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Bilateral and regional trade agreements: Report of a GURN online discussion

Bilateral and regional trade agreements

Report of the GURN Online discussion, March 2005

Background
The number of bilateral and regional trade agreements and negotiations is
continuing to grow. Many contain provisions beyond WTO commitments, including
in the areas of services, investment, government procurement, intellectual property,
and competition policy. Interest in these negotiations has intensified since multilateral
trade negotiations stalled at Cancún. Many governments have been looking for other
ways to continue trade liberalisation and conclude bilateral or regional deals with
those countries that are willing.

The reasons for an interest in bilateral trade agreements range from political
ones to commercial ones. Many developing countries have been feeling pressure to
conclude bilateral deals so as not to be excluded from agreements that provide market
access to industrialised countries, even if they are concerned about the consequences
for domestic producers that may face more competition as a result. Some trade
agreements are linked to aid and development programmes such as the EPAs
(economic partnership agreements between the EU and ACP countries) and AGOA
(African Growth and Opportunity Act between African countries and the US), which
make the developing countries concerned more likely to negotiate.

There have been various criticisms of free trade agreements from different
quarters. Some have argued that negotiating and implementing so many agreements
requires significant resources from often very resource-strapped governments, with
each agreement having different provisions (the so-called “spaghetti bowl” of trade
agreements). Secondly, because of the complexity of the agreements as well as the
speed with which they are frequently negotiated, many commitments are made
without proper economic, social and environmental assessment of the consequences.
Trade unions are not properly consulted, if at all, about the ongoing negotiations and
the commitments that are being considered by their governments.

The WTO has warned regularly about the consequences of bilateral and
regional trade agreements for multilateral trade. Dr. Supachai asked for increased
focus on the Doha Development Round rather than on bilateral agreements, and the
APEC Summit of November 2004 concluded with a reaffirmation of commitment to
the Doha negotiations, rather than to start APEC regional trade negotiations as
business leaders had requested. In December 2004, Dr. Supachai said that the WTO
would institute a mechanism to ascertain whether RTAs and FTAs contributed to the
multilateral process of integrating and easing world trade. According to him, FTAs
are costly both in terms of financial and human resources, and the benefits remain low
compared to multilateral negotiations. [1] Questions arise with regard to the
compatibility of bilateral trade agreements with WTO agreements. So far only two
bilateral trade agreements have been looked at in the WTO. Some FTAs with the US
for example include intellectual property provisions that contradict the August 2003
WTO decision on TRIPS and public health.

Clearly, it is important to look into the commitments made in bilateral and
regional trade agreements, which are likely to have an impact on future commitments
in the WTO. Trade unions should be informed and consulted during the negotiations.
Moreover, they should have the possibility to cooperate and consult with trade unions
of the other countries that participate in the trade negotiations.

In order to increase and improve trade union participation in trade agreements
an online discussion was organised in March 2005, over 4 weeks, which considered
the involvement of trade unions in trade agreements, the role they play and the
influence they have on the final outcome of trade agreements. Discussions took place
on the different strategies that trade unions could use and on how to improve them.
These provided more insight into the multitude of agreements, both with regard to the
inclusion of labour standards into trade agreements and with regard to the impact of
trade liberalisation and provisions on investment, services, competition and
intellectual property on employment, workers’ rights and working conditions.

And finally the discussion provided for an exchange of experiences between
trade unions in different countries. Some 60 people registered for the discussion, and
around 20 people participated actively in the discussion. The different questions that
were addressed during the discussion can be found in Annex I.

Summary of the discussion
The first week of the online discussion focused on the problems of bilateral
and regional trade agreements for trade unions, and on trade union involvement in
those agreements. The central question that guided the discussion was: What are the
key problems and opportunities of bilateral and regional trade agreements for trade
unions?

A wide variety of contributions were made, providing different regional
perspectives.

It was clear from the discussion that trade union participation and consultation
in bilateral and regional trade agreements takes places at different levels in different
countries. Some trade unions are consulted on trade agreements through a formal
structure, which is for example the case in Belgium as well as Mercosur and Caricom.
Others are only consulted on an ad hoc basis (such as Andean and Central American
countries). Some are not consulted at all, as in Serbia and in many West African
countries.

Most consultations are limited to labour issues or labour related issues, such as
in India where trade unions were only consulted concerning “social clause” proposals
but do not have any access to information on the GATS commitments the government
has tabled. Others are consulted on a broader range of issues.

