Abstract
In September 2022, the Commission adopted a proposal for a Regulation on prohibiting products made with forced labour on the Union market. This arises in a context of rising concern over many years about breaches of workers’ fundamental rights and core standards of the International Labour Organization in supply chains of products that are marketed in Europe, particularly where multinational corporations have offshored production to states without the high labour standards enforced in the EU. There has also long been widespread concern, particularly from trade unions, that such offshoring enables manufacturers to undercut labour protections of European workers. Furthermore, the offshoring of manufacturing has enabled certain third countries to develop their industrial and technological capacities in ways that create geostrategic risks for the EU and its Member States, as these third countries become ‘systemic rivals’ of the Union. First, this article argues that the proposed Regulation fits with Anu Bradford's theory of the ‘Brussels Effect’ exposited in her 2019 book of that name, and that the Union should take advantage of Bradford's insights in developing the Regulation and future legal instruments. Bradford established the Brussels Effect as an empirical reality; this article makes a normative case that, in this instance, the EU institutions should actively embrace it as a means to advance its goals. The proposed Regulation is an example of the Union leveraging market power to accomplish normative goals, by exporting its values to third countries. This offers room for the EU to be a force for good in the world, answering some of the qualms raised in Bradford's work about the potential ‘imperialism’ of the Brussels Effect. The present article argues the Union should go further, try to ‘externalise’ more of the social acquis in the field of labour law, leveraging its international market power to both improve labour standards around the globe. This article challenges Bradford's original contention that the Brussels Effect does not apply to labour standards, arguing instead that it is possible, and normatively desirable, for the Union to follow this Regulation with a broader suite of measures aimed at globalising European labour standards, with benefits for both third-country nationals and citizens of the Union. Second, the article links the proposed Regulation to concern about the geostrategic vulnerability of Member States and the Union as a whole, where essential products are manufactured in third countries. This became apparent during the Covid-19 pandemic, with many critical supplies predominantly manufactured outside the Union. The ‘strategic autonomy’ agenda of the EU implies re-shoring of important industry, which is more easily accomplished where EU regulation lessens the ability of third countries to undercut the EU with low labour standards. This will have long-term economic benefits for the Union and its citizens, as well as depressing the potential for systemic rivals to the Union to develop their industrial and technological capacities at the expense of the Union and its Member States, and deprive governments that disregard fundamental rights of workers of revenues from investment, manufacturing and exports to the Union.
Introduction
The EU is committed to further strengthening its role as responsible leader in the world of work, to stand up for workers’ rights and to prevent a race to the bottom, by using all the instruments at hand and developing them further… The promotion of decent work worldwide is key for the EU as a geopolitical player that strongly supports individual rights and freedoms, even more so in a rapidly transforming world of work and in a context of shifting global relations. It is in line with the EU's strong support for multilateralism and a rules-based global order of international labour standards.
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So proclaimed the European Commission in its 2022 communication on decent work. Other authors have tracked recent efforts by the European Union to put this into practice, by attempting to ‘export’ certain labour standards through trade policy. For example, Nissen has reviewed bilateral disputes between the EU and the Republic of Korea in respect of the latter's compliance with the trade and sustainable development chapter of the free trade agreement between the Union and Korea which was signed in 2011 and ratified in 2015. 2
The EU is not alone in this endeavour: the United States of America has longstanding rules restricting imports of products made with forced labour, that have been updated recently to target specific regions and products. 3 Alongside its efforts to include labour standards within the ‘new generation’ of bilateral trade agreements (such as that with Korea), the EU has been developing a set of regulatory tools similar in effect (if not in design), the most recent of which is the proposed Regulation on prohibiting products made with forced labour on the Union market. 4 Generally speaking, the EU has enjoyed remarkable success in ‘exporting’ its regulatory standards across a wide range of industries. Bradford calls this ‘the Brussels Effect’, and documents how the EU is the most significant driver of regulatory standards in areas like market competition, data protection, consumer health and safety, and various environmental rules. 5 Thus far, however, the same has not been true of European labour standards, and Bradford is pessimistic about the extent to which the Brussels Effect can apply to labour law. 6
This article takes a different view. First, it will situate the proposed Forced Labour Regulation and other EU policies within the Brussels Effect paradigm, and conclude there is a reasonable prospect of a Brussels Effect occurring with respect to the Regulation; second, it will make a normative case that the Union should take advantage of the Brussels Effect to export its labour standards, in this and other cases; and third, it will link such an approach to the Union's pursuit of ‘strategic autonomy’. In so doing, it will mount a defence to the twin charges of protectionism and ‘regulatory imperialism’ that are levelled against the Forced Labour Regulation and other such policies.
Externalising the internal market: a taxonomy
A preliminary task of this article is to differentiate six modes by which the EU can ‘externalise’ its regulatory standards, in the sense that the ‘regulatory space’ of EU law may extend beyond the Union, in order to identify the Brussels Effect.
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These are:
When products do not call for a uniform standard, the EU can at best achieve compliance with its standard, but not globalization of those standards. Consider the attempts to regulate labor standards. Labor markets are divisible as long as scale economies do not require the producer to concentrate production into a single production location. Adhering to one global minimum wage across jurisdictions, for instance, entails few scale economies. A corporation can therefore maintain different standards in different jurisdictions without difficulty – ranging from working hours and vacation policies to retirement plans and collective labor strategies.
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[…] Of course, labor standards may be successfully exported to other jurisdictions through other means. The argument here is only that to the extent that they are divisible, labor standards are not amenable to the Brussels Effect.
