The European Commission (EC) proposed on June 22 to impose sanctions on trade partners who breach the human rights and climate change provisions included in bilateral trade agreements.

“We will step up our enforcement, and we will resort to sanctions if key labour and climate commitments are not met,” Valdis Dombrovskis, executive vice-president and commissioner for trade of the EC, said in a statement. 

Advertisement

A spokesperson of the EC tells fDi that the application of trade sanctions for serious violation of Trade and Sustainable Development (TSD) commitments “may take the form of suspension of trade concessions”, such as suspending tariff preference. Serious violations include “failure to respect Paris Agreement on climate change” or “withdrawal from the Paris Agreement.”

Labour and climate commitments are included under the TSD chapter of the EU bilateral trade deals. These commitments uphold the core standards of the International Labour Organization (ILO) and the Paris Agreement on Climate Change.

The EU has included the TSD chapter in its trade deals since 2010, when it signed its free trade agreement (FTA) with South Korea, to increase the role of trade agreements in sustainable development. 

Even though the EU’s modern trade deals include TSD chapters, it has been criticised for the lack of a sufficient enforcement mechanism. 

Antoine Oger, the head of the global challenges and sustainable development goals at the Institute for European Environmental Policy, told fDi that much criticism on the TSD chapter has been voiced about “weak enforceability” and the “one-size-fits-all approach”, which cannot embrace differences in each country.

The EU cannot currently take trade restrictive measures on its trading partner to comply with human rights and climate change provisions. Instead, both parties must resolve the conflict through consultation and an independent panel of experts’ report under the sustainability chapter. This has long been done cooperatively, without raising trade barriers or imposing sanctions. 

The new approach will be proposed for all future negotiations and reflected in the ongoing negotiations as appropriate. This has implications for future trade partners, including India and Indonesia.

“Now the EU is going to implement this new approach, and we will have a very clear signal soon with [the South American trading bloc] Mercosur in the coming months, and with India and Indonesia in the medium term,” Mr Oger said.  

After a gap of eight years, India and the EU have resumed talks for a trade agreement on 17 June, with the aim to strike an agreement in 2024. The trade negotiations between Indonesia and the EU are ongoing. 

One of the EU’s major issues with Indonesia has been deforestation, and the tight timeline will put additional burden on the bloc’s trade negotiations with India to cover the EC’s new approach.

“India is extremely difficult to negotiate,” Mr Oger said. “Sustainability issues are massive between the EU and India, covering biodiversity loss and environmental causes globally. On the other hand, he said there is a concern as to whether the EU is indeed capable of finalising the negotiation,” considering that the EU only has a year and a half left.

The EU’s new value in its trade relationship has been captured since a trade negotiation with Brazil. While Brussels has negotiated a deal with Mercosur; however, it has been dragged out for more than three years as the European Parliament has yet to ratify the FTA due to “concerns about deforestation in the Amazonia”. 

Alongside the plan for sanctions, the new TSD chapter-enhancement plan will strengthen the sustainability provisions by supporting the participation of civil society and requiring the time-bound roadmap for sustainability-oriented results for its future trade partners. 

Some 11 trade partners have included the rules on the TSD chapter in their trade deals with the EU thus far. Four countries and regions have included the rules on the TSD chapter in their trade agreements but are awaiting ratification.

The EU and New Zealand have signed the first FTA foreseeing the possibility of trade sanctions for breaches of the TSD chapter on June 30.