Welcome to the second panel in today’s hearings. Thank you so much for joining us here in the House of Commons. Eric, thank you so much to you for joining us from, I think, AFL-CIO headquarters in Washington. We are really grateful for you joining us today. The purpose of this panel is to help the Committee understand what new guardrails we may need around trade agreements in the future to help ensure that we are all engaged in a race to the top and not to the bottom on labour standards.

Trade unions in the UK are very concerned that the Modern Slavery Act is completely unfit for purpose for tackling exploitation in global supply chains. The transparency in supply chain clause in that Act just requires that companies publish statements. The statements can say that a company has taken no action to address modern slavery, so no action is actually required to prevent any form of exploitation. It is not even all companies that have to publish those statements, so it is really not an adequate approach at all. At the TUC, we have been very heartened by the approach that has been taken in the EU with the introduction of the due diligence regulation recently. We would want to go further than that regulation, but, very importantly, it includes a liability on global supply chains and on companies and it is a civil liability for those companies. It requires trade unions to be involved in remediation of abuses and it has stronger provisions around penalties when it comes to those liabilities. Where we would want to go further is that we would want to reverse the burden of proof, because there are some high barriers to the evidence threshold being met in that legislation. We would want there to be a scope that encompasses all companies. Currently, in the EU legislation, only 0.05% of companies would be covered, according to research by the European Coalition for Corporate Justice. We would want all companies to be covered by that legislation as well. There are ways we would want it to go further, but we think that the EU has taken an important step forward. As you say, there is a risk that the UK is falling behind and that we are unevening the playing field. We are attracting the wrong kinds of companies that do not respect workers’ rights, which is really bad news for the vast majority of companies that do respect workers’ rights and want to address these fundamental abuses in global supply chains.

Yes, absolutely. In 2015, the Modern Slavery Act was a world-leading, groundbreaking provision. Since then, we have seen this huge wave of similar bits of legislation brought in around the world. The US has taken the lead, and Eric will talk about this, with the Tariff Act and the Uyghur Forced Labour Prevention Act. As Rosa says, in the EU you have the corporate sustainability due diligence directive. All the time, the UK is falling behind and becoming further a laggard. I know that a representative of Tesco came in front of this Committee and used the phrase that the UK is at risk of “becoming a dumping ground”. I see no reason not to believe her experience. Government inaction on this issue is out of step with public opinion. We at Trade Justice Movement did some polling in December in partnership with Yonder. That told us that 74% of respondents of the British public agree with the statement that “the UK should ban products that have been produced using forced labour”.

What are the lessons, Eric, that the UK should draw from American advances in guarding against the perils of forced labour in supply chains?

Thank you for inviting me. There are some lessons to share. One is that, as Rosa mentioned at the top, these transparency Bills, such as the UK Modern Slavery Act, were focused on the assumption that transparency itself would be sufficient to drive corporate due diligence and real effort to eliminate forced labour. In practice, it has not happened. It has not provided a great enough incentive. We have learned in the United States that you need some teeth. You need some regulatory teeth to motivate companies to do that due diligence, to look down their supply chains all the way to the raw materials level, and to identify and eliminate forced labour and human trafficking. We have seen very positive results from our general ban on goods made with forced labour under our Tariff Act and then the elevated ban that we have adopted with respect to goods from Xinjiang, the Uighur region of China, where we see state-sponsored forced labour. There is a systemic, quite remarkable and awful programme there. That is the takeaway lesson from us. You need teeth. Otherwise you are not going to get the corporate action you hope for.

It seems an important point. This Committee is publishing correspondence this afternoon from Shein, which tells us that the safeguards that Shein has in place about the products it sells in the United States are not in place for the products that it sells in the UK. Is that a good example of what good regulation can give you?

That is deeply troubling. I read some of its answers to this Committee. It is deeply troubling that it was saying to you that it has put up some guardrails, evidently to screen for forced labour for products to the United States. To be candid with you, I am not sure how robust those guardrails are that Shein and Temu are using for their products in the United States. We can talk more about some of the measures that are coming to address that. This issue of a dumping ground is a real thing. If they can cut corners and still have guaranteed access to the UK market, they will, and that is troubling.

Eric, I will come to you as you are on the screen and then I will come back into the room. Labour standards in global supply chains can be addressed multilaterally, bilaterally or with unilateral action. Which approach do you think is most effective?

