Mu-hyup "US·EU Labor Regulation Strengthening... Legal Obligations and Supply Chain Risk Review"

'Analysis and Implications of the Normalization of Labor Issues as a Common Agenda' Report

Stricter Regulations Such as Suspension of Preferential Tariffs if USMCA Labor Provisions Are Violated

[Image source=Yonhap News]

[Asia Economy Reporter Moon Chaeseok] As the United States and the European Union (EU) are imposing sanctions on international trade of goods violating labor rights such as forced labor, there are claims that Korean companies also need to inspect their supply chains and manage risks.

On the 4th, the Korea International Trade Association's Institute for International Trade and Commerce released a report titled "Analysis and Implications of Labor Issues Becoming Trade Agendas" containing this information.

According to the report, since the mid-2000s, the US and EU have shown a stance through their own free trade agreements (FTAs) to block imports of goods manufactured at low cost by violating labor rights.

The US introduced a "Labor Rapid Response Mechanism" in the United States-Mexico-Canada Agreement (USMCA). This mechanism allows suspension of preferential tariffs for companies violating the labor provisions of the agreement.

In the recently launched Indo-Pacific Economic Framework (IPEF) negotiations, plans are underway to introduce strengthened labor standards and enforcement mechanisms. The "Uyghur Forced Labor Prevention Act," which fully blocks imports of related products from China's Xinjiang region due to forced labor and human rights violations, has also been in effect since June.

The EU is no different. Through the "Directive on Corporate Sustainable Supply Chain Due Diligence" announced last February, it imposed obligations on companies both inside and outside the EU to review and report on human rights violations within their supply chains. In line with the US's forced labor eradication policy, the EU also announced plans to introduce legislation banning imports of forced labor products into the region.

Korea has already experienced labor issues becoming trade disputes through the Korea-EU FTA. Although the FTA agreement includes provisions to comply with the core labor standards of the International Labour Organization (ILO), the EU claimed that Korea violated its obligations under the FTA by not ratifying the ILO conventions, leading to the initiation of dispute resolution procedures.

Although the expert panel did not accept the EU's claims, it was a case that made Korea keenly aware that trade frictions over labor issues could arise at any time. Additionally, at the Korea-US FTA Labor Committee held in April for the first time in nine years, the US raised concerns about Korea's compliance with labor regulations.

Hwang Junseok, a researcher at the Korea International Trade Association, pointed out, "Trade disputes over labor issues are intensifying through trade agreements and domestic laws," adding, "Not only domestic legal violations such as domestic labor issues, non-compliance with international labor-related agreements, and non-compliance with labor provisions in FTAs, but also supply chains of companies linked to countries with labor-related risks can become problematic."

He continued, "As demands for compliance with labor rights are likely to intensify mainly among developed countries, it is necessary to review legal obligation compliance as well as supply chain risks and seek countermeasures."

This content was produced with the assistance of AI translation services.