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China’s evolving approach to environmental and labour provisions in regional trade agreements

by Henry Gao
August 2017

In this article, the author reviews China’s experience with environmental and labour provisions by looking at its regional trade agreements, especially in terms of the evolution of the Chinese position. It concludes with a projection of how China’s approaches to such provisions might further develop in the future.

The rapid proliferation of regional trade agreements (RTAs) has enhanced the role of these agreements in formulating the rules for international trade. These include not only rules in traditional areas such as tariffs and non-tariff barriers, but also rules covering newer issues such as environmental and labour provisions.

The US and EU are the main proponents for the inclusion of these issues and their approaches are relatively well-known. In contrast, the approaches taken by China, another major player in the international trading system, remain rather unclear to the outside world.

Environmental Provisions

When the People’s Republic of China (PRC) was established in 1949, its main task was to develop the economy and little attention was paid to environmental protection. This did not change until 1972, when China sent a delegation to the United Nations (UN) Conference on Human Environment. The following year, China held the first meeting on National Environmental Protection Work and adopted a national strategy on environmental protection. In 1978, China recognised the importance of environmental protection for the first time in its Constitution, followed by the adoption of a provisional Environmental Protection Law a year later.

Over the next four decades, China gradually built up a comprehensive legal framework on environmental protection. The basic principles are laid down in the Environmental Protection Law enacted in 1989, with an additional dozen laws addressing specific environmental problems, including ocean protection (1982), environmental noise (1996), air pollution (2000), cleaner production (2002), environmental impact assessment (2002), radioactive pollution (2003), solid waste (2004), renewable energy (2005), energy conservation (2007), water pollution (2008), and the circular economy (2008).

Further to these advances in domestic legislation, China has signed more than 50 multilateral environmental agreements (MEAs). However, until recently, it has preferred to address environmental issues in separate economic cooperation agreements at the bilateral and regional levels rather than in RTAs. As a result, there are few environmental provisions in most of its earlier RTAs.

Even those RTAs with environmental provisions tend to take a cautious approach. Typically, the environmental provisions in these agreements are limited to the recognition of the principle of “sustainable development” in the preamble, the inclusion of environmental measures as exceptions to trade obligations, some non-binding best endeavour language on environmental cooperation, and occasionally, market access commitments on environmental goods and services.

In its more recent RTAs, however, China has taken a more flexible approach and showed greater willingness to include more substantive environmental provisions. For example, its free trade agreement (FTA) with Singapore refers to the Sino-Singapore Tianjin Eco-city project. Located near the capital of China and developed with technology and know-how from Singapore, the project is the first inter-governmental eco-city in the world and provides an interesting new model for environmental cooperation.

China’s most recent FTAs with Switzerland (2014) and Korea (2015) went one step further by including dedicated chapters on environment. In the Swiss FTA, the two parties agree to “facilitate and promote investment and dissemination of goods, services, and technologies beneficial to the environment,” and to provide “the necessary resources for the implementation of environmental cooperation.”

The Korean FTA includes a provision on conducting an environmental impact assessment of the FTA. It also addresses the enforcement problem by requiring parties not to “fail to effectively enforce its environmental measures including laws and regulations, through a sustained or recurring course of action or inaction, in a manner affecting trade or investment between the Parties.”

These interesting provisions reveal China’s willingness to engage more on environmental issues in FTAs. At the same time, neither agreement allows the application of the dispute settlement mechanism to the environmental chapter, suggesting that China is still reluctant to accept the environmental commitments as binding, legally-enforceable obligations.

Labour Provisions

China also takes a cautious approach to labour rights in RTAs. China was a founding member of the International Labour Organization (ILO) but, for political reasons, it only started actively participating in the Organization from 1983. So far, it has signed 26 ILO conventions, including four core conventions on equal remuneration, discrimination (employment and occupation), minimum age, and child labour. This puts China well below the world average of 40 ILO conventions and seven core conventions signed by a typical country.

Moreover, the conventions signed by China are almost all technical conventions with only two governance conventions. In particular, China has not signed the conventions relating to the freedom of association, right to organise and collective bargaining. These rights are also recognised by Article 8(1)(a) of the International Covenant on Economic, Social and Cultural Rights (ICESCR), ratified by China in 2003 with the reservation that the application of this Article “shall be consistent with the relevant provisions of the Constitution of the People’s Republic of China, Trade Union Law of the People’s Republic of China and Labour Law of the People’s Republic of China.” As the Trade Union Law only recognises the All-China Federation of Trade Unions, no independent trade unions are allowed in China.

Another problematic area for China is forced labour, where re-education through labour was officially abolished only in 2013 and prison labour still remains an issue in China. Beyond the ILO conventions, forced labour is prohibited by the International Covenant on Civil and Political Rights (ICCPR), which China has yet to ratify.

In contrast to its cautious approach on labour rights, China has assumed a more active approach on labour exports and cooperation. Chinese labour exports can be traced back to the 1950s, when project workers were sent abroad as part of China’s foreign aid programme. In the 1980s, more and more workers started to work abroad on an individual basis. Between 1992 to 2008, China adopted a dual agency regulatory model for its labour exports, with the Ministry of Commerce (MOFCOM) in charge of regulation of project workers and the Ministry of Labour and Social Security (MOLSS) overseeing individual workers. The regulatory power for both groups was eventually consolidated into MOFCOM in July 2008.

In line with its cautious approach, China did not include labour issues in its earlier FTAs. Instead, the issue was often addressed in stand-alone bilateral labour cooperation agreements or memorandums of understanding (MOUs) signed by MOLSS with its counterparts in the partner countries.

Since 2008, however, China has taken a new approach. For example, its FTAs with New Zealand and Australia include special chapters on movement of natural persons, as well as special market access opportunities for China-specific occupations such as Traditional Chinese Medicine practitioners, Chinese martial arts coaches and Chinese chefs. Its FTAs with Peru, Chile and Switzerland also include special provisions on labour cooperation but, as these clauses simply refer to the respective MOUs that MOLSS has signed with these countries, they do not add much in terms of substance.

Future Outlook

In addition to its existing FTAs, China is also presently negotiating FTAs or conducting feasibility studies with dozens of countries. Judging from China’s shifting positions on sustainability issues mentioned earlier, we will see more willingness by China to include environmental provisions in these agreements.

At the same time, it will probably adopt different approaches when dealing with different partners. For developed country RTA partners, China will request more provisions on technical assistance and technology transfer on environmental goods and services. For developing countries partners, the focus will instead be on joint studies and harmonisation of environmental standards.

As for labour issues, we will definitely see more provisions facilitating the export of Chinese labour, such as expedited visa processing, more Mode 4 commitments, and quota expansion on China-specific occupations. On the other hand, China will maintain its tight position on labour rights provisions, especially those relating to labour unions.

Henry Gao is Associate Professor of Law at Singapore Management University and Dongfang Scholar Chair Professor at Shanghai Institute of Foreign Trade.

In March 2017, ICTSD and the Inter-American Development Bank (IDB) organised a dialogue on sustainability provisions as part of the RTA Exchange project.

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