Multilateral action is always welcome where you can get that consensus, but it is not an easy thing to achieve. We have seen at the WTO that previous UK Governments, this Government and our previous Biden Administration have tried to push the WTO to address things such as modern day slavery and forced labour but we have not been able to get a consensus, even with these quite extreme labour rights violations that, after all, are not just about human rights. They are about competitiveness. We do not want our workers to have to compete with practices such as that. It is simply not tenable. Multilateral action is welcome, but I am afraid that we have seen that unilateral and bilateral action is where the real game is at the moment. That is where we have made the most progress, on a unilateral and bilateral basis. We can talk a bit about what we achieved in the USMCA as well. That is, I guess, a regional basis. I will leave it there.

If I come back to the panel here, Tom and Rosa, do you want to comment on that? Then I have a further follow-up question as well.

I do not see it as an either/or. You can pursue all the tracks and we have to pursue all the tracks. It is really important that the UK implements that mandatory human rights due diligence legislation, building on that which has come in with the EU, but then working closely with the EU. We had a lot of discussion in the previous panel about that closer relationship with the EU, which for the TUC is an absolutely core objective. We really welcome that it is a priority of the Government. We would want a component of that UK-EU reset to be that the UK at least keeps up with EU standards on employment rights, so we would incorporate and then build on the due diligence legislation. That is an example of bilateral working. We hope that that joined-up approach could then encourage that approach in other regions. Hopefully there is some partnership and dialogue with the US possible in this area as well. We also need to work in the multilateral sphere. We are members, as the TUC, of the International Trade Union Confederation. We have been lobbying at the global level with trade union partners around the world, including AFL-CIO, for a UN binding treaty on human rights and due diligence. It has taken over 10 years and there are still more discussions to go. I think that it is going to be quite a hard road ahead. It is really important that that discussion is taking place in the fora of the UN, linking closely with the International Labour Organisation, because we need to have a comprehensive approach to make sure that we do not allow a race to the bottom in the countries that are not regulated. I see that as important terrain ahead, even though it will be challenging.

I am in agreement with Eric and Rosa. I have one word about the potential of bilateral trade agreements to act as an engine for the establishment and maintenance of high labour standards. Trade agreements have an additional advantage when it comes to protecting rights that do not exist in lots of other types of international agreements. They have an inherent enforceability mechanism. If one party contravenes the commitments of a trade agreement, the other party has recourse to removing market access and re-establishing tariffs. Typically, a trade agreement will contain a dispute settlement chapter that will lay out the rules for how that is actually done. There is no reason why high labour standards and high standards of environmental action cannot be included within that main text of a trade agreement and we cannot use our bilateral FTAs as a vehicle for establishing and maintaining higher standards. That lays out a distinction between trade agreements on one side and things such as the Paris agreement, or even the ILO core conventions, on the other. If you contravene those, often you can get away scot-free.

You have both mentioned the ILO. In thinking about the ILO and the World Trade Organisation, how effective do you think they are in enforcing good labour standards through supply chains? Do you have any thoughts on their effectiveness or any improvements that could be made?

It has been a concern of trade unions since the ILO was founded in 1919 that there are no concrete penalties that can be implemented on countries that are found to be breaching the core conventions. There are diplomatic pressures that can be brought to bear. As Tom has already mentioned, where ILO conventions are inserted as clauses within trade agreements that have to be adhered to in order for that market access to continue, that can be a way in which you can encourage adherence to those conventions or, indeed, have a penalty when they are not adhered to. In the experience of trade unions—and trade unions in the US know this from long experience of trying to use their labour chapters to improve labour rights in other countries as well—the way that they have been set up has been extremely difficult to use in practice. They have been written in a way that means that you have to demonstrate that any labour violation has an impact on trade. There is a famous case against Guatemala where that proof was not there even though there were egregious abuses of labour rights. Because it did not have an impact on trade, there was not a violation proved. There is a long way to go to improve those labour chapters. With the UK-EU agreement, to come back to that discussion, there was a huge innovation with the level playing field clause. It was very broadly written and it was a requirement that the UK needed to keep up with the employment rights that were in place in the EU at the end of 2020. If that was not kept to, there would be an actual material penalty imposed in form of a tariff. That was a very strong penalty. As trade unions, that was a really important lever for us to put more pressure on the previous Government about the strikes Act, for example, which undermined that commitment. There have been innovations but it needs to go further. The WTO is really glaring in the absence of ILO conventions in the rules. The global trade union movement is really pushing for respect for ILO standards to be included as a criterion for unfair trade practice, because it is one. If you deny trade union rights, workers cannot claim a decent wage and so that is a form of keeping prices down, but it is not considered in the ILO framework. That is a global campaign that we are engaged in with trade unions around the world.

