The EU-Korea FTA Labor Dispute: Comparing Labor Provisions Under the EU-Korea FTA and the KORUS FTA

On January 25, 2021, the EU-Korea Panel of Experts found that Korea had failed to uphold its labor obligations to “respect, promote, and realise” the right to freedom of association and to take concrete steps to ratify all eight fundamental conventions of the International Labor Organization (ILO). In the final report, the Panel recommended Korea to bring its domestic laws “into conformity with the principles concerning freedom of association” but recognized that Korea had “ma[de] continued and sustained efforts towards ratification of the core ILO Conventions.”[1] This case marked the EU’s first victory in enforcing labor obligations under the trade and sustainable development (TSD) chapter of the EU’s “new generation” of Free Trade Agreements (FTAs).[2]  The EU adopts the TSD provisions as tools to improve and reinforce the labor and environmental standards of its trading partners – a key policy objective the EU has recently adopted.[3]  Within the last two years, the EU has increased enforcement of TSD obligations in its trade agreements, requesting 3 other TSD consultations,[4] and successfully securing a win against Ukraine for the violation of the TSD environmental obligations under the EU-Ukraine Association Agreement.[5] Although labor and environmental provisions are not unique to the EU’s “new generation” FTAs, EU-style TSD provisions impose additional and higher obligations, beyond those commonly provided for in the labor and environmental provisions of other model FTAs.  The following example compares the labor provisions of the EU-Korea FTA and the Korea-US (KORUS) FTA to demonstrate the differences in labor standards between these two agreements. ILO Declaration and Conventions Before the EU-Korea FTA came into force, Korea had already committed to substantially similar labor obligations under KORUS. Indeed, Article 13.3 of the EU-Korea FTA, the very provision Korea was found to have violated, is nearly identical to Article 19.2 of KORUS.  Under both FTAs, the parties must respect and maintain the five fundamental rights under the ILO Declaration of 1998, namely: (1) freedom of association; 2) the right to collective bargaining; (3) elimination of all forms of compulsory or forced labor; (4) effective abolition of child labor (and, in the KORUS FTA, “prohibitions on the worst forms of child labor”); and (5) elimination of discrimination in respect of employment and occupation.[6] The EU-Korea FTA goes one step further, mandating that the Parties to the FTA “reaffirm the commitment to effectively implement […] the ILO Conventions that Korea and the [EU] have ratified respectively” and to “make continued and sustained efforts towards ratifying the fundamental ILO Conventions as well as the other Conventions that are classified as up-to-date by the ILO.”[7]  Since the US has ratified only 2 of 8 core ILO Conventions (compared to the universal ratification by all EU member states), the EU clearly views the ratification of ILO Convention as an essential step towards strengthening global labor standards.[8] Dispute Settlement Both the EU-Korea FTA and KORUS contain similar provisions to settle disputes arising out of their respective labor provisions.  In both FTAs, the parties must first enter into consultations before they can pursue formal dispute settlement under an established panel.[9]  Although both FTAs instruct parties to effectively enforce labor laws “in a manner affecting trade,” the US alone requires the complaining party to connect the violation specifically to trade-related aspects of labor.[10]  The EU takes a more liberal approach, concluding that “national measures implementing [labor] rights [are] inherently related to trade.”[11]  The additional procedural requirement in the US model FTA has contributed to US processing only one labor dispute, in the agreement between the US and Guatemala under CAFTA-DR.[12]  By contrast, the EU has brought the 4 complaints referenced above and has successfully processed 2 cases within the last 2 years alone. Despite the relatively low number of cases launched under their provisions, US FTAs at a minimum provide a successful complaining Party enforceable remedies with regard to breaches of labor standards.  Specifically, KORUS grants a successful complaining Party the authority to impose trade sanctions, or to demand a monetary fine for the violations.[13]  By contrast, under the EU-Korea FTA, a successful Party’s remedies are not spelled out.  Instead, the agreement merely requires the losing party must “make their best efforts to accommodate advice or recommendations” of the panel.[14] Conclusion The EU’s recent successful invocation of the EU-Korea labor dispute mechanism, as well as the EU-Ukraine environmental dispute mechanism, demonstrate the potential power States may deploy through trade agreements, in seeking to raise and enforce labor and environmental standards beyond their borders.  In this regard, EU-style FTAs appear to have stepped ahead of the US model, seeking compliance with the full suite of international labor agreements established under the auspices of the ILO.  The absence of secure remedial mechanisms are one drawback of the EU vs. the US approach, since in the former remedial steps are dependent on voluntary implementation of panel recommendations by a respondent Party to a dispute.  The EU’s increased enforcement efforts nevertheless demonstrate the potential promise of instrumentalized international trade agreements, to help raise and more securely enforce labor and environmental standards around the world.

---

  [1] Report of the Panel of Experts Proceeding Constituted Under Article 13.15 of the EU-Korea Free Trade Agreement (“EU-Korea Final Panel Report”), 78-79 (Jan. 20, 2021). [2] These “new generation” FTAs are with Canada, Central America, Columbia, Ecuador, Georgia, Mercosur, Mexico, Moldova, Singapore, South Korea, Ukraine, and Vietnam.  A TSD chapter has also been included with the recent the EU-United Kingdom FTA.  See https://trade.ec.europa.eu/doclib/press/index.cfm?id=2238; https://ec.europa.eu/trade/policy/policy-making/sustainable-development/. [3] 15-Point Trade and Sustainable Development Action Plan 7-8 (Feb. 26, 2018) (https://trade.ec.europa.eu/doclib/docs/2018/february/tradoc_156618.pdf). [4] “Disputes under Bilateral Trade Agreements,” European Commission (last updated Jan. 25, 2021) (https://ec.europa.eu/trade/policy/accessing-markets/dispute-settlement/bilateral-disputes/). [5] “Ukraine Wood Export Ban Found Illegal in Independent Panel Ruling,” European Commission (Dec. 12, 2020) (https://trade.ec.europa.eu/doclib/press/index.cfm?id=2223). [6] EU-Korea Free Trade Agreement, art. 13.4; Korea-US Free Trade Agreement, art. 19.2. [7] EU-Korea FTA, art. 13.4(3). [8] “Feedback and Way Forward on Improving the Implementation and Enforcement of Trade and Sustainable Development Chapters in EU Free Trade Agreements," Non-paper of the Commission Services (Feb. 26, 2018). [9] See EU-Korea FTA, art. 13.14 & 13.15; KORUS FTA, art. 19.7 & art. 22.8 – 22.9. [10] KORUS FTA, art. 19.2.1, n.2. [11] EU-Korea Final Panel Report, para. 94 & 95 (Jan 20, 2021). [12] See Labor Enforcement Issues in U.S. FTAs, CRS Report IF10972 (last updated Dec. 18, 2020). [13] See Dispute Settlement in the U.S.-South Korea Free Trade Agreement (KORUS FTA), CRS Report R41779 12 (March 12, 2012) (https://www.everycrsreport.com/files/20120321_R41779_0c85250b0ee956ca921eb4694c2ebc5e9e233248.pdf). [14] EU-Korea FTA, art. 13.15.2.