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The Brussels Effect takes two forms: de facto and de jure. Under the former, businesses based outside the EU adjust their production practices to comply with EU regulations in order to sell products and services to European consumers; crucially, however, for a ‘true’ Brussels Effect to occur, the operator ends up changing its practices even for those goods that are marketed in third countries. Under the latter, third-country governments unilaterally adopt domestic regulations based on or similar to EU regulations. This is distinct from the separate and parallel ability of the EU to shape global regulations through trade agreements with third countries; the idea behind the de jure Brussels Effect is that third countries adopt EU rules either because of lobbying from domestic businesses who are already following the de facto Brussels Effect, or in an effort to boost national exports to the EU. Here is not the place to exhaustively detail how the Brussels Effect works; some of the factors identified by Bradford will be discussed below in the context of the Forced Labour Regulation. Of greater interest for the moment is when (Bradford says) it does not work:
The Forced Labour Regulation
Context
It is unnecessary to recount here the information available on the prevalence and effects of forced and/or child labour around the world, nor is it necessary to analyse the international legal position with respect to forced and/or child labour. Suffice to say, these are issues of grave concern in both civil society and political circles across the EU and its Member States. As stated above, the EU is not the only actor to attempt to restrict trade in goods made with forced and/or child labour: the USA, 14 Canada, the United Kingdom 15 and Mexico 16 are among the states with import restrictions or other compliance measures for importers. The ILO and the UN have adopted various instruments and strategies aimed at eliminating forced labour and the worst forms of child labour – building on the core labour standards by which all members of the ILO are bound. 17
Nor is the proposed Forced Labour Regulation the EU's first foray into this field: there are requirements (in force and proposed) on companies listed in EU Member States to conduct due diligence in respect of their supply chains and disclose certain information relating to human rights compliance, including forced and/or child labour. These include the Financial Statements Directive, 18 the proposed Corporate Sustainability Due Diligence Directive, 19 the Conflict Minerals Regulation, 20 and two proposed Regulations on supply chain due diligence in battery 21 and timber 22 production. Meanwhile, the Anti-trafficking Directive 23 establishes minimum penalties for a harmonised offence of trafficking in human beings, including forced labour or services. This article will not examine these measures, nor how supply chain due diligence and reporting requirements work in practice; instead, the focus will be on the proposed Forced Labour Regulation. The EU has been under considerable pressure to respond to high-profile allegations of forced labour practices around the world, including in the People's Republic of China. 24 The recent ban adopted by the USA was explicitly targeted at China, but it seems the EU has been reticent to target specific regions or industries; 25 instead, the Commission has proposed a Regulation that would apply to all products placed on the internal market (although, as we will see, it has the capacity for targeted enforcement). It has been suggested that this is an effort to ensure compliance with World Trade Organization rules, 26 though the approach has also been criticised as demonstrating reluctance to upset particular trading partners, including China. 27
Content 28
Since the Forced Labour Regulation will impact both trade between the EU and third countries, and trade within the internal market, the Commission has proposed a joint legal basis of Article 114 TFEU (harmonisation of internal market) and Article 207 TFEU (common commercial policy). Subsidiarity is addressed by reference to the fact that a supply chain might stretch across several Member States as well as third countries, and that disparate regulation between Member States would either create internal trade barriers, or be insufficient to prevent goods produced by forced labour entering the internal market through a ‘weak link’ and then circulating freely. The Commission argues that targeted enforcement will ensure the measure satisfies the requirements of proportionality. The recitals cross-reference the legal instruments referred to above, to show what role the Regulation is to play in the overall Union legal framework in this area.
The Regulation applies to the placing of products on the market; it does not cover the withdrawal of products that have already reached end-users. ‘Forced labour’ is defined by reference to ILO Convention No 29. The key substantive rule is laid down in Article 3 of the Regulation: ‘Economic operators shall not place or make available on the Union market products that are made with forced labour, nor shall they export such products.’ Article 4 provides for preliminary investigations, on the basis of risk assessments carried out by national authorities, 29 including on foot of information provided by the public. 30 As mentioned above, authorities are encouraged to target investigations, taking into account the size of the operator and the closeness of its involvement in suspected forced labour. Operators are obliged to provide authorities with information from its own due diligence upon request. Sections (6) and (7) of Article 4 envisage an authority potentially being satisfied that an investigation is not warranted on foot of due diligence carried out by the operator and evidence of the operator's internal policies.
Should an authority not be so satisfied, a formal investigation may be initiated under Article 5. Operators are then obliged to provide ‘any information that is relevant and necessary for the investigation, including information identifying the products under investigation, the manufacturer or producer of those products and the product suppliers’, 31 and authorities are empowered to conduct inspections in premises inside or outside the Union (with the consent of operators and acquiescence of Member State or third-country governments as applicable). Under Article 6, should the authority decide that Article 3 has been breached, it shall issue a prohibition on the placing of the relevant product(s) on the internal market, and order the operator to withdraw products that have already been made available (although, as mentioned above, this does not extend to recalling all products already sold to end consumers). Operators are then obliged to dispose of all such products in accordance with applicable environmental regulations. The authority is empowered to take steps to give effect to this prohibition, withdrawal and disposal if the operator fails to do so. Only once the operator provides evidence that forced labour has been eliminated from its supply chain shall the authority withdraw the decision and allow the operator to resume the importation or marketing of the product(s) in question. Member State law shall provide for effective and proportionate penalties for non-compliance with a decision under Article 6. 32 Article 7 sets standards for the form and content of a decision to prohibit; Article 8 provides for a right of appeal against a decision.
