Monitoring of trade deals needs a risk-based approach

On human rights issues, trading partners must do more than trust to luck.

Expert comment Updated 7 July 2021 Published 24 May 2021 3 minute READ

The recent row within the UK government about the treatment of agricultural products in a proposed new trade deal with Australia provides a reminder that changes to trading arrangements can have social and environmental costs, as well as benefits.

Although the UK government clearly feels political pressure to demonstrate its ‘Global Britain’ credentials with some speedily concluded new deals, rushing ahead without a full understanding of the social, environmental, and human rights implications risks storing up problems for later. In the meantime, calls for better evaluation and monitoring of trade agreements against sustainability-related commitments and goals – ideally with statutory backing – will only get stronger.

EU experiences with these kinds of processes are instructive. For more than 20 years the Directorate General for Trade of the European Commission (DG Trade) has been commissioning sustainability impact assessments (SIAs) from independent consultants in support of trade negotiations, and since 2012 these assessments have explicitly encompassed human rights impacts as a core part of the analysis.

The Commission should be transparent about how it plans to respond to the EU-Mercosur SIA recommendations regarding flanking measures and follow up

These processes have since been augmented with a programme of periodic ‘ex post’ evaluations of trade agreements to ‘analyse the observed economic, social, human rights, and environmental impacts’ of live trade deals and to make recommendations about any mitigation action which may be needed.

For credibility and objectivity, the Commission outsources much of its sustainability assessment and ex post evaluation activities to independent consultants, who are encouraged to innovate and tailor their approaches subject to broad methodological parameters laid down by the Commission. Over time, experiences with specific assessment and monitoring assignments have enabled external SIA practitioners – and the Commission itself – to progressively strengthen these processes and underlying methodologies.

Yet despite the improvements there remains legitimate questions about whether the human rights aspects of these SIA processes – and subsequent evaluations – are having real policy impact. The difficulty of predicting human rights impacts of trade agreements in advance – as the COVID-19 crisis amply demonstrates – suggests a need for realism about the extent to which a ‘one off’ process, often carried out at a time when there is only ‘agreement in principle’ as to future trading terms, can produce a robust roadmap for heading off future human rights-related risks.

Human rights impact assessments have a potentially valuable role to play in laying down the substantive and structural foundations for future human rights monitoring as part of a broader, iterative, human rights risk management strategy. But the fragmented manner in which many trade agreements approach human rights issues, and the fact that outcomes are the product of negotiation rather than necessarily design, make it difficult to turn this vision into reality.

Controversies surrounding the SIA process for the EU-Mercosur agreement illustrate why striving for more coherence in the identification and subsequent management of human rights-related risks is important. In June 2019, the Commission decided to wrap up negotiations with the South America Mercosur bloc, even though the SIA process for the proposed agreement was still incomplete and the interim and final SIA reports yet to be delivered. Frustrated NGOs made their feelings clear in the form of a formal complaint – and a slap on the wrist from the EU Ombudsman duly followed.

While there may be opportunities for EU institutions to follow up the recommendations through unilateral ex post evaluation processes, current legal, policy, and institutional arrangements provide few guarantees this will take place

However, when it eventually appeared in December 2020, the final SIA report for the EU-Mercosur deal did include a number of interesting recommendations for responding to specific areas of human rights-related risk identified through the pre-signing assessment process – such as flanking measures designed to address issues pertaining to health, equality, and protection of indigenous peoples, and stressing the need for ‘continuous monitoring’.

Hopefully these recommendations will be proactively followed up, but there are reasons not to be overly optimistic about that. To the extent that these recommendations might have required, or benefitted from, some tweaks to the terms of the trade agreement itself, it was clearly too late. And while there may be opportunities for EU institutions to follow up the recommendations through unilateral ex post evaluation processes, current legal, policy, and institutional arrangements provide few guarantees this will take place.

The credibility of the EU SIA programme has clearly taken a knock because of the problems with the EU-Mercosur process, and stakeholders could be forgiven for questioning whether expending time and effort on engaging in these processes is actually worthwhile. As a first step towards rectifying this, the Commission should be transparent about how it plans to respond to the EU-Mercosur SIA recommendations regarding flanking measures and follow up – ideally consulting with stakeholders about the various human rights monitoring options available.

Looking further ahead, the Commission should be urging SIA practitioners to deal more expansively with the options for follow up human rights monitoring in future SIA reports, setting out recommendations not just on the need for ongoing monitoring of human rights-related issues but on the detail of how this might be done, and how progress towards human rights-related goals could be tracked. And creativity should be encouraged because, as detailed in a newly-published Chatham House research paper, there may be more opportunities for human rights monitoring than first appear.

The SIA process could also provide a forum for exploring complementary measures needed to make future monitoring efforts as effective as possible – jointly and unilaterally; politically, structurally, and resources-wise; both within the framework of the trading relationship and extraneously. The credibility of the process – and hence stakeholder trust – would be further enhanced by commitments from the Commission to be more transparent in future about how different human rights monitoring recommendations laid out in SIAs have been taken into account in subsequent negotiations, in the supervisory arrangements developed for specific trading relationships, and in the implementation of EU trade policy more generally.