Opinion of the Economic and Social Committee on the 'Proposal for a Council Regulation (EC) applying the special incentive arrangements concerning labour rights and environmental protection provided for in Articles 7 and 8 of Council Regulations (EC) Nos 3281/94 and 1256/96 applying the scheme of generalized tariff preferences in respect of certain industrial and agricultural products originating in developing countries` (98/C 73/15)

On 14 November 1997 the Council decided to consult the Economic and Social Committee, under Article 198 of the Treaty establishing the European Community, on the above-mentioned proposal.

The Section for External Relations, Trade and Development Policy, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 25 November 1997. The rapporteur working alone was Mr Etty.

At its 350th plenary session (meeting of 10 December 1997), the Economic and Social Committee adopted the following opinion by 112 votes to one with 11 abstentions.

1. General comments

In its opinion on the Proposal for a Council Regulation (EC) applying a three-year scheme of generalized tariff preferences (1995-1997) in respect of certain industrial products originating in developing countries and the Proposal for a Council Regulation (EC) extending into 1995 the application of Regulations (EEC) No 3833/90, (EEC) No 3835/90 and (EEC) No 3900/91 applying generalized tariff preferences in respect of certain agricultural products originating in developing countries (CES 1159/94), the Committee had already expressed its support for the special incentive arrangements which the Commission has now translated into concrete proposals. The Committee strongly welcomes the Commission's proposals as providing most adequate and effective provisions for positive measures to promote respect for labour and environmental standards in GSP beneficiary countries.

2. Specific Comments

2.1. As regards the measures proposed to stimulate compliance with certain international labour standards, the Committee welcomes the strong emphasis given by the Commission in Articles 3, 4 and 5 that as a prerequisite for access to improved preferences, potential beneficiary countries will have to demonstrate that both their law and their practice provide a framework within which freedom of association and abolition of child labour can realistically be guaranteed, as well as to the importance of strict monitoring and cooperation procedures, on-the-spot checks and effective technical assistance to develop suitable administrative and technical monitoring infrastructures (Articles 6 and 7).

In this context, we would emphasize the importance of reference to the reports of the competent UN authorities in these areas, namely the Committee on Freedom of Association of the ILO, the Committee of Experts on the Application of Conventions and Recommendations of the ILO and the UN Committee on the Rights of the Child.

2.2. The Committee also expresses its concern that the practical application of the new system of incentives detracts from the advantages of the 1995 reform of the overall system, namely simplicity, transparency and reliability.

After several decades of cooperation with the beneficiary countries, these factors have proved decisive for the effectiveness of these measures to promote trade.

This should in no way be endangered.

2.3. At the same time, however, the Committee expresses its regret and disappointment that the Commission proposal restricts the new instrument to these three ILO Conventions on Freedom of Negotiation and Protection of the Right to organize (No 87), on the Right to Organize and Collective Bargaining (No 98), and on Minimum Age (No 138). This is a departure from earlier positions as regards international trade and labour standards, taken by the Commission and supported by the Economic and Social Committee, which included the ILO Conventions on Forced Labour and on the Abolition of Forced Labour (Nos 29 and 105) and on Discrimination (Employment and Occupation) (No 111). These three Conventions, together with Convention Nos 87 and 98, are considered to be the basic human rights' conventions of the ILO. The Commission ignores them in this proposal without giving any explanation. While recognizing that forced labour is already addressed in Article 7 of the existing GSP regulation, the Committee nonetheless feels that the elimination of forced labour could still be rewarded by additional preferences.

2.4. Another related point which requires clarification is that the Commission has included the Minimum Age Convention (No 138) without any further comment. One comment the Committee wishes to make is that, while it fully agrees that the problem of child labour should be addressed in the proposed Council regulation, it is regrettable that four out of the fifteen Member States of the European Union have not ratified the ILO Convention on Minimum Age. Once again the Committee wishes to make the point that in such cases the EU's demands will be much more credible if all its Member States meet themselves the criteria they wish others to meet. With regard to Convention 111 (Discrimination, Employment and Occupation) the Committee reiterates its earlier observations that three Member States (Ireland, Luxembourg, United Kingdom) have not yet ratified this ILO instrument. Therefore, the Committee urges the Commission to take the initiative for consultations with those Member States, which have not yet been able to ratify Convention No 138, with a view to try and overcome the obstacles to do so in the foreseeable future. Furthermore, the Committee hopes that the Member States of the EU will contribute actively to the work on the forthcoming new ILO Convention on the most exploitative and dangerous forms of child labour, due for 1999, that they will ratify it as quickly as possible after its adoption by the International Labour Conference, and that the Council will subsequently include it in the now proposed instrument in addition to ILO Convention 138.

2.5. With regard to the measures proposed to stimulate compliance with international environmental standards, the Committee understands the difficulties expressed with regard to setting up environmental clauses, but considers that such incentives would still be desirable insofar as they are practicable. It agrees with the Commission's choice for ITTO (International Tropical Timber Organization) standards as the yardstick to be used.

