Khóa luận tốt nghiệp: Trade sustainable development (TSD) chapter under EVFTA: legal analysis and recommendations for vietnam’s implementation

MINISTRY OF JUSTICE MINISTRY OF EDUCATION AND TRAINING

HANOI LAW UNIVERSITY

HOANG VIET LINH443035

TRADE SUSTAINABLE DEVELOPMENT (TSD)CHAPTER UNDER EVFTA: LEGAL ANALYSISAND RECOMMENDATIONS FOR VIETNAM’S

IMPLEMENTATION

MINISTRY OF JUSTICE MINISTRY OF EDUCATION AND TRAINING

IMPLEMENTATIONMajor: General Law

Nguyen Thi Thuy Duong, MA

Hanoi - 2023

Thereby state that I- Hoang Viet Linh — Class 4430, being a candidatefor the degree of Bachelor of Arts accept the requirements of the Universityrelating to the retention and use of Bachelor's Graduation Paper deposited inthe librany

Interms ofthese conditions, Lagree that the origin of my paper depositedin the itbrany should be accessibie for the purposes of study and research iaccordance with the normal conditions established by the librarian for thecare, loan or reproduction of the paper.

December 7% 2023

Supervisor Student

Nguyen Thi Thuy Duong Hoang Viet Linh

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Mỹ eternal gratitude to my Supervisor, Ms Nguyen Thi Thuy Duong,MA, for her unwavering guidance, constructive criticism, and practicalsuggestions throughout the duration of the thesis.

‘My genuine appreciation to every member of the Thesis Committee fortheir fair assessment and comprehensive review, as well as favorable feedback:for my future research

Tam profoundly indebted to my beloved family and close ‘fiends forfF throughout the joumey.

In the absence of the unconditional, unequivocal, and wholeheartedtheir wise counsel and sympathetic

support of these individuals, my graduation thesis could not have beenaccomplished.

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Global integration has been one of the key drivers of Vietnam'sremarkable achievements in growth and poverty reduction over the past threedecades In recent years, the EU and the Vietnamese Government have hadextensive and comprehensive cooperation, which can be proven by the signingofthe EVFTA The EU and Vietnam both respect and set goals for sustainabledevelopment between economic development and environmental and socialprotection Therefore, in addition to expanding and promoting free trade‘between the two sides, the EVFTA also particularly emphasizes sustainabledevelopment, ensuring that the EVFTA does not have adverse effects, but onthe contrary, will be the foundation to protect the environment and improveissues related to social welfare for employees Stemming from this orientation,chapter 13 on TSD, one of the most notable chapters, has been developed andincluded in the agreement by both sides It could also bea case that this Chapterisa meeting point between the EU's priority policy and Vietnam's intemal needto address sustainable development Vietnam is leading in two-way trade withthe EU and can be considered as a gateway for the EU to access Southeast Asiaand possibly China The EU is curently negotiating FTAs with other regionalcountries, namely Thailand, Malaysia, the Philippines, and Indonesia (after thedeadlock in negotiations for a comprehensive EU-ASEAN) All are competingdirectly with Vietnam over merchandise exports to the EU Therefore, Vietnammust optimize the first-mover advantage and opportunity to maintain andpromote its existing advantages in trade relations with the EU

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TABLE OF CONTENTSDECLARATIONS.

LIST OF TABLES AND FIGURES.LIST OF ABBREVIATIONS.

1 Rationale of the study2 Aim of the study.

3 Research questions4 Scope of the study5 Methodology

CHAPTER 1 INTRODUCTION OF TRADE SUSTAINABLE

11 Definition and Conceptualzadon of Trade SustainableDevelopment.

1.2 The Inclusion of TSD in EU's FTAs: Rationale and Context.13 Key Components of TSD Chapters in EU FTAs.

13.1 Labour standards

1.3.2 Environmental standards1.3.3 Institutional structures

1.3.4 Enforcement/Disp ute settlements

144 Challenges and new approaches for the implementation of TSD

1.4.1 Challenges 3142 The new EU approach to effective enforcement of TSD

2.2.1 Adherence to domestic laws pertaining to sustainable development42.2.2 Commitments to Labour 43.2.3 Commitment to the Environment 452.2.4, Supervision and Dispute Settlement Mechanism 482.2.4.1, Supervision Mechanism, 482.2.2.4, Dispute Settlement Mechanism 49CHAPTER 3 IMPLEMENTATION PRACTICES OF EVFTA’S TSDCHAPTER AND RECOMMENDATIONS FOR VIETNAM FROMEXPERIENCES OF SOUTH KOREA AND NEW ZEALAND bì3.1 Experiences Korea and New Zealand from thr implementation of theTSD Chapter and some recommendations 53.1.1 Experiences from Korea and New Zealand 523.1.2 Recommendations 553.1.2.1 Recommendations to improve State policies and laws 55

vị

3122 Recommendations on organizational apparatus and

coordination mechanisms 56

3.1.2.3 Recommendations for policy enforcement bị3.2 Implementation progress of commitments in TSD Chapter 593.21 Achievements and difficulties in the process of implementingIabour commitments 593.21 1 Achievements 593.21.2 Difficulties 63.22 Achievements and difficulties in the process of implementing

environmental commitments 63

3.2.2.1 Achievements 63.2.2.2 Difficulties 63.23 The establishment of the Domestic Advisory Group Vietnam 67

CONCLUSION 7LREFERENCES 7

LIST OF TABLES AND FIGURESFigures

Figure 1 Dispute Settlement Machanism in the EU TSD Chapters bìFigure 2 Vietnam's GDP and Export to GDP ratio (2000-2020, billion USD,%) 35

