Rasim Huseynov
Managing Editor of Seamless Trade and International Trade Consultant at Tevolution Ltd
Introduction
The interplay between international business transactions and environmental considerations has evolved significantly over time, particularly since the Industrial Revolution. This evolution raises a critical question: In an arena dominated by profit-centric, rational players, is there a role for moral considerations, and how can these be reconciled with environmental interests? This paper delves into these dynamics, focusing particularly on the European Union’s Environmental, Social, and Governance Trade-Related Measures (ESGTRMs). It aims to explore the development of ethical and moral principles within the realm of trade law and to evaluate their current influence on international business practices.
A central issue addressed in this paper concerns the potential impact of the European Union's ESGTRMs on international business transactions. These measures might exacerbate existing economic challenges faced by developing nations, which are already constrained by limited resources and expertise. The paper argues that if ESGTRMs are not managed judiciously and aligned with multilateral agreements, they could inadvertently function as trade barriers, thereby hampering global cooperation and increasing the cost of transactions. Furthermore, the unilateral implementation of ESGTRMs and their incorporation into customs law could create significant trade obstacles, particularly for less technically equipped commercial entities and countries of the developing world.
The essay is structured into three main sections. The first examines the historical context of the developmental and economic discourse between the Global North and the Global South, with the latter term referring to middle- and low-income countries, as well as the least developed countries. The second section explores the interrelation of law, society, and justice within international business transactions, highlighting the transition from traditional ethical norms to the contemporary complexities of global trade and regulation. The final section offers a critical evaluation of ESGTRMs, analysing their ethical assertions and real-world implications in international business, and assessing the legitimacy and ethical standing of these measures.
Section 1. Morality in Global Trade: From Historical Context to ESG Considerations
In the aftermath of World War II, the process of decolonisation was significantly shaped by a prevailing neoliberal narrative, advocating for free market principles and a transformative agenda that sought to reconfigure the developing world through a Eurocentric legal framework[i]. In other words, the law, having been internationalised, accommodated the existence of structures established by the imperialist order. This allowed Oduntan to argue about the introduction of proto-international law and the imposition of a former agenda with a new system, enabling the continued exploitation of the natural resources of developing countries, thereby keeping them underdeveloped[ii]. New international post-Bretton Woods financial institutions actively became involved in shaping the new world order based on the principles of the free market, whilst developing countries' interests were marginalised[iii]. Proponents of this free market ideology advised market participants not to be overly concerned with the negative externalities of their activities, suggesting that they could still be considered good and moral players as long as their trade and wealth creation continued[iv]. Consequently, these above processes had profound influences on determining the acceptable balance between moral and mercantile considerations within the Eurocentric legal system, thereby shaping global approaches enshrined in laws and regulations.
The World Trade Organisation led global negotiations, influenced the behaviours of states, and imposed restrictions on the sovereignty initially afforded to developing countries during the establishment of the ‘proto-international legal system,’ resulting in increased trade inequality[v]. As this influenced the behaviours of states, the diverse international business transactions scene still maintained its traditions and continued to be nourished by international trading standards, common law, and Lex Mercatoria, even though it had to adapt to policies implemented at the global level[vi].
Despite these developments, global financial institutions and the post-war economic system have been notably unsuccessful in addressing the enduring issue of global poverty[vii], neither in absolute nor relative terms, in either the South or the North. This was marked by the substantial profits earned by hedge fund[viii] and private equity funds[ix] owners, in stark contrast to the increasing poverty and job losses experienced by the majority. Most of the developing countries suffer from chronic underinvestment, the cost of servicing debt[x] and climate inequality between the rich North and the poor South, disproportionately putting the burden on the most vulnerable[xi]. The question of distributional justice has been and remains a crucial element in the debate surrounding moral philosophy and legal jurisprudence, spanning the history of these disciplines.
Growing environmental pressure, often described by ecological economists as a market failure—that is, the inefficient allocation of damages to the natural environment by violators[xii]—has spurred the creation of responsive international policies and agreements[xiii]. Markets, oscillating between boom and bust and periodically marred by scandals of poor business behaviour[xiv], have prompted leading governments to advocate for responsible and ethical business practices under the ESG (Environmental, Social, and Governance) banner, which very often becoming a little bit more than marketing or public relations exercise[xv]. Corporate Social Responsibility and ESG, being relatively new phenomena, are meant to complement the already existing philosophical theories of morality and virtue. The latter have a more fundamental and historical relationship with the law, including the law of international business transactions.