Under Articles 9, 11, 13 and 14 (and the procedural requirements of Chapter IV), authorities must share information, maintain a database of decisions, recognise each other's decisions and otherwise co-operate within an EU-wide ‘network’. 33 Chapter III of the Regulation contains specific provisions for the impounding of products subject to adverse decisions by customs authorities at the EU external borders. Article 23 requires the Commission to produce guidelines on the sort of due diligence that must be carried out by operators in order to satisfy authorities in the course of preliminary investigations, guidance to authorities on risk factors relevant to targeted enforcement strategies, and other aspects of the implementation of the Regulation. Article 26 encourages the Commission to co-operate with third-country authorities, international organisations and civil society groups to develop policies on forced labour.
It is beyond the scope of this article to examine the criticism that has been levelled at the Forced Labour Regulation as proposed for being too weak in its efforts to combat forced labour. 34 Instead, the remainder of it will consider the regulatory strategy pursued on its own terms, to measure it against the requirements for successful export of EU regulatory standards identified by Bradford in respect of the Brussels Effect. It will then go on to consider how this strategy may serve the interests of the EU and its Member States and citizens.
Forced Labour Regulation and the Brussels Effect
An earlier section explained the Brussels Effect as identified by Bradford. It now falls to explain how the Forced Labour Regulation can take advantage of the Brussels Effect to export EU standards. There are five criteria needed for the Brussels Effect: import market size; regulatory capacity; regulatory stringency; inelastic targets; and non-divisible production. 35 Each of these will be examined in turn to see whether the Forced Labour Regulation satisfies them.
Market size
Since the Forced Labour Regulation applies to all products placed on the internal market, market size is in principle huge – though it will vary by sector, depending on how significant an importer the EU is of products with supply chains containing forced labour. Importantly, because the Regulation covers the entire supply chain, its impact is likely to be greatest in respect of industries producing raw materials that are used in many kinds of products, where it is initially unclear whether these will end up in the internal market. This will be returned to below.
Regulatory capacity
Regulatory capacity applies to both the expertise of Union regulators in devising the relevant standards, and the resources of (in this case) national enforcement officials to apply those standards. Here, we cannot say in the abstract what regulatory capacity will be mobilised by the Commission to define indicators of forced labour and requirements for due diligence, guidance for national authorities etc., or what resources national customs and other authorities will devote to enforcement. In particular, it is unclear to what extent Member State authorities will have the capacity to inspect third-country facilities, since this depends on the co-operation of operators and third-country governments. Such practical considerations will be returned to in a later section.
Regulatory stringency
Assuming for the moment a reasonably good-case scenario in respect of capacity, we turn to regulatory stringency. EU regulators tend to require higher standards than other large import markets (most notably, the USA), especially when it comes to consumer products. Operators have an incentive to satisfy the EU standard, because ex hypothesi they will have also met the (lower) standards required for other markets. The point Bradford makes in her book is that EU consumers and voters demand higher standards than elsewhere – so the stringent EU regulation enjoys political support. 36 Therefore, EU regulatory stringency in the field of labour standards will depend on the level of public support for higher labour standards, even if this results in higher consumer prices for certain imported goods. When it comes to forced labour, it is reasonable to assume that there is widespread public concern about this issue, and thus sufficient political support for high regulatory standards, but there are at least two problems with applying this aspect of the Brussels Effect to the Forced Labour Regulation. First, there is the ‘value-behaviour gap’. Nissen has discussed this in the context of justifying measures like the Forced Labour Regulation under various exceptions to provisions of the WTO's General Agreement on Tariffs and Trade (GATT), 37 and the concerns map over to the use of the Brussels Effect to export labour standards more broadly. In short, it is well-documented that people's observed behaviour as voters or consumers often diverges from their stated values or beliefs on social and moral issues, notwithstanding that those values are sincerely held. 38 Perhaps EU policymakers cannot rely on the public's expressed support for regulatory efforts to combat forced labour and other labour abuses, if - and this article is not claiming this will be the case - those efforts have the effect of reducing consumer choice or increasing prices. Moreover, it is entirely possible that there may be sufficient support for this proposed Forced Labour Regulation, but not for a broader range of measures (this will be returned to below). Second, it should be observed that the EU has not adopted a strategy of regulatory stringency in the sense required for the Brussels Effect stricto sensu. That requires relative stringency – i.e. the EU must adopt the most stringent regulatory standards among comparably large import markets. It is far from clear that the proposed Forced Labour Regulation is any more stringent than the measures adopted by the third countries referred to above. In any event, the Forced Labour Regulation explicitly adopts the definition of forced labour from ILO Convention No 29. Of course, it makes sense to align EU efforts with global standards in this way, but it does mean that any impact of the Regulation in third countries is only a Brussels Effect to the extent that the EU and its Member States have historically played a leading role in shaping the content of international legal norms themselves, such that the international norms being transmitted via EU market mechanisms like the Regulation are themselves ‘European’ standards. However, from the normative perspective of eliminating forced labour, it does not matter whether the prohibition is distinctly European. 39
Inelastic target
Turning to the next factor, the target of the regulation must be inelastic in the sense that it is ‘non-responsive to regulatory change’ 40 – it cannot simply move outside the internal market to avoid the regulation. The Brussels Effect works best for consumer goods and services because it is the location of the consumer that determines what regulatory regime that applies, and consumers are unlikely to travel outside the internal market to access most goods and services. It fails to work where the regulatory regime depends on the location of something that can easily be moved without losing access to the internal market. For example, a business can be resident in a third country for tax purposes (and thus subject to local tax laws) but still sell most goods and services to EU consumers. EU law will ‘bite’ the business in respect of product standards or data protection, but not in respect of tax. Similarly, the business must comply with local labour laws – not those applicable within the EU or its Member States. This is one reason it has historically been difficult for the EU to export its labour standards using the Brussels Effect.