LIST OF ABBREVIATIONS

ASEAN : Association of Southeast Asian Nations

Comprehensive and Progressive Agreement for‘Trans-Pacific Partnership

CSR - Corporate Social ResponsibilityDAG - Domestic Advisory Group

ECJ : European Court of Justice

EESC : European Economic and Social CommitteeENV: Nature Education Center

EPA - Economic Partnership AgreementEPA - Economic Partnership Agreement

EU : European Union

EUKFTA : EU-Korea Free Trade AgreementEVFTA - EU-Vietnam Free Trade Agreement

FTA Free Trade Agreements

ILO: Intemational Labour OrganizationIPA: _ Investment Protection AgreementIWTU : _ Institute of Trade Union Workers

MEA - Multilateral Environmental AgreementNAFTA : North American Free Trade Agreement

OECD - Co-operation and Development

‘Sustainable Development Goal

Center for Sustainable Rural Development‘Trans-Pacific Partnership AgreementTrade Sustainable DevelopmentUnited Nations

‘Vietnam Association of Seafood Exporters andProducers

‘Vietnam Chamber of Industry and Commerce‘Vietnam Fisheries Association

‘Vietnam Elevator AssociationWorld Trade Organisation

The principal objective of this section is to form the basis of the researchpaper with a detailed explanation ofits rationale, aim, research questions, scope,‘methodology, and organization.

1 Rationale of the study.

To strike the balance between economic growth and the protection of theenvironment, there is an increasing practice that countries have employed FreeTrade Agreements FTAs) to address sustainable development Thisis particularlya priority policy of some developed countries using non-commercial commitmentsintheir FTAsasa condition for granting market access to goods from their tradingpartners, mostly developing countries Chapter 13 of the EU-Vietnam Free TradeAgreement (EVFTA) could be a typical example of the EU's priority policy ofadvocating sustainable development from its FTA partners One may argue thatChapter 13 of the EVFTA is a trade-off to gain market access for Vietnamesegoods However, it could also be a case that this Chapter is a meeting pointbetween the EU's priority policy and Vietnam's intemal need to addresssustainable development.

‘The EU has signed an FTA with Singapore in 2018 and another one withVietnam in 2019 These FTAs contain a similar chapter on trade and sustainabledevelopment It could be predicted that the Trade Sustainable Development (TSD)Chapter in the future ASEAN and EU, FTA would share great similarities withthe EVFTA and the EU — Singapore FTA Given the fact that Asia and ASEANcountries still have divergent perspectives on the inclusion of sustainabledevelopment provisions in their FTAs, it further suggests that using Chapter 13 ofthe EVFTA as an example, the sustainable development chapter in the ASEAN-

EU FTA could be agreed upon when the EU's perspective meets with intemalneeds of ASEAN in addressing sustainable development,

This research studies the provisions of the EVFTA on sustainabledevelopment Firstly, it provides a key background of the TSD Chapter underinternational documents and in FTAs, the definition and conceptualization of theTSD, and key components ofits EU FTAs By the way, the research points out thechallenges and the new approach to TSD of EU FTAs Later, it analyzes theframework of the legal of TSD under EVFTA and what Vietnam implement inpractice Then, the study examines Viet Nam's experiences with other countriesthat havea TSD Chapter with the EU inFTA Based on the assessment this articlesuggests a possible approach and recommendations for Vietnam's implementation2 Aim of the study

The chief purpose of the study is to define and clarify the legal regulationsof the TSD Chapter under EVFTA and the meaning of enforcement The studyshows the implementation process in Vietram and how we get experiencesthrough other countries To be more specific, this study is conducted to seek theanswers to the following issues

+ Conceptualization of TSD under intemational documents and in FTAs‘© Challenges in implementation progress and the new approach to

enforcement pracess

+ The legal regulations of the TSD Chapter under EVFTA and the meaning

of Vietnam's enforcement process.

‘© The difficulties and achievements do Vietnam have after signing with EUthe EVFTA.

+ Compare implementation progress with other countries to draw effective

implementation methods and experiences from FTA partners

3 Research questions

‘The research will be implemented to resolve the following question:

+ Question 1: What is trade sustainable development in EU Trade

Agreements and the approach of EU to pursue it?

+ Question 2: What are the regulations and practices for implementing

EVFTA's TSD Chapters??

+ Question 3: What are the solutions recommended to improve the

implementation process for Vietnam after comparing with others FTApartners?

