Sustainability provisions in RTAs: Options for multilateralisation

Sustainability provisions in RTAs: Options for multilateralisation

Sustainable development is increasingly becoming mainstream in trade agreements. The past few years have seen a significant upsurge in the inclusion of sustainable development provisions (SDPs) in regional trade agreements (RTAs), particularly in deep-integration RTAs – i.e. those seeking commitments beyond WTO obligations. There has been interest in using RTAs as building blocks towards the multilateralisation of SDPs.

Trends in sustainability provisions across RTAs

A plethora of RTAs we reviewed, concluded by Canada, Australia, Canada, Chile, the European Free Trade Association (EFTA), the EU, Japan and the US, have included SDPs. However, the levels of incorporation of SDPs differ, with some RTAs containing more comprehensive measures than others. Some RTAs just pay homage to sustainable development with no real commitments undertaken.

On balance, incorporation tools have over time undergone a substantive transformation away from mere dialogue provisions towards comprehensive SDPs in preambles, general exceptions clauses, dedicated chapters, incorporation in other chapters, side letters, and side agreements.

Despite this trend of incorporating comprehensive provisions into deep-integration RTAs, there is still no consensus to create binding provisions subject to dispute settlement in RTAs, with the partial exception of the Trans-Pacific Partnership (TPP). Of course, there are some exceptions that always create binding obligations, notably in US RTAs since the North American Free Trade Agreement (NAFTA). Nonetheless, the absence of binding commitments subject to dispute settlement may indicate that most states prefer a soft law approach to sustainable development issues. These soft law provisions take the form of cooperation mechanisms, consultation requirements, enforcement mechanisms, and reaffirmation of international standards.

Some RTAs have gone beyond soft law provisions to incorporate investor-state dispute settlement (ISDS) which creates another platform to resolve disputes, notwithstanding the controversy surrounding them. Most prominently, a new Investment Court System for dispute settlements is being established under the Comprehensive Economic and Trade Agreement (CETA), partly with a view to enhance the enforceability of SDPs.

Another trend concerns the provisions addressed in RTAs, where provisions broadly address similar social and environmental issues. The main social issues addressed include labour, transparency, and political participation. The main environmental issues include protection of the marine environment, ozone layer, and fisheries. The EU goes a step further to include a specific provision on human rights; but this still remains a challenge for other countries, most of which shy away from explicit human rights provisions. As a result, human rights provisions are only incorporated under other chapters, such as the labour chapter.

Furthermore, the standards in relation to labour and the environment are similar across RTAs. RTAs refer to similar international instruments such as the International Labour Organization (ILO) Declaration and the Montreal Protocol.

Overall, the incorporation of sustainable development into RTAs is far from complete, with many obstacles remaining. Against this backdrop, what are the prospects for multilateralising RTA SDPs?

Multilateralisation of sustainability provisions

Some SDPs are amenable to a multilateralisation process. The degree of similarity in the channel of incorporation, issues addressed (social and environmental), and enforcement mechanisms among some RTAs, notably those concluded by Canada, the EU, and the US attests to this.

While a critical mass of developed countries has adopted and continues to adopt SDPs, there has been unwillingness by developing countries to include SDPs in RTAs, though there are exceptions such as Chile. Many developing countries are wary of taking on SDP commitments that could impose rigorous obligations on them, or obligations they are not prepared to accept. Given the broader challenges with negotiating multilateral deals in the WTO, this does not bode well for multilateralising SDPs.

Despite these challenges, the quest for multilateralisation continues to grow. Possible avenues include:

  • the extension of existing RTAs to willing non-parties to the overall package, thus widening the circle;
  • regional consolidation, creating one larger RTA by combining two or more existing RTAs, for example the Tripartite Free Trade Agreement (TFTA) in Africa;
  • a convergence of key SDPs through plurilateral agreements negotiated amongst a critical mass of countries in the WTO; and
  • the WTO gradually adopting new substantive provisions or negotiating a new agreement like the Trade Facilitation Agreement (TFA) and ratifying it progressively.

In considering all these options, the WTO’s work programme on trade and sustainable development could be used as a basis to promote the extension of deep RTAs containing sustainability provisions.

Looking ahead

While important building blocks have been erected at the regional level, the multilateralisation of SDPs in RTAs is critical. It would ensure, among other things, uniform application of the provisions, which would facilitate the advancement of the UN Sustainable Development Goals. Work already done at the RTA level gives us ground for cautious optimism. With political will, more RTAs could be persuaded to join the bandwagon leading to greater acceptance and eventual multilateralisation of sustainable development provisions. 

This article is derived from the paper Sustainability Provisions in Regional Trade Agreements: Can they be Multilateralised?

Peter Draper, Nkululeko Khumalo, and Faith Tigere are respectively Managing Director, Senior Associate, and Researcher, Tutwa Consulting Group.

In March 2017, ICTSD and the Inter-American Development Bank (IDB) organised a dialogue on sustainability provisions as part of the RTA Exchange project.

Caught between the WHO and the lure of a cash crop

Caught between the WHO and the lure of a cash crop

Over the last couple of decades, great effort was made to reduce tobacco consumption rates the world over. These efforts come as a result of concern over the harmful impact of tobacco use and exposure to tobacco smoke. This year the World Health Organization will highlight the health risks associated with tobacco use on World No Tobacco Day 31 May 2017, advocating for effective policies to reduce tobacco consumption.