The Forced Labour Regulation is designed to account for this. It prohibits placing goods made with forced labour on the internal market, not using forced labour per se. This makes the target of regulation inelastic – the products being sold within Europe, not the workers being forced to work in third countries. Any attempt to ‘externalise’ the internal market must work the same way – by first ‘internalising’ the behaviour it is sought to regulate into a regulatory target that is within the internal market, and inelastic (such as a consumer transaction). 41 Of course, the Forced Labour Regulation has only accomplished this imperfectly. There is nothing inherent to the products in question that would indicate whether they comply or not with the Regulation – unlike, say, a product safety regulation, against which products can be tested once they arrive in Europe. This certainly makes enforcement more difficult: the Forced Labour Regulation inevitably depends on information which operators are obliged to provide, and potentially on inspections in third countries. But while this undermines the Brussels Effect, it is not fatal to it. The comparison might be drawn with competition law. As will be discussed below, anti-competitive behaviour that occurs outside the internal market can be captured by EU competition law because there is some inelastic target (in that case, the ‘substantial operations’ of an undertaking within the internal market). 42 Likewise, the due diligence requirements discussed above operate on the basis that company registration and other corporate structuring decisions display a certain amount of inelasticity: despite widespread concern that this kind of regulation would lead to businesses disestablishing themselves in Europe, or remaining privately-held rather than publicly-listed, there are enough other factors and costs involved in such decisions that these fears have not been realised. 43 Fundamentally, the regulatory strategy with the best chance of success is that which focuses on the least elastic target – which is what the Forced Labour Regulation does.
Non-divisible production
The major problem for exporting EU labour law under the Brussels Effect is the final criterion, non-divisibility. As Bradford explains, it is non-divisibility that makes the Brussels Effect remarkable: not just that businesses based in third countries obey EU law in respect of goods and services they sell into the EU, but that they produce all goods to EU standards whatever market they are destined for, even where this exceeds the standards required for those other markets. The Brussels Effect thereby imposes EU law on markets in third countries, not just on producers in third countries exporting to the EU. A ‘true’ Brussels Effect would only occur with respect to the Forced Labour Regulation if an operator eliminated forced labour from its entire supply chain, even in respect of goods that are not subject to the Regulation because they are not being placed on the internal market. 44
It is therefore necessary to examine in more detail how the Forced Labour Regulation interacts with divisibility of labour in supply chains. Non-divisibility may take one or more of three forms: legal, technical and economic. Legal non-divisibility means that it is inherent in the nature of a legal obligation of a particular jurisdiction that an operator must comply with it in all jurisdictions; the prime example in this context is EU competition law, under which any mergers, acquisitions, anti-competitive agreements, etc. anywhere in the world that ‘may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market’ 45 are prohibited. This is the case ‘irrespective of whether or not the undertakings… have their seat or their principal fields of activity in the Community, provided they have substantial operations there’. 46
Technical and economic non-divisibility are more contingent, and relate to one another. Technical non-divisibility means that the limitations of technology available to the enterprise make it impossible to separate elements of production or the provision of services. The example here is food production: though a farmer might sell different cuts of meat from the same animal to different global markets, it is not possible to ensure some cuts are free from hormones prohibited in the EU, and others not – so all the meat must comply with the EU standard. 47 Likewise, the risk of cross-pollination or other forms of contamination in arable farming and the harvesting, transport and storage of crops is so high (even with tactics like buffers between different fields), that many farmers cannot grow genetically-modified crops anywhere on their farms, lest some end up in food destined for the EU. 48
Technical and economic non-divisibility are related because it might be technically possible to make a production process divisible, but only at a disproportionate cost. Economic non-divisibility occurs when the cost of customising goods and services for different markets is too high; or to put it the other way around, the cost savings that accrue from standardisation (like economies of scale) outweigh the costs of producing everything to the EU standard. This most often occurs where the industry is capital-intensive, requires a high degree of monitoring for quality control, or different global markets can be unpredictable (because if there is a weakening of demand in one market, standardised products can be shipped elsewhere in a way that customised products cannot). As mentioned above, labour laws generally fail to be externalised because labour is divisible. Bradford explains: Labor markets are divisible as long as scale economies do not require the producer to concentrate production into a single production location. Adhering to one global minimum wage across jurisdictions, for instance, entails few scale economies. A corporation can therefore maintain different standards in different jurisdictions without difficulty – ranging from working hours and vacation policies to retirement plans and collective labor strategies.
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Arbitrage of regulatory (in this case, labour) standards in each jurisdiction where elements of the production process take place becomes increasingly difficult where the ultimate regulatory standard applies to the end product, whichever jurisdiction(s) it was produced in. The more complex the supply chain, the more likely it is that forced labour in any one facility may contribute to a product that ends up placed on the internal market; or at least, the more difficult it becomes to prove it did not. Complexity of supply chains is often thought of as a reason why it may be difficult to be confident any given product is free from human rights or labour abuses. However, in the case of a regulatory model like the Forced Labour Regulation, that complexity actually makes a ‘true’ Brussels Effect more likely – forced labour cannot be simply eliminated from production facilities that supply the EU directly, but from any facilities with any prospect of contributing to a supply chain for a product placed on the internal market. Operators can thus only take advantage of forced labour if they are certain there is no prospect of the product of that labour ending up in the internal market. For many industries (particularly extractive industries where materials go on to be used in a wide range of manufacturing processes) or stages of any complex manufacturing process, that may not be possible to reliably ascertain in advance – a sort of ‘epistemic non-divisibility’. The obvious implication of this will be that many production facilities the product of which does not, in fact, end up in the EU will have to eliminate forced labour (because the operator cannot know in advance that the product will not end up in the EU). Thus, labour standards in third countries will converge around a European regulatory standard despite no legal obligation (as it turns out) to do so – the Brussels Effect in action.