4 Scape of the study

The research object of the project is current domestic and intemationalregulations related to trade sustainable development Among them, internationallegal documents include multilateral intemational treaties in the field of labourand environment

The study primarily concentrates on the legal regulations of the TSDChapter under EVFTA and how Vietnam puts the TSD Chapter into practice fordevelopment The study also analyzes how Vietnam operates, leams from othercountries, and then makes comparisons to clarify where the problems are currentlydifficult Besides, the researcher points out what the signing with the EU requiresfor Vietnam, and what the future development orientation for Vietnam will be5 Methodology

The research of the graduation thesis was conducted using analysis andsynthesis methods to analyze the regulations of TSD under intemationaldocuments to introduce theoretical basis which is used to serve as the backgroundImowledge base for the thesis The synthesis method, analysis - synthesis,comparison - contrast, induction - deduction, inference - prediction andcomparative are applied in all chapters of the graduation thesis to clarify the

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regulations and how Vietnam and the EU put those provisions into practice Theseresearch methods also help readers more easily recognize and clearly thecomparisons between the regulations of FTAs and the way they apply and developthose regulations

6 Organization of the study

The graduation thesis includes 71 pages and 2 images In addition to theintroduction and conclusion, the content of the graduation thesis is structured into3 chapters:

Chapter 1 is Introduction of Trade Sustainable Development in EUTrade Agreements which lays out the theoretical basis for research

Chapter 2 is Legal Analysis of Trade Sustainable Development Chapterunder EU-Vietnam Free Trade Agreement which supplies the analysis of TSDChapter regulations.

Chapter 3 is Implementation Practices of EVFTA’s TSD Chapter andRecommendations for Vietnam from Experiences of South Korea and NewZealand which indicates the analytical findings of difficulties and achievementsthat Vietnam has achieved and leamed from companing the process andperformance with other countries.

CHAPTER 1 INTRODUCTION OF TRADE SUSTAINABLEDEVELOPMENT IN EU TRADE AGREEMENTS,

11 Definition and Concep tualization of Trade Sustainable DevelopmentRegarding the concept of TSD, there is curently no intemational ordomestic document that professionally defines this concept The study willanalyze the concept of trade and sustainable development from the perspective ofsustainable development in three intemational documents including SustainableDevelopment Goals (SDGs) of the United Nations (UN), World TradeOrganisation (WTO) and the International Labour Organization (ILO)

Although the notion of sustainable development has been labeled as vague,it has provided the necessary flexibility to be included in legal instruments at theinternational, regional, national, and municipal levels in both hard law and softJaw forms It is sometimes referred to as an integrated idea, especially when itcomes to social, economic, and environmental goals as well as human rights Thethree interconnected pillars of sustainable development including economic,social, and environmental protection were highlighted in the Political Declarationand Implementation Plan that were endorsed at the 2002 World Summit onSustainable Development in Johannesburg The goal of sustainable developmentis to achieve economic success while protecting the environment and promotingsocial justice and cohesiveness?

‘The United Nations approved the Sustainable Development Goals (SDGs),commonly referred to as the Global Goals, in 2015 asa global call to action to endpoverty, safeguard the environment, and guarantee that by 2030 everyone will livein peace and prosperity In the SDGs, sustainable development involves theintegration of sustainable development principles into international trade policies

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and practices Sustainable development embodies a comprehensive andinterconnected vision for fostering global well-being between trade, economicdevelopment, social progress, and environmental sustainability” The 2030 TheAgenda for Sustainable Development acknowledged that combating climatechange and preserving our oceans and forests must coexist with measures toalleviate poverty and other forms of deprivation, enhance health and education,lessen inequality, and promote economic growthŠ The TSD in the SDGsunderscores the integral role of trade in achieving broader global objectives, itenvisions international trade as a catalyst for positive change, emphasizing ethicalpractices, social responsibility, and environmental stewardship to create a moreequitable and sustainable global trading system* It seeks to ensure that tradeactivities contribute positively to economic growth, social progress, andenvironmental sustainability Sustainable development is gre ly impacted by bothnational and intemational economic interactions and policies Because thedevelopment process cannot proceed if the global economy is unstable, unreliable,and lacks vitality, a favorable extemal economic environment is essential’Agenda 21 - a comprehensive plan that aims to take global, national, and localaction proposed by United Nations systems and significant groups in which everyperson has an environmental impact It drafts @ general goal for local communitiesto create an action plan for sustainable development’ Agenda 21 calls for “a

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supportive intemational climate for achieving environment and development goals‘by promoting sustainable development through trade liberalization; making tradeand environment mutually supportive; providing adequate financial resources todeveloping countries dealing with intermational debt; and encouraging‘macroeconomic policies conducive to environment and development "?

