From Caspar Dohmen
When the EU concludes free trade agreements with other countries, it should not only be about duty-free movement of goods, but also about social and ecological standards. The trade treaty with Vietnam went into effect last year, and trade is flourishing. But do people and the environment also benefit from this?
Vietnam is an economic success story. Only China has achieved more growth since the 1990s. In a video from the International Monetary Fund, the economist Vu Thanth Tu Anh from Fulbright University in Vietnam names two reasons for this upswing: “If you take a soaring eagle as an analogy for Vietnam's economy, it has two wings: one wing is the institutional reforms . The other wing is the opening for trade. "
Vietnam is also one of the last communist countries. The unity party rules the political system. According to the constitution, citizens enjoy basic rights such as freedom of the press and freedom of assembly. In reality, however, fundamental rights are in a bad position: the US think tank Freedom House counts the country among the least free. The non-governmental organization Reporters Without Borders ranks Vietnam 175th out of 180 countries in the press freedom index.
Vietnam as a test
So should the question of trade be linked to the question of fundamental rights for people and the environment? This is exactly what the European Union has been doing since 2014 and adding special chapters on sustainable development to its new free trade agreements. This applies, for example, to the treaties with Ecuador, Mexico, South Korea and Vietnam, the EU's second most important trading partner in Southeast Asia after Singapore. Given the great difference between economic development and the human rights situation, Vietnam is an important test of the EU's attempt to influence conditions in a trading partner country by expanding trade policy to include aspects of environmental protection, climate, human rights and working conditions.
"So the point is that we want to bring about social and political changes in the partner country through the instrument of trade agreements," says Evita Schmieg. She has worked in the field of trade policy for decades, for the EU Commission and the Federal Ministry for Economic Cooperation. Most recently, she conducted research on the topic at the Science and Politics Foundation.
“We say we will write it down in an agreement, next the partner country has to change its laws and then it has to implement the laws. A whole lot of things depend on it, the appropriate institutions have to be created if they do not yet exist, for example labor inspections when it comes to companies wanting to carry out inspections, ”says Schmieg.
Trade agreements made globalization possible
After the Second World War, states concluded more and more free trade agreements multilaterally and bilaterally in order to facilitate trade. Initially by reducing tariffs, and later also by reducing regulations. With the trade agreements, governments made the enormous economic globalization that characterizes our epoch possible. Independently of this, the international community created standards, for example in the area of work with the core labor standards of the International Labor Organization (ILO). But in the past these requirements did not play a role in the trade agreements. When did that change?
“The international debate actually existed as early as 1998, when the EU and the USA tried to bring the issue of labor standards into the World Trade Organization. That was just before the start of a new trade round and the EU and the US wanted to bring this topic into the mix. That failed at the time because of the resistance of the developing countries, ”says Evita Schmieg.
Because cheap wages are a key competitive advantage for developing countries. They didn't want to give it up. To this day there is a tension between economic development and the guarantee of environmental protection and human rights. The economist Gabriel Felbermayr from the Kiel Institute for the World Economy says:
“Where do we have the right to intervene in Europe and where does protectionism begin? Because people like to pretend to want to protect workers in developing countries. But the developing countries like to say that you are not protecting our employees, because they may become unemployed due to stricter standards, but you are protecting your own employees and then suddenly we have quite protectionist elements in these free trade agreements.
"Then of course there was international agreement on the international sustainability goals in 2015," says Evita Schmieg.
These include 17 goals that the United Nations wants to achieve by 2030: for example, ending poverty and hunger and ensuring access to drinking water.
“All states have committed themselves to this, and not just as states, but in principle these sustainability goals are aimed at all actors. All have pledged to anchor sustainability more broadly in actions, in government action and in the actions of the institutions. That means that they take sustainability into account, ”says Evita Schmieg.
The poverty rate fell sharply
Vietnam benefits enormously from global trade. In the early 1980s it was still one of the poorest countries in the world. Since then, the poverty rate has been reduced significantly. The turning point came after the communist government introduced a socialist-oriented market economy with the so-called Đổi-Mới reforms in 1986, faced with the threat of famine. Thousands upon thousands of private companies emerged. In 2007, the country joined the World Trade Organization and was integrated into various global supply chains, for example in the electronics and textiles industries. Despite the pandemic, the economy grew in 2020; and experts also expect a clear plus for 2021.