The prospect of this is enhanced by the economic aspect of non-divisibility. Even where it is technically possible to isolate production facilities where forced labour is used and others where it is not, and divert the products thereof to different markets, there will be significant costs associated with this. For example, a surge in demand in the EU market (or any market supplied by the same production facilities as the EU) cannot be met with products or materials from the other supply chain where forced labour is used. Likewise, a weakening of demand in third-country markets cannot be compensated for by diverting products or materials to the EU market. Hard enough as that will be to manage in vertically integrated supply chains, the transaction costs between firms in disintegrated chains will increase costs even further, as due diligence requirements will inevitably delay supplies.
The interaction between the substantive prohibition on placing products made with forced labour on the internal market, and the due diligence requirements contained in the EU legislation referred to above or national legislation, is important. Authorities developing enforcement strategies and conducting preliminary investigations of potential breaches of the Forced Labour Regulation are required to take account of due diligence (whether or not required by EU or national legislation) carried out by operators. 52 It seems unlikely that authorities will decline to investigate where an operator discloses forced labour somewhere in its operations, but claims to have successfully insulated the specific products placed on the internal market from that forced labour, across the entirety of the supply chain. Even if the investigation ultimately vindicates the operator, there is a strong incentive on operators to eliminate forced labour from the supply chains of its products marketed in third countries too, in order to avoid costly (potentially repeated) investigations of its products sold in Europe. The same goes for the requirement on authorities to take account of information provided to them by third parties: if a credible claim of forced labour in a third country is brought to an authority in respect of a particular operator, authorities cannot reasonably conclude that the operator has successfully insulated the specific products placed on the internal market from that forced labour, across the entire supply chain, in the absence of at least a preliminary investigation. Again, this will entail costs and delays for the operator, even if later vindicated. At the very least, such a strategy brings massive reputational risks for the operator – and whatever about authorities applying the Forced Labour Regulation, ‘the court of public opinion’ is unlikely to be convinced that products placed on the internal market are free from forced labour when the operator is known to make use of forced labour, or relies on suppliers which make use of forced labour, in respect of goods sold elsewhere. 53 Consumers are unlikely to give the benefit of the doubt to an operator whose defence relies explicitly on it being perfectly capable of removing forced labour from its supply chain, but choosing only to do so for some products (those sold in the EU) and not for others.
None of this is necessarily to contradict Bradford, who (as mentioned above) acknowledges that there are circumstances in which at labour standards may enjoy the Brussels Effect. 54 The foregoing simply illustrates how that is likely to occur in respect of the Forced Labour Regulation, in more detail than Bradford offers. The next section will examine whether the Forced Labour Regulation can thus act as a model for the EU to export other labour standards to third countries, and consider some drawbacks to this strategy offered by other commentators.
Forced Labour Regulation as a model
Three connected points raised above should be returned to: a ‘true’ Brussels Effect only occurs where the EU is the most stringent regulator among major economies; regulatory stringency depends on political support, particularly where it increases costs for consumers; and the proposed Forced Labour Regulation seeks to enforce international labour law standards agreed within a multilateral institution (the ILO). Two questions arise from this: could the Forced Labour Regulation offer a model for exporting labour standards that are more distinctive to the EU; or a model for using the EU's economic leverage to enforce other international standards? These are not necessarily rivalrous endeavours, particularly if there are international standards that reflect a strong European influence and have little practical support outside the Union, but they do raise different considerations when it comes to the perceived legitimacy of EU action, which will be returned to below.
Whatever about the political feasibility, it seems legally and conceptually plausible that the EU could adopt a prohibition on placing goods on the internal market that have been produced by workers who suffer other kinds of abuses apart from forced labour. For example, a later section will discuss the advantages to the EU and its Member States of exporting higher standards of wage adequacy to third countries, in part because this would increase the financial incentive for businesses to locate within the EU. If the Union can set out factors to be considered by Member State authorities in setting national minimum wages (as in the recently-adopted Adequate Minimum Wages Directive), 55 it could prohibit the sale of goods produced by workers who are paid wages that do not meet those adequacy standards, or some other standard that would aim to raise extremely low pay without necessarily conforming to what would be ‘adequate’ within the EU. However, there would be serious practical barriers to enforcement that are significantly greater than with respect to forced labour: national authorities may not have sufficient information on the location of every worker involved in the various stages of the production process, nor on the prevailing wages and costs of living in third countries, to assess the adequacy of wages along the same lines as Member States are required to do under the Adequate Minimum Wages Directive. It would be significantly more intrusive to demand such information as part of due diligence requirements on businesses, or in the course of investigations by national authorities, and it is much less likely that third-country governments would be co-operative in facilitating investigations. These considerations would also be relevant in challenges to the compatibility of such legislation with the principle of proportionality, or the rights of operators under the Charter of Fundamental Rights (in particular, Article 16 thereof). Although this article supports as a matter of principle the promotion of EU labour standards in third countries, we cannot take a position on any specific regulation without more information on what standard is to be exported and what sort of resources will be available to enforce it.
On the subject of legal challenges to such regulation, we must also consider the compatibility of this sort of regulation with international trade law (which also raises the issue of political support for regulatory stringency). Nissen reviewed earlier EU proposals for an import ban on products made with child labour for compatibility with the WTO's General Agreement on Tariffs and Trade,
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and reached the following conclusions:
The effectiveness of unilateral import restrictions on eliminating child labour in exporting countries is contested.