Doctrinal and philosophical sources of morality can be classified as either teleological (from 'telos', meaning 'purpose' in Greek) or deontological (from 'deon', meaning 'duty' in Greek). Teleological morality seeks solutions based on the ratio of resulting happiness or pain, rather than adhering strictly to the letter of the code[xvi]. In contrast, deontological morality permits no compromises, regardless of the outcome, and can accept harm for the sake of a perceived greater good[xvii]. Deontological morality regards adherence to the letter of moral codes as an unbreakable tenet of its approach. It is arguable that teleological and deontological principles found reflection in two legal concepts: positivism[xviii] and natural rights[xix]. While the legal positivist concept generally aligns with the utilitarian view in denying the necessity of a moral connection in lawmaking, proponents of natural rights maintain that justice cannot exist outside the realm of morality, insisting that it must be based on moral principles—a stance reflecting the perspective of deontologists.
Transitioning from these classical moral theories to a more contemporary analysis, we encounter the work of Jacobs, who offers a unique perspective. She posits two key moral syndromes: the commercial and the guardian. These are underpinned by 'systems of survival,' based on two evolutionarily predetermined driving forces, commerce and appropriation. However, her analysis seems to overlook the significance of the desire to give, philanthropy, altruism, and the communitarian needs of humanity, elements that set it apart from the rest of the natural world. In contrasting morality systems as optimistic and fatalistic, Jacobs characterises the commercial and guardian systems with their own distinctive attributes. In contrasting morality systems as optimistic and fatalistic, Jacobs characterises the commercial and guardian systems with their own distinctive attributes[xx]. Within this framework, she views issues like child labour and exploitation as temporary, believing they will eventually self-eradicate[xxi]. This view contrasts sharply with the often unfavourable distributive outcomes of a free-market system.
This observation is crucial, especially when proponents of Smithian and Ricardian theory advocate for minimal state interference in the economy, insisting that wealth creation in absolute terms should be celebrated, regardless of the unequal distribution of outcomes. The primary disagreement between proponents of positive law and natural right theories is nuanced, particularly in how they perceive the intersection of morality and law. Positivists assert that morality and law exist separately, advocating that the utilitarian outcomes justified by the wealth generated by businesses should not be disrupted by redistribution efforts. This perspective highlights a fundamental divide over the role of redistribution as either a necessary correction or a disturbance to an established economic balance[xxii]. Providing a detailed analysis of all these approaches would be an overly ambitious task for the scope of this essay and, indeed, a more significant endeavour.
In my analysis of morality in International Business Transactions (IBT), I have identified three distinct areas. The first area covers the relationships among traders, focusing primarily on contract law. It examines the equitable aspects of promise, parties behaviour during the contractual period, and issues related to contract frustration, as well as covering areas like the sales and purchase process, transaction transparency, and acting in good faith. The second area extends to international cross-border transactions, addressing challenges such as illicit financial flows, bribery, export control, anti-terrorism, economic sanctions, unfair trade practices, dumping, and subsidies. This paper, however, will primarily concentrate on the third area. My analysis critically examines the interplay between environmental, social, and governance (ESG) measures in IBT. The subsequent analysis will explore the historical backgrounds and moral approaches in this domain, followed by an examination of the impacts of these measures on participants in international commerce. This area subsequently did not found enough research and new emerging wave of ESGTRMs warranting special attention to this field.
Sections 2. Evolving Ethical Paradigms in Global Geopolitical Reconstruction and IBT
The exploration of law, society, and justice has been a cornerstone of philosophical and political debate for centuries, with ethical practices in trade and commerce present across various cultures and historical periods. However, the formal field of business ethics, particularly emphasising the social responsibility of businesses, gained significant attention in the seventies and coincided with industrial democracy reforms[xxiii]. Prior to this era, commercial morality was guided not just by traditions regulating honest conduct but also by a range of ethical codes deeply rooted in different societies. Historical trade guilds and medieval marketplaces, for instance, had complex rules that went beyond regulating quality and selling practices[xxiv]. Philanthropy and the welfare state, which could be seen as other elements of redistributive justice, became part of responsible state policy and reputable establishment in the UK since the Victorian era, with contributors such as Jeremy Bentham[xxv] and Seebohm Rowntree[xxvi]. Since the end of the last century, we observe the emergence of voluntary standards as well as the implementation of environmental, social, and governance matters in international trade law[xxvii]. Both of these changes have significantly influenced international business transactions. However, unilateral statutory laws and multilateral international laws exert a more profound effect on global business operations. This is because they become integrated into national and customs law, thereby directly impacting the legal framework within which businesses operate.
