The multilateral trading system and the 2030 Agenda: Insights from trade agreements

International trade can be used as a way to implement the 2030 Agenda for Sustainable Development. To harness its potential, trade policies need to be coherent with and supportive of the Sustainable Development Goals. Trade liberalization can foster economic growth, but we need to ensure that it does not lead to lower labour or environmental standards for the sake of competitiveness.

In the multilateral trading system, negotiations on sustainable development issues can be slow, as epitomized by the World Trade Organization (WTO) Doha Development Round. At the same time, bilateral and regional preferential trade agreements (PTAs) have recently made rapid advances towards addressing sustainable development concerns. For example, including stricter obligations on labour standards and environmental protection in PTAs has become increasingly common over the last years. That said, PTA provisions in both fields vary in terms of enforceability and aspirations. Can countries build upon the experience of PTAs when addressing sustainable development concerns in multilateral trade negotiations? Comparing the texts of labour and environmental provisions across PTAs allows us to assess to what extent these can serve as building blocks for future WTO commitments.

To this end, we extract labour/environment chapters and labour/environment-related provisions from PTAs and compute an indicator of textual similarity between different treaties known as a Jaccard similarity (Alschner, Seiermann and Skougarevskiy, 2017). The results of this exercise are displayed in heat maps, where each cell represents the textual similarities between one pair of treaties. It is coloured red to identify similar textual patterns and bright yellow to identify differences. Agreements are ordered along the axes according to the name, in alphabetical order, of the signatory party with the highest 2015 GDP in each respective agreement. For example, the first row and column in each graph represents the degree of similarity between the Free Trade Agreement (FTA) between Australia and the Republic of Korea and another treaty. The solid red diagonal reflects the perfect overlap between identical treaty pairs (i.e., the top left corner simply represents the overlap between the FTA between Australia and the Republic of Korea with itself). The graph is symmetrical along the diagonal, as treaty pairs follow the same order along the vertical and horizontal axes. Within each figure, the treaties along the horizontal and vertical axes are the same and identically ordered. However, the included treaties differ between the two figures, as only treaties that contain provisions on labour are included in figure a, and those with provisions on environment are included in figure b. This explains why the location of treaty groups may differ between the two figures.

Heat maps of textual similarity of PTA chapters on sustainable development
Heat maps of textual similarity of PTA chapters on sustainable development

The key message to take away from the figure is that it is possible to identify certain countries that have considerable overlap on provisions related to labour standards and environmental protection among their bilateral and regional agreements. Canada and the United States have a relatively consistent treaty network concerning both labour and the environment. Different European groupings (the European Free Trade Association and the EU) and the Republic of Korea have concluded PTAs with similar labour provisions with different partners, but are heterogeneous in terms of environmental provisions. Japan’s environmental provisions resemble each other across different treaties. Commonalities demonstrate that the content and formulation of these provisions is accepted across several partner countries, which can make it easier to introduce them at a multilateral level.

A large and growing number of recent agreements between other countries includes labour and/ or environmental provisions. For example, more than 200 agreements stipulate the right to apply technical barriers to trade measures related to the environment (Morin, Pauwelyn and Hollway, 2017). PTAs with labour and/or environmental provisions include North-North, South-South and North-South agreements, regional and interregional, and with the participation of countries from different continents.

This broad willingness to consider sustainable development issues in the context of trade agreements by a wide range of countries is a promising precedent for multilateral negotiations. As stated by the ILO (2016) in a report on labour provisions, “regardless of the approach […], the objectives of countries are shared”. While no single template of labour/environmental provisions has yet emerged, there is some evidence of convergence, such as between environmental clauses in agreements signed by the EU and the United States (Morin and Rochette, 2017). Sets of provisions that have already been accepted by several countries from different world regions may have a larger chance of being multilateralized. Where two or more templates exist, their texts need to be compared in more detail to determine whether the textual differences also reflect fundamental differences in the content and purpose of the provisions that need to be bridged to achieve a multilateral agreement. Hence, mapping similarities and differences between agreements can help policymakers and negotiators identify ways to build on the PTA experience in the multilateral arena.

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