In recent years, there has been a growing focus on ESG (environmental, social, and governance) considerations in the business world. Companies are increasingly expected to operate in a way that is environmentally sustainable, socially responsible, and governed in an ethical and transparent manner. This trend is being driven by several factors, including pressure from investors, customers, and regulators, as well as a growing awareness of the need to address global challenges such as climate change, inequality, and human rights abuses.
One area where ESG considerations are becoming particularly important is in the field of international trade. States are entering into international treaties that require and encourage them to adopt measures to protect environmental, labour, and human rights standards. They are also adopting legislation that requires and encourages private actors to behave in accordance with those same standards. As a result, ESG compliance has become a standard part of the business model.
ESG in international trade law nothing new
In fact, ESG considerations have been recognized in international trade law for decades, under various rubrics. For example, the Panel in Belgian Family Allowances, one of the very first GATT disputes, stated that workers’ compensation could not be used as a basis upon which to discriminate between imports. More recently, the international trade community has been examining whether trade remedies authorities can (and should) take these considerations into account in their investigations.
Trade remedy authorities look out for unfair practices
Trade remedies are measures that governments can take to protect domestic industries from unfair trade practices, such as dumping or subsidies. These measures can include anti-dumping duties, countervailing duties, and safeguards. In order to impose a trade remedy, the authorities must first determine whether there has been injury to the domestic industry. They must also determine the extent of the injury and the appropriate level of remedy to impose.
Cheaper not to comply
ESG considerations can come into play in a number of ways during the trade remedy process. For example, authorities can examine the higher ESG compliance costs of domestic producers, compared to the lower non-compliance costs of exporting producers. They can also account for lower export costs by virtue of exporters not complying with ESG standards. However, trade remedies authorities have generally found it more difficult to take this into account, with some bodies pushing back on attempts to do so.
Defining a ‘like domestic product’
Despite the challenges, there are a number of ways in which trade remedies can and should reflect ESG considerations. For example, authorities can consider whether a product that is produced to higher ESG standards is ‘like’ a domestic product that is not made according to these standards. They can also take ESG standards into account when determining whether it would be in the economic interest of the country to impose trade remedies.
So why not add someone to your board that has that experience?
Given the growing importance of ESG considerations in the business world, it is likely that trade remedies will continue to be influenced by these factors. As a result, companies should be aware of the potential impact of ESG considerations in any trade remedy investigation to which they may be party. By operating in a way that is environmentally sustainable, socially responsible, and governed in an ethical and transparent manner, companies can mitigate their risk and position themselves for success in the global marketplace.
A non-executive director could cost as little as £500 a month time and required obligations vary – to add that dimension to your board compliance and ensure international Trade is not just covered but understood. Contact lesley.batchelor@exportbootcamps.com