Linkages of Trade, Investment and Labour in Preferential Trade Agreements: Between Untapped Potential and Structural Insufficiencies

ILO (2008), p. 5.

For instance, in Noble Ventures v. Romania and in Plama v. Bulgaria, the investors claimed that their host states had violated its duty to provide full protection and security against allegedly unlawful strikes and blockades by local trade unions, ICSID, Noble Ventures v. Romania, ICSID Case No. ARB/01/11, 12 Oct 2005, para. 160 et seqq.; ICSID, Plama Consortium Limited v. Bulgaria, ICSID Case No. ARB/03/24, 27 Aug 2008, para. 236. In Paushok v. Mongolia, the investor claimed that a Mongolia’s introduction of a new windfall tax due for every non-Mongolian worker hired in excess of a permissible limit of 10% of the investor’s workforce constituted a violation of Mongolia’s obligation to accord fair and equitable treatment, UNCITRAL, Sergei Paushok, CJSC Golden East Company and CJSC Vostokneftegaz Company v. Mongolia, Award on Jurisdiction and Liability, 28 April 2011, para. 353. In Veolia v. Egypt, the investor argued that an increase of the statutory minimum wage violated its rights under a stabilization contract it had concluded with Egypt under a prior government, ICSID, Veolia Propreté v. Egypt, ICSID Case No. ARB/12/15, 25 May 2018.

In Noble Ventures v Romania and Plama for example, the investor’s claims were dismissed as the investors were not able to provide sufficient proof, ICSID, Noble Ventures v Romania, ICSID Case No. ARB/01/11, 12 Oct 2005, para. 160; ICSID, Plama Consortium Limited v. Bulgaria, ICSID Case No. ARB/03/24, 27 Aug 2008, paras. 248–249.

Ebert (2017), pp. 307 ff.; ILO, IILS (2013), pp. 31 ff.

See Singapore Ministerial Declaration, 18 Dec 1996, WT/MIN(96)/DEC, para. 4; Maupain (2013a), pp. 178ff.

According to a 2016 study, nearly half of trade agreements with labour provisions came into existence since 2008 and over 80% of agreements entering into force since 2013 included them. ILO (2016), p. 22.

Gordon et al. (2014), pp. 10 ff.; VanDuzer (2016), pp. 171 f.

E.g. CETA (Chapters 8 and 23), CPTPP (Chapters 9 and 19) or USMCA (Chapters 14 and 23).

Gött and Holterhus (2018), pp. 237 f.

Art. 14.2(4) USMCA.

This happened in response to the CJEU’s 2017 advisory opinion on the EU-Singapore FTA, see CJEU, Opinion 2/15 EU-Singapore FTA, ECLI:EU:C:2017:376, see also Hainbach (2018), pp. 199 ff. Moreover, on the insistence of Japan, EUJEPA only provides for investment liberalization, but excludes investment protection and ISDS.

See e.g. Art. 4.12(1) EU-Singapore Investment Protection Agreement.

E.g. Dombois et al. (2004); Ebert and Posthuma (2011), pp. 20 ff.; ILO, IILS (2013); ILO (2017), pp. 50 ff.; Abel (2018a).

In particular, there is a lack of systematic large-scale empirical research, ILO (2017), p. 14.

Kamata (2015), p. 20.

Marx and Soares (2015), pp. 158 ff. and 167 ff.

Ebert (2017), pp. 307 ff.

Incorporating by reference the earlier Trans-Pacific Partnership Agreement (TPP). For convenience, both TPP and CPTPP provisions will be cited as “CPTPP” here.

Pursuant to Art. 27 VCLT, the parties may not invoke domestic law as justification for the non-performance of a treaty.

E.g. Art. 32.1 USMCA. Some of these clauses also apply to investment liberalization and non-discrimination of investors, e.g. Art. 28.3(1) CETA.

E.g. Art. 32.1(1) and (2) USMCA.

Addo (2015), pp. 135 ff.; Cottier (2018), pp. 85 ff.

Blüthner (2004), pp. 312 ff.; Cottier (2018), pp. 85 ff.

Read (2005), pp. 239 ff.

Art. 19.6. CPTPP, explanatory footnote 6; Art. 23.6 USMCA, explanatory footnote 10.