It is important to specify from the outset that International Business Transactions (IBT) law, in contrast to public law, affords more freedom and bargaining power. This allows for greater flexibility for market participants, maintaining their freedom for unhindered decision-making. Since ancient times, this has enabled markets to function efficiently, maintaining traditions and safeguarding livelihoods from regulatory imbalances. Nevertheless, IBT is increasingly affected by public law and policy. The main areas of tension include tariffs, diversity of legislation, standards for goods and services, export and import controls, and marketing standards, which are significantly impacted by these factors. Although the historical trend of international cooperation has reduced tariffs and made arbitrary trade barriers more complicated, the current 'spaghetti' of legislation continues to put pressure on traders' ability to transact freely[xxviii]. Additionally, the introduction of Environmental, Social, and Governance Trade-Related Measures (ESGTRMs) makes the ability of trade participants to respond dependent on information systems, data management, and expert knowledge. These trade regulations particularly challenging for markets already suffering from red tape and corruption in underdeveloped regions[xxix].
The material nature of trade transactions, involving monetary or similarly measurable values, seemingly aligns more coherently with utilitarian principles due to their quantifiable focus on profit, efficiency, or overall utility. This alignment makes the integration of utilitarian approaches with cost-benefit analysis appear less ambiguous in these contexts[xxx].
Zamir and Medina's analysis further elucidates the dynamics between private and public morality, highlighting a discernible distinction. They observe that public institutions tend to gravitate towards deontological principles, rightly prioritising rights, duties, and justice. While not advocating for the direct enforcement of morality, they argue that morality and democracy should not fundamentally diverge. This approach is view of natural rights law. Conversely, organisations governed by private law often adopt utilitarian approaches, emphasising outcomes and market success. This contrast underscores the different ethical orientations in the public and private sectors. However, it should be borne in mind that in certain contexts, a deontological approach combined with elements of economic analysis can be effectively applied in areas of private law. This includes situations such as acting under duress, determining unenforceability based on public policy or illegality, and adhering to principles of good faith[xxxi]. Similarly, in the public sector, decisions that are not contrary to civil rights and democratic principles can benefit from a utilitarian approach, especially if it provides more benefits to a wider public. Nonetheless, in decision-making influenced by public morality, greater emphasis is placed on the principle of 'no harm', rather than on the promotion of positive outcomes[xxxii].
The differentiation in ethical approaches between public institutions and private organisations reflects their divergent priorities and responsibilities. Public institutions typically address broader social, ethical, and legal issues, while private entities often prioritise efficiency, profitability, and market competitiveness. This dichotomy parallels differing approaches in complex issues like immigration, sovereignty, and the treatment of foreigners, subtly revealing an undercurrent of double standards that might not be immediately apparent. There is an expectation for a consistent anti-discriminatory approach towards goods from third countries, as mandated by international trade law, but this is not always reflected in the treatment of foreign businesses and citizens from these states. This discrepancy not only highlights an inconsistency in international policies but also underscores a broader tension where economic considerations often overshadow human values. Furthermore, the intricate system of international free trade agreements, both multilateral and bilateral, introduces additional challenges, especially for corporations from developing countries, further exacerbating these disparities.