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The predominant view among states (and thus the presumption in global trade forums such as the WTO) has long been that trade rules ought to be insulated from international labour standards, with multilateral standard-setting through the ILO the appropriate forum for dealing with the latter.
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Nevertheless, import restrictions can be used ‘to create a level playing field for human rights protection’, including at least some labour standards, though ‘it cannot be overstated that import restrictions can only serve as a mechanism of last resort’,
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and restrictions must be accompanied by proposals for further, more co-operative measures.
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Restrictions introduced by the EU may be subject to challenge by third countries before the WTO Dispute Settlement Body (DSB). Nissen assessed whether they could be justified under Article III(4) or Article XX(a) GATT.
The defence to Article III(4) depends on the EU demonstrating that products made with child labour are not ‘like’ other products, in that they do not satisfy a consumer demand that products be made without child labour. Nissen does not believe this argument could be sustained, because the DSB takes a strict approach to interpreting consumer behaviour (not expressed preferences, on which more below) under this provision.
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Article XX(a) requires the EU to establish that child labour is contrary to the ‘public morals’ of its population. Case law on this Article is very rare, because the DSB demands the measure be ‘necessary’ to protect public morals. However, it does seem that here, the DSB takes a more deferential approach, allowing parties to define their own ‘public’ moral standards, and to invoke actions of citizens apart from their behaviour as consumers as evidence of these. As such, Nissen says a restriction would be more sustainable on this ground (subject to further conditions returned to below).
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In both cases, Nissen raises the ‘attitude-behaviour gap’ as an obstacle for parties to justify import restrictions.
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The DSB focuses exclusively on consumer behaviour under Article III(4), which is unlikely to perfectly reflect those consumers’ expressed preferences regarding issues like child labour. Under Article XX(a), a broader range of behaviour is taken into account (including petitions or other forms of political activity), but Nissen argues that the underlying weakness remains: the ability of a party to introduce import restrictions depends ‘arbitrarily’ on the depth of public feeling about a particular issue, which is affected by the level of public awareness.
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The approach of the DSB in this respect is incompatible with the growing support in academic commentary for a perspective on consumer welfare that recognises individuals do not want to be hypervigilant about the products they buy, and expect governments to regulate the market to ensure they can trust those products to satisfy at least some of their preferences – not just in respect of safety and quality, but also (at least some of) their expressed ethical values (like an aversion to forced labour).
65
Leaving aside Nissen's critique of the DSB's approach, the EU has taken into account WTO law in designing the Forced Labour Regulation. An issue has been selected which has a strong basis in international labour and human rights law, and which is clearly of public concern. The Regulation is, if not quite a last resort, a measured response after the EU has tried to exert influence through international co-operation, and the EU remains willing to engage constructively with trading partners in this regard. It contains provisions for Member State authorities and the Commission itself to co-operate with third-country governments. 66 And (unlike some recent measures adopted by the USA) it is indistinctly applicable with regards to geography or industries. Nissen is critical of the Forced Labour Regulation – not, as others assert, because it is too weak or delayed, 67 but because it is ‘an anomaly and an anachronism’ (she prefers more robust enforcement of sustainable development clauses in bilateral trade agreements). 68 She argues that equivalent legislation is used in the USA for protectionist motives, but that ultimately (in accordance with the analysis referred to above in respect of child labour) it may be justified as compatible with the GATT. 69 One priority for the EU is to demonstrate that the provisions in the Forced Labour Regulation will be effective in eliminating forced labour, rather than simply imposing administrative costs on operators outside the Union for no clear substantive benefit. This is an important part of the ongoing debate within the Union legislative process on the enforcement provisions of the proposed Regulation, 70 and would be necessary to avail of the GATT exemptions discussed here.
However, the fundamental problem with using the Forced Labour Regulation as a model for exporting other labour standards is that forced labour is an issue with particular moral resonance, such that it can credibly be considered a matter of ‘public morals’ even under the DSB's restrictive interpretation of Article XX(a) GATT (though as set out above, its approach to Article XX(a) is less restrictive than that to Article III(4)). As Nissen argues, it is unclear what other labour standards are capable of satisfying this test. 71 The ILO core standards include, alongside the abolition of forced labour: freedom of association and collective bargaining; abolition of child labour; elimination of discrimination; and (since 2022) a safe and healthy working environment. 72 Not all of these issues enjoy a prominent place in public discourse – to say nothing of whether they affect consumer behaviour. Beyond this core, there is even less evidence of sufficiently widespread political pressure. This is regrettable, since the inclusion of occupational health and safety offers ample space for the EU to take potentially drastic action to raise labour standards in third countries – recall that the EU's own Working Time Directive was adopted as an occupational safety measure, 73 which illustrates the breadth of such a basis.
In the absence of such ‘internal’ political pressure, the EU would be open to challenge before the WTO for failing to satisfy the ‘public morals’ clause. 74 An EU restriction on products made with forced labour, if generally applicable, is unlikely to be challenged by a major trading partner because of the diplomatic disadvantages of being seen to support forced labour practices. However, it is not obvious that such disadvantages would accrue to third countries for challenging EU attempts to export other labour standards, nor that any diplomatic disadvantages would outweigh the perceived risk to those third countries’ comparative advantages in trade. Any attempted Brussels Effect for trade union rights, anti-discrimination, occupational safety (including working time), or minimum wage adequacy is likely to meet robust challenge, not just from major emerging economies like China or India, but also from economically-developed third countries with lower labour standards than the EU, such as the USA. Any restriction on businesses’ trading opportunities because of their labour practices in a third country is an implicit reproach of that third country's economic model and approach to economic development.
