189 The action plan also focuses on delivering results under the TSD chapters. To achieve these objectives, the European Commission aims at identifying priori-ties per FTA partner to enable a more efficient implementation of commitments under the agreement, improving the compliance with commitments through the full use of the tools available (like resorting to the dispute settlement mechanism), and ensuring that the partner countries ratify key conventions in labour and environmental international agreements. Monitoring of the TSD chapters is a priority, as illustrated in the preparation of annual reports on FTA implementation, as is the increase in resources that support the implementa-tion of TSD chapters, and stronger and more detailed provisions on climate ac-tion and labour convenac-tions. Equally important, there is also a strong focus in the action plan on transparency and communication.
The European Commission aims at communicating developments and re-sults of the work carried out with development partners and civil society on TSD, as well as giving timely responses to submissions received from stake-holders on the matter at hand. Besides ensuring the proper implementation and enforcement of the TSD chapters in EU FTAs, the European Commission also strives to measure the impact of potential FTAs, as well as evaluating the objectives accomplished by FTAs already in place. To do this, the Commission services make use of specific instruments like ex-post evaluations and Sustain-ability Impact Assessments.
3 Sustainable development: measuring success and evaluating
190 European trade policy and a sustainable world: facing the challenges ahead
deal, which aims at removing duties on 91% of goods that EU companies ex-port to Mercosur. The agreement includes a chapter dedicated to sustainable development, which covers issues like the sustainable management and con-servation of forests, respect for labour rights, promotion of a responsible busi-ness conduct and the implementation of the ILO’s fundamental conventions (European Commission, 2019a).
In February 2020, LSE Consulting delivered the interim report of the EU-MERCOSUR SIA, which presented the core findings of the study. The study focused on the aforementioned themes, typical of an EU SIA, from which we highlight the environmental and social analysis – based on GHG emissions, land use, waste production, trade in environmental goods and services, im-proved working conditions, income inequalities and employment. On the envi-ronmental front, the AA is expected to increase CO2 emissions in the long term in Europe by 0.03%, in the most-ambitious scenario (LSE Consulting, 2020).
For the Mercosur countries, the highest increase in emissions will be in Argen-tina (0.69%, also in the most-ambitious scenario). However, certain mitigating factors (like the technique effect) are not taken into account in these estimates.
Regarding the social sphere, unskilled labour wages are expected to increase more in real terms than skilled labour wages. Additionally, the effects of the AA on informal employment, child labour and forced labour will be shaped by regional disparities – the report highlights that, for the past decade, Latin American countries’ openness to trade has been accompanied by the enforce-ment of stronger labour standards (assuming that there is a political will and resources to do so). Finally, LSE Consulting addressed the great potential for in-ternational cooperation on TSD chapters’ conventions, due to the proliferation of legislation designed to address these issues. Overall, the interim report of the EU-Mercosur SIA provides a clear, positive outlook on the effects of trade in the EU’S and Mercosur’s sustainable development, since there will be an overall negligible impact on CO2 emissions, and positive social effects for both parties.
Although the increase in CO2 is negligible, it is still an increase. It is worth noting that this increase may be offset by the development of less polluting, new technologies within the Mercosur countries, a mechanism that current methodologies cannot properly take into account. However, it is expected that the EU’s advanced and often more stringent environmental policies may actu-ally reduce emissions overall due to the trade-induced technique effect, which leads to the adoption of more environmentally friendly methods of production due to the more stringent environmental policies (Managi, Hibiki and Tsurumi, 2009).
In many instances, empirical evidence found that trade can be a channel for technological diffusion. Xu and Wang (1999) found that capital goods trade was a major carrier of R&D spillovers in OECD countries. Furthermore, Grossman and Krueger (1991), in their study of the North American Free Trade Agree-ment, found empirical evidence supporting the fact that, after certain levels of income (which would have risen with the more liberal trade regime), pollution problems tend to be alleviated. The authors also stated that trade liberalization might increase Mexico’s specialization in more environmentally friendly
sec-191 tors. Because the EU’s capital goods are more technologically advanced, they have to comply with the strict rules aforementioned. This may ultimately miti-gate the potential increase in CO2 emissions as there are R&D spillovers towards the Mercosur countries, and thus a higher production of more technologically advanced, more environmentally friendly goods.