I would like to draw the Committee’s attention to my entry in the Register of Members’ Interests as a former staff member of the TUC. The new Government have not yet updated the negotiating mandates for existing free trade agreements to improve labour standards. Should we be worried about this?

It is very welcome to have the question from you, Antonia. We are concerned about the direction of travel with the continuation of trade talks with partners that include Gulf states, Israel, India, Turkey and South Korea. These are all countries where there are serious abuses of labour rights taking place and in Israel also breaches of international law. We would welcome the Government following the approach that they had taken with the EU, where there is a trade negotiation ongoing with a partner where market access is dependent on respect for the highest standards of employment rights, as you find in the EU. With these other countries, we have some of the most serious violations of workers’ rights in the world. For example, trade unions are banned in half of the Gulf states.

I want to pause on that, Rosa. You just said to Sarah Edwards that there are real worries about the use of WTO or ILO to raise labour standards. Now you said that you are also worried that the labour enforcement provisions in current trade deals are not strong enough. This feels as though we do not have a trade strategy in place that is strong enough on labour standards. Is that your judgment? Is that where we are?

When it comes to non-EU countries, we do not feel like labour standards are being considered enough. We would want there to be more engagement with trade unions about these ongoing trade negotiations, getting to a place where we had some pre-ratification criteria, where our trading partners had to respect fundamental rights ahead of any trade negotiations being entered into. This is not the case for other trading partners, but those ones in particular are extremely concerning. With the EU, it is very different. We think that that is a very welcome approach, where labour rights, high employment and social standards are being prioritised. Those are the two different approaches.

We are now in a situation where, seven or eight months after the election, it is impossible to see any difference in the approach being taken by this Government relative to the previous Administrations when it comes to these free trade agreements. We are pursuing deals with, as Rosa has already laid out, in my view, unsuitable partners where labour rights are under attack. We have not changed our approaches to those negotiations. The Government bring out a strategic approach document that is published prior to any negotiations. That has not been revised and, therefore, we are seeing the same results. It was reported this morning that the Secretary of State for Business and Trade is in India and they will not be reopening the labour chapter, which had been negotiated and closed in the UK-India negotiations. That was leaked about 18 months ago and has been broadly criticised by everyone from trade unions to charities for being completely non-binding. As far as we can see—and obviously we await the trade strategy with bated breath—there is very little difference in terms of the intention and likely impact of the Government’s approach. It is worth reflecting on the paucity of the ambition that the UK has taken up to this point. In the stated aims for negotiations with India and with the Gulf, one of the Government’s commitments is that this trade agreement should reaffirm parties’ commitments to international labour standards, including the ILO. That sounds very good, but, when you consider that neither India nor five of the six Gulf states have ratified the core ILO conventions on freedom of association and collective bargaining, you start to see these warm words for the empty fluff that they really are.

Turning now to Eric, it has been a while since I was at the AFL-CIO. It is lovely to have you here, Eric. Would a provision like the US’s rapid response mechanism be an effective way to uphold labour rights in these FTAs?

