Abstract:

Starting with the NAFTA (North American Free Trade Agreement) side agreements, many recent free trade agreements (FTAs) have included provisions to address social and environmental conditions; however, the language relating to these issues is usually weak and general in nature. If there are separate social and environmental chapters or provisions in FTAs, the language generally states that parties are obligated to maintain and enforce their own national social and environmental laws. While increased communication is sometimes encouraged, any reference to market-based mechanisms such as reporting standards, certifications, or incentives is usually vague and gives no guidance on what specific actionable steps governments or companies can take. This research project will assess the viability of Corporate Social Responsibility (CSR) reporting as a means of addressing environmental and social concerns in future trade agreements. This evaluation will be accomplished by examining the role CSR reporting can play in balancing the trade promotion and social and environmental goals of FTAs.

The viability of CSR reporting within future FTAs will be determined by examining the thirty-four individual countries in the proposed Free Trade Area of the Americas (FTAA) to ascertain their commitment to CSR reporting versus other governance mechanisms and the resources they have available to implement CSR reporting requirements. This will be accomplished by interviews with trade representatives from each of the FTAA countries, representatives from three companies that issue CSR reports, and representatives from four CSR reporting organizations. Secondary data that uses social and environmental indicators to rank the state of corporate responsibility by country will be analyzed to provide additional support. The viability of CSR reporting will also be determined by examining the current level of CSR being reported by large multinational corporations (MNCs) in the Americas to help identify their current capabilities and commitment to implementing CSR reporting.

A further goal of this research is to assess the potential role FTAs can play in harmonizing CSR reporting standards and whether or not an existing CSR standard meets the needs of a broad enough range of stakeholders to provide a likely foundation for harmonization. This will be accomplished by looking at how the interests of various stakeholders (MNCs, member countries, reporting agencies) are affected by linking CSR reporting with FTAs.

Overall, this research will contribute to prior research on labor and environmental issues in trade agreements and add to the limited research on the inclusion of CSR initiatives in trade agreements. The results of my analysis will provide new insights into the viability of FTAs to serve as a driver towards harmonizing CSR reporting standards and institutionalizing CSR reporting as a new market-based mechanism for realigning the economic and social and environmental goals of expanded trade.