civil Society Forums find their way into the policy process, as reflected in the extent to which the state parties are obliged to consider these views, react to allegations of non-compliance, and give reasoned responses. The current absence of a formal feedback mechanism by which FTA parties inform stakeholders of how their input, through the institutional mechanisms set up in the TSD chapter, has been used, undermines accountability and discourages active engagement by civil society.
As argued in our recent publication, it is our view that such ‘minding’ or careful and attentive managing, rather than sanctioning, of the compliance gap can be more effective in achieving progressive improvement in the level of implementation of the TSD chapters. It is to be hoped that the EU will continue to engage constructively with its trading partners to address sustainable trade concerns, but will do so in a manner that ensures effective and lasting change by refining its ‘managerial’ approach so that it becomes a useful tool for governing through trade.
Written by Iveta Alexovičová and Denise Prévost