Pushing EU trade in the right direction?

20 May 2020

Written by: Perrine Fournier

Pushing EU trade in the right direction?

Analysis of the French-Dutch call for making trade more sustainable in EU free trade agreements.

In recent media interviews, Phil Hogan, the EU trade commissioner, reaffirmed the EU’s commitment to the rules-based trading system: a commitment which in recent years has seen the EU reject the rising tide of protectionism, isolationism and trade wars, to sign a raft of Free Trade Agreements (FTAs).

But, until now, this embrace of free trade has come with a serious pitfall. The EU’s trade deals with forested countries, such as the Mercosur nations or Indonesia, prioritise market access over protecting forests and human rights.

On May 5, however, France and the Netherlands signalled their intentions to push the EU to strengthen its commitment to protecting human life and the environment in its trading relationships, in the wake of the COVID-19 pandemic. The way to do this, the text proposed, was by imposing higher tariffs on countries who ignore sustainable development commitments.

The joint proposal contains recommendations which NGOs have long supported, and seems, to some degree at least, to validate the long battles many campaigners fought to highlight the failures of the Transatlantic Trade and Investment Partnership (TTIP) and the difficult ratification process of the EU-Canada Comprehensive Economic and Trade Agreement (CETA).

But while the French and Dutch governments have shown the political will to make the EU’s trading relationships more sustainable, the devil may be in the detail - as well as the execution. And while there is much to welcome in the proposal, there is also cause for concern.

Here are Fern’s four main take-aways from the Franco-Dutch proposals:

1. France and Netherlands suggest that the EU could provide incentives to partner countries which implement trade and sustainable development (TSD) commitments. These incentives would result in tariff reductions. Withdrawing those specific reductions could be possible if the countries breach TSD provisions. Member States have suggested there should be commercial retaliation if environmental and social commitments in FTAs are violated. Even if this proposal is framed in a so-called non-paper (a non-formal document), it is significant that they are introducing these ideas into the policy debate, which may influence the direction of travel [1]. To make them actionable, more specific commitments need to be added to the FTA Trade and Sustainable Development (TSD) chapter, in order to help protect forests and human rights. Current commitments in EU FTAs focus on forestry only (legal and sustainable timber trade) and do not cover deforestation linked to agricultural commodities such as palm oil, soya and cocoa.

2. The paper suggests that where international agreements are lacking, sustainability provisions should be agreed bilaterally.  This is significant for those focussing on how trade agreements could better protect forests, since there is no internationally recognised definition of what a forest is [2]nor of what deforestation is.Sustainability criteria could therefore be further detailed in FTAs. Discussions on palm oil sustainability have been a key part of Indonesia-EU FTA negotiations, but civil society are not included in a systematic way. Sustainability criteria can only be legitimate if they are adopted through a transparent, deliberative process, with the participation of all relevant groups. If the EU offers support to a producer country, it should also provide a roadmap specifying which legislative changes are needed in that country, before trade benefits apply to the targeted goods. This approach, coupled with the development of an EU due diligence regulation may be the most effective way to mitigate negative impacts on forests and peoples.

3. The French-Dutch proposal would make it easier to raise violations of TSD commitments.Fern welcomes this. Civil society has, in fact, already put forward several ideas on how to make TSD chapters more effective, such as ClientEarth’s proposal of a formal complaints mechanism allowing citizens, civil society, unions, and Member States to submit a substantiated complaint to the Commission regarding non-compliance of human rights, social, and environmental provisions. ClientEarth goes further to say that if a complaint is substantiated, the Commission would need to conduct a full examination, respect time limits, allow for a hearing, and take a formal decision as to whether or not the complaint requires action according to the FTA.

4. On climate, the two Member States propose making the Paris Agreement an ‘essential element’ clause of FTAs, like respect for human rights. However, since the essential elements clause, which could lead to the suspension of the agreement, has never been used except when the Council decided to partially suspend the Cooperation Agreement with Syria, we are not sure that this would be triggered. It is therefore probably more beneficial to include specific climate obligations in the TSD chapter, providing, of course, that they are enforceable and would lead to suspension of trade privileges.

[1]Some academics have looked into the Asian Pacific Economic Cooperation (APEC) agreement and the Environmental Good Agreement (EGA) “which grant tariff concession in favour of "green" goods and discuss how these initiatives fit into the WTO legal regime. By using tariffs concessions as a policy instrument to meet public policy concern, these agreements introduce innovative ideas in international trade policies.

[2] The failures of efforts to develop a global forest governance framework in the 1990 led to the adoption of the EU Forest Law Enforcement and Governance Action Plan in 2003 to fight illegal logging and associated trade. This was partly possible because stakeholders agreed to focus on legality – only timber products complying with national laws can be exported to the EU – and not on sustainability.  It is however expected that producing countries undergo legislative reforms, including sustainable forest management, to improve forest governance

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