Free Trade Agreements (FTA) and Global Framework Agreements (GFA) Pong-Sul Ahn ILO ROAP, Bangkok

Free Trade Agreements (FTA) and Global Framework Agreements (GFA) Pong-Sul Ahn ILO ROAP, Bangkok

Table of contents 1. FTAs and labour provisions in the world 2. FTAs in the AP and labour provisions 3. The role of MNEs and global supply chains 4. Global framework agreements as a governance tool in GSCs 5. Concluding

FTAs and labourprovisions in the world

FTAs in the world According to the World Trade Organization (WTO) A total of 291 bilateral and multilateral free trade agreements (FTAs) signed globally as of May 2017 In Asia, around 160 FTAs take effect

No of trade agreements effective by year Source: ILO Research Department based on WTO.

Reference to labour standards in TAs since 2009 Instruments EU US Canada ILO 1998 Declaration FPRW X X X Effective implementation of nat labour laws X X X Access to nat l tribunals Acceptable conditions of work - X X Migrant workers Peru and Colombia - X Effective implementation of ILO Conventions Central America, Colombia and Peru and Korea - - Decent Work Agenda X - Honduras, Peru, Colombia, Jordan, Panama*

Definition of Labour Provision by ILO, 2016 (i) any standard which addresses labour relations (for example, with reference to international labour standards) or minimum working conditions and terms of employment (for example, occupational safety and health (OSH), minimum wages and hours of work); (ii) any mechanism to ensure compliance with the standards set, under national law or in the trade agreement; and (iii) any framework for cooperative activities, dialogue and/or monitoring of labour issues (for example, development cooperation, established bodies for facilitating consultation between the parties or regular dialogue).

According to an ILO study, FTAs, including labour provisions, have increased from four in 1995 to 21 in 2005 and to 47 in 2011.

FTAs in the AP and labourprovisions

Key contents of FTAs o General Provision o Market Access of Goods o Non-Tariff Measures / Quantitative Restrictions o Trade facilitation o Export measures o Rules of Origin o Trade remedies o Services o Investment o Government procurement o Competition policy o Intellectual property o E-commerce o Dispute settlement o Labor standards o Environmental policy o Technical cooperation o Institutional Mechanism o Other measures

FTAs in selected countries in AP Bangladesh - 6FTAs Fiji 5 FTAs India - 28 FTAs Indonesia - 17 FTAs Japan - 24 FTAs - Japan-Malaysia Economic Partnership Agreement - Japan-Philippines Economic Partnership Agreement

Korea - 24 FTAs - [Republic of] Korea-Peru FTA - [Republic of] Korea-Singapore Free Trade Agreement - [Republic of] Korea-United States Free Trade Agreement Malaysia - 22 FTAs - Japan-Malaysia Economic Partnership Agreement Nepal - 3 FTAs Pakistan - 18 FTAs Philippines - 11 FTAs - Japan-Philippines Economic Partnership Agreement Thailand - 22 FTAs Vietnam - 16 FTAs

Case 1 of labour provision Japan-Malaysia Economic Partnership Agreement Chapter 12 Co-operation Article 139 Basic Principles 1. The Governments shall, in accordance with the applicable laws and regulations of their respective Countries, promote co-operation under this Agreement for their mutual benefits in order to liberalise and facilitate trade and investment between the Countries and to promote the well-being of the peoples of the Countries. For this purpose, the Governments shall co-operate and, where necessary and appropriate, encourage and facilitate co- operation between parties other than the Governments. 2. The main objectives of this Chapter are as follows: (a) to enhance socio-economic development; (b) to strengthen economic competitiveness; (c) to advance human resource development; (d) to promote sustainable development; and (e) to improve overall well-being of the peoples of both Countries.

Article 140 Fields of Co-operation The fields of co-operation under this Chapter shall include: (a) agriculture, forestry, fisheries and plantation; (b) education and human resource development; (c) information and communications technology; (d) science and technology; (e) small and medium enterprises; (f) tourism; (g) environment; and (h) other fields to be mutually agreed upon by the Governments. Article 141 Areas and Forms of Co-operation Areas and forms of co-operation under this Chapter shall be set forth in the Implementing Agreement. Article 142 Costs of Co-operation 1. The implementation of co-operation under this Chapter shall be subject to the availability of funds and the applicable laws and regulations of each Country. 2. Costs of co-operation under this Chapter shall be borne in an equitable manner to be mutually agreed upon between the Countries.

Case 2 of labour provision: Korea-Peru FTA CHAPTER EIGHTEEN LABOR ARTICLE 18.1: FUNDAMENTAL LABOR RIGHTS The Parties, in accordance with their obligations as members of the International Labor Organization (hereinafter referred to as the ILO) and the ILO DeclaraFon on Fundamental Principles and Rights at Work and its Follow-Up (1998) (hereinafter referred to as the O Declaration ), shall endeavor to adopt and maintain in their legislation and practices thereunder, the principles as stated in the ILO Declaration. ARTICLE 18.2: APPLICATION AND ENFORCEMENT OF LABOR LAW 1. A Party shall not fail to effectively enforce its labor laws and regulations, including those it adopts or maintains in accordance with Article 18.1, through a sustained or recurring course of action or inaction, in a manner substantially affecting trade or investment between the Parties. 2. The Parties shall not waive or otherwise derogate from, or offer to waive or otherwise derogate from, their laws or regulations implementing Article 18.1, in a manner substantially affecting trade or investment between the Parties, where the waiver or derogation would be inconsistent with the principles as stated in the ILO Declaration.

