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Opinion

VIP protection for multinationals vs talking shops for human rights: the fundamental imbalance in trade and investment deals

At a recent event, EU trade chief Valdis Dombrovskis stated: “Trade policy alone will not solve all the human rights and sustainable development issues in the world, but we should make every effort to ensure it is fulfilling its role to the maximum.”

Trade and investment agreements create new opportunities for international businesses to trade and profit. When the rights of investors are not respected, there are strong legal mechanisms available for investors to seek recourse. In contrast, trade deals are largely silent on what should happen if investors abuse human rights, labour rights or the environment. For this to change demands a reconsideration of EU investment protection policies, as well as stronger enforcement of the Trade and Sustainable Development chapters in trade agreements.

Investment protection

To date, Europe has resisted using trade sanctions to respond to violations of fundamental human and labour rights, whether by trade partners or corporations. Instead, the European Commission has advocated peer pressure and dialogue, standing in sharp contrast to the way investment treaties offer a proactive legal defence of investors’ rights.

This imbalance in the enforcement of rights is at the heart of exploitative global supply chains and unfair globalisation, where business interests trump people’s rights.

As a trade unionist and Labour MEP (2014-20), I have spent a large amount of time working on, and scrutinising, the EU’s trade deals, pressing for stronger enforcement of human rights and building alliances to oppose the controversial Investor-State Dispute Settlement (ISDS) tribunals. These clauses, inserted into many trade agreements struck by the EU and others, allow corporations to sue states if government policy threatens corporate profits. It’s a murky world which effectively guarantees VIP legal protection for investors.

There has been incremental movement to reform ISDS – but every step away from the status quo has felt like pulling teeth and faced bitter opposition from business lobbyists. It has only been through assertive campaigning and tight coordination between politicians and civil society that progress has been made. During the campaign against TTIP (the now-abandoned US-EU trade deal), MEPs were aggressively lobbied by transatlantic and domestic business associations in favour of including ISDS in the deal. We relied on the legal advice of NGO lawyers from the labour and environmental movements, which allowed MEPs to counter misleading claims and expose corporate lobbies to the light of public scrutiny. Famously, this led to a corporate lobbyist shouting at me across my office desk; my mum’s definition of losing the argument.

During the TTIP negotiations (2014-15), the public campaign across Europe against ISDS resulted in a new approach from the EU. Our aim was to kill ISDS, and the campaign was supported by a petition signed by 3 million EU citizens. But this was never going to be a single battle. The EU renegotiated concluded EU investment agreements with Canada, Singapore, Vietnam and Mexico to include a revised ISDS approach, while multilateral talks were launched for a global investment court. These alternatives represent a shift away from the private and secretive ISDS tribunals, but they do not allay the major concerns with the ISDS system: it allows multinational companies the right to challenge public policy decisions, including the improvement of social rights and environmental protection.

At the same time, hundreds of treaties between EU countries and third countries remain in place. Although ISDS is very much alive, campaigning attention seems to have moved on: new EU deals with Singapore and Vietnam saw little political pressure from ISDS campaigners.

The next step should be balancing investment protection with investor obligations. The majority (80%) of global trade happens within the value chains of multinationals, and these businesses exert a huge influence on trade rules. Making companies liable for their suppliers, and their suppliers’ suppliers, is an absolute necessity if we want to end the exploitation of people and the planet. If investment protection was limited to those operating responsible global supply chains, business would become a powerful ally in improving human and labour rights.

Trade and Sustainable Development chapters

Earlier this summer, the European Commission launched a new consultation on the enforcement of ‘Trade and Sustainable Development’ (TSD) provisions in trade agreements – political jargon for the commitments trade partners undertake on fundamental labour rights and environmental protection. These chapters, present in many of the EU’s trade agreements, have not been properly enforced and have failed to lead to action when fundamental ILO conventions have been breached. For example, it took over a decade for a Panel of Experts to be constituted following complaints about the suppression of workers’ rights in South Korea.

This comes on the back of former EU Trade Commissioner Cecilia Malmström’s “15-point plan” to make the EU’s TSD chapters more effective – which was unveiled in 2018 in response to pressure from the European Parliament and the public.

However, this was largely a tinkering exercise aimed at placating criticism rather than fundamentally addressing the weaknesses of the EU’s approach.

This lack of progress made human rights enforcement a key political issue ahead of the acceptance of Von der Leyen’s Commission in 2019. Members of the European Parliament were instrumental in pressing for the creation of the role of Chief Trade Enforcement Officer and demanding an EU framework for mandatory human rights due diligence (due this autumn). With the launch of a review of TSD chapters, once again the spotlight is on the role of EU trade policy in ensuring the respect of human rights.

Jude Kirton-Darling is Deputy General Secretary of IndustriALL and a former Member of the European Parliament for North East England (2014-2020)