It is arguable that combating illicit financial flows, corruption, or drug trafficking constitutes a deontological duty; it is driven by moral obligation rather than by considerations of effects or cost-benefit analysis. These activities are universally recognised as harmful and unfair, making them categorically unacceptable. In this ethical framework, there is no weighing of winners or losers, as these activities are outright illegal. Yet, despite stringent regulations against drug trafficking and money laundering, a striking irony persists: these illicit activities continue to infiltrate Western markets. At the same time, developing countries often encounter significant barriers in exporting legitimate products, primarily due to perceived non-compliance with specific Western standards[xxxiii]. Utilitarians might perceive the use of illicit funds or sanctioned money as a means to achieve beneficial outcomes, whereas deontologists would unequivocally refuse any engagement with funds obtained through illicit means. Regrettably, the prevailing legal framework falls short in facilitating the restitution of these funds to their rightful beneficiaries, often in developing countries, who are deprived of essential investments and victimised. This situation relegates moral condemnations to the realm of academic debate, far removed from practical application[xxxiv]. While efforts are made in the form of philanthropic aid to the poor, there simultaneously exists a utilitarian laxity in pursuing actionable justice for stolen funds. These seemingly convenient choices are just drops in the ocean compared to the substantial sums of money siphoned from Africa to Western banks. This reflects not only a preference for maintaining the status quo but also highlights the stark disparity where the outflow of stolen funds vastly overshadows initiatives aimed at addressing systemic issues in developing countries[xxxv].
On the other hand, the moral implications of anti-dumping duties spark heated debates. Critics from the utilitarian camp view them as a negative-sum game, while proponents argue for fair trade justifications, which can be subjective. McGee argues that anti-dumping is irrational, asserting that while buyers may benefit from dumped prices, losing competitors can re-enter the market once the dumper normalises prices[xxxvi]. However, this perspective seems implausible to me. Given that a competitor's human and business capital has been depleted, restoring it swiftly enough to re-enter the market may not be feasible. Nevertheless, integrating additional cost-benefit analysis with deontological measures could offer a more balanced solution. In our next section, we will discuss subsidies, which are increasingly utilised in conjunction with the latest Environmental, Social, and Governance Trade-Related Measures (ESGTRMs).
Section 3. New Moral Narratives in Changing Global Trading Environment and IBT
International cooperation has yielded significant achievements through multilateral environmental agreements[xxxvii], with notable successes including the combat against the depletion of the ozone layer and the implementation of the Convention on International Trade in Endangered Species (CITES), based on North-South equity and in the spirit of protecting the global commons[xxxviii]. These agreements have led to the establishment of secretariats dedicated to collaborative research, development, and coordinated action. However, the recent resurgence of global political rivalry, marked by a retreat from the previously designed trade order, evidently showcases attempts to introduce new coercive and unilateral actions, even in the realm of Environmental, Social, and Governance (ESG). This shifting landscape, characterised by bloc-based or unilateral measures, poses complexities in reconstructing the international order. The challenge is further amplified by inconsistent approaches and the ambiguous nature of the burgeoning plethora of both voluntary action and statutory laws in the field of ESG. This context presents significant hurdles in implementing new moral imperatives, creating a scenario where confusion reigns supreme amid an avalanche of new regulations[xxxix].
Furthermore, the application of balanced moral approaches is challenged by the incommensurability and incomparability of environmental goals. For example, the use of wind power raises issues related to renewable energy, such as aesthetic infringement on landscapes and effects on biodiversity, including the threat to migratory bird routes. This complexity of moral dilemmas creates an additional threat of imbalanced approaches, where the perceived ultimate goal of achieving climate change mitigation at any cost may divert attention from the significantly life-threatening problem of loss of biodiversity. Hulme rightly pointed out the pitfalls of an alarmist 'clock-ticking' narrative, which removes rational decision-making from the equation[xl]. He questions whether this approach is healthy, urging us to consider the bigger picture, including identifying the winners and losers of the economic reshuffle, and to ask critical questions about its overall impact in traditional democratic way[xli]. Mazzucato has astutely observed a pivotal shift in the landscape of global consultancy. This sector is now aligning itself with burgeoning climate elites, reaping substantial rewards and capitalising extensively on the discourse surrounding new climate-focused legislation[xlii]. In a parallel vein, other industrial powerhouses stand poised on the precipice of exploiting the seabed for critical minerals. Their anticipation, tinged with opportunism, appears to overlook or dismiss any significant threats to biodiversity, revealing a relentless drive for profit that typifies the ethos of global corporations. The advocacy of Eurocentric systems in guiding developing countries to address environmental challenges has a deep-seated history. Arturo Escobar astutely pointed out that Western environmental managerialism often overlooks the disparities in resource allocation and wealth. It also fails to acknowledge the significant contributions to environmental degradation made by various countries, while ignoring that many of these problems are rooted in the displacement of indigenous communities. In an effort to exploit the planet’s resources, the traditional discourses of environmentalism and developmentalism have been subtly repackaged into the contemporary narrative of sustainable development[xliii]. New ESGTRMs, often adopt a unilateral approach that neglects the developmental needs of less fortunate global partners, thereby sidestepping narratives that were previously embraced with enthusiasm. Let’s look at each of these legislations and see what are aims and how each of them can affect IBT.