Economist Gabriel Felbermayr says: "Vietnam certainly currently has very high bargaining power, because the EU and the USA are dependent on alternatives to China being developed in Asia, and Vietnam is playing this geostrategic role very cleverly."
Territorial conflicts with China
The middle power Vietnam is politically and economically interested in good relations with the USA and the EU, because the relationship with its powerful neighbor China is ambivalent. On the one hand, both countries are closely linked economically; on the other hand, there are territorial conflicts in the South China Sea.
In addition, the EU, with the world's largest single market, is also attractive for Vietnam. The free trade agreement between the EU and Vietnam came into force in August of last year: 65 percent of EU exports to Vietnam and 71 percent of EU imports from Vietnam have been duty-free since then. In the next few years, even 99 percent of the tariffs will be abolished. Under this agreement, Vietnam undertook, among other things, to ratify and implement the eight fundamental ILO conventions, for example against child labor and for collective bargaining.
Trade expert Evita Schmieg explains: “In Vietnam one can actually say that the agreement has already led to an improved implementation of the ILO conventions, and Vietnam has already in anticipation of the ratification or the conclusion of the agreement or of the ratification in the EU ratified Convention No. 98 on collective bargaining and revised labor law. Further steps are planned with which these requirements of the agreement will ultimately be met. "
In this respect, the free trade agreement with Vietnam is a good example of the EU's attempt to influence the human rights situation or working conditions. But how effective are such agreements?
So far there has only been one legal union in Vietnam - and that is dependent on the ruling Communist Party and employers. Independent unions were banned.
Company unions should come
Recently, however, the government has allowed co-determination at company level. We are talking about company unions, but they are more comparable to works councils. Bernd Lange, SPD MEP and Chairman of the Trade Committee in the EU Parliament, sees this as a step forward.
He says: “First of all, it is a matter of negotiating the fundamental rights collectively and joining forces in a union, including in a company, for example at Samsung, one of the largest electronics manufacturers in Vietnam and Vietnam's largest exporter, where working conditions are sometimes underground and the right to negotiate working conditions and of course wages. And that is a big step indeed. It wasn't undisputed either. Of course, the unified union didn't find that particularly nice. "
But what can an independent participation in companies achieve if the organizations cannot join forces?
Frank Zach from the German Trade Union Confederation says: “When you build a sensible organization, it starts at the bottom and then slowly goes up, and opinion should also be formed from the bottom up. Those are very specific democratic principles. That is why the question of the design of working conditions always plays a major role in the company as well. But if you read the convention of the International Labor Organization carefully, it also says that freedom of association also means that you can join together to form industry organizations or federations or confederations, and from my point of view that is part of it. "
However, there are still no plans for free trade unions at the national level in Vietnam. Many important questions are still open with regard to the company unions: How will they be financed? What role will company unions be able to play in wage negotiations? And how will the rulers behave towards the free employee representatives? After all, the authorities keep cracking down on independent actors.
"Toothless sustainability chapter"
The human rights situation has worsened since the free trade agreement was concluded, says the Green politician and EU parliamentarian Anna Cavazzini:
“Other political activists were arrested on a large scale, fundamental rights restricted and, on the other hand, the European Union did not react and did nothing and for me that is actually a sign that the toothless sustainability chapters and the specifications that are in these trade agreements there, do not bring that much in the end. "
Because it is also the question of how these standards, which were agreed in the free trade agreement, are controlled at all. Usually there are dispute settlement procedures and sanction mechanisms for this. Above all, the way the arbitration boards work has also been criticized frequently in other EU free trade agreements. However, their effectiveness is undisputed. But these mechanisms do not apply to the sustainability chapters of the EU free trade agreements. There is a separate procedure for this, which critics believe is much weaker.
So-called Domestic Advisory Groups - internal advisory groups - regularly check compliance with sustainability regulations.
The EU parliamentarian Bernd Lange says: “In Vietnam it is still very important that civil society is of course also involved in the implementation via the domestic advisary groups and that for the first time we have an acceptance error from civil society and also to a certain extent self-organization . "
Under the communist regime in Vietnam, however, it could even be dangerous for independent civil society organizations to move into the limelight, experts on the spot report.
"There is no such thing as an independent movement"
Green politician Cavazzini has fundamental doubts: “I don't think the Vietnamese government would allow independent NGOs to take part in these dialogue forums. So a large part of the so-called civil society in Vietnam is more government-controlled and there is no real independent movement, or will never be officially included by the government in life. "
In contentious cases, an independent mediation committee can be set up to investigate the case and produce a report for both trading partners to review. Then the committee makes a final decision. The accused party has to report within a certain period of time how it has remedied the grievances. However, there is no sanction mechanism.