ARTICLE 18.3: PROCEDURE GUARANTEE AND PUBLIC AWARENESS 1. Each Party shall ensure that persons with a recognized interest under its labor laws or regulations in a particular matter have appropriate access to tribunals for the enforcement of the Party s laborlaws and regulations. Such tribunals may include administrative, quasijudicial, judicial, or labortribunals. 2. Each Party shall ensure that proceedings before such tribunals for the enforcement of its laborlaws and regulations are fair, equitable, and transparent. 3. Each Party shall provide that parties to such proceedings may seek existing remedies to ensure the enforcement of their rights under its labor laws and regulations. 4. Each Party shall promote public awareness of its laborlaws and regulations. ARTICLE 18.4: INSTITUTIONALMECHANISM 1. The Parties hereby establish a LaborAffairs Council comprising representatives of each Party s LaborMinistry and other competent authorities responsible for laboraffairs. 2. The Council shall meet within one year following the date of entry into force of this Agreement and thereafter as necessary, to discuss the matters of mutual interest, and to oversee the implementation of this Chapter, including the cooperative activities on laborunder Article 18.5. 3. Each Party shall designate and maintain an office within its administration that shall serve as a contact point with the other Party and assist the Council in carrying out its work, including coordination of cooperative activities on laborunder

ARTICLE 18.5: LABOR COOPERATION Recognizing the importance of cooperation on trade-related aspects of labor policies in order to achieve the objectives of this Chapter, the Parties commit to initiating cooperative activities as set out in Annex 18A. ARTICLE 18.6: LABOR CONSULTATIONS 1. A Party may request consultations with the other Party in writing regarding any matter of mutual interest arising under this Chapter. The Parties shall commence consultations promptly after a Party delivers such request to the contact point of the other Party. 2. The Parties shall make every attempt to arrive at a mutually satisfactory resolution of the matter and may seek advice or assistance from any person or body they consider appropriate. 3. If a Party deems that the matter needs further discussion, the Party may request that the Council be convened to consider the matter by delivering a written request to the contact point of the other Party. The Council shall convene promptly and endeavor to agree on a resolution of the matter. ARTICLE 18.7: DISPUTE SETTLEMENT Neither Party shall have recourse to Chapter Twenty-Three (Dispute Settlement) for any matter arising under this Chapter.

Case 3 of labour provision Japan-Philippines Economic Partnership Agreement Article 103 Investment and Labor The Parties recognize that it is inappropriate to encourage investment by weakening or reducing the protections afforded in domestic laborlaws. Accordingly, each Party shall strive to ensure that it does not waive or otherwise derogate from, or offer to waive or otherwise derogate from, such laws in a manner that weakens or reduces adherence to the internationally recognized labor rights referred to in paragraph 2 below as an encouragement for the establishment, acquisition, expansion or retention of an investment in its Area. If a Party considers that the other Party has offered such an encouragement, it may request consultations with the other Party and the Parties shall consult with a view to avoiding any such encouragement.

1. For purposes of this Article, labour laws means each Party s laws or regulations that are directly related to the following internationally recognized labor rights: (a) the right of association; (b) the right to organize and bargain collectively; (c) a prohibition on the use of any form of forced or compulsory labor; (d) labor protections for children and young people, including a minimum age for the employment of children and the prohibition and elimination of the worst forms of child labor; and (e) acceptable conditions of work with respect to minimum wages, hours of work, and occupational safety and health.

Labour provisions: importance of stakeholder involvement Country/ Case CAFTA-DR Agreement Implementation Actions Effects FTA with US (2004) Pre-ratification Capacity buidling to improve implementatin gaps Stakeholder involvement Monitoring &. progress reports Some ratifications (El Salvador) & legislative changes (EPZs) ILO Verification project: Increased MOL budget by 20%; inspectorates by 55%; Increased number of judges Cambodia Republic of Korea Bangladesh Bilateral Textile Agreement with US (1999-2004) Pre-ratification Stakeholder involvement Monitoring & progress reports Positive incentives FTA with EU Stakeholder involvement Monitoring Unilateral trade agreement Stakeholder involvement Capacity building activity Monitoring Strengthened freedom of association Decrease in gender wage gaps ILO conventions: 1 ratification and follow-up of others Initiatives for cooperation in CSR and nondiscrimination More frequent and improved inspections Amendments to the Bangladesh Labour Act

The role of MNEs and global supply chains

The role of MNEs in FTAs FTAs provide multinational corporations (MNEs) with policy support and incentives to attract investments.