2.6. The Committee further welcomes the Commission's proposal (in Articles 3 and 4, and 10 and 11) to publish all applications for the additional preferences in the Official Journal in order to allow for all parties with relevant expertise and information to provide their evidence. We particularly welcome the acknowledgement in the Commission's explanatory memorandum of the importance of consultation with organizations, in particular the ILO, national trade unions and international trade union and employers' federations as well as specialized NGOs (human rights, environmental issues), including consumers' organizations. In addition to participation in the submission of evidence as indicated in the memorandum, the Committee would propose that the new provisions should allow for the international trade union and employers' federations to take part in visits to those countries where there are particular doubts about respect for labour rights. This seems appropriate with a view to their role and their experience in the supervising machinery of the ILO.

2.7. The Committee concurs with the Commission that the additional preferences need to be set at a high level in order to provide a genuine incentive to respect the labour and environmental standards concerned. For the same reason, we welcome the proposal that the additional incentives should apply even to countries that have graduated from the basic system. Concerning the likely cost of such measures, we concur with the Commission's assessment that, given the lack of respect for labour rights and environmental protection in many GSP beneficiary countries, the total impact on the EU is unlikely to be extremely high and will certainly be far lower than the figure of ECU 787,7 million (representing a theoretical maximum) mentioned in the Commission's financial statement accompanying the draft regulation.

2.8. The Committee does regret, however, the lack of any reference to the least developed countries (LDCs) in the Commission's draft regulation or even in the explanatory memorandum. For the LDCs, of course, there would be no possibility of providing enhanced benefits, due to the fact that their tariff level is already fixed at zero. This could seriously reduce the scope of the new provisions as LDCs would have no incentive to improve their respect for labour rights and environmental protection. In their case, the Committee would propose that additional measures must be taken in order to provide an incentive for least developed countries to respect labour rights and undertake environmental protection. Specifically, the GSP preference scheme needs to be included in discussions on the possibility of increased development assistance for those countries. In this context the Committee also refers to its Opinion on 'Development aid, good governance and the role of the socio-economic interest groups` () and the standards for good governance discussed in that text.

2.9. The Commission's proposals are slightly ambiguous concerning the procedures for suspension or withdrawal of additional GSP benefits (Article 14). The Committee would propose that the procedure for representations should be that any party with a legitimate interest in the case, including representatives of the economic and social interest groups, could make a proposal to open an investigation by the Commission. In order to ensure the good functioning of the new mechanism, we would propose that an application for an investigation should automatically lead to the initiation of an investigation within 30 days, unless good cause to doubt the bona fides of any complaint can be demonstrated. We would also propose that, as under the anti-dumping procedures, provision should be made for interim measures to be taken to suspend countries from additional GSP benefits during the course of an investigation, as this could take some time in order to respect due procedure.

2.10. The Committee interprets Article 14(1), referring to the total or partial suspension of the additional GSP preferences 'without prejudice to the possible application of Article 9 of Regulations (EC) Nos 3281/94 and 1256/96` to refer above all to the case of 'fraud`. The Committee considers that this provision should be invoked such that any misrepresentation of a product as having been produced in respect of labour rights and/or environmental standards when such is not the case should be considered a case of 'fraud` under the terms of the GSP, so causing any country which, having first been granted additional preferences, was then found to be violating labour rights in these areas would stand to lose not just its additional GSP benefits but its entire duty-free access under the GSP.

2.11. The Committee draws the attention to the fact that current efforts of governments, business, trade unions and NGOs with regard to social labelling and codes of conduct for certain products, containing similar labour and environmental standards as proposed for the new Council regulation might be impaired by the latter's focus on countries. While the Committee thinks that the country approach is the most practical, it requests the Commission to consider ways and means by which successful self-regulation could be exempted from the suspension or withdrawal procedures foreseen in the present proposal and to draw up a complementary procedure.

2.12. In view of the large number of GSP beneficiary countries, one might expect a considerable amount of work for the Commission if all countries interested in the new scheme apply rapidly and more or less simultaneously for the new benefits. Under such circumstances, the Committee would emphasize nonetheless the need for a cautious approach by the Commission in order to provide time to properly evaluate respect for the new provisions in potential beneficiaries. We would therefore emphasize the need for an evaluation of the present level of staff resources devoted to the GSP and, if the evaluation finds it necessary, an increase in the number of Commission staff working on the GSP supervisory mechanisms as well as an increased effort as regards adequate training of such staff.

2.13. In conclusion, the Committee strongly recommends that, while its above comments should be taken into account when it comes to the practical interpretation of the new GSP arrangements, the present Commission proposal for a Council Regulation should be adopted by the Council in its existing form within short. It hopes that the Commission will seriously consider including in its proposed instrument the fundamental ILO Conventions on forced labour and on discriminations, as well as the 1999 new ILO Convention on Child labour in the foreseeable future.

Brussels, 10 December 1997.

The President of the Economic and Social Committee

Tom JENKINS

() OJ C 287, 22.9.1997, p. 44.