Several factors were identified that have an impact on trade union participation
and consultation in trade agreements. Some of the most important ones are the lack of
human and financial resources to deal with these issues; the lack of willingness from
the government to consult trade unions on trade issues (or on issues beyond labour);
trade unions failing to push for consultations (beyond labour issues); the lack of a
tripartite tradition; the influence of World Bank and IMF in dictating trade regimes in
many developing countries without including trade unions; and political instability as
an excuse to avoid consultations.

Other observations from the discussion include the risk that bilateral and
regional trade agreements undermine WTO agreements and take away human and
financial resources, especially in developing countries, that should be used in the
multilateral negotiations, given the fact that these bilateral agreements have often little
to offer for developing countries. Another problem that was identified is trade-aid
dependence. Many bilateral trade agreements include an aid component which makes
it more difficult for governments to refuse a bilateral deal that includes trade
concessions.

Finally, the discussion provided information on different trade blocs and trade
agreements such as the SAARC and SAFTA, Mercosur, FTAA, NAFTA, CAFTA,
APEC, Caricom and the Andean Community. Information was provided on trade
union consultations in these blocs, on new initiatives for trade union consultation and
participation (EU/Mexico and CAFTA), and finally on the politics behind trade
agreements between different trade blocs/countries.

The second week of the discussion focused on trade union strategies with
regard to bilateral and regional trade agreements. Such strategies can be on a
participatory basis, which means that trade unions have some form of consultative
status whether formal or informal, and whether structural or ad hoc. This is the insider
strategy. Another possibility is the outsider strategy, in which trade unions try to
influence trade agreements from the outside, such as through information campaigns,
publication of reports, boycotts, demonstrations etc.

Most of the contributions showed that either an insider or participatory
strategy is used by trade unions (in different degrees), or that there is no trade union
involvement at all. An exception is the FTAA agreement which is currently
negotiated and which has received a lot of protest from trade unions in Latin
American countries. In most Latin American countries we find some sort of
consultative structure, which is effective in some cases and less effective in others.
Again financial resources are often lacking to bring trade unionists of different
countries together.

Other strategies focus on training and development of training programmes
such as the master programme for trade unionists “Labour Policies and
Globalisation”. These training programmes however are often only offered in English,
thus making it difficult for French and Spanish speaking trade unionists to participate
in such programmes.

Another participant argued that there is a need for stronger trade unions in
order to influence trade agreements and other policies and suggested to make better
use of workers’ capital (such as workers’ provident and pension funds) and the
possibilities this can offer to improve trade union strength.

It was suggested to make more use of the GURN web page on bilaterals as a
place to exchange information between trade unions on trade union strategies with
regard to trade agreements.

The ASEAN Social Charter was mentioned by one participant as a way to
include a social dimension in ASEAN, and several strategies were presented to make
progress on this.

A final point was the need for trade unions to focus on trade agreements and
their impact on development. This requires a much broader approach than focusing on
achieving a consultative status or on workers’ rights or social provisions in trade
agreements. It would involve the need to look at how trade liberalisation can be
beneficial for a country’s economy and its productive capacity. This requires
accompanying government policies that maximise the benefits of trade agreements
and minimise the adverse effects.

The third week of the discussion focused on the inclusion of social issues and
labour standards in trade agreements and strategies for trade unions to include such
issues.

From the discussion it became clear that the inclusion of social issues in trade
agreements can take place at different levels, ranging from commitments to the
application of national labour legislation to the creation of common binding
supranational social legislation.

The enforcement of the social commitments can vary from dialogue or
technical assistance to fines or trade sanctions. There can be positive incentives (such
as providing more market access if core labour standards are respected) or negative
incentives (such as imposing trade sanctions)

In some countries there is no inclusion of social issues or core labour standards
in trade agreements, as in the case of Benin, although the current EPA negotiations
under Cotonou are supposed to include labour standards and other social issues.
However, trade unions in countries negotiating EPAs should make sure that the social
issues are included in the final agreements.

In AGOA (African Growth and Opportunity Act) there is reference to core
labour standards (except for discrimination) in section 104, but there is no
transparency in monitoring and reporting, and generally it is not used. One example
was given of how this section was used to change labour legislation in Swaziland, but
legislative changes are often not enough to change actual practices.

In the Americas there has been inclusion of social issues in NAFTA, but
provisions have remained weak. In Mercosur a tripartite Social and Labour
Commission was set up, which undertakes annual reviews of the commitments
member states have taken. The US-Chile and US-CAFTA agreements include
commitments to core labour standards (except for the ILO core conventions on
discrimination and equal remuneration), but no enforcement mechanism is attached.
In Caricom there is a policy of harmonisation of labour rights in four areas: equality,
security, health and working environment, recognition of wages, and termination of
contract. Another recently agreed agreement is the CSN (Confederation of South
American Nations), which has not included a social dimension so far. The CCSCS
(Mercosur) and the Andean consultative labour council have proposed a socio-labour
instrument for the CSN, similar to what is included in Mercosur.

