In October 2015, ministers of the 12 countries negotiating the Trans-Pacific Partnership (TPP) announced the successful conclusion of 7 years of negotiations. These 12 countries are comprised not only of developed countries such as the United States and Japan, but also South-East Asian developing countries such as Vietnam and Malaysia, in which Japanese companies have a considerable business presence. The content of the TPP is broader than mechanisms to liberalize trade and investment among these 12 countries. For instance, the agreed outcome document of the TPP1 includes an independent labour chapter, requiring parties to the TPP to take measures to eliminate child and forced labor and to protect freedom of association. In this issue we will examine provisions in the labour chapter of the TPP and their implication for Japanese companies.
Trans-Pacific Partnership (TPP): Labour Chapter
The 12 participating countries constitute 36% of the world's GDP and 26% of global trade.2 If and when it enters into force, the TPP will become the largest regional trade agreement. The inclusion of working conditions in the TPP is significant - the World Trade Organisation, for example, does not count working conditions within the scope of their mandate. Chapter 19 ("Labour") of the TPP obliges parties to agreement to do the following:
- To adopt and maintain in their laws and practices the following fundamental labour rights as set out by ILO Declaration on Fundamental Principles and Rights at Work:
- a.Freedom of association and the right to collective bargaining;
- bElimination of forced labour;
- c.Abolition of child labour;
- d.Elimination of discrimination in respect of employment and occupation.
- To have laws governing minimum wages, hours of work, and occupational safety and health.
- To discourage the importation of goods that are produced in whole or in part by forced or compulsory labour.
Moreover, commitments in the Labour chapter are subject to the same dispute settlement procedures available for other chapters of the TPP, meaning that alleged violations of labour-related obligations could trigger economic penalties by way of suspension of benefits. The US government notes3 that these binding and enforceable obligations will help to improve labour conditions in TPP countries that do not currently meet international labour standards.
Impact of TPP on working conditions in TPP countries and its implication for Japanese companies
Upon its entry into force, the Labour chapter of the TPP obliges state parties to enact or revise their laws as necessary to incorporate international labour standards as recognised by the ILO Declaration. The US has agreed "implementation plans" with several countries which include the establishment of standing Senior Officials Committees (SOCs) in order to review progress made in implementing the Labour chapter. In the Vietnam implementation plan,4 Vietnam commits itself to allowing workers the autonomy to establish and join independent unions and to bargain collectively, and to this end to conduct necessary legislative and institutional reforms. This is significant as currently all trade unions in Vietnam must be affiliated with the sole trade union confederation, which is overseen by the Communist Party. Vietnam has also agreed to develop and implement a strategy for targeted inspection including of sites in the garment industry. The Malaysian implementation plan5 includes the implementation of regulations requiring that private employers employing foreign workers provide each foreign worker a notice informing them of their right to retain their passport and information on how to report violations of this right. These implementation plans are enforceable because, as we noted above, the country-specific labour reform commitments are subject to dispute settlement under the TPP.
In anticipation of the entry into force of the TPP, these ASEAN countries have already taken steps to amend their laws and regulations that do not yet meet international labour standards.6 Companies in TPP countries, including those owned by or in the value chain of Japanese companies, will likely come under increasing regulatory pressure to do business in a manner consistent with ILO standards as a result of these national reforms. In addition, since all the parties to the TPP need to commit themselves to discouraging the importation of goods associated with forced or compulsory labour, Japanese companies should pay close attention to developments in TPP countries - including in Japan - and consider how they can establish or strengthen due diligence/risk management mechanisms to tackle this complex issue.
The addition of the Labour chapter to the TPP can be considered the result of efforts by like-minded countries to level the playing field by ensuring that international labour and human rights standards become a staple feature of trade agreements, countering countries and regions that have not codified respect for these universal norms in domestic legislation. It also evidences a growing consensus in the international community that companies need to respect international labour and human rights standards regardless of where they operate. Japanese companies with operations in TPP countries will need to further efforts to ensure that they meet their responsibility to respect human rights, both in Japan and aboard.
Although Japanese companies have traditionally focused their human rights activities on tackling internal cases of discrimination and harassment, companies also need to identify and address human rights impacts on a variety of external stakeholders linked to their business. EY Japan can tailor e-learning programme content and interactive workshops and lectures to deepen understanding about the company's human rights responsibilities in accordance with the United Nations Guiding Principles on Business and Human Rights.
EY Japan Climate Change and Sustainability Services (CCaSS) assists our clients to respect internationally recognized human rights, wherever they operate. Project members have taken leadership roles internationally in the human rights field, speaking at the UN Forum on Business and Human Rights and supporting the OHCHR. Ashleigh and Keiichi represent Japan on the UN Global Compact (NYC) Human Rights and Labour Working Group and EY Japan has a partnership with the Japan local network. Masa has participated in a number of negotiations on international human rights standards and instruments at the UN as a representative of Japan. Our team members have a breadth of practical experience in areas of human rights, including;
- Human rights policy drafting
- Human rights due diligence
- Human rights e-learning
- Stakeholder engagements
- Human rights-related disclosure and reporting
- Human rights education and awareness raising