Written evidence submission from the Business & Human Rights Resource Centre (TPP0009)

Submission to the International Trade Committee’s inquiry ‘UK trade negotiations: CPTPP accession’

Source: https://committees.parliament.uk/call-for-evidence/641/?slug=uk-trade-negotiations-cptpp-accession

About the Business & Human Rights Resource Centre  

The Business & Human Rights Resource Centre is a non-profit that tracks the positive and negative human rights impacts of more than 9,000 companies worldwide and, since 2015, has taken up more than 6,000 allegations of human rights violations with companies.

The Resource Centre also produces advice and analysis relating to the business practices and public policies that prevent and mitigate negative corporate human rights impacts. This includes studying the role that international trade agreements play in supporting human rights around the world. The Resource Centre has a global team of around 80 members based in over 20 locations in every region of the world. 

Summary of points

• The CPTPP deal undermines high standards of human rights and labour rights protections
• The CPTPP trade agreement contains Investor-State Dispute Settlement provisions which are incompatible with corporate accountability, democracy and the protection of human rights
• For these reasons, the UK should not accede to the CPTPP agreement

Human rights and labour rights protections

1. Liberalising trade agreements make it easier for goods and services to be sold internationally. This can create a race to the bottom on social and environmental protections, as states compete to gain a competitive advantage on their trading partners. According to the UN Office of the High Commissioner on Human Rights: “Evidence indicates that pressures from international trade and investment rules to open borders for goods and services, to create a ‘business-friendly’ environment for foreign direct investment and to strengthen intellectual property rights have often contributed to undermining the protection and realisation of human rights.”

2. Recent decades have seen the development of trade agreements that safeguard against this possibility by including social and environmental chapters which create a shared commitment to minimum acceptable practice.

3. The UK government has recognised the potentially negative correlation between trade deals and human rights, with the Trade Secretary announcing that: “The Government are clear that more trade will not come at the expense of human rights. The UK will continue to show global leadership in encouraging all states to uphold international rights obligations and to hold to account those who violate those rights.”

4. According to the Department for International Trade's own February 2022 polling, the British public prioritises respect for human rights and strong workers’ rights above any other factor when considering what would make another country an appealing trading partner.

5. However, when it comes to human rights and labour rights the CPTPP is a low-standards agreement that lacks adequate safeguards. CPTPP members sign up to a Labour Chapter which refers only to the 1998 ILO Declaration on Fundamental Principles and Rights at Work. This is a low bar. It lays out protections that already need to be respected by all the CPTPP signatories as part of their ILO membership, and it is not subject to supervision and monitoring by the ILO.

6. A more rigorous standard would be to require signatories to have ratified the ILO’s eight fundamental conventions. These cover issues ranging from freedom of association to forced labour to discrimination, and countries which have ratified the conventions are monitored by the ILO’s supervisory bodies.

7. Ratification and effective implementation of the ILO’s fundamental conventions is the standard  required in around 15% of all trade agreements with labour provisions, including the EU-UK Trade and Cooperation Agreement. [1] It is also the standard that the UK requires of poorer countries being offered preferential access to the UK market under the Generalised Scheme of Preferences Enhanced Framework. The UK government has not explained why weaker labour standards are acceptable in the CPTPP compared to these other trading arrangements.

8. High labour standards in trade agreements are an important bulwark against countries compromising on labour standards in order to gain a competitive advantage. For the UK to be joining a lower-standard agreement would be a concern even if the trading partners concerned currently met the highest possible standards.

9. That is not the case with CPTPP. The commitment of CPTPP countries to the fundamental ILO labour rights conventions varies significantly. According to the UK government’s own analysis, of the eight fundamental conventions, Brunei has ratified only two and Malaysia and Singapore have ratified only five. Five of the 11 CPTPP members have not ratified the ILO convention on Freedom of Association.[2]

10. As well as setting out required standards, labour chapters often contain a provision for a complaint to be brought against another party should those standards not be met. When it comes to the CPTPP, this provision is insufficient to effectively protect labour rights.  For a case to be brought, violations need to be judged to have had a provable and sustained effect on trade and investment. This constitutes a significant obstacle: it has been difficult for lawyers to demonstrate a causal link between proven rights violations and changes in trade flows.

11. A demonstration of the uselessness of this type of labour rights protection can be seen in the Central America Free Trade Agreement (CAFTA), which contains an identical provision. The USA attempted to bring a case against Guatemala under CAFTA for having failed to enforce its own labour laws, including the right to freedom of association and collective bargaining. Nine years after US unions filed the original case, the CAFTA labour arbitration panel found that, although Guatemala had indeed failed to effectively enforce its labour laws, that failure had not affected trade in a sustained or recurring way and there was therefore no scope to use the terms of the trade agreement to establish higher labour standards.[3]

12. The UK is acceding to an agreement with 11 countries, some of which meet a far lower standard when it comes to labour rights protections, and which lacks the tools to effectively safeguard standards. This may mean lower prices for consumers in the UK, but those lower prices could come at a human cost. Research from the British Foreign Policy Group shows that ‘choice and competition for British consumers’ is the public’s lowest priority when it comes to trade deals.

13. For example, according to Human Rights Watch, Vietnam “continues to prohibit independent labor unions, human rights organizations, and political parties. Organizers trying to establish unions or workers’ groups face harassment, intimidation, and retaliation.” Research from Anti-Slavery International indicates that the lack of freedom for independent unions leaves Vietnamese garment workers vulnerable to further abuses including “long hours of work, forced extension of work, denial of sick leave, a lack of occupational safety and health training and threat of employer retribution directed towards workers who attempt to speak out.”

