Trade Interests and Extraterritorial Value Considerations in New-Generation Free Trade Agreements : The Psychology of Redirection

This paper analyzes the phenomenon of environmental and labor standards in world trade, their place in WTO law, their remarkable emergence in new generation FTAs, and explores whether the insistence of developed countries on their protection has been driven by the moral desire to protect fundamental values or whether value-standards are the products of selfish trade interests. First, it examines member states' possibility under WTO law to erect extraterritorial value considerations against their trading partners and unilaterally restrict trade with reference to such considerations. As a matter of principle it argues that such extraterritorial value-considerations may be accommodated in Article XX GATT and Article XIV GATS. Second, it gives a short account of the approach of new generation FTAs, the emerging “folklore”, and showcases how non-trade values are becoming an integral part of trade. It argues that FTAs, including their regimes on environmental and labor issues fused into the concept of sustainability, have the perspective for the same carrier path as BITs. Although international investment protection has always remained predominantly bilateral, with a few exceptions, since its appearance in 1959 these bilateral strands resulted in a taut fabric that is often treated as a multilateral scheme. Third, it presents the two traditional explanations on the relationship and interaction between values and economic interests. Fourth, it concludes that while the debate on core labor rights and environmental protection is fueled by “selfish economic interests”, it is undeniable that these are genuine global values. Extraterritorial value considerations emerge under circumstances where regulatory competitive pressure is perceived to be exceptionally high, and the standard is regarded as non-negotiable by the local electorate. Although environmental and labor standards are both trade or value-driven, they are a redirection activity