Sustainable development has been incorporated into the WTO's foundingdocuments’, the Doha Development Agenda”, decisions made by the AppellateBody, and the terms of reference for the Committee on Trade and Environment”However, WTO legal texts do not include a definition of sustainable development,nor do Appellate Body Reports provide further clarity WTO Director-GeneralPascal Lamy remarked that “Sustainable development should be the comerstoneof our approach to globalization and to the global governance architecture that wecreate" According to Lamy, the WTO officially recognizes sustainabledevelopment as a goal, acknowledging that as trade expands globally and thenumber of members rises, trade liberalization's influence has grown morewidespread Its strategy, as a trade organization, is predicated on finding points‘where commerce and sustainable development intersect Froma policy standpoint,achieving sustainable development necessitates carefully balancingadvancementsin each of its pillars: policies intended to promote social growth, environmentalconservation, and economic development, for example As a trading

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organization, the WTO has an obligation to react, and it wall do so by laying forthconstructive measures to promote sustainable development

In the ILO, sustainable development refers to the integration of economic,social, and environmental considerations to achieve lasting and equitableimprovements in the world of work'* Sustainable development fosters economicprogress while ensuring social justice, decent work, and environmentalresponsibility The ILO actively supports the UN's SDGs through policy advice,technical assistance, and the promotion of international labour standards'" TheILO supports trade and sustainable development policies that encourageinnovation, entrepreneurship, and the expansion of small and medium-sizedtusinesseslS It promotes more environmentally friendly corporate practices,which benefits employment and sustainability This tackles inequality, asignificant barrier to economic progress, together with social security for people‘who are incapable or unable to find employment Improving productivity is a keycomponent of the ILO's mandate to advance decent employment, including rightsat work To this end, it uses social dialogue to foster collaboration betweengovemnments, companies, and employees.”

To conclude, in intemational environmental agreements, sustainabledevelopment refers toa framework that integrates environmental protection, socialequity, and economic development to meet the needs of the present without

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compromising the ability of future generations to meet their own needs'° Theseagreements are designed to address global environmental challenges and promotepractices that support long-term ecological balance and human well-beingSustainable development in the international environment agreements requiresinternational cooperation and capacity building to support the implementation ofenvironmental protection measures, particularly in developing countries”

‘SD refers to the integration of sustainable development principles into thepolicies, practices, and outcomes of international trade It is interconnected invarious intemational environmental agreements, reflecting a growing recognitionthat trade activities can impact the environment and represent a nuanced approachto addressing the interplay between economic activities, environmental concerns,and long-term social well-beingTM It can be understood that TSD is an overarchingpolicy objective of the intemational community This holistic approach recognizesthe interconnectedness of economic, social, and environmental dimensions,aiming to ensure that trade activities contribute positively to broader societal and.environmental goals,

‘The conceptualization of TSD involves recognizing that economic growthshould not come at the expense of social well-being and environmental health.Key elements include promoting inclusive economic development, addressingenvironmental impacts, upholding fair labour practices, and adhering tointernational standards TSD envisions trade as a force for positive change whenconducted responsibly, fostering a harmonious relationship between trade

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activities and sustainable development objectives It emphasizes responsible‘business conduct, adherence to ethical trade practices, and alignment with globalsustainability goals Overall, TSD seeks to creat a balanced and equitableframework that considers the long-term well-being of societies and the planet inthe context of intemational trade

1.2 The Inclusion of TSD in EU's FTAs: Rationale and Context

Although it is widely agreed upon that trade should promote sustainabledevelopment rather than hinder it”, there is disagreement over the precise mannerin which social and environmental issues should be included in trade agreements.The importance of FTAs as an alternative govemance framework for trade-environment and trade-labor linkages has grown due to the inherent limitations ofthe WTO This trend began with the North American Free Trade Agreement(NAFTA) and its Side Agreements on Environmental” and Labor Cooperation”.

Under its Founding Treaties, the EU is to define and pursue common.policies and actions in order to “foster the sustainable economic, social andenvironmental development of developing countries’ As such, TSD is one of theEU's common commercial policy's guiding principlesTM Accordingly, the EUFTAs increasingly contain ‘non-trade-issues’ to reflect the political significanceofthe concept of sustainable development The historically first type of such non-trade issues was compliance with intemational human rights obligations, the rule

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oflaw, and democratic principles® Since 1995, the EU has included human rightsclauses in its trade agreements

The first trade and sustainable development chapters appeared in theEconomic Partnership Agreements (EPAs), trade and development treatiesnegotiated between the EU and African, Caribbean, and Pacific countries (ACP).The objective of sustainable development was set out under the CotonouAgreement The pioneer EPA was concluded between the EU and Cariforumcountries in 2008%

Due to their usually wider regulatory scope and lower number of parties,FTAs have more options for sustainable development concems than the WTO”,‘The EU joined this trend soon after the Treaty of Lisbon” made it constitutionallyrequired for it to promote sustainable development through its external tradepolicy Since 2010, so-called TSD chapters have been an essential part ofthe EU'snew generation of comprehensive free trade agreements that it has negotiated with‘both developed and developing nations

‘The EU has developed a consistent practice of including chapters on TSDin its FTAs, aiming at ensuring that increased trade is mutually supportingenvironmental protection and social development, and does not come at theexpense ofthe environment or labour rights® The establishment ofa TSD chapterreflects the EU's commitment to promoting sustainable development, ensuring that