14. Malaysia is rated by the International Trades Union Congress as having “no guarantee of rights”. Malaysian factories have repeatedly been subject to allegations of forced labour. This has led to the US Customs and Border Patrol banning imports from six Malaysian manufacturers.[4] The UK government is facing a high court review for having sourced medical PPE from Malaysian manufacturer Supermax, a company accused of using forced labour.

15. Entering into a liberalising trade arrangement with countries where labour rights are not protected is against the interests of UK domestic businesses, which are held to higher standards by UK labour laws and may therefore struggle to compete. The Department for International Trade is yet to produce analysis of the sectors in which UK businesses are in direct competition with businesses in CPTPP countries with lower labour standards.

Investor-State Dispute Settlement provisions

16. The CPTPP agreement contains Investor-State Dispute Settlement (ISDS) provisions. These allow corporations to sue states through a secretive parallel legal system if government polices threaten their future profits – even if those policies are aimed at protecting human rights and the environment. Corporations have already used ISDS to sue governments more than a thousand times, including over laws aimed at raising minimum wages, guaranteeing affordable water to citizens and phasing out the use of fossil fuels.

17. The UK should avoid signing any new agreements containing ISDS: this includes the CPTPP. The UK already has investment agreements containing ISDS in place with Malaysia, Mexico, Peru, Singapore and Vietnam. Therefore, acceding to the CPTPP would entail extending the right to sue the UK state to investors based in Australia, Brunei, Canada, Japan and New Zealand.

18. States are increasingly moving to dismantle the ISDS system. The provisions feature in only 1/3rd of investment treaties agreed in the last five years and countries including South Africa, Pakistan and Tanzania have successfully modified their investment treaties to remove ISDS clauses. The Regional Comprehensive Economic Partnership, a trade agreement in the Asia-Pacific region covering 30% of global GDP, is notable for excluding ISDS.

19. The UK government’s position on ISDS is difficult to define. None of the FTAs that the UK has negotiated since Brexit, with Japan, Australia and New Zealand, have included ISDS. The government has announced that one of its objectives for a new UK-Canada agreement is to ‘ensure the agreement does not contain an investor state dispute mechanism’. However, this position is entirely undermined by the notion that the UK government intends now to accede to the CPTPP, at a stroke opening up the UK state to being sued by investors from Canada, Japan, Australia and New Zealand.

20. As the UK takes the necessary steps to decarbonize the economy and meet its target of net zero by 2050, it may be particularly vulnerable to being sued by foreign fossil fuel investors using ISDS to protect the value of their investment. For example, Australian private equity manager EMR Capital owns an 80% share in West Cumbria Mining Ltd, which has applied to open a controversial new coal mine at Whitehaven in Cumbria. If the UK accedes to CPTPP and the UK government thereafter withdraws approval for the mine, EMR could attempt to sue for huge sums in compensation using ISDS. There is significant precedent for similar cases globally.[5]

21. Governments, including France and New Zealand, have admitted delaying or restricting climate regulation due to the risk of being sued by corporations using ISDS.[6]

22. There may be scope for the UK to negotiate the suspension of ISDS provisions on a bilateral basis with CPTPP partner countries. This is an approach taken by New Zealand, which agreed ‘side letters’ with five CPTPP partners (Peru, Australia, Brunei, Malaysia and Vietnam) that either exclude ISDS entirely or put measures in place to negate the threat of ISDS.

23. If the UK accedes to the CPTPP, negotiate ‘side letters’ with all CPTPP members to entirely exclude ISDS as an urgent priority. However, as a new member acceding to the agreement it is unclear how much latitude will be afforded to the UK to pick and choose in this fashion.

Conclusion

24. The UK should not accede to the CPTPP trade agreement unless the concerns outlined above can be adequately addressed through negotiation with the 11 current signatories to the agreement in such a way that higher labour standards are included in the agreements and ISDS removed.

25. This appears unlikely. CPTPP is unlike the bilateral trade agreements that the UK has recently been negotiating with Australia and New Zealand, where each party has the scope to propose and negotiate new elements to the agreement in question. Rather, the UK is acceding to a deal the text of which has already been agreed. While there may be scope to pursue side-letters to negate the threat of ISDS, and the government should be encouraged to do so, it is unlikely that the UK will be able to use this piecemeal approach to transform the CPTPP agreement into one that delivers for human rights.

26. In addition, the additional economic benefits of membership are likely to be small. The CPTPP countries are a long way away from the UK, making trade more expensive and challenging.[7] Furthermore, the UK is already party to trade agreements with nine of the CPTPP signatories: Japan, Australia, Mexico, Canada, Chile and Peru (via the UK-Andean Countries Trade Agreement) and Vietnam (provisional application). It is for these reasons that the UK Trade Policy Observatory has concluded “the economic gains from the UK acceding to the CPTPP do not appear to be very high”.

27. The diplomatic and geopolitical benefits of CPTPP membership are also unclear. While the UK government has made stronger links with the Asia-Pacific a major strategic priority, CPTPP membership may not be the best route since it is not the settled 11-country strong bloc that it may appear. Brunei, Malaysia and Chile have yet to ratify the agreement – with the result of the December 2021 election in Chile making their ratification unlikely. China, Taiwan, Ecuador and Costa Rica have also applied to join the agreement, suggesting further instability.

August 2022