Subsection 3.1 Regulation on prohibiting products made with forced labour
The Regulation, linked to another EU directive, the Corporate Sustainability Due Diligence Directive[xliv], which has a wider scope, has been accepted by Parliament in principle, while the forced labour regulation is still in the legislative process. The importance of this legislation for International Business Transactions (IBT) stems from its implementation into EU customs law. Sections 15 to 21 of the proposal reflect the powers of customs regarding the release to free circulation and suspension, as well as the exchange of risk-related information among customs authorities[xlv]. Although this regulation must be considered under criminal law according to the opinions of certain stakeholders, it should have a moderate effect on International Business Transactions (IBT). If criminal prosecution is initiated, the burden of proof is to lie with customs, and the involvement of parties in the immoral exploitation of forced labour must be proven beyond a reasonable doubt as a significant failure on the part of the actors. Based on the proposed legislation, customs can refuse to release to free circulation, with consequent disposal under customs law[xlvi]. Still, the approaches taken in implementing the regulation will provide an indication of the compliance cost. Knowing one's supply chain is increasingly important, and the associated costs cannot be overestimated. In the realm of International Business Transactions (IBT), the advent of new contractual clauses is increasingly crucial. These clauses, designed to ensure a supply chain free of forced labour, place a significant liability on suppliers to conduct thorough verifications. Such stipulations demand comprehensive screening processes and sophisticated capabilities, particularly challenging for small firms lacking the necessary resources to implement these rigorous standards.
Subsection 3.2 Regulation on Products Associated with Deforestation and Forest Degradation
The new EU regulation, adopted on 23 June 2023, aims to combat critical global deforestation driven by the conversion of forests to agricultural land and the production of commodities such as cattle, palm oil, wood, soy, cocoa, and coffee[xlvii]. Competent authorities of EU member states may reclaim from traders the costs related to non-compliance and checks[xlviii]. Customs authorities play a core role in controlling the process by monitoring pre-lodged due diligence statements[xlix], which must be submitted to the register and provide material information including the geo-location of the plot of land and confirmation of compliance with the products declared[l]. Annex 1 lists nomenclature codes for products subject to control, which, among food products, include manufactured products from wood such as furniture, railway or tramway sleepers, casks, and barrels[li]. The legislation will have significant effects on International Business Transactions (IBT) and warrants increased requirements from operators for suppliers. Seventeen countries have written a letter to the EU Commission and Council of the European Union, stating that the measures do not consider the heterogeneous conditions of countries and are punitive, will increase poverty, and have not provided the same exclusion for compliance of overseas small businesses, as provided to EU companies[lii]. In the same vein, Pamela Coke-Hamilton, Executive Director of the International Trade Centre (ITC), stressed that the EU favoured big companies, risking cutting off smallholders[liii]. The rule will come into force at the end of 2024, leaving very little time for traders to adjust, since the crops for 2024-2025 have already been planted while details for high-risk countries are still not provided. Fines could reach 4% of turnover, prompting manufacturers and retailers in the EU to add new contractual clauses making the supplier liable[liv].
Subsection 3.3 Carbon Border Adjustment Mechanism (CBAM)
The Carbon Border Adjustment Mechanism (CBAM) was adopted with a transition period to be fully effective from January 2026[lv]. Similar to the Deforestation-Free Regulation, the CBAM is part of the European Green Deal and has multilateral objectives. These are declared as addressing the risk of carbon leakage, providing a good investment environment for investing in carbon technologies, ensuring that domestic production and imports are subject to an equal application for pricing of carbon, and encouraging manufacturers in third countries who export to the EU to introduce low-carbon technologies. It aims to provide environmental integrity and to level playing field for private and public sector in the application of the policies[lvi].