However, efforts have expanded to not only address the consumption of tobacco but also to target the entire tobacco value chain. At the forefront of this effort is the widespread adoption and entry into force of the World Health Organization’s Framework Convention on Tobacco Control (WHO FCTC). The set of regulations as proposed by the FCTC, and their accompanying implementation guidelines and working group recommendations, could seriously retard a number of Southern African countries’ development.

Developing Sub-Saharan African (SSA) states tend to be heavily dependent on the agricultural sector. Obviously, this sector provides a means for producing food for domestic consumption; however, from a development perspective the agri-sector also presents a way of generating revenue, both domestic and foreign, as well as means of supporting rural families and creating jobs. Data from the United Nations Statistics Division shows that SSA states can generate as much as one third of GDP from the agriculture sector and employ as much as two thirds of the labor force. Malawi, for example, reportedly generates 32.9{fdf3cafe0d26d25ff546352608293cec7d1360ce65c0adf923ba6cf47b1798e1} of its GDP from the agriculture sector, which employs about 64.1{fdf3cafe0d26d25ff546352608293cec7d1360ce65c0adf923ba6cf47b1798e1} of the labour force.

While a large variety of activities can contribute to the agriculture sector beyond the growing of crops – rearing cattle, fowl, pigs – many farmers in Southern African states tend to depend on a mix of rainfed crops. Since these crops are grown in rotation in order to optimally use soil, nutrients, fertilizers – and control pests and diseases – small scale farmers in Southern African states have to very carefully choose which crops to grow to maximize soil utility, crop output and profit. This necessarily requires allocation of a suitable cash crop within the crop rotation mix, which in Southern Africa often means tobacco.

Profits generated from cash crops, like tobacco, usually go towards paying school fees, buying assets to improve their quality of life, paying off bills and building better houses.

Growing tobacco in the more drought prone sandy areas of Southern Africa allows farmers to take advantage of their environment as well as the inherent robustness of the tobacco plant. Compared to several proposed alternative cash crops tobacco tends to be less sensitive to fluctuations in rainfall, but more importantly research shows that profits from tobacco tend to be less sensitive to changes in yield and price. Furthermore, while the crop might be more labour intensive in the planting and harvesting phases than alternative crops, it does not necessarily require the same level of ongoing care while growing, freeing labour to focus on other income-generating activities. This makes tobacco cultivation very appealing to generally poor, especially small scale, farmers in Southern Africa.

Direct tobacco sector investments are also contributing to improving the quality of life of the people in the tobacco growing countries. From building dams and drilling boreholes to investing in civic services and facilities the tobacco sector has attempted to address the most pressing needs of rural communities. Arguably the most valuable investment from the tobacco sector comes from tobacco leaf companies entering into purchasing contracts with tobacco farmers. The purchasing contracts offer tobacco farmers more stability as they’re producing a determined volume for a willing buyer, while getting additional support from the leaf companies who’re determined to get the best quality tobacco from their contracts. This includes support for growing other crops – like maize, groundnuts, beans and rice –in the farmer’s crop rotation mix; the output of which is usually twice the output of the tobacco crop.

Furthermore, the extension services included in the contracts puts leaf companies in a unique position where their field technicians and extension service officers operate at a grassroots level to deliver on the most pressing needs in the community. Often these private services are more useful to farmers than those Southern African states have the capacities to provide.

The development benefits of tobacco cultivation extend well beyond personal enrichment. Tobacco production feeds into the manufacturing sector (especially in Zimbabwe), as well as the logistics & transportation, and broader services sectors, creating additional positive spillovers. Considering the number of citizens employed in the tobacco sector, and the overall number of agricultural employees; it is estimated that one extra tobacco job creates between 0.65 and 0.8 additional jobs in Southern African economies. In addition, since almost all tobacco produced in Southern Africa is exported, tobacco cultivation often contributes substantially to foreign currency reserves. For example, in Malawi the export of tobacco products has consistently generated more than 40{fdf3cafe0d26d25ff546352608293cec7d1360ce65c0adf923ba6cf47b1798e1} of total exports while tobacco’s share of total exports in Mozambique, Tanzania, Zimbabwe, and Zambia has increased from 2012.

Unfortunately, this level of dependence on the tobacco industry does seem to put its developmental impact at odds with the global thrust of clamping down on the entire tobacco value chain. Article 17 of the WHO FCTC calls on parties to promote viable alternatives to tobacco workers, growers and sellers, but fails to mention

  1. how these substitutions efforts will be financed,
  2. whether least developing countries and vulnerable groups will receive support and short term relief, and
  3. the risk of these substitutions efforts forcing a shift towards another monocrop leaving workers, growers and sellers exposed to more volatile market conditions.

What seems most alarming is that there’s very little evidence to suggest that this new wave of regulations has had any substantial impact on further reducing tobacco consumption. It seems fitting that the theme for No Tobacco Day 2017 is “Tobacco – a threat to development”, unfortunately the WHO seem unaware of the impact these regulations could have on the many poor people dependent on the value chain.

The original article was published in the hard copy of the Business Report, 31 May 2017