TAKING stock: Trade Tools and Labour Outcomes
The TASC Platform is joining forces with the World Economic Forum to identify how trade policy and practice can enable decent work and lift labour standards. Our project aims to strengthen links between the trade and labour communities, integrating relevant expertise to cover the effects of green, digital, and other transitions on labour markets.
Aditi Vergese, Policy Lead for International Trade and Investment at the World Economic Forum, shares insights on the evolving trade policy toolkit contributing to better outcomes for workers the world over.
A fast-moving context
While international trade has created opportunities and lifted incomes in many instances, it has caused disruptions to labour markets and encouraged the lowering of labour standards in others. Poverty wages, forced and child labour and other longstanding labour challenges persist in global value chains, even as new risks emerge from geopolitical, digital and green transitions. In the context of a fast-moving regulatory landscape, this piece takes stock of various trade policy tools being used to tackle labour and human rights challenges in supply chains.
Policy Stocktaking
Labour provisions in free trade agreements
Half of the free trade agreements (FTAs) concluded in the 2010s contain labour provisions, an increase from 22% in the 2000s.[1] Approaches differ across agreements.
United States FTAs generally contain separate labour chapters requiring parties to adopt and enforce domestic labour laws and promote due process and awareness; setting out areas of cooperation; and establishing dispute settlement and consultation procedures.[2] The 2020 United States-Mexico-Canada Agreement (USMCA) introduces innovations, including a facility-specific rapid-response labour mechanism that allows complaints to be brought against the violation of workers’ collective bargaining and freedom of association rights in specific factories in Mexico. In the case of non-compliance, tariff benefits may be suspended or goods denied entry.[3]
Since 2009, the EU has included trade and sustainable development chapters in its FTAs, covering environmental and social elements, including labour rights. These typically require international treaties be upheld and labour standards not lowered to gain a competitive advantage, and they include cooperation provisions. A 2022 review concluded that a stronger focus on enforcement through dispute settlement and potentially trade sanctions was needed.[4]
Trade preferences
The US, EU and other advanced economies grant non-reciprocal, zero or low tariff access to their markets for certain products from developing countries subject to specified conditions, including meeting human and labour rights standards.
Joint taskforces
Countries are also partnering through taskforces and other initiatives. For instance, the US and Japan signed a memorandum of cooperation in January 2023 to launch a Task Force on the Promotion of Human Rights and International Labor Standards in Supply Chains. They will exchange information on policies, facilitate dialogue with stakeholders and promote best practices on due diligence.[5]
International guidelines
International guidelines have been referenced in international agreements and domestic legislation and relied on by multinationals. These include the 1976 OECD Guidelines for Multinational Enterprises updated most recently in 2011. The 2018 OECD Due Diligence Guidance for Responsible Business Conduct provides practical explanations for firms looking to implement the Guidelines. Sector-specific guidance has been developed, including on conflict minerals, agriculture and garment and footwear.[6]
The United Nations Guiding Principles on Business and Human Rights (2011) emphasizes the duty of the state to protect, the responsibility of companies to respect and effective remedy for victims. It encourages human rights due diligence along value chains. The UNGPs refer to the ILO’s Declaration on Fundamental Principles and Rights at Work and the International Bill of Human Rights to define labour and human rights.[7]
Various initiatives by these international organizations work to help governments and businesses implement these guidelines and declarations.
Domestic legislation
Some advanced economies are implementing or considering unilateral legislation that aims to improve supply chain transparency or prevent goods that are the product of worker right violations from being sold in their markets.