The CBAM, implemented in customs law, covers carbon-intensive products such as aluminium, iron, steel, cement, fertilisers, and certain chemicals. It also includes products manufactured from these materials, according to their specified nomenclature. This reflects another important step in the incorporation of measures for cross-border IBT, starting at the first point of contact through customs entry.[lvii]. Additionally, CBAM requires reporting by authorised declarants similar to customs declarations based on direct or indirect representation, to apply interfaces of well-known and established customs declarants processes[lviii].
The emissions from carbon-intensive products are already accounted for by EU companies under the EU Emissions Trading System (EU ETS). The CBAM is expected to generate revenue of 2.1 billion euros per year after the end of the transition and the beginning of the definitive period[lix]. The legisaltion is based on adherence to manuals for the EU ETS, which are based on complex formulas for calculating carbon emissions. Manual produced by EU for non-EU operators consists of 266 pages[lx]. CBAM will have significant effects on IBT and require from exporting companies provide granular information for emmissions to avoid fines[lxi].
The CBAM has been criticised by many opponents for its questionable effectiveness and complex nature, which is considered too burdensome for administration. Additionally, it is viewed as being in breach of the UNFCCC principle of Common but Differentiated Responsibility (CBDR)[lxii]. Critics claim that it could create power imbalances, forcing developing countries to accept unfavourable terms of trade. This may divert EU-Africa trade to other countries and regions, as well as exacerbate inequalities within African countries. It is estimated that the CBAM could potentially reduce African exports to the EU by 5.7%[lxiii].
3.4 ESGTRM's Moral Dilemmas: Challenging the Equitability in Global Trade
ESGTRM measures, anchored in the deontological principles of rightness and good governance, represent a bold endeavour to counter the pervasive issue of the 'Tragedy of Commons.' The EU's laudable efforts to prioritise these concerns in international trade discussions showcase a proactive and innovative approach. By focusing strategically on achieving ultimate sustainability and promoting intra-generational equity, these measures illustrate a pragmatic, consequentialist approach to problem-solving, integrating utilitarian reasoning.
However, the introduction of ESGTRM faces several challenges, notably a lack of balance. These measures, not entirely proportional in the spirit of Aristotle's balanced approach[lxiv], disproportionately affect small enterprises and least developed countries.
Furthermore, established principles of the Paris Climate Agreement[lxv] are not adequately reflected in these new measures. Similarly, the principle of special and differential treatment[lxvi], a morally celebrated gain of trade law, is not being efficiently or meaningfully applied. This oversight also extends to the developmental interests of least developed countries, which are largely disregarded[lxvii]. The prescribed assistance for green finance in the Paris Climate Agreement[lxviii] not getting reflected in legislation. Developed countries will benefit from instruments such as CBAM financially while developing countries incur losses. The failure to compensate for the costs of externalities inflicted on developing countries, which have long benefited from their cheap exports prior to CBAM, is a significant concern[lxix]. Additionally, the tendency to overlook environmental and social costs is becoming increasingly evident in the struggling communities of developing countries, leading to imbalances in trade law and reflected in issues like gender inequality[lxx]
The ambiguity surrounding the expediency of reporting standards[lxxi] adds another layer of complexity, making aggressive advocacy morally vulnerable. On one hand, approaches to taxonomies, such as the EU's inclusion of nuclear power, often reflect the interests of powerful lobbying states[lxxii]. On the other hand, there are homegrown double standards within countries like the UK, where controversial decisions like north oil exploration raise questions about their commitment to reducing carbon intensity, leading to a minister's resignation over governmental inconsistencies[lxxiii]. Additionally, while the North urges developing countries with limited industrial bases to transition away from carbon-intensive fuels, it paradoxically continues to subsidise fossil fuels, highlighting a significant contradiction in global environmental policies.
Market-based instruments, such as carbon trading exchanges, proposed by leading global economic institutions, fail to account for the economic and social diversity of various countries. The broad scope of tasks addressed by new policy instruments is not well-suited for these complex measures Policy instruments are more effective when tailored to specific tasks[lxxiv]. For instance, a carbon tax, while financially beneficial for the economies of developing countries, does not incentivise carbon reduction but can provide financing for sustainable solutions. Therefore, to effectively incentivise carbon reduction, a different policy instrument is required. On the other hand, while introducing a carbon tax globally may seem straightforward, it fails to encourage the adoption of cleaner technologies. The comprehensive consideration of carbon measures costs[lxxv], including their full financial and success ratios, is a complex yet vital aspect of this discussion[lxxvi]. An over-reliance on market-based instruments alone risks inadequate resolution of global climate and social challenges.
