EU plans sanctions if partner countries breach labour and sustainability rules

The EU will propose new rules this week that would allow it to impose trade sanctions against countries that breached conditions on labour rights and climate change in bilateral deals with the bloc.

Valdis Dombrovskis, EU trade commissioner, said in an interview he wanted to put “sustainability at the heart of trade policy” by improving enforcement of the trade and sustainable development (TSD) clauses in the deals.

The move comes days after the World Trade Organization clinched its first agreement on sustainability and trade, limiting subsidies for vessels fishing in unregulated international waters and for overfished stocks.

Dombrovskis said the fishing deal marked “a real turning point” after 21 years of talks. “Sustainability has gone from a side show to being centre stage when it comes to global trade. It shows there is now greater willingness by the global community to address these issues.”

The EU has included TSDs in all trade deals since 2009 but has rarely used them to force trading partners to change domestic policies. “We will be outlining our new approach on sustainable development chapters in our bilateral trade deals, including by stepping up enforcement and implementation of sustainability commitments,” Dombrovskis said.

The new rules, to be formally agreed by the European Commission on Wednesday, are likely to win broad acceptance among member states and in the European Parliament, which must approve them.

They will include tighter enforcement of TSDs in new trade deals and the ability to impose sanctions such as tariffs if countries breach “core provisions”, according to people briefed on the plan. Those core provisions meet the standards of the International Labour Organization and the Paris agreement to cut carbon emissions, the people said.

The EU has found it increasingly hard to ratify trade deals in all 27 member states without addressing concerns that they will cause environmental destruction or labour abuses as partners increase production to meet EU demand.

Brussels has negotiated a deal with South American trading bloc Mercosur, which includes Brazil and Argentina, but several EU countries have refused to ratify it until Brazil signs a side letter promising to protect the Amazon rainforest.

“If we want to get more bilateral trade deals done . . . we have to reinforce sustainability commitments”, Dombrovskis said.

However, both parties to any trade deal would have to agree with the EU conditions. The first big challenge could come in talks with India, known as a tough negotiator, which restarted on Friday after a decade.

At last week’s WTO gathering, Piyush Goyal, India’s commerce minister, refused to cut most fishing subsidies in domestic waters, saying developed nations had “allowed their gigantic industrial fleets to exploit and plunder the ocean’s wealth over the past several decades”.

A proposed deal with New Zealand is largely finished and would not be affected.

Dombrovskis said the WTO’s ministerial conference in Geneva last week had put “multilateralism back on track”. 

As well as a plan to make it easier for poorer countries to make cheap copies of Covid vaccines, trade ministers agreed to limit food export restrictions to tackle global food shortages. They also temporarily extended duty-free trade in digital products such as films, computer software and data,

“When the globe is facing a multitude of acute challenges, stronger and better global rules are more important than ever,“ the trade commissioner said.

The EU is increasingly using its muscle as the world’s largest trader to change policies in developing countries. Earlier this year it proposed imposing tariffs on countries that block the return of deported migrants.

But the EU’s use of trade to export its values globally has previously faced resistance. Jair Bolsonaro, Brazil’s populist president, in 2019 told Berlin to “reforest Germany” when it said he was failing to protect the Amazon.

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