We would certainly welcome you back to the AFL-CIO at any time. The short answer is yes. The USMCA’s rapid response labour mechanism has been a major successful innovation. It merits close study by this body to see what might be applicable for some of the trade agreements that you are exploring now. Let me give you a little background on that. The RRM was included in USMCA to address the severe known labour rights challenges in Mexico, where decades of a government policy to suppress labour rights had had the effect of keeping wages down and denying workers the right to organise independent trade unions. We are talking about a systemic issue in Mexico that the Government had only begun to address. We knew that it would take time and would be measured not in months or years but probably in decades to change that ingrained anti-union low-wage culture in Mexico. What did we do? Sure, we included the enforceable commitments for Canada, Mexico and the United States to meet these core ILO commitments. That was what the Governments are meant to be doing. We also included this facility-specific enforcement mechanism. The reason we put that in there is that we knew that the problems in Mexico would not be solved overnight, since they were so systemic and known, and that Mexico was making progress on reforming its laws but that that would not trickle down to what was actually happening in the factories that were exporting to the US market. This rapid response mechanism allowed the United States, upon the presentation of sufficient credible evidence, to ask Mexico to complete an investigation of what is happening in this car factory or this call centre. I am using real cases here. Mexico would have 45 days—quite a rapid, short window—to investigate and report back to the US. Then the US would decide whether remedial action on that specific facility was needed. That is targeted at where the problems are, not disrupting the wider trade relationship. This has worked quite well. The Biden Administration used it over 30 times and it resulted in gains for Mexican workers, including everything from new collective bargaining agreements to reinstatements of fired labour organisers and back pay for workers who were illegally dismissed. They are the bread and butter things that you want to see a labour inspectorate doing, but it required this extra targeted pressure. It is quite appropriate because, after all, I would argue that these multinational companies are the prime beneficiaries of these trade deals. They are asking for market access, and a guaranteed market access for a number of years indefinitely. It is only right to hold them to account that they are actually playing by the rules and have a mechanism to do that. It is worth exploring for the UK. I have one word of caution: you would have to adapt it depending on the trade partner and the challenges in that country. It is not one size fits all, but this idea of facility-specific enforcement has legs and should be explored.

In different times it was important in negotiations on a critical mineral partnership, for example.

I would like to change gears a little bit to think about how trade, exports and imports are affecting workers and businesses here in the UK. This is probably one for Rosa, but I would be interested to get Eric’s perspective from the US too. Given the rapid growth in global ecommerce and regulatory responses from the US and EU, is the UK’s approach to managing digital supply chain of low-value goods sufficiently robust to ensure a level playing field for businesses here in the UK, particularly retailers and manufacturing?

I take from this that you are alluding to the closure of the de minimis loophole that has taken place in the US. Obviously it is very welcome. You have shone the spotlight on ecommerce companies, where there are abuses in supply chains. For us, the action that we really need is that mandatory due diligence legislation to compel companies across global supply chains to have that civil liability. It is really only with that comprehensive legislation and working with trade unions to make sure there is adequate remediation where abuses are found that we will properly address these abuses. You might increase the tariff on a lower-value good and there will then be a cost to the importer, which might be passed on to the consumer and have a commercial effect, but that will not address the abuse. There would still be forced labour taking place, for example. With the due diligence legislation, a company would be compelled to conduct that due diligence and, where forced labour was found, work with trade unions. Independent trade unions are banned in China but work within global trade union federations to address that abuse. We need much more than a measure around tariff exemptions to address those labour abuses.

Eric, what is the perspective from the US on that?

We face a very similar problem in the US. I already mentioned that we have this ban on the import of goods made with forced labour. That is good, but we have this rather large de minimis loophole. In the US, it is shipments up to $800, which is quite a large loophole de minimis level comparatively if you look around the world. The challenge we have seen here is that Shein, Temu and these companies have built a business model around exploiting the de minimis loophole. It allows them to avoid tariffs, which obviously is important for them. Also, goods that are entering through de minimis, at least in our system, are subject in practice to a lower level of scrutiny for their compliance with all sorts of regulation, including the forced labour issue. We have also seen, by the way, fentanyl and other illegal substances being exported in de minimis packages. It is a bit of a regulatory problem in the US. We have been very supportive of efforts by the Biden and Trump Administrations to come to grips with this loophole, because it is quite large and we know that things are getting in that ought not to.

Your question demonstrates the gulf that currently exists in the public pronouncements from this Government and the Department for Business and Trade about why we are trading and what we are seeking to do with our trade policy. Are we looking to support UK producers? How are we hoping that trade will contribute to our mission for net zero? How are we hoping that trade will contribute to the achievement of human rights around the world? On all of this, we have silence. We are speaking today in the context of the Government bringing out a trade strategy in May or June, possibly. We are pointing to that as a vehicle and an opportunity for the UK to start to settle some of these questions and to demonstrate some ambition and global leadership, along the lines of the rapid response mechanism that Eric has mentioned and all these other questions that have come from all sides of the Committee today.

That has been extremely useful. Thank you very much indeed. You have really helped us light up the lack of high standards when it comes to labour rights in some of our trade agreements. That has been incredibly helpful evidence. Thank you very much indeed for your time today. Eric, thank you very much indeed for joining us from Washington DC. Good luck, as they say, in the days to come. For now, that concludes this panel.