There has always been criticism that the EU's approach to global trade and market regulation is ‘imperialist’. This will be addressed in the next section. For the moment, it is necessary to conclude that twin challenges face a regulatory strategy on the part of the EU to export its labour standards to third countries, using the proposed Forced Labour Regulation as a model: first, such measures would pose a greater risk of provoking a trade dispute with major trading partners, which may lead to a challenge to the compatibility of those measures with the GATT before the WTO DSB; second, the EU is at greater risk of adverse findings in respect of those measures, and certainly so in the absence of widespread political pressure on Member State governments and EU institutions to restrict the market access of products made by workers who are employed in conditions that fall short of EU labour standards. Therefore, as a bare minimum, proponents of such a regulatory strategy need to mobilise political support for it across the Union.
The next section does not purport to offer a roadmap for political action in this regard. However, it does aim to identify arguments which might well be employed in such a political campaign, or ultimately in the justification of regulatory strategy. Of course, the working conditions of third-country nationals are morally salient for most EU consumers (at least as a matter of expressed preferences), and efforts to generate political pressure of this kind will undoubtedly foreground the interests of these workers. But it is worth considering an additional set of normative arguments that are more closely aligned with the economic self-interest of European workers, Member State governments, and the Union as a whole, since these are likely to enjoy distinct political appeal, and engage distinct constituencies of potential support. The next section will examine the relationship between these complementary rationales for EU action to use the Brussels Effect to export its labour standards, in the context of the Union's pursuit of strategic autonomy.
Forced Labour Regulation and EU strategic autonomy
The final section of this article situates the proposed Forced Labour Regulation, and the broader strategy considered in this article, within the landscape of the EU's geopolitical priorities. This begins with a consideration of the legitimacy of the EU exporting its values – including labour standards – through international trade.
‘Imperialism’ of the Brussels Effect
Mentioned above was a criticism that is often levelled against the Brussels Effect – that the EU is engaged in ‘regulatory imperialism’ by imposing its standards on third countries. Nissen says this must be taken seriously by the EU in light of the imperialist history of several of its Member States: ‘Criticisms relating to neo-colonialism, interference in other states’ sovereignty and protectionism are apposite.’ 75 It would, she says, be ‘extremely controversial if the EU had imposed externally applicable rules on non-EU corporations that do not have a connection with the EU’ – which is precisely what is envisaged under a true Brussels Effect. Bradford, however, would reject the use of language like ‘imposed’ in this context: she defends the Brussels Effect as merely giving enterprises ‘market incentives’ to ‘voluntarily’ conform to EU standards throughout their operations, even when not required in order to sell products into the EU. 76
This author is not convinced that the language of ‘imperialism’ and ‘colonialism’ is appropriate to describe the way the Brussels Effect functions as an international market mechanism. There is a world of difference between gunboat diplomacy and container ship diplomacy. However, for the purposes of this article, we can concede that the Brussels Effect favours the economic and geostrategic interests of the EU and its Member States. This is true even when, as in the case of the Forced Labour Regulation, the EU's regulatory strategy is paternalist, in the sense that it is a sincere effort to benefit third-country nationals (for example, who are subject to forced labour). A paternalist Brussels Effect may still benefit European interests, if it allows the EU to adhere to high regulatory standards within the internal market without being undercut by businesses based in third countries; 77 but this is not inconsistent with European bona fides in combatting forced labour or other abuses, wherever they occur. Its credentials in this regard are not undermined merely because there may be benefits to the EU and its Member States from the action, in that it allows for the maintenance of high standards at home.
The question becomes more difficult the more stringent the EU's regulatory strategy is. It was considered above that attempting to export most of the social acquis to third countries by means of the Brussels Effect is likely to be more controversial than the Forced Labour Regulation, and open to challenge for compatibility with international trade law. The more the EU attempts to use trade to level up labour practices in third countries to its own standards, rather than commonly-agreed international norms, the more it may stand accused of ‘social democratic imperialism’. 78 This is not to say that such efforts are not normatively desirable. This article supports the externalisation of EU labour standards, but acknowledges that this strategy will be diplomatically fraught and practically difficult to enforce. 79 The enforcement of EU labour standards against business operators with supply chains spanning across continents will be very difficult, but the strategy developed in respect of the Forced Labour Regulation is promising. The regulatory standards are based on international law; they apply generally to both importers and EU-based business and across industries, but enforcement will be targeted at industries where there is good information about labour abuses; and the operators themselves will be conscripted into the regulatory effort through due diligence and reporting requirements, if they want to place their products on the internal market.
On the subject of information provided to authorities and the targeting of enforcement (discussed above), it is worth stressing that the Forced Labour Regulation envisages co-operation and information-sharing between the Commission, national authorities in Member States, third-country governments, and civil society organisations in the design of enforcement strategies. This offers great opportunity to assuage fears of EU ‘regulatory imperialism’, particularly if enforcement strategy is designed in collaboration with representatives of workers at risk of forced labour. 80 Of course, fully-fledged trade unions may not exist in some industries and territories where forced labour is prevalent, but whatever the Union can do to engage with third-country workers can only bolster its legitimacy in operating the Forced Labour Regulation. Identifying and supporting suitable representatives, including through NGOs working on the ground to combat forced labour, should therefore be a priority for the EU and Member State governments.
These are deep waters, and it is beyond the scope of this article to wade further into them. Suffice to say that an EU trade policy orientated to improving labour standards in third countries, by denying access to the internal market to businesses that fail to respect those labour standards in their operations and supply chains, may face practical difficulties but remains normatively desirable. This is so even if it must weather allegations of ‘social democratic imperialism’.
