GT13 – Exploring the interface between unilateral and bilateral approaches to greening EU trade  

The European Union (EU) Green Deal represents a paradigm shift with respect to the EU’s approach to trade policy. While previously, the inclusion of non-trade policy objectives was mostly limited to human rights and labor issues, the Green Deal has established the importance of aligning trade and environmental objectives. In this regard, the 2021 Trade Policy Review notes that “the more sustainable growth model as defined by the European Green Deal … [underscores that] the EU needs a new trade policy strategy – one that will support achieving its domestic and external policy objectives and promote greater sustainability…”.

In making trade a lever for environmental action, the European Commission (Commission) has adopted a two-pronged approach. On the one hand, the Commission has taken the bilateral route, seeking to use Free Trade Agreements (FTAs) as a platform to advance its sustainability agenda. Key focus areas include enhancing the enforcement of the Parties’ commitments in Trade and Sustainable Development (TSD) chapters in FTAs through sanctions and elevating the Paris Agreement to an essential element of its FTAs. On the other hand, the Commission seeks to strengthen the link between trade and sustainability through unilateral measures. For example, the Carbon Border Adjustment Mechanism (CBAM), the Regulation on Deforestation-free Products (Deforestation-free Products Regulation), the Directive on Corporate Sustainability Due Diligence (CSDD), and the Eco-design for Sustainable Products Regulation (ESPR) are all unilateral measures standards that once they have entered into force would condition access to the EU market on meeting minimum sustainability standards. 

The EU’s parallel unilateral and bilateral approaches to sustainable trade are considered complementary, as they play different roles in advancing the trade and sustainability agenda. Yet the interface between them is not always considered. For example, despite the significant implications of the EU Deforestation-free Products Regulation ontrade between the EU and Mercosur, efforts to strengthen sustainability provisions in the EU-Mercosur FTA are focused on strengthening provisions within the FTA through an additional EU-Mercosur Joint Instrument. With respect to deforestation, draft provisions revealed in a leak of the EU-Mercosur Joint Instrument focus on enhancing cooperation and implementation of sustainable supply chains, but do not provide for tailored capacity building or detailed enhanced cooperation commitments linked to the EU’s Deforestation-free Products Regulation.

This policy brief seeks to unpack key differences in the EU’s unilateral and bilateral sustainability approaches, with a focus on the objective(s) pursued, the nature of the obligations, and avenues of enforcement. It starts with a description of the sustainability approach pursued as part of EU FTA TSD chapters and key unilateral sustainability measures, followed by a comparative overview of these two approaches, and an analysis of the implications of the differences observed with regards to ambition, legitimacy, negotiating power, and capacity building. Based on the analysis, this paper provides recommendations on how the bilateral sustainability approach, pursued through FTAs, can better complement the EU’s unilateral approach – leveraging strengths and minimizing the weaknesses of each approach.