Global Supply Chains in the apparel industry 23

World economy s participation in GSCs Source: ILO, 2016 ILC Report IV, Decent Work in Global Supply Chains (Geneva, 2016), p. 14. 24

Share of employment in GSCs and in the total economy, 2013 25

FDI plays a key role in GSCs FDI inflows in emerging, transition and least developed economies, 1970-2012 directly engage by purchasing an existing suppliers or by setting up their own production facilities in another countries enter into a contractual relationship with an independent suppliers or contractors outside the home countries engage in GSCs indirectly when purchasing a production input from a domestic suppliers Decent work in GSCs 26

Key challenges in GSCs Non-standard forms of employment/ or vulnerable employment Low wages and income inequality Unsafe working conditions Lack of social protection Gender disparity Lack of compliance with labour standards (FOA and the right to collective bargaining) lack of protection for the rights of migrant workers 27

Gender pay gaps Women workers wages in many countries of the AP region share around 60-80 percent of their counterpart male workers. Source: ILO, Global Wage Database 2014/15, based on national statistics. 28

Social security expenditure in Asia and the Pacific In comparison with a high economic growth in the region, the economic benefits are not equitably shared 30 Total public social protection in percentage of GDP - regional estimates Weighted by population 25 25.1 Public social security expenditure (excluding health) Public health expenditure Total public social security expenditure 20 18.9 Percentage of GDP 15 10 16.0 13.6 13.5 10.2 9.8 5.3% of GDP 8.4 5 5.3 5.3 0 Western Europe Central and Eastern Europe North America North Africa CIS Latin America and the Caribbean Middle East Asia and the Pacific Sub-Saharan Africa Total Regions 29

Ratification of ILO core conventions by region The ratification of the core conventions is relatively low in in Asia and Arab states, and the implementation of the ratified conventions is another challenge in many developing countries. Country Freedom of association Forced labour Discrimination Child labour C087 C098 C029 C105 C100 C111 C138 C182 Total: 187 153 164 178 175 171 172 168 180 Africa (54) 49 54 54 54 52 54 52 53 Americas (35) 33 32 34 35 33 33 31 35 Arab States (11) 3 6 11 11 7 10 11 11 Asia (35) 18 21 28 24 28 24 23 30 Europe (51) 50 51 51 51 51 51 51 51 Source: ILO, www.ilo.org, 2016 30

Global framework agreements as a governance tool in GSCs

Various types of governance in GSCs Public governance : state s duty to promote compliance, enforce national labour laws and regulations and implement int l labour standards Private governance : led by enterprises, promoting private compliance initiative, ie., CSR and code of conduct Social partners initiatives : taking place at enterprise, sector, national or international level, so-called social governance including collective bargaining (CB) and global framework agreements (GFA) Multilateral initiative : led by international development agencies such as OECD guideline (2011), ILO MNE Declaration (2017), and UN global compact

Global framework agreements To establish the principles and standards that MNEs apply throughout the world; Recognition and implementation of ILO core conventions; Guarantee of corporate social responsibility and sustainable development; Promotion of social dialogue at international, regional and enterprise level, on the basis of shared ethical and social principles and values;

The guiding principles of GFA are: 1. A minimum labour standard with reference to ILO conventions Freedom of Association and Collective Bargaining (Conventions 87 and 98) Discrimination (Conventions 100 and 111) Forced Labour (Conventions 29 and 105) Child Labour (Conventions 138 and 182) 2. Other issues Qualified and secure employment Environmental protection Occupational safety and health Living wages

References of int l instruments and principles in GFAs 60 56 54 50 46 40 30 27 24 24 20 19 18 10 8 0 OECD Guidelines Universal Declaration on Human Rights UN Global Compact ILO MNE Declaration UN Guiding Principles 0 1999 May-15 Note: The figure is based on an evaluation of 62 GFAs from 1994 to 2007 and 54 GFAs from 2009 to May 2015. Source: Felix Hadwiger. Global framework agreements: Achieving decent work in global supply chains?, in Int l Journal of Labour Research Vol7: Issue 1-2 (Geneva, ILO, 2015).

GFAs signed by GUFs 120 1 1 1 100 1 17 20 20 1 17 1 7 7 7 14 80 1 14 6 1 13 6 12 5 5 31 34 35 35 60 1 4 11 31 10 30 4 25 27 40 8 4 4 14 6 12 5 4 7 5 4 6 11 16 21 26 28 31 33 34 36 40 45 46 46 49 20 4 5 4 3 3 21 0 4 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 IFJ BWI IUF UNI IndustriALL

Concluding Active campaigns are needed to ensure the participation of trade unions in the negotiation stage of bilateral/ multilateral trade agreements, which will lead to the inclusion of labour provision in the FTAs. As seen the operation of many FTAs in the region, union capacity building is necessary for understanding the impacts of FTAs on employment and labour standards. Union network building is essential to monitor MNEs business activities in the implementation of FTAs to assure compliance with ILS.

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