See e.g. Howse (1999); Kaufmann (2007), pp. 134 ff.; Cottier (2018).

Annex 4-B. Art. 7 (3) lit. a USMCA.

Annex 4-B. Art. 7 (1) USMCA.

Notably, given the considerable relevance of the automotive industry in the USMCA parties, the question has arisen whether the rules stand in the way of liberalizing ‘substantially all trade’ in the sense of Art. XXIV(8) lit. b GATT, Titievska and Pietsch (2018).

Against this backdrop, it has been suggested that the main aim of the labour value content rules seems to be to incentivize production relocations to high-wage countries, i.e. from Mexico to the USA and Canada, Titievska and Pietsch (2018).

Ebert and Villarreal (2018).

Brooks (2018), p. 46. The obligation can either extent to the entirety of a party’s labour laws and regulations or to specified parts of them, see e.g. the definition of ‘labour laws’ in Art. 19.1 CPTPP and Art. 23.1 USMCA. Some agreements also discipline the parties’ discretion on how to allocate their enforcement resources, Art. 19.5(2) CPTPP; Art. 23.5(3) USMCA.

In a similar manner, but limited to certain labour laws, Art. 19.4 CPTPP and Art. 23.4 USMCA.

Art. 23.4 USMCA, explanatory footnote 7.

Other FTAs require that the host state purports to encourage trade or investment, e.g. Art. 23.4(2) CETA. Such regulatory intent is hard to isolate and to prove, not least because the host state’s motivation for relaxing labour regulation will rest on several (and often interchangeable) motives.

E.g. Art. 23.3(1) CETA; Art. 16.3(2) EUJEPA; Art. 23.3(1) USMCA.

E.g. Art. 22.1(1) CETA.

E.g. Art. 22.1(1) CETA; Art. 16.1(1) EUJEPA.

CETA, preambular clause 4.

E.g. Art. 22.1(1) CETA.

E.g. Art. 23.3(1) CETA.

E.g. the 1998 ILO Declaration on Fundamental Principles and Rights at Work (Art. 16.3(2) EUJEPA) or the 2006 ECOSOC Ministerial Declaration on Generating Full and Productive Employment and Decent Work for All (Art. 12.2(2) EU-Singapore FTA).

Art. 16.3(5) EUJEPA.

Art. 16.3(3) EUJEPA.

Art. 19(5) lit. b ILO Constitution.

On the development see Alston (2004), pp. 499 ff. These nowadays include freedom of association and the effective recognition of the right to collective bargaining, the elimination of all forms of forced or compulsory labour, the effective abolition of child labour, a prohibition on the worst forms of child labour, and other labour protections for children and minors, the elimination of discrimination in respect of employment and occupation, and acceptable conditions of work with respect to minimum wages, hours of work, and occupational safety and health (see e.g. Art. 23.1 USMCA).

19.3(2) CPTPP; Art. 23.3(2) USMCA.

Art. 23.3(2) lit. c CETA; Art. 23.8 USMCA; ILO (2017), p. 15.

Art. 23.5(1) lit. a CETA; Art. 23.5(2) USMCA.

See e.g. Art. 23.5 CETA; Art. 19.8 CPTPP; Art. 23.10 USMCA.

Art. 23.3 USMCA.

On the employers’ group’s interventions and the ILO’s post-2012 constitutional crisis, in which the question of the right to strike being an intrinsic corollary of freedom of association played a central role, see Maupain (2013b); La Hovary (2018), pp. 44 ff.

For instance, Art. 23.7 USMCA explicitly obliges the parties to address cases of violence, threats or intimidation against workers. That governments are required to do so is laid down in ILO Conventions No. 87 and 98 and established in the practice of the ILO’s supervisory bodies, see ILO (2006), paras. 44–60. However, the two ILO conventions have not been ratified by the USA.

E.g. Art. 16.8 CAFTA-DR; Art. 23.1 USMCA; Alston (2004), pp. 499 ff.

The formulations are rather weak, requiring each party to implement such policies it considers appropriate, and explicitly stating in a footnote that the USA does not have to take further action.

In fact, a clarifying footnote even explicitly states that no amendments to Title VII of the US Civil Rights Act 1964 on equal employment opportunities are required.

