Research questions and arguments in brief

To address the observations made here, this book asks two related questions about the causes and consequences of social standards in EU and U.S. PTAs. First, why do U.S. PTAs have stricter social standards? In other words, what makes U.S. social provisions wider in scope, more enforceable, and more legally binding than similar provisions pursued by the EU? And second, do these standards achieve their desired goals? In other words, does the design of social standards matter, and which design is more effective in terms of improving labor and environmental conditions in partner countries? To answer these questions, this study will explore the distinct but related processes of making and implementing social standards in EU and U.S. PTAs.

In order to understand the varying design of social standards, we need to unravel the complex foreign economic policy-making process that leads to the inclusion of labor and environmental provisions in EU and U.S. trade agreements and the roles played by various domestic actors and policy-making institutions in these processes. It will demonstrate how weaker institutional insulation of trade policy executives from societal actors results in their ability to set the agreement agenda independently. Thus, it will show that in the EU, with its high institutional insulation of executives from societal actors, social provisions mirror the normative preferences of European Commission officials rather than the interests of non-govermnent organizations (NGOs), labor unions, and businesses. In the U.S., where such insulation is low, social provisions reflect the preferences of interest groups rather than trade policy executives.

It will be further shown that the difference in the design of social standards matters for the agreement outcomes because it produces a different implementation dynamic, resulting in the distinct patterns of change in the domestic policies of states that join EU and U.S. PTAs with social standards. The main difference between the EU and U.S. approaches to the design of social standards is the issue of enforceability - the former relies on the soft mechanism of dialogue with government and civil society actors in trading partners, while the latter resorts to coercion through sanctions. This book will demonstrate that both approaches can be effective in terms of triggering positive domestic change in trading partners leading to improvements in labor and environmental conditions. Elowever, the two approaches work through two distinct causal mechanisms, determining the timing of their effects: U.S. provisions will have positive ex ante effects (i.e., prior to signing an agreement because of a fear of possible sanctions), while EU provisions will have positive ex post effects, as a result of learning by domestic actors during the implementation process.

Social standards in international trade

Just like the shift from multilateralism to bilateralism in world trade itself, the inclusion of labor and environmental issues in PTAs is the result of a systematic failure to address them through the WTO. Since its inception, developed countries led by the U.S. envisioned the WTO to become the desired forum for addressing labor and environmental issues related to trade liberalization. At the conclusion of the Uruguay round in Marrakesh in 1994, the participants of the ministerial conference of the General Agreement on Tariffs and Trade (GATT) expressed their views on the importance of linking trade-related labor and environmental issues but failed to come up with a specific blueprint. At the next ministerial conference in Singapore in 1996, U.S. negotiators brought up the issue of social standards again, along with other trade-related aspects (termed the Singapore issues ever since then) but failed to convince other participants, particularly from the developing world, about the need to institutionalize labor and the environment as part of the WTO mandate (Elliott 2011). At the ministerial conference in Seattle in 1999, EU leaders tried to advance the social agenda in trade again but to no avail. It was decided that the International Labor Organization (ILO) would remain the appropriate forum for labor issues, and the environment should be covered by multilateral environmental agreements. Thus, despite the continuing criticism from civil society groups (see Esty 2002), labor and environmental issues to date remain outside of the WTO remit.

The failure to include social standards in the WTO is part and parcel of broader disagreements between the Global North and the Global South about international trade and the overall legitimacy of the global economic order. Social standards are particularly vexing for developing countries, which view them as nothing more than disguised green and labor protectionism on the part of the developed world and thus use their collective bargaining power to prevent the linkage between WTO rules and social issues. Consequently, labor and environmental provisions have become increasingly institutionalized in North-South PTAs, where developed countries exercise their greater bargaining power, leading developing countries to acquiesce to their demands and make concessions on social issues to gain access to their lucrative markets, despite having the same concerns as in the WTO.⁵

Thus, the linkage between social provisions and preferential trade liberalization is well established and institutionalized in many North-South bilateral trade agreements, especially those formed by the EU and the U.S. This means that labor and the environment are currently part of the bilateral trade agenda and have a distinct political dynamic within the trade policy-making process. Young (2007) was the first to provide a useful typology of current trade policy issues which, according to him, fall into two main categories: 1) at-the-border issues, concerned with trade liberalization, such as tariffs and quotas, and 2) behind-the-border issues. The latter are further divided into 2a) commercial policy, dealing with differences in domestic regulatory regimes on services, investment, government procurement, and so on (the so-called Singapore issues), and 2b) social trade policy (i.e., regulatory attempts to address market failures, such as sanitary and phytosanitary rules, technical barriers to trade, core labor rights, and the environment). Each type of trade policy issue is associated with a certain pattern of politics. Behind-the-border issues are thought to be part of so-called "new trade politics” (Young 2016). However, while commercial policy issues are generally thought to be affected by the general dynamic of regulatory competition, the political dynamic behind social trade issues is expected to be quite ambiguous (Young 2007,2016).

Labor and environmental issues stand apart from other behind-the-border provisions, as they touch on some essential and unique normative and institutional foundations of advanced industrial societies, such as their industrial relations, labor market institutions, and social attitudes. Thus, the definition and various types of governance and regulatory regimes in developed countries determines the extent to, and maimer in which, labor and environmental issues are integrated into the preferential trade agenda.⁶ Both labor and the environment are also thought to be part and parcel of so-called "fair” trade (Ehrlich 2010, 2018). Thus, we need to understand the political dynamic behind these issues to examine their inclusion in trade agreements and the corresponding effects.