Trade-related issues such as market access, and tariff elimination or reduction have been the main concerns of free trade agreements or “FTAs” since the 2000s. But more of the recent FTAs appear to focus on non-trade concerns such as protection of the environment and workers. A typical example is the FTA between Korea and the European Union (hereinafter referred to as “Korea-EU FTA”), which was signed in 2009 and provisionally taken into force in 2011. Ever since Korea-EU FTA the European Union has included a chapter on “Trade and Sustainable Development” or “TSD” in its FTAs to extensively provide for environment and labour obligations. Further, it is noteworthy that the United States and the European Union have resorted to dispute settlement and enforcement mechanisms within their FTAs to ensure their trade partners effectively implement environment and labour obligations at the domestic level. For instance, on December 17, 2018, the European Commission formally requested a consultation to Korea under Korea-EU FTA on the grounds that the Korean government had not shown sufficient efforts in ratifying the remaining four of the eight ILO core conventions and thus acted inconsistently with the TSD Chapter of the same FTA. This is the first case that the European Union has ever initiated a dispute settlement procedure under a TSD Chapter. The Panel of Experts was composed on December 30, 2019, and it recently published the final report on January 25th, 2021.
Against this background this study aims to understand recent trends in the use of environmental and labour provisions in trade agreements and provide meaningful guidance to the Korean government in conducting negotiations for new FTAs or for amendments of its previous FTAs. It discusses possible approaches the Korean government may be able to take when conducting future FTA (re-)negotiations, and responding to environment or labour claims posed by FTA partners in the future. In particular this study focuses on the aspect of “enforceability” of environment and labour obligations in FTAs.
In Chapter 2 this study explores the question of linkage between trade and environmental issues, and identifies main components and key features of environmental provisions under the FTAs of the United States, the European Union, and Korea. It further examines environmental chapters of the CPTPP and the USMCA. One of the main features the U.S. FTAs have is their strong enforcement mechanism, which was first introduced in NAAEC and was virtually repeated with minor variations in the following FTAs. In the case of the European Union, since Korea-EU FTA a TSD chapter has been included in every FTA it negotiates and concludes. As opposed to the U.S. approach which is based on enforceability and sanctions, EU FTAs tend to focus on consultation and dialogue between FTA partners. Consultation and the “Panel of Experts” under TSD chapters, a provision on non-application of an FTA Dispute Settlement mechanism to a TSD chapter, and establishment of Domestic Advisory Groups (“DAGs”) and Civil Society Forum (“CSF”) are examples of such tendency.
In Chapter 3 this study discusses the question of linkage between trade and labour issues, and identifies key features of labour provisions under FTAs of the U.S., the EU, and Korea. It further examines labour chapters of CPTPP, USMCA, and CETA. One of the main features the US FTAs have is their strong enforcement mechanism, which was first introduced in NAALC and repeated only with minor changes in the following FTAs. In case of the EU, FTA labour provisions were first introduced in the Association Agreement with Israel and a comprehensive labour chapter was later adopted for the first time in EU-CARIFORUM EPA. Under the TSD Chapter of Korea-EU FTA, labour provisions regarding “continued and sustained efforts” for ratification of ILO core conventions; upholding of labour protection; the TSD Committee; DAG; CSF; and a TSD dispute settlement mechanism were included, and these components have been included only with minor variations in the following FTAs.
In Chapter 4, this study sheds light on the background and impacts of strengthened environmental and labour provisions in FTAs. It focuses on three aspects including (ⅰ) inherent limitations of the multilateral trading system, (ⅱ) the need for levelling the playing field, and (ⅲ) domestic politics. Theoretically, when a trade agreement is linked with new issues of non-trade character, it can broaden the scope of negotiation, and can lead to higher chances of concluding an agreement with increased social welfare. This study also confirms such results empirically: it finds that introduction of environmental and dispute settlement provisions in FTAs shows a tendency of increasing trade between FTA partners and that developing countries, by accepting enhanced environmental obligations, can increase their trade. Further, strengthened environmental and labour provisions in FTAs lead to reduction of greenhouse gas emission and a positive contribution to an index or indicators on the level of workers' right protection.
Chapter 5 sheds light on the possibility of the United States’ and particularly the European Union’s further strengthening environmental and labour standards in their FTAs, and of using their FTAs as a leverage for addressing climate change issue pursuant to the Paris Agreement. It also intends to predict possible impacts on Korea and draw meaningful policy implications regarding Korea’s legal and policy responses to such changes. In particular the European Union is slowly but surely moving towards ensuring its FTA partners’ compliance of environmental and labour standards and is considering a multiple of options to improve the enforceability of its trade agreements. The Korean government needs to pay close attention to any future development of the EU’s recently created position of Chief Trade Enforcement Officer (CTEO) and the proposed amendment of the Trade Enforcement Regulation, particularly in relation to the recently announced report by the Group of Experts under Korea-EU FTA regarding Korea’s non-ratification of some of core ILO conventions.
Lastly, as the United States and the European Union have emphasized on the need of ‘effective’ implementation of their FTAs, a rather cautious approach would be desirable in preparing and introducing provisions on effective domestic implementation of international environmental and labour standards (e.g. MEAs, ILO conventions) in future FTAs (re-)negotiations. This study further suggests that a domestic monitoring system be prepared and/or otherwise improved in order to ensure Korea’s effective (and “convincing”) implementation of environmental and labour obligations in order to avoid any unnecessary tensions with its FTA partners.