That being said, the emergence of PTA labour provisions has so far not been challenged within the WTO.

On this see e.g. VanDuzer (2016), pp. 147 ff.; Gött and Holterhus (2018), p. 242.

Ebert (2017), pp. 310 f.; ILO, IILS (2013), pp. 38 ff.

E.g. Art. 23.7 CETA.

E.g. Art. 16.5 CAFTA-DR.

Art. 16.11 EUJEPA.

E.g. under a range of Chilean FTAs, ILO (2017), p. 52. See also Art. 6(1) Hong Kong-EFTA Agreement on Labour.

This has been the means of choice in recent EU agreements, see. e.g. Art. 23.10 CETA; Art. 16.18 EUJEPA.

In particular in US and Canadian Agreements, Abel (2018a), pp. 153 ff.

PTAs usually allow for a dynamic evolution of the committee structure. Main committees can create new (or dissolve existing) subcommittees and may modify the allocation of tasks. Furthermore, each (sub)committee retains wide discretion as to its own procedure.

E.g. the Trans-Pacific Partnership Commission’ (Art. 27.1 CPTPP), the CETA Joint Committee (Art. 26.1 CETA) or the Free Trade Commission (Art. 30.1 USMCA).

Art. 22.1(3) EUJEPA.

Art. 26.1 (5) (e) CETA; Art. 9.24 (3) CPTPP; Art. 23.14 USMCA.

Art. 27.2(2) lit. c CPTPP; Art. 30.2(2) CETA.

Art. 19.12 CPTPP; Arts. 22.4 and Art. 26.2.1 (g) CETA.

Art. 26.2 CETA; Art. 27.2 (2) (a) CPTPP.

E.g. Arts. 22.4 and Art. 23.8(3) CETA. For a non-EU example, see Art. 19.14(2) CPTPP.

Art. 22.5(2) CETA.

Orbie et al. (2018), pp. 135 ff.

E.g. Art. 23.11(1) CETA.

E.g. Art. 19.15 CPTPP.

Art. 23.17(8) USMCA.

See. e.g. Art. 19.15(12) CPTPP; Abel (2018a).

E.g. Art. 23.10 CETA; Art. 16.18 EUJEPA.

Art. 23.10(11) CETA.

Abel (2018b), pp. 174 ff.

E.g. Art. 16.8(6) EUJEPA.

Harrison et al. (2018), pp. 9 f.

Compa (2001), pp. 147 ff.; Finbow (2006), p. 232; Bolle (2016), pp. 5 f.

ILO, IILS (2013), pp. 79 ff.

Abel (2018b), p. 166; Gött (2018), p. 196.

For example, the USA have initiated dispute settlement in some cases arising under the NAALC, the CAFTA-DR, the US-Bahrain FTA and others, Congressional Research Service (2018), p. 2; ILO (2016), pp. 44 f.

Dombois et al. (2004); ILO, IILS (2013), pp. 84 ff.; Abel (2018a).

Brooks (2018), p. 45.

Dombois et al. (2004), p. 293; Dombois (2006), p. 246.

Dombois et al. (2004), p. 293; Dombois (2006), p. 246; Nolan Garcia (2009), p. 189; Greven (2012), p. 88; ILO, IILS (2013), p. 49.

Under earlier PTAs, labour-related submissions have been made by all three groups, see Greven (2012), p. 89; ILO, IILS (2013), pp. 43 ff.

ILO (2016), pp. 125 ff.

Gött (2018), pp. 189 f.

Gött (2018), pp. 190 f.

ILO, IILS (2013), p. 45.

For instance, the US-Guatemala case took a total of 9 years, for an overview see ILO (2016), pp. 45 ff.

Dombois et al. (2004), p. 267.

Art. 19.8 CPTPP; Art. 23.11 USMCA.

Art. 19.10(3) CPTPP; Art. 23.12(4) USMCA. See also Art. 19.14(1) CPTPP.

Art. 16.10 EUJEPA. See also Art. 16.16(4) EUJEPA.

Art. 16.15(3) EUJEPA.

Art. 16.18(6) EUJEPA.

The final report of the arbitral panel is made public, see e.g. Art. 28.18 CPTPP.

ILO (2017), p. 73.

