Linking International Trade and Labour Standards: The Effectiveness of Sanctions under the European Union’s GSP

Abstract

Linking international trade and labour standards is one of the ways to make countries comply with their international obligations to respect core labour standards. Under the European Union’s Generalized System of Preferences (EU’s GSP), trade preferences of Myanmar in 1997 and Belarus in 2006 were withdrawn for the use of forced labour and for violations of the freedom of association. This paper highlights the EU’s GSP scheme and idea of linking EU trade policy to core labour standards. Based on two case studies, we investigate the trade effects of the EU sanctions on the target country and analyse the effectiveness of the EU’s GSP sanctions. We find that using the EU’s GSP regime to sanction countries which violate the core labour standards has very limited effectiveness. However, sanctions can be an effective way to demonstrate the political commitment to a particular set of values and norms such as core labour standards. Sanctions may also deter other countries from committing violations. If Europe must have a stronger social dimension, so should its trade policy. – Former EU Trade Commissioner Peter Mandelson