Trade Agreements and Sustainability: Exploring the Potential of Global Value Chain (GVC) Obligations

Abstract

This article investigates the potential of global value chain (GVC)-orientated sustainability provisions in regional and bilateral trade agreements (FTAs). Such provisions impose social and environmental obligations directly onto GVCs, as opposed to creating obligations for governments. The theoretical potential of GVC provisions is examined, and the concepts of effectiveness and legitimacy are introduced as values by which to assess them. Four recent sets of provisions are then scrutinized. These are (i) palm oil sustainability standards from the Indonesia–European Free Trade Association (EFTA) Comprehensive Economic Partnerhsip Agreement (CEPA) FTA, (ii) hen welfare standards in the European Union–Mercosur Association Agreement, (iii) a stipulation of a minimum average wage for the automobile industry in the US–Mexico–Canada Agreement (USMCA), and (iv) enforcement of collective bargaining and freedom of association directly against factories, also in the USMCA. All of these provisions are found to have significant deficiencies. At the same time, it is argued that three different governance models underpin them, namely (i) third-party certification schemes, (ii) domestic regulations of one of the parties, and (iii) bespoke arrangements created for the FTA in question. The article therefore considers the potential and drawbacks of each governance model in terms of their effectiveness and legitimacy, as well as alternative and complementary commitments including unilateral measures and subject-specific trade agreements.