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economic growth is coupled with social progress and environmentalresponsibility® At the core of this strategy is the recognition that trade, whenconducted responsibly, can be a powerful force for positive change These TSDchapters are presented as a central part of the EU's value-based trade policy,whereby the Union is determined to use trade as a vehicle for promotingsustainable development worldwide

EU trade agreements have incorporated a specific TSD chapter containing‘measures on labor rights, climate change mitigation, and environmental protectionever since the free trade agreement with South Korea was completed in 20085.The European Commission is firmly committed to ensuring that its tradeagreements foster sustainability, so that economic growth goes hand in hand with.the protection of human rights, decent work, the climate, and the environment, infull compliance with the Union's values and priorities The Commission adopteda communication titled “ The power of trade partnerships: Together for green andjust economic growth” 3 The EU needs to be a more trustworthy partner to thirdnations in the current geopolitical environment of increased uncertainty The tradepolicy of the EU offers a strong foundation for working with trading partners ontrade-related sustainability issues 3*

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addition to upholding the duties outlined in the EU treaties namely, promoting and.defending human rights and sustainable development in developing nations, thisalso attempts to level the playing field for trading partners All pertinent EUmeasures, including trade policy, are required by law to support sustainabledevelopment® Specifically, making sure that every legislative proposal advancesthe UN 2030 sustainable development agenda is the goal of the Commission'sBetter Regulation agenda”

Economic development, social development, and environmentalpreservation are generally recognized as the three primary pillars of sustainabledevelopment in EU free trade agreements This is essential because globalconcems can only be addressed through global cooperation via the creation,approval, and execution of its internal policies as well as via active participationwith its allies in the international sphere, the EU is dedicated to advancing thesegoals The TSD pledges contained therein complement a broader range of policytools, multilateral initiatives, and development cooperation instruments in acomprehensive manner TSD in FTAs fosters innovation, market expansion, jobcreation, and economic progress By removing regulatory barriers to market entry,FTAs significantly cut prices and promote the adoption and use ofenvironmentally friendly technologies, as well as related products and servicesthat aid in the global reduction of greenhouse gas emissions and the adaptation toa changing climate Additionally, it aids in securing raw material supplies that are

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required, particularly for low-carbon technology'?, Global trade may also have aneffect on biodiversity, the climate, or working conditions Trade liberalization, theadvancement of intemational labor standards, and resolute environmental andclimate action must all coexist in order to guarantee the benefits of open tradeTrade agreements offer a forum for policy discussions and collaboration onsustainability with partner nations as tools of privileged partnerships.

The EU currently has 42 preferential trade agreements in place with 74partners‘! The following modem trade agreements”, starting with the EU-SouthKorea FTA which entered provisionally into force in 2011, include trade and.sustainable development chapters implementing intemational labour conventionsand environmental provisions: Canada, Central America, Colombia, Peru, andEcuador, Georgia, Japan, Moldova, Singapore, South Korea, Ukraine, the UnitedKingdom, and Vietnam" In addition, another six EU trade agreements that areawaiting ratification include sustainable development chapters: Chile, China,Kenya, Mercosur, Mexico, and New Zealand Besides, the EU has proposedprovisions on TSD with ongoing trade negotiations with the following countriesAustralia, Eastem and Southem Africa, India, Indonesia and Thailand*.

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In summary, the EU's decision to include a Trade and SustainableDevelopment chapter in its FTAs is rooted in a comprehensive understanding ofthe multifaceted impacts of trade on societies and the environment Therefore, the'TSD chapter has been included in the lisal law and is mandatory in trade policiesin the EU and partner countries This strategic approach aligns with the EU'scommitment to sustainable development, responsible business practices, andinternational cooperation, and reflects the EU's vision of trade asa tool forpositivegiobal transformation The TSD chapter embodies the EU's vision of trade as atool for positive transformation, where economic prosperity goes hand in hand‘with social progress and environmental stewardship

13 Key Components of TSD Chapters in EU FTAs

‘The EU has developed a consistent practice of including chapters on TSDin its FTAs, aiming at ensuring that increased trade is mutually supportingenvironmental protection and social development, and does not come at theexpense ofthe environment or of labour rights

13.1 Labour standards

‘The Parties' current commitments in pertinent areas, such as the ILO 1998Declaration on Fundamental Rights and Principles at Worle and its follow-up, andthe 2008 ILO Deciaration on Social Justice for a Fair Globalization, which isapplicable to all ILO members, should serve as the starting point for discussionsin the labor domain The notion of decent labor is in line with the EU TSDchapters The Parties shall encourage labor inspection, decent working conditions

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for all, occupational safety and health, and non-discrimination with regard to‘working conditions, according to the ILO Declaration of 2008 The UN 2030Agenda for Sustainable Development, which was established in 2015 and hasseventeen Sustainable Development Goals (SDGs) **, is more widely referred toin the most recent chapters When it comes to labour issues, the SDG promotesfull and productive employment and decent work forall.

‘The incorporation of labour rights within the TSD chapters of intemationaltrade agreements reflects a commitment to fostering fair, ethical, and humane‘working conditions, Labour rights provisions within TSD chapters aim to ensurethat economic growth resulting from trade agreements goes hand in hand with theprotection and promotion of fundamental human rights in the workplace” At theheart of these provisions is the recognition that economic development shouldprioritize the well-being and dignity of workers Usually, the labour provisions inthe EU TSD chapters correspond to minimum labour standards developed by theILO, particularly the ILO Fundamental Conventions

TSD chapters often include commitments to uphold core labour standards,‘which encompass principles suchas freedom ofassociation, the right to collective‘bargaining, the elimination of forced labour and child labour, and the preventionof discrimination in the workplace By incorporating these elements, tradeagreements seek to create an environment where workers are treated with respect,have the right to organize and bargain collectively, and are protected from

“Karna Headiovt, Onde) Svoboda, Jounal of Weld ade Vm 52, I5su 6 2018)pp 1019 ~ 1082,‘Staiable Developmere Chapters in the FU Fee Trade Agreement: Searlmigfor Aectenet,

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exploitative labour practices One crucial dimension of labour rights within TSDchapters is the promotion of decent working condiions51, Provisions may addressissues such as working hours, wages, and occupational health and safety.Additionally, TSD chapters may include provisions related to social development,emphasizing the importance of investing in education and training for workers®13.2 Environmental standards

Conceming environmental issues, the starting point should be therecognition of the importance of global environmental governance to tackleenvironmental challenges of common concem, whereby MultilateralEnvironmental Agreements (MEAs) are of critical importance to deliver globalbenefits’ The latest EU TSD chapters include a broad range of environmentalstandards, it has an explicit reference to MEAs related to areas such as climatechange, biological diversity®S, chemicals and weste', etc However, TSDchapters go further as they include thematic articles on sustainable managementofnatural resources in areas such as low carbon development, biodiversity, timber,or fisheries”

The integration of environmental protection within the TSD chapters ofinternational trade agreements represents a crucial commitment to balancing

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economic growth with ecological susainabiity' Environmental protectionprovisions within TSD chapters acknowledge the significant impact that tradeactivities can have on the environment and aim to foster responsible andsustainable practices® At the core of these provisions is the recognition thateconomic development should not come at the expense of environmentaldegradation®TM

One key aspect of environmental protection within TSD chapters is theencouragement of sustainable resource management®! This involves promotingpractices that ensure the responsible use of natural resources, preventing over-exploitation and depletion Special attention is paid to the promotion of tradeschemes that lead to the conservation of biodiversity, which involves alsocooperation on eco-labeling schemes The EU and trade partners are required tocombat illegal trade in endangered species of fauna and flora as well as illegallogging Another issue to address is illegal, unreported, and unregulated fishingthat contributes to the overfishing of global fish stock and impairs the functioningof sea ecosystems.

Another critical dimension is the emphasis on reducing carbon footprintsassociated with trade-related activities TSD chapters often include

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commitments to environmental responsibility, encouraging businesses tominimize their ecological footprint’ Provisions may address issues such ascarbon emissions, resource management, and pollution prevention The Parties areencouraged to trade in sustainable goods and services that facilitate the transitionto a low-carbon economy®® TSD chapters may encourage businesses to adoptmeasures that contribute to mitigating climate change, such as investing inrenewable energy sources, improving energy efficiency, and implementingsustainable transportation practices Moreover, TSD chapters may addressenvironmental degradation by promoting the responsible management of wasteand pollution prevention

1.3.3 Institutional structures

‘The institutional structure of the EU TSD chapters is based on the work ofthree main bodies that are involved in the process of monitoring and enforcing theobligations Namely the Sub-Committee on Trade and Sustainable Development,Joint Civil Society Dialogue, and Domestic Advisory Group (DAG)”

The TSD Sub-Committee is an inter-governmental working group made byemperts on trade, labour, and environment from each Party with the tase ofoverseeing the implementation of the TSD chapter and guiding further bilateralcooperation in this area, It usually gathers once per year and reports to the TradeCommittee of the respective FTA®.

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The civil society plays an important role in collecting information and‘monitoring the compliance of sustainable development commitments, EU TSDchapters establish two types of mechanisms for the involvement of civil society®.Joint Civil Society Dialogue isan open forum composed of civil society (includingDAGs) from both sides and the governments that on the EU side are representedbby the European Commission”, The meetings are usually held once per year,together with TSD Sub-Committee meetings The views of the Joint Civil SocietyDialogue may be submitted to the TSD Sub-Committee”)

Inaddition to this joint inter-govemmental body, each party is also requiredto have in place domestic consultative mechanisms (DAG3), comprising a‘valanced representation of business, environmental, and labour stakeholders, with.a view to seeking their input on matters under the TSD chapter” Bilateralconsultative mechanisms are also foreseen in various forms for the parties toconduct regular dialogue with these stakeholders on the implementation of theTSD chapter’? Despite this emphasis on public participation in the monitoring ofTSD chapters, there is no formal requirement for the parties to follow up on thesubmissions received from stakeholders

13.4 Enforcement/Disp ute settlements

The TSD chapters in the EU FTAs are not subjected to a general 'based dispute settlement mechanism of the FTA due to a lack of consensus within

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the EU on this matter Instead, there is a special procedure based on a commondialogue between the Parties which also comprises the civil society”, Dialogueand consultation are integral components of TSD chapters within intemationaltrade agreements These mechanisms are designed to facilitate ongoingcommunication and collabouration between participating parties, fostering acooperative approach to addressing challenges related to sustainable development,environmental protection, and labour rights” The inclusion of provisionsemphasizing dialogue and consultation underscores a commitment to inclusivity,transparency, and the engagement of diverse stakeholders

The first stage of the process is government consultations Ifa mutuallysatisfactory resolution is not reached, a Party may request the establishment of thePanel of Experts on trade, labour, and environment In the next step, the Panel ofExperts submits a report that is made publicly available Finally, theimplementation of recommendations made by the Panel of Experts as well asenforcement of the TSD Chapter is reviewed through regular TSD SubCommitteemeetings 6

Figure 1 Dispute Settlement Machamism in the EU TSD Chapters”

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In addition to that, the TSD chapters build a framework for mutualcooperation The EU and the partner countries are setting the priority areas ofcooperation and conducting specific projects Usually, these projects concem theimplementation of ILO conventions, multilateral environmental agreements, orother trade-related topics, including development in Corporate SocialResponsibility (CSR) practiceTM Consultation processes are typically designed tobe transparent and accessible Parties may be required to make relevantdocuments, reports, and information available to the public, allowing for externalscrutiny and accountability” Transparency in consultation mechanisms ensuresthat stalceholders, including the public, have access to information, enabling themto participate meaningfully in the dialogue surrounding the implementation ofsustainable development commitment®

Therefore, these institutional provisions, reflect the EU's collabourative andnonconfrontational approach to the implementation and enforcement of the TSDchapters, relying on interparty dialogue and third-party adjudication butexcluding the possibility of imposing sanctions in cases of non-compliance with

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the recommendations of the Experts Panel, In this sense, TSD chapters can beunderstood as an example of "Normative Power Europe" coined by Manners,whereby “persuasion, argumentation and the confemal of shame and prestige”rather than “coercion or solely material motivations” may affect more sustainedlong.term change in environmental and social norms in third countries*.

1.4, Challenges and new approaches for the implementation of TSD Chapter14.1 Challenges

‘The regulations about the enforcement of the TSD provisions within the EUare typically outlined in the specific TSD chapters of individual tradeagreements® The EU employs a combination of both soft and hard enforcement‘mechanisms in the TSD chapters of its trade agreements with partners, Thesemechanisms are designed to ensure that partners adhere to the agreed-uponsustainable development commitmentsTM While the exact regulations can varydepending on the agreement, there are common elements that highlight theenforcement mechanisms,

When TSD provisions are enforceable, violations of obligations aregenerally required to have affected trade or investment between the Parties.Importantly, if the Panel of Experts finds a breach of TSD Chapter commitments,no sanctions follow, instead, the TSD Chapters direct that the parties “shall discuss

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appropriate actions or measures to be implemented” while taking into account thefinal report and recommendations of the Panel of Experts®®

TSD Chapters create a specialized Committee to monitor itsimplementation and a DAG in the process is set up in the EU and in the partnercountry or countries to advise on the stimplementation of the trade agreement orparts of i5 However, neither enforceable dispute settlement procedures norfinancial sanctions for non-compliance are provided It is clear that theenforcement implementation is mostly based on monitoring the implementationofthe panel report.

A few years back, it seemed like most critics were against the idea of usingsanctions to enforce TSD Chapters since they are only temporary and are meantto put financial pressure on the violator to make them pay for their actions” TheEuropean Union has decided to forgo sanctions, believing that cooperation anddiscourse are more effective in promoting sustainable development than conflictand confrontation®® The enforcement mechanismis model has faced challengesfrom both theoretical and empirical perspectives These challenges range from thenotion that there wouldnt be enough motivation for the parties to abide by theaward in the absence of sanctions to a criticism ofthe operational flaws that hinderthe functioning of civil society mechanisms on the ground”

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In conclusion, the EU aims to strike a balance between soft enforcementand hard enforcement However, the enforcement mechanism for violations duringthe implementation process currently only stops at the level of supervision,‘monitoring, and reporting There are no specific deterrent penalties to the goal isto create a system that promotes responsible and sustainable practices ininternational trade Stefanie Schacherer and Tensin Studer have argued that theEU has been criticized for the relatively soft enforcement mechanism of its TSDChapters, raising doubts about the EU's seriousness in balancing its trade andinvestment policy with sustainable development For many, there are noconvincing reasons to exclude TSD commitments from the FTA’s general disputesettlement mechanism, which allows for arbitration or mediation, and which canlead to the suspension of trade concessions (i.e, sanctions)® There are, however,some arguments that warrant against a too simplistic assumption that sanctionswould necessarily improve TSD compliance Overall, dissatisfaction with this‘model asit currently stands seems ubiquitous, and the present work takes the needto reformit asa given.

14.2 The new EU approach to effective enforcement of TSD Chapters

In the last few years, the EU trade policy has experienced several criticalpoints which led to a rethink of some of its attributes” As these chapters are ingeneral welcomed in demonstrating the parties’ commitment to non-trade valuessuch as labour rights or protection of the environment, they are also criticized for

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being largely rhetorical and lacking enforcement mechanisms” The old EUapproach in promoting trade and sustainable development provisions in FTAs isoften compared with the approach of the US and Canada” The implementationof the EU TSD chapters is based on a partnership and dialog with the partnercountries and this approach does not lead to imposing sanctions in case of non-compliance with the obligations The latest US and Canada FTAs allow to use ofeconomic sanctions as an enforcement mechanism to implement these chapters.

The EU seeks to improve the implementation and enforcement of TSDobligations, as many EU trade agreements already contain such provisions”” TheEU intends to pursue the extension of the ordinary State+to-State disputesettlement mechanism to the trade agreements' TSD chapters In the event of non-compliance, trade sanctions will be imposed% The European Commissionreleased its Trade Policy Review”, titled “An Open, Sustainable and Assertive21 With leadership and engagement, the EUhopes to better reflect its strategic interests and values and malke its own decisionswhile also shaping the world around it This is the goal of the new trade policy®®

Trade Policy”, on February 18,

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Signed on July 9, 2023, the EU-New Zealand Free Trade Area representsthe first contract to include the new TSD methodology Sanctions may be used incases of flagrant disregard for the Paris Agreement and the ILO's core labor andclimate obligations, which include fundamental labor rights and principles® Theparty who is being complained about may choose to pay compensation as one ofthe sanctions, or the application of the covered provisions' responsibilities may besuspended

Additionally, the Council applauded the TSD review and endorsed the new.strategy to reinforce the TSD provisions’ implementation and enforcement in all‘upcoming trade agreement discussions, including the use of trade sanctions as alast option Parallel to Parliament, the Council urged the Commission to adjust thecurrent approach in the continuing discussionsas needed, suggesting, for example,that the TSD chapter of such agreements be included in the general state-to-statedispute settlement process’ compliance stage!TM

Executive Vice-President and Commissioner for Trade, ValdisDombrovskis, said!

“We promised to make trade more sustainable and today we aredelivering Our trade agreements give us clout on the world stage amdsupport economic growth and sustainable development — but as ofow, we want to make them an even bigger driver of posttive change

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‘The new approach of TSD Chapters will include the use of trade sanctionsfor breaches of core TSD provisions It will be applied to future negotiations andongoing negotiations as appropriate The new approach is based on three mainfollowing aspectsTM

First, priority- and results-based cooperation with partner nations The EUwill also step up trade partner engagement in a cooperative process to fostercompliance with intemational labor and environmental standards, includingthrough technical and financial assistance The EU will negotiate with partnercountries tailored objectives and time-bound roadmaps for more effective resultsIn order to reduce dependence in the current geopolitical environment, MemberStates and the Europ:

implement TSD commitments as well as to open up new markets for the importtú Parliament must collaborate more closely to monitor and

and export of green goods, services, and raw materials"

Second, increased involvement in and backing for civil society The EU isstreamlining the complaint process for DAGs and civil society on sustainabilitycommitment breaches They are updating the Operating Guidelines for Single-Entry Points and creating deadlines that the Commission will generally adhere towhen handing TSD complaints The DAGs will guarantee greater transparencyon the activity of the DAGs, including publishing the lists of participatingorganizations, and they will be more actively involved in meetings with EU‘Member States and technical assistance programs Additionally, the EU enhancesthe role of EU DAGs by furnishing resources necessary for their operation’

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Thirdly, more emphasis should be placed on enforcement and execution Inother words, ifa party is found to be in violation ofany ofthe TSD commitments,the EU will extend the standard state-to-state dispute settlement compliance phaseto the TSD chapter of our trade agreements This means that the party in violation‘will have to promptly inform how it will implement the panel report and complywithin a certain period Asa last resort, trade sanctions for flagrant violations ofthe Paris Climate Agreement and the ILO's core labor standards may be applied'%,

The European Commission has been consistently urged to enhance theexecution and efficient enforcement of the TSD chapters by the EuropeanParliament, the European Economic and Social Committee (ESC), and civilsociety organizations They specifically demanded that TSD chapters be includedin the state-to-state dispute resolution process and that sanctions be an option asalast resort A alternative, sanctions-based strategy has been implemented by anumber of EU trading partners, including the US, Canada, and New Zealand, toensure the enforcement of TSD requirements Under this strategy, tradepreferences may be discontinued in response to TSD violations that have an impact,on trade The EU is anticipated to present the revised TSD strategy in the currentfree trade agreements it is negotiating with Australia, Indonesia, and India

Only the EU-New Zealand FTA incorporates the comprehensively updatedTSD approach among the three most recent EU trade accords for whichnegotiations have been completed, In the trade section of the EU-Chile AdvancedFramework deal, there is a specific TSD chapter wherein the EU and Chile havemade explicit TSD obligations There is also a specialized dispute resolutionsystem included in the deal, but it does not allow for the imposition of sanctionsAdditionally, a special TSD chapter covering labor, gender equality,

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