Art. 8.1(2) EUJEPA.

E.g. Art. 8.1(2) EU-Vietnam-FTA; Art. 8.1(2) EUJEPA.

Gött and Holterhus (2018), p. 243.

Compare the slightly stricter wording of Art. 14.16 USMCA.

For a rare exception, Art. 20 SADC Model-BIT, after reaffirming host states’ right to regulate, provides that “[e]xcept where the rights of a Host State are expressly stated as an exception to the obligations of this Agreement, a Host State’s pursuit of its rights to regulate shall be understood as embodied within a balance of the rights and obligations of Investors and Investments and Host States, as set out in this Agreement.”

Art. 13.2(1) EU-Vietnam-FTA; Art. 16.2 EUJEPA. Such reaffirmations have a long tradition, see already Art. 2 NAALC.

ICSID, Veolia Propreté v. Egypt, ICSID Case No. ARB/12/15, 25 Jun 2012, Zimmer (2018), p. 225. In Goetz v. Burundi, the investor brought a case because the host state repealed a prior derogation of its labour laws that had attracted the investor, ICSID, Antoine Goetz et al. v. Burundi, ICSID Case No. ARB/95/3, 10 Feb 1999. In Paushok v. Mongolia, the tribunal dismissed the investor’s challenge against changes of labour regulation but indicated that the decision could have been different had the parties concluded a stabilization agreement, UNCITRAL, Sergei Paushok, CJSC Golden East Company and CJSC Vostokneftegaz Company v. Mongolia, Award on Jurisdiction and Liability, 28 Apr 2011, para. 370.

Art. 22.3(2) lit. b CETA; Art. 16.5 lit. e EUJEPA.

Critical e.g. Abel (2018a).

Art. 18(1) ECOWAS Supplementary Act on Investment.

E.g. Art. 23 Dutch Model-BIT (regarding compliance with the 2011 UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises); Art. 43(1) 2016 Draft Pan-African Investment Code. The 2016 Draft Pan-African Investment Code foresees a range of investor obligations, including on labour issues, e.g. in Arts. 19 et seqq. and Art. 34.

Art. 19.7 CPTPP.

A prominent (albeit rather unique) exception is Art. 72 EU-CARIFORUM, which obliges the parties to ensure that investors act in accordance with core labour standards.

Gött and Holterhus (2018), p. 256.

Gött and Holterhus (2018), pp. 248 ff.

Shihata (1986), p. 4.

Gött and Holterhus (2018), p. 260.

ICSID, United Parcel Service of America v. Canada, Decision on Petitions for Intervention and Participation as Amici Curiae, 17 Oct 2001, para. 73; ICSID, Foresti et al. v. South Africa, ICSID Case No. ARB(AF)/07/01, 5 Oct 2009.

E.g. Art. 9.23(3) CPTPP; Art. 3-8(6) EU-Vietnam Investment Protection Agreement.

See Art. 9.23(3) CPTPP.

Art. 13(6) Zero Draft.

Art. 13(7) Zero Draft.

Arguably, they would constitute an interpretation agreement in the sense of Art. 31(3) lit. a VCLT.

E.g. Harrison et al. (2018); Bronckers and Gruni (2018), pp. 4 ff.; Stoll et al. (2018).

E.g. Bronckers and Gruni (2018), pp. 4 ff., who propose amending the EU’s Trade Barrier Regulation accordingly.

Gött (2015b); AK Europa (2017), p. 10; Foundation for European Progressive Studies (2018), pp. 20 f.; Gött (2018), for a textual proposal see, Stoll et al. (2018). Outside the labour context, the idea has also been promoted by consumer associations, VZBV (2017), p. 9; VZBV (2019), p. 23.

European Commission (2017) pp. 1 ff.

Harrison et al. (2018), pp. 1 ff.; AK Europa (2017), pp. 2 ff.

This will be particularly challenging regarding investment-labour linkages, given that enhancing the procedural capacity of other non-governmental actors would almost inevitably call into question the bipolar structure of investment protection and investor-state dispute settlement in order to enhance an ‘enforcement balance’ among different economic actors, Gött (2015a); Gött (2018), p. 181; see also Stoll et al. (2017), pp. 202 f.; Stoll (2018), pp. 289 f.