At the other end of the “evaluation timeline”, we have the ex post evalua-tions. After sufficient time has passed to gather a robust amount of evidence, an ex post evaluation is conducted to analyse the observed impacts of the trade agreements. Contrary to the SIA, the reports on ex post evaluations are pre-pared by the European Commission, and are not DG Trade specific. The ex post evaluations can also help in discovering unintended effects that were not foreseen by ex ante evaluations (European Commission, 2016a). Much like the SIAs, the ex post evaluation reports are also organized in different sec-tions, each focusing on a different theme (social analysis, economic analysis, environmental analysis, and so on). An example of such report is the ex post evaluation of the EU-Korea FTA. The report (prepared by an external consult-ant) highlights the insignificant increase of CO2 emissions throughout Europe induced by the FTA (0.2%), whilst it reports a higher percentage of emissions in Korea in general – although the effects of the FTA are heterogeneous across sectors. Whilst the automotive sector’s CO2 level increased with the FTA, Ko-rean trade and transport CO2 emissions decreased, which can be explained by trade diversion effects. (IFO and CIVIC Consulting, 2018). Furthermore, the FTA application did not have any significant effects on gender-related discrimi-nation is Korea, nor was it possible to discern if the FTA ratification was respon-sible for the deteriorated labour rights in the country.
Yet another example of the scope of the evaluation tools of the European Commission is the mid-term evaluation of the GSP. The GSP, already mentioned in the previous section, is specifically tailored to benefit developing countries to export their goods to the EU. The mid-term evaluation of the GSP is particu-larly interesting because we can analyse the impact of the ILO conventions and climate action provisions in countries that are characterized, amongst other things, by significantly lower levels of economic growth and general develop-ment when compared to the EU. However, the analysis of the social impact of the scheme on the beneficiary countries is hampered by the lack of data on social data, as monitoring and collecting such data is difficult in such settings (Development Solutions, 2017).
In the particular case of the GSP, the objectives of this trade instrument can be achieved through various mechanism, that could lead to a reduction of cases of violations of fundamental human rights and labour standards by the ben-eficiary countries, when compliance with sustainable trade principle are cou-pled with improved market access. This approach has been proved to work when examining the cases Pakistan and Bangladesh, where labour rights have strengthened since the GSP has been in place. In theory, trade could promote environmental protection and improvement through the technique effect dis-cussed in section 2. Trade could lead to economic growth and increased in-come, more resources could be used towards implementing effective policies
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on environmental protection and climate change. However, case studies from developing countries have also highlighted that in the absence of appropriate sustainability provisions, trade may also lead to detrimental environmental ef-fects. As the demand for products from developing countries increases because of the increased market access, so does production, motorised transport and urbanisation and land conversion from forested to agricultural purposes in the beneficiary developing countries. It is therefore important to ensure that ap-propriate mechanisms are included in FTAs when it comes to the enforcement of environmental standards, so that developing countries have the right set of incentives to comply with global targets aimed at the reduction of greenhouse emissions.
Many of the GSP beneficiaries are African nations that are also engaged now in implementing the provisions of the Economic Partnership Agreements with the EU. Therefore, it is paramount for the EU and African nations to main-tain and strengthen the strategic partnership that supports strong institutions, democratic governance, peace and security, and a sustainable economic de-velopment. The main focus for the future of this partnership is the sustain-able development of the agrifood sector of the southern continent. In 2017, the former EU Agriculture and Rural Development Commissioner Phil Hogan (now the Commissioner for Trade) stressed the importance of private invest-ment in the sector, as millions of more jobs will be needed to accommodate the fast-growing African population. The future of Africa will also have to rely on the sustainable management of natural resources, and its partnership with the EU can certainly help in that matter.
Trade policies and instruments can steer the path towards a sustainable fu-ture, if coupled with a clear plan on how to tackle the environmental chal-lenges that the world is facing nowadays.