Environmental and social impacts embedded in EU trade policies

AUTHOR: Antoine Oger

This policy brief looks at the external impact of EU policies embedded into trade analysing the EU Corporate Sustainability Due Diligence and Deforestation-free products Regulations impact on Vietnam in the context of the EU-Vietnam Free Trade Agreement.

Trading relations with the EU have a considerable impact on the capacity of third countries to achieve the UN Sustainable Development Goals (SDGs) which comes with a responsibility to address the potential adverse effects of these trade relations. The upcoming European Union legislations on Corporate Sustainability Due Diligence (CSDD) and Deforestation-free products Regulations (EUDR) are integral parts of that effort since actions of private sector organisations significantly affect society and the environment in which they operate beyond the products and/or services they offer.

Yet, the increased complexity of that environments and reliance by companies on globalised value chains make adequate due diligence processes more difficult to implement. This study assesses the potential impact of the upcoming EU CSDD and EUDR legislations on EU-Vietnam trade relations in the context of the EU-Vietnam Free Trade Agreement (EVFTA) and through the lens of a selection of specific value chains selected according to their economic, social and environmental importance. These specific value chains are electronics, coffee, textile and timber.

The study includes some recommendations for the EU and Vietnam to support adequate sustainability processes in their value chains and thus attempting to mitigate the negative external impact of EU trade-related policies. It calls both the European Commission and the Government of Vietnam to adopt Due Diligence legislations aligned with international standards such as the UN Guiding Principles on Business and Human Rights (UNGP) or the OECD Due Diligence Guidance for Responsible Business Conduct. Such an alignment between the EU and Vietnamese DD policies would avoid policy fragmentation at the international level and provide economic operators, including Vietnamese exporters, with a transparent level-playing field thus facilitating sustainable trade relations between both partners. The European Commission should eventually work with other DGs as well as the EU Delegation in Vietnam to provide external partners with a consistent and informed message on the future implementation of EU trade-related legislations. The study also outlines sectoral recommendations pertaining to the specific value chains identified:

The EU should provide targeted support (including financial) to conduct and share further studies of the risks inherent to the electronics sector combined with activities designed to build capacities of government officials and labour inspectors on the matter. The EU could also incorporate adequate purchasing practices requirements in the CSDDD to limit the risks for companies to cause or contribute to labour rights or safety breaches in the sector.
The EU should promote systematic consultations of civil society in the context of the DAGs to provide evidence-based policy recommendations and inform policy makers. Direct technical and financial support should be provided to CSOs, including trade unions, for them to be able to do so.
The EU should provide support for capacity building activities of smallholders to understand the new requirements implied by other relevant legislations such as the VPA/FLEGT system or the recently adopted EU deforestation free product legislation which include due diligence considerations. In particular, the EU should:

Support multi-stakeholder initiatives to foster dialogue and share knowledge in the context of EUDR implementation, while also taking into account the challenges faced by smallholder farmers.
Support capacity-building initiatives for CSOs, local small producer communities and local authorities, enabling them to effectively monitor and enforce compliance with the EUDR requirements.

The EU should promote awareness amongst government officials, companies’ workers and management as well as civil society on the recommendations regarding textile supply chain due diligence in global standards.

Both the EU and Vietnam should support the integration of grievance mechanisms accessible to NGOs and CSOs such as trade unions in Due Diligence mechanisms. This would allow for such organisations to file complaints on labour rights, working conditions or environmental concerns and allow for better monitoring and improvement of working conditions and environmental impact in relevant value chains.

The adoption of the EU legislation on CSDD and EUDR provides a crucial opportunity to improve sustainability aspects in key value chains between the EU and Vietnam. Both parties have now the chance to make do with their international commitments and promote the adoption and implementation of ambitious sustainability standards in their value chains.

Read the study.

Photo by Thai Tong on Unsplash

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