Labour Provisions in Preferential Trade Agreements: Potential Opportunities or Challenges to Vietnam?

Abstract

In this research, we discuss the impacts of labour provisions in preferential trade agreements (PTAs) to which Vietnam is a party in aspects of politics, institutions, law and economy. We find that the impacts are a mixture of both positives and negatives. Positive effects include a more and more developed and well-established domestic labour legal framework, stronger domestic political commitment to labour reforms, more stabilized political environment, higher level of labour protection, higher wages, better working conditions and better life, higher productivity and competitiveness of goods and services and more foreign direct investment. Negative effects include potential political risks of state sovereignty weakening, reduction in competitiveness because of rising labour costs and undermined trade and economic growth resulting from tradebased sanctions in labour disputes. Both positive effects and negative effects exist as possibilities and whether they are materialized and which of them outweighs depend on reactions taken by Vietnam. Proposals for Vietnam to benefit from labour commitments include improving the domestic labour law system and efficiency of state administration and enforcement of domestic labour law, changing the economy from factor-based to efficiency-based status, making relevant institutional reforms, introducing the trade-related labour topic into the academic setting, performing studies on the impacts of labour provisions in PTAs, set up strategies and tactics in PTAs' labour negotiations, joining forces with other trade partners of the same interest, effective exploitation of cooperation mechanisms in PTAs and proposing S&D treatment for developing countries.

The Social Dimension in EU Free Trade Agreements: ASEAN Perspectives

“…Besides, they argue that bringing labour rights and environmental standards into the arena of trade negotiations presents new barriers for exports or a smokescreen for protectionism undermining the trade potential of developing countries (Ref. 35, p. 3) 41 . The fact that the proposal to include a social clause in international trade agreements, with trade sanctions to enforce core labour standards, is being raised by major developed countries such as the EU and the US, is interpreted as being to some extent driven by their protectionist interests (anonymous interview).…”

“…Compliance with labour commitments can result in increased costs in the short term, increasing compliance costs, and decreasing the competitiveness of its domestic labour force when compared with foreign labour (Refs 35, Ref. 41, also anonymous interviews). It should be noted that Indonesia, Malaysia, and Vietnam are regarded as the world’s potential ‘low-cost labour alternatives’ in East Asia – in competition with China.…”

“…For Vietnam, observance of labour commitments in FTAs forces the Government of Vietnam (GoV) to take into account conflicting interests of different interest groups, and confront a significant law-making workload to translate these regulations into Vietnam’s legal system and to issue detailed guidelines, thereby making policy and law-making procedures more costly and time-consuming (Ref. 41, p. 50). In the case of the Philippines, Lanzona argues 35 that if these labour standards are included in the Philippine Labour Code, integrating them into a FTA will not lead to distortions.…”

“…Observance of standards such as required by the EU can interfere in Vietnam’s legislation and political stability and undermine the conventional strategic ‘relationship’ between the Communist party and the labouring class – the crucial component in building the successful governance and leadership of the Party according to the Marxist and Leninist ideology of the CPV (Ref. 41).…”

Normative Power Europe through trade: Vietnamese perceptions

“…Consequently, despite being active in furthering international economic integration in general and participating in bilateral FTAs in particular, it has not been the intention of Vietnam to include the labour issue in FTA frameworks. 147 Even so, as with the case of sustainable development, some interviewees thought that to have market access to the EU, Vietnam might need to comply with these labour standards or at least search for a 'tradeoff' on this issue.…”