It was stressed that the ILO needs to be strengthened, that there needs to be
closer cooperation between the ILO and the WTO, such as an observer status of the
ILO in the WTO, and that they should work together on a social clause to ensure
respect for core labour standards. Such a social clause linked to dispute settlement is
however strongly opposed by many governments in the WTO, but opposition to trade
sanctions can be found in bilateral and regional trade agreements.

A number of strategies were proposed for trade unions with regard to the
inclusion of a social dimension in trade agreements. First of all trade unions should
make more and better use of the existing instruments, which requires engagement in
the technical processes. In addition, trade unions should cooperate more in bilateral
and regional trade agreements, and coordinate their actions. Trade unions need to
have clear objectives on what they try to achieve through participation in
commissions and consultations. Trade unions should lobby for changes in agreements
if the need arises. And finally employers should be more seriously involved in
negotiating social paragraphs.

The last week of discussion addressed the main non-trade components of
bilateral and regional trade agreements such as provisions on investment, competition
policy, government procurement, services, intellectual property, etc, and looked at the
different commitments that countries make in these areas. The discussion focused on
trade union strategies with regard to such “WTO plus” agreements.

It was noted that most FTAs include WTO plus provisions on investment,
intellectual property, competition policy, services and government procurement,
which governments may to in the WTO but agree on in FTAs, sometimes even
undermining WTO agreements. For example the TRIPS and public health decision at
the WTO in August 2003, which allows for compulsory licensing, is undermined by
US FTAs, which try to re-strengthen patent protection and data protection, therefore
making cheap access to medication more difficult. Another example is services.
Services are in many cases far more liberalised in FTAs than in the WTO (using a
“negative list approach” in FTAs, versus a “positive list approach”, which specifies
which sectors or subsectors will be liberalised, in the WTO). The risk is that these
bilateral commitments are now going to be used as benchmarks for liberalisation in
the WTO.

Other concerns were expressed with regard to investment provisions in trade
agreements. These provisions generally offer a strong protection for investors,
including investor to state provisions which allow investors to claim compensation in
the case of government legislation or regulations that affect profits. The provisions on
investment provide for national treatment, thus not allowing governments to treat
foreign and domestic companies differently. In practice this means that subsidies to
support domestic industries can no longer be provided. Moreover, international
disputes on investment take place in a private setting and rulings are not objective.

Many agreements do not address technical barriers to trade and other NTBs.
Developing countries are mostly excluded from taking part in these standard-setting
bodies.

It is clear that these are all important issues to be looked at and to engage in,
and that these are technical issues that require distribution of information, cooperation
and increased knowledge.

Conclusions and Recommendations
Trade union participation in bilateral and regional trade agreements differs
from one country to another, and the degree of involvement differs. Generally
speaking, the level of trade union involvement in trade agreements has to be increased
in order to cover all areas of the agreement, not just social issues. Some examples of a
high degree of trade union involvement can be found in Latin America (in particular
the Coordinadora for Mercosur), in South Africa, in the Caricom region, in the EU
and in the US.

Some constraints need to be dealt with such as lack of information and
knowledge on trade issues, lack of financial resources, and the language barriers in
this field. These constraints need both a national and international approach.

Ways to improve trade union participation in trade agreements could be:
– to establish or improve tripartism and social dialogue as a basis for
trade union consultation and participation in trade agreements;
– to develop trade union consultation beyond labour issues and to
establish contacts with other ministries such as the trade ministry or ministry of
commerce;
– to address information gaps on substantive issues (on trade in
agricultural and industrial goods and services, and on issues such as provisions on
investment, competition policy, intellectual property) in bilateral and regional trade
agreements;
– to identify and analyse the impact of provisions in trade agreements
that go beyond or undermine WTO provisions, such as provisions on intellectual
property that restrict access to medicines, and to exclude such provisions;
– to include provisions on labour standards in trade agreements;
– to make better use of existing possibilities for trade union participation
and consultation, and to make better use of possibilities offered by provisions on
labour standards in trade agreements;
– to cooperate and coordinate with trade unions in those countries with
which the trade agreement is negotiated;
– to increase trade union training in the area of trade agreements and
their developmental impact;
– for trade unions to develop and focus on development strategies that
include trade policies and investment policies with a strong social dimension;
– to look at best practices of trade union participation in trade
agreements including in situations of political instability;
– to extend trade union participation in bilateral and regional trade
agreements to participation in Bilateral Investment Treaties.