Labour standards, the Brussels Effect and strategic autonomy
Finally, we should acknowledge that in pursuing the sort of regulatory strategy exemplified by the Forced Labour Regulation, the EU is acting not just for paternalist reasons, but also in the self-interest of the EU – particularly in the pursuit of ‘strategic autonomy’. We have already seen how the interests of the EU and its Member States are served by obliging businesses, and the third countries they operate from, to adopt EU labour standards, because it prevents them from undercutting EU-based businesses and workers. This allows the EU to maintain its own high standards without losing a competitive edge, as has been documented in respect of various areas of EU regulatory policy. 81 Exporting EU labour standards to third countries and placing obligations on multinational business operators to monitor the labour standards in their supply chains makes it more costly to operate in third countries than it would otherwise have been, and thereby undermines the comparative advantage of third countries. In itself, this is widely-discussed in commentary, and framed (whether approvingly or disapprovingly) as ‘protectionist’. 82 What tends to be overlooked, however, is that such protectionism may not be exclusively directed towards maintaining the economic conditions of European businesses and workers in the face of international competition. 83 Equally important is the protection of European geostrategic interests.
‘Deglobalisation’, ‘regionalisation’, ‘decoupling’, ‘onshoring’, ‘reshoring’ and ‘friendshoring’ are examples of terminology that has come en vogue since first, the Covid-19 pandemic exposed the fragility of global supply chains and of states that depend on importing certain vital goods like medical supplies, and second, Russia invaded Ukraine and tensions increased between the USA and China. 84 The security implications of supply chains and trade patterns are more salient than ever before. In the EU, this discourse has been framed around the concept of ‘strategic autonomy’. 85 This article cannot exhaustively make the case for European strategic autonomy (nor even fully define it), but it takes as given that it is in the interests of the EU and its Member States to have the industrial and technical capacity to produce more of the goods and services on which EU citizens depend for a high standard of living, as well as more jobs producing those goods and services with conditions which allow the workers to afford that high standard of living. The latter is more straightforwardly protectionist, but the former must be credited with nuance. It is not merely that high living standards in the EU might be undermined by reliance on businesses based in third countries for the production of goods and services for the internal market, but that dependence on trade with third countries risks undermining the EU's ability to adhere to its values and to realise the political aspirations of its citizens. Most compellingly, in light of recent events, any loss of industrial and technical capacities within the EU makes it more difficult for Member States to defend themselves militarily against external threats.
Regulatory policy directed towards strategic autonomy must account for the fact that many third countries have a significant comparative advantage in labour standards that are lower than those in the EU. In extremis, this includes the use of forced and child labour, but it also includes many other violations of international labour laws, and any standards that comply with ILO Conventions but remain lower than the standards in most EU Member States. 86 The use of the Brussels Effect to level up labour standards in third countries towards convergence with EU labour laws undermines this comparative advantage, and creates financial incentives to establish production in the EU. 87 Further incentives are generated by the cost of due diligence, and the risks associated with complex supply chains across third countries where compliance with relevant standards by suppliers cannot be guaranteed. Mentioned above was the concern that monitoring supply chains for labour abuses is too great a burden for private businesses to bear – the response to this from the perspective of strategic autonomy is those businesses should produce or source more within the EU, where compliance is more likely and easier to monitor, and national authorities are generally more committed to the prevention of labour abuses.
Conclusion
Even in a supposedly ‘deglobalising age’, the EU remains committed to ‘managing globalisation’. 88 This can be done through multilateral institutions and bilateral agreements, and through imposing regulatory standards for businesses that operate in its own market – both reporting requirements for businesses themselves, and regulations targeted at products placed on the market. It is the latter where the Brussels Effect comes into play as a powerful tool for the EU to use. The prospect for the Brussels Effect to apply to labour law has been under-appreciated to date, but this article has argued it is a useful framing device, and the insights for when and how the Brussels Effect works are important lessons for designing regulatory strategies to raise global labour standards.
There are three main reasons why the EU might follow such a strategy: sincere, if paternalist, concern for the welfare of third-country workers who could benefit from the protection of EU labour standards; the protectionist impulse to insulate EU workers from international competition by preventing businesses taking advantage of lower labour costs outside the Union; or the equally, but distinctly, protectionist aim to safeguard the geostrategic interests of the EU and its Member States. Unlike some commentary on this topic, this article condemns none of these goals, and also sees no reason why they should be mutually exclusive. 89 Despite the connotations of ‘social democratic imperialism’, such a trade and regulatory strategy on the part of the EU offers enormous benefits for the welfare of both third-country workers and EU citizens, and goes some way towards offsetting the serious geopolitical risks the EU and its Member States face in the contemporary world. 90 The proposed Forced Labour Regulation is a welcome start, and could act as a model for a more ambitious set of measures to export further labour standards, if political support is mobilised in favour of regulatory stringency when it comes to other labour standards – particularly those which track international labour law norms.
Such a strategy will, however, face serious practical barriers, including the need for co-operation from third-country authorities to conduct inspections of labour conditions in business facilities that export to the EU. 91 As such, it cannot be pursued in isolation from bi- and multilateral engagement with trade partners. This view is shared by the Union institutions themselves: for example, the impact assessment published by the Commission for the Forced Labour Regulation situated it within a broader strategy to promote EU values through trade. 92 Unfortunately, however, there is ample evidence that multilateral co-operation is in a period of decline, 93 and preferential trade agreements do not have a good track record of promoting higher labour standards, 94 even when these are contained as specific, actionable provisions. 95 As such, the EU must be prepared to act unilaterally, particularly where there is strong political demand within its Member States. But unilateral regulatory measures require very careful design and target selection in order to be effective; the Brussels Effect framing is useful because it helps to identify how to best put the EU's regulatory power to work.
Footnotes
Declaration of conflicting interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.