In conclusion, it must be boldly stated that ESGTRM measures urgently need to consider the technical capabilities of small businesses and developing countries. Deontological approaches, although well-intentioned, can lead to significant unintended consequences, adversely affecting entities and countries already under significant stress. Such outcomes, which contradict the essence of moral and ethical governance, raise serious moral questions. This critical oversight necessitates a reassessment of strategies to ensure the equitable distribution of the burdens and benefits of environmental and social governance, truly reflecting the principles of justice and fairness.
Conclusion
This essay has thoroughly examined the complex interplay between international business transactions and environmental considerations, with a particular focus on the European Union's Environmental, Social, and Governance Trade-Related Measures (ESGTRMs). It has navigated the historical shifts in global trade, highlighting the ethical and moral implications of these shifts, especially concerning the developing world. The paper critically assesses the potential impact of ESGTRMs on international commerce, especially on developing nations, and underscores the need for a balanced and equitable approach in the implementation of these measures. It argues for an alignment of ESGTRMs with broader economic and ethical considerations to avoid unintended detrimental effects on global trade dynamics. The conclusion drawn is that while ESGTRMs have the potential to integrate ethical concerns into global commerce, their application must be carefully calibrated to ensure they do not unintentionally exacerbate existing global inequalities or hinder economic development in less affluent nations.
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Selicato G, ‘The EU proposal for a Carbon Border Adjustment Mechanism: an advanced tool to combat ‘carbon leakage’, a new EU own resource of ‘moral suasion’ for third countries?’ (2022) Vol.50 No.3 Review of European and Comparative Law pp 25-37
Thompson C, ‘Co-producing CITES and the African Elephant’ in: Jasanoff, S. States of Knowledge (Routledge 2004) 67-86
4. Working Papers, Conference Papers, News Articles, Technical Reports, Policy Papers
Africa Climate Foundation and The London School of Economics and Political Science, ‘Implications for African Counties of a Carbon Border Adjustment Mechanism in the EU’. 2023
Aikman D, Dong Y, Drellias E, Havaldar S, Lepere M, Nilsson M, 'Emissions Gaming? A Gap in the GHG Protocol may be Facilitating Gaming in Accounting of GHG Emissions' (KBS Research Impact Paper No 1, King's Business School June 2023) 1-30
Bounds A and Espinoza J, ‘Rich world uses green policies to hold back the poor, says UN trade chief. Interview with Unctad secretary-general Rebeca Grynspan ‘ Financial Times (London 24 December 2023)
European Commission, 'Guidance Document: The Monitoring and Reporting Regulation-General Guidance for Installations' (Brussels, 20 February 2023)
Chancel L, Bothe P and Voituriez T, (2023)‘Fair taxes for a sustainable future in the Global South’. Climate Inequality Report 2023, World Inequality Lab study 2023/1
Hancock A, ‘EU deforestation rules risk ‘catastrophic’ impact on global trade, says ITC chief‘ Financial Times (Brussels 20 August 2023)
Hancock A, ‘France scores diplomatic wins on banks and nuclear in new EU rules‘ Financial Times (Brussels 14 December 2023)
Hancock et al, ‘Food industry calls for more time to implement EU deforestation rules ‘ Financial Times (London 13 November 2023)
Hancock A and White S, ‘France seeks weaker EU due diligence rules for banks’ Financial Times (Paris 13 December 2023)
Markkanen S, Vinuales J, Pollitt H, Kiss-Dobronyi B, Vaishnav A. et al. 'On the Borderline: The EU CBAM and its Place in the World of Trade' (University of Cambridge, Institute of Sustainable Leadership Working Paper, 2023)
Robert Francis, 'EU deforestation regulation: 17 countries want legislation ‘repaired’', Borderlex.net (11 September 2023)
Stavins R, ‘Carbon Taxes vs. Cap and trade: Theory and Practice’. Discussion Paper ES19-9, The Harvard Project on Climate Agreements, Harvard Kennedy School November 2019
UK Climate and Trade Commission ‘Policy Brief: Towards a Fair and Strategic Trