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7 Set 2023

Professor James Harrison, University of Warwick

Will the new wave of trade and sustainability initiatives succeed in protecting rights?

So much of what we consume today relies on complex, and often fragmented, value chains that span the globe. Although human rights and environmental issues have been well documented in many of these value chains, there has been a struggle to create international legal frameworks addressing these problems.

In this context, trade agreements are widely recognised as one of the most important legally binding instruments at states’ disposal, with the potential to make a real impact on ‘sustainability issues’, including human rights, labour rights and the environment.

Up until the last few years, sustainability issues tended to be marginalised within trade policy-making processes. Agreements negotiated at the World Trade Organisation (WTO) generally have exceptions which allow governments to deviate from their trade law obligations for specified social and environmental reasons. However, they have not traditionally included requirements on governments or corporations to achieve positive social and environmental objectives through trade.

It’s true that bilateral trade agreements, negotiated by countries outside of the WTO system, have increasingly contained sustainability obligations, for example covering labour rights, human rights or environmental protections. These have required governments to sign – and even sometimes to effectively implement – labour and environmental treaties. Although this is a positive step in the right direction, studies have found these provisions have typically failed to lead to concrete action in practice.

In recent years, and often following pressure from campaigners, trade policymakers have brought through a wide range of new trade and sustainability initiatives. For instance, trade negotiations between the EU and Mercosur countries have been massively delayed due to concerns about Amazon deforestation. Partly as a result of this, in 2022 the European Commission revamped the way it addresses sustainability through its trade deals, presenting it as “a major step in making EU trade greener, fairer and more sustainable.”

In 2021, there was opposition in Switzerland to a proposed trade agreement with Indonesia because of concern about unsustainable palm oil production, which almost prevented the agreement from being signed. This led to a new provision being included in the final text of the agreement, granting producers of certified sustainable palm oil from Indonesia easier access to the Swiss market.

Opposition to the renegotiation of the North American Free Trade Agreement between the US, Canada and Mexico also led to changes, including a mechanism whereby factories can lose some of the benefits of the new trade deal if their management violates core labour rights. Even the WTO is getting in on the act: its Agreement on Fisheries Subsidies, agreed in 2022, “is the first WTO Agreement to place an environmental objective at its core”.

Alongside this new focus on social and environmental sustainability in trade agreements, there is an increasing number of so-called ‘unilateral’ trade instruments which focus on sustainability issues. In December 2021, the USA introduced the Uyghur Forced Labor Prevention Act which stops businesses importing goods into the USA from China’s Xinjiang region unless they can prove through due diligence processes that their products were not made with forced labour. The EU has adopted regulations on deforestation-free products and is discussing proposals for the prohibition of products made with forced labour from the EU market.

The key question remains to be answered: will these initiatives actually make international trade more sustainable?

This wave of new policy measures has scholars talking about a ‘sustainability revolution’ in trade governance. But the key question remains to be answered: will these initiatives actually make international trade more sustainable? Two sets of concerns need to be considered for each new measure before this question can be answered.

First, how effective is each measure in terms of its ability to achieve sustainability outcomes? For instance, there are real concerns about whether the palm oil provisions in the trade agreement between Switzerland and Indonesia will actually lead to beneficial effects. The measure will only affect a tiny proportion of Indonesian palm oil production (0.03%), since most palm oil imported into Switzerland is already certified as sustainable and there are, in any case, concerns about the weaknesses of the sustainability standards utilised in the trade deal. Overall, this initiative is unlikely to tackle the entrenched labour rights and environmental concerns in palm oil supply chains.

The effects of many other recent sustainability initiatives are harder to ascertain. They may have some strengths on paper, but they generally require dedicated work by a range of actors across different countries for several years if they are to have significant impacts on production processes. Therefore, understanding their effects in practice is a complex endeavour.

Second, there is an issue about who bears the costs of these sustainability initiatives. For instance, the EU regulation on deforestation-free products will impose obligations onto producers and traders to trace their products and show they are ‘deforestation-free’. This could end up burdening producers in the Global South with significant costs to upgrade their systems. In a worst-case scenario, smaller and less affluent producers could be driven out of the market. There is also a need to carefully monitor how the EU regulation interacts with national laws on forest governance in trade partners to ensure it is strengthening, and not undermining, domestic regulation.

There is often a great deal of interest, excitement and contestation about new trade and sustainability initiatives while they are being negotiated – but this often fades once they come into force. For most initiatives, we need to study them closely over a number of years to understand what their impacts are in practice. Regulators, scholars and campaigners need to do more work of this kind. Only then will we be able to determine whether a sustainability revolution has occurred and who the winners and losers are.

Professor James Harrison is Co-Director of the Centre for Human Rights in Practice at Warwick University’s School of Law