The Social Democrat Bernd Lange also criticizes this: “If the saying of this panel is not accepted by experts, then we have to be able to set sanctions, in particular, of course, compensation for possible violations: In other words, employee rights violations, trade unions are compensated or the colleagues or completely flat, if that is the case a tree is felled, a new one is planted. "
The EU Commission rejected this for a long time, then Brexit came.
"Incidentally, the Commission deviated from this principle of not wanting to introduce this for the first time with the agreement with the United Kingdom". explains Lange.
Should the UK lower environmental or social standards, the EU could raise tariffs or impose other trade sanctions to encourage the British to rethink. Could this be an example for other commercial contracts as well?
The Greens politician Anna Cavazzini says: "So the pressure is increasing and the Commission has promised that they will examine this year to bring actionable and really sanctionable sustainability chapters on the way."
USA has tough sanction mechanisms
The USA and Canada also combine free trade agreements with requirements for compliance with certain social and ecological standards. The USA also has a tough sanction mechanism for this, such as the withdrawal of tariff relief. Canada faces financial penalties for violations. The partner countries would then not have to pay any money to Canada, but rather keep a corresponding sum available in their budget for the political area concerned.
Evita Schmieg thinks that this is pioneering: “This discussion comes to parliament that since more money has to be made available for the sector, it gives you an eye on the problems that exist. So again under the aspect of discussion in the country, social change, I just believe that this instrument is perhaps more suitable for achieving something. "
But what value would that have in a country with one-party rule like Vietnam? It would also be important to take into account the consequences of the trade agreements themselves for people and the environment in the partner countries of the EU. What is the benefit of making specifications for compliance with standards when environmental and human rights are violated more often as a result of increasing trade itself?
Michael Windfuhr, Vice Director of the German Institute for Human Rights, says: “For example because indigenous people are being displaced in the rainforest, for example because small farmers in Africa are inundated with European surplus agricultural products and thus lose their income, so to speak, there is a way to react - and that does not yet exist in the environmental and trade agreements. "
That is why it is important to incorporate some kind of emergency mechanism into such agreements.
“When something goes wrong, countries have the right to say, so to speak, to stop. To say we have to check it out first, ”said Windfuhr.
Developing countries want emergency mechanisms
For Michael Windfuhr, such a mechanism would also be a key prerequisite for the World Trade Organization to regain influence. The WTO is actually supposed to set the rules for all world trade. Every country has to agree to this. But because this has not been successful for a long time, countries or groups of countries such as the EU are concluding more and more bilateral agreements. An important reason for the blockade of the WTO is that developing countries want the emergency mechanisms mentioned.
That is understandable, says Michael Windfuhr: Otherwise the risk would be too great that the expansion of trade through the trade agreement would create considerable social and ecological problems, for example because more primeval forest would be felled for the cultivation of soy or small farmers would be driven out to make room for to create large farms.
Windfuhr says: "We are only just beginning to really learn this sensor system and the sustainability chapters currently available are actually a mini-mini aspect of it and not sufficient in that sense."
Trade expert Evita Schmieg also warns against too high expectations of environmental and human rights standards in trade agreements: “In principle, trade agreements are there to lay down trade rules. And what we want are other things and we use the agreements as an aid. The basic problem is not that foreign trade or these agreements are somehow bad, but that foreign trade is not sustainable because production and consumption are not sustainable. "
Trade changed through liberalization
In addition, trade has changed as a result of liberalization. Today, over 70 percent of trade movements are made along supply chains by companies, with numerous preliminary and intermediate products.
EU parliamentarian Bernd Lange says: "So a smartphone like this has covered around 32,000 kilometers, put all the preliminary products together and then of course crossed 100 borders. And that shows that you can basically no longer map this supply chain with a single bilateral agreement . "
"So a good combination of improved, smarter sustainability and human rights parts in the trade agreements and a supply chain law could really help to enforce more rules at the points that are urgently needed for world trade, especially after it has increased so much as a result of the globalization wanted by trade policy", so Windfuhr.
But it would also be naive to believe that the EU could do this with all trading partners. The middle power Vietnam may still move a little at the urging of the EU, but it should look quite different with China, for example. The EU has negotiated an investment agreement with the world power, which the EU Parliament has yet to approve. Here, too, the EU relies on a sustainability chapter.
