Labour Standards and the Future EU-UK Trade Agreement
Mark Bell (Trinity College Dublin)
There was relatively little attention paid to labour standards in the Brexit negotiations on the Withdrawal Agreement. Of course, the free movement of workers and the rights of EU citizens has been a core issue in these discussions, but those aspects of labour law that do not relate to the mobility of workers rarely surfaced. This is likely to change with the opening of the negotiations on the future trade agreement between the EU and the UK. On the one hand, divergence in domestic labour standards does not give rise to immediate barriers to trade, unlike issues such as food quality standards. On the other hand, the history of European integration reminds us that some Member States have often been concerned that lower labour standards elsewhere could give rise to ‘unfair’ competition. This is closely linked to the perceived risk of ‘social dumping’, i.e. businesses relocating or outsourcing to those Member States with lower labour costs and/or less labour market regulation. European integration has also been accompanied by a persistent debate over the extent to which competition based on labour costs is ‘unfair’ and whether the risk of social dumping is substantial. Existing EU law reflects an uneasy compromise that does not require full harmonisation of labour standards, yet imposes, in certain fields, minimum standards (e.g. the Working Time Directive).
The European Council’s Guidelines for Brexit Negotiations (29 April 2017) provided an early indication that labour standards would be relevant in the future trade negotiations. Paragraph 20 states: ‘Any free trade agreement should be balanced, ambitious and wide-ranging. … It must ensure a level playing field, notably in terms of competition and state aid, and in this regard encompass safeguards against unfair competitive advantages through, inter alia, tax, social, environmental and regulatory measures and practices.’ This is reiterated in paragraph 12 of the March 2018 European Council Guidelines on the framework of the future EU-UK relationship.
The European Commission explored the concept of a ‘level playing field’ in a presentation to the EU27 in their preparatory discussions for the trade negotiations. This identified the risk that the UK could, post-Brexit, seek to gain a competitive advantage by reducing labour standards. In order to avoid the risk of a ‘race to the bottom’ in terms of labour standards, the Commission noted that recent EU Free Trade Agreements (FTAs) have included non-regression clauses, citing the example of the EU-Japan Economic Partnership Agreement: ‘The Parties shall not encourage trade and investment by relaxing or lowering the level of protection provided by their respective domestic environmental or labour laws and regulations’ (Art 2(2), ch. 16).
EU FTAs with states such as Canada, Japan, and South Korea take the fundamental Conventions of the International Labour Organisation (ILO) as the benchmark that all parties are committed to respect. In the Comprehensive Economic and Trade Agreement (CETA) with Canada, there are more detailed provisions on labour standards (see chapter 23). These include a commitment by the parties to promote the ILO Decent Work Agenda and, in particular, to establish ‘acceptable minimum employment standards for wage earners, including those not covered by a collective agreement’, as well as ‘non-discrimination in respect of working conditions, including for migrant workers’. Doubts remain, though, about the effectiveness in practice of these commitments (see M. Faioli, ‘Atlantic Transitions for Law and Labor: CETA First and TTIP Second?).
Do the existing FTAs offer a template for the future agreement with the UK? Certainly, they indicate that labour standards can be expected to form a key element. Yet the position of the UK is unlike that of other non-EU states. For the latter, ILO labour standards are an obvious point of reference because they cover all parties to the FTA. In contrast, the UK enters these negotiations from a position where it currently shares a common set of minimum labour standards with the EU27. An approach based upon non-regression would imply that the UK should continue to respect EU labour standards, rather than simply shifting the frame of reference to the fundamental Conventions of the ILO. The March 2018 European Council guidelines refer to ensuring a level playing field via ‘substantive rules aligned with EU and international standards’ (para. 12).
This is likely to be highly contentious because many advocates of Brexit see it as an opportunity for the UK to make different regulatory choices in relation to the labour market; in particular, escaping the constraints of the Working Time Directive has long been an objective of some Brexit supporters. Yet such critics may also resist the alternative of making the ILO the benchmark for minimum labour standards. Unlike EU employment law, freedom of association and the right to collective bargaining are at the heart of the fundamental Conventions of the ILO. Paradoxically, some Brexit advocates might be more comfortable with EU labour standards, which are predominantly focused on individual, rather than collective, worker rights.
From the perspective of the EU27, it is important to consider not just the labour standards of today, but those that may emerge in the future. In the wake of the European Pillar of Social Rights, there appears to be fresh political appetite for EU measures to improve the protection of workers, such as those in precarious forms of employment. While the substance of this commitment is still unfolding, it indicates the potential for tension to develop around how a ‘level playing field’ can be sustained over time if the EU27 forge ahead with improved labour standards while the UK follows a different path.
Mark Bell is Regius Professor of Laws and a Fellow of Trinity College Dublin. He has published widely in the fields of Anti-Discrimination Law and Employment Law. He is a member of the Board of Directors of the Irish Centre for European Law and the committee of the Employment Law Association of Ireland.