The California Transparency in Supply Chains Act 2010 required large retailers and manufacturers doing business in the state to disclose to consumers their efforts to address slavery and human trafficking in their supply chains.[8]
The UK Modern Slavery Act 2015 defines and sets out penalties for offences relating to slavery, servitude, forced and compulsory labour and human trafficking. It requires certain companies to publish on their websites an annual statement which discloses steps taken to ensure that its operations and supply chains are free of slavery and human trafficking.[9] Australia has adopted similar legislation.[10]
The 2017 French Duty of Vigilance law requires large French companies to publish annually a “vigilance plan” that covers measures to identify risks and prevent negative human rights and environmental impacts in their own operations and those of their subsidiaries and suppliers with whom they have established relationships. Penalties may be imposed for non-compliance, and civil suits brought by harmed individuals.[11] The German Supply Chain Act, setting out detailed human rights supply chain due diligence obligations and penalties, came into force in January 2023. Meanwhile, the European Commission has adopted a proposal for a Corporate Sustainability Due Diligence Directive that requires certain companies to identify, prevent and rectify human rights and environmental impacts in their operations and value chains. This will need to be approved by the European Parliament and Council.[12]
Import bans have a more direct effect. Section 307 of the US Tariff Act of 1930 prohibits the import of goods produced with forced labour, with the initial concern primarily being unfair competition to domestic producers.[13] In 2021, the US passed legislation to reverse the burden of proof for goods sourced from Xinjiang so that firms would need to prove that they were not produced with forced labour.[14] The European Commission has proposed a prohibition of products made with forced labour in the EU market, empowering customs authorities to stop offending imports at borders.[15]
innovations ahead
The trade and domestic policy tools described above are part of a complex web of sustainability initiatives undertaken by businesses, industry associations, labour unions, civil society organizations and sustainability start-ups. With growing pressure from consumers, investors and civil society, further policy developments and innovations are inevitable. A central question we are working to address with this multi-stakeholder community is how these diverse and rapidly evolving trade tools can be improved and aligned to deliver decent work.
REFERENCES
[1] ILO, “ILO launches new online database on trade agreements that include labour provisions”, 26 January 2022, https://www.ilo.org/global/about-the-ilo/newsroom/news/WCMS_835844/lang--en/index.htm
[2] See for instance, Korea – United States Free Trade Agreement, Chapter Nineteen: Labor, https://ustr.gov/sites/default/files/uploads/agreements/fta/korus/asset_upload_file934_12718.pdf
[3] Office of the USTR, “Chapter 31 Annex A; Facility-Specific Rapid-Response Labor Mechanism”, https://ustr.gov/issue-areas/enforcement/dispute-settlement-proceedings/fta-dispute-settlement/usmca/chapter-31-annex-facility-specific-rapid-response-labor-mechanism.
[4] European Commission, “Commission unveils new approach to trade agreements to promote green and just growth”, 22 June 2022, https://ec.europa.eu/commission/presscorner/detail/en/ip_22_3921.
[5] Office of the USTR, “United States and Japan Launch Task Force to Promote Human Rights and International Labor Standards in Supply Chains”, 8 January 2023, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2023/january/united-states-and-japan-launch-task-force-promote-human-rights-and-international-labor-standards; Ministry of Economy, Trade and Industry of Japan and Office of the USTR, “Memorandum of Cooperation on the Japan - U.S. Task Force on the Promotion of Human Rights and International Labor Standards in Supply Chains”, 6 January 2023, https://www.meti.go.jp/press/2022/01/20230107003/20230107003-1.pdf.
[6] OECD, OECD Guidelines for Multinational Enterprises, http://mneguidelines.oecd.org/mneguidelines/.
[7] UN, Guiding Principles on Business and Human Rights, 2011, https://www.ohchr.org/sites/default/files/documents/publications/guidingprinciplesbusinesshr_en.pdf.
[8] State of California, “California Transparency in Supply Chains Act of 2010”, 2010, https://oag.ca.gov/sites/all/files/agweb/pdfs/cybersafety/sb_657_bill_ch556.pdf.
[9] https://www.legislation.gov.uk/ukpga/2015/30/part/6/enacted
[10] https://www.legislation.gov.au/Details/C2018A00153
[11] République Française, “LOI n° 2017-399 du 27 mars 2017 relative au devoir de vigilance des sociétés mères et des entreprises donneuses d'ordre”, https://www.legifrance.gouv.fr/jorf/id/JORFTEXT000034290626/
[12] European Commission, “Corporate sustainability due diligence”, https://commission.europa.eu/business-economy-euro/doing-business-eu/corporate-sustainability-due-diligence_en
[13] Congressional Research Service, “Section 307 and Imports Produced by Forced Labor”, 26 July 2022, https://crsreports.congress.gov/product/pdf/IF/IF11360.
[14] United States, “An Act to Ensure that Goods Made with Forced Labor in the Xinjiang Uyghur Autonomous Region of the People’s Republic of China Do Not Enter the United States Market, and for Other Purposes”, Public Law 117–78, 23 December 2021, https://www.congress.gov/117/plaws/publ78/PLAW-117publ78.pdf.
[15] European Commission, “Commission moves to ban products made with forced labour on the EU market”, 14 September 2022, https://ec.europa.eu/commission/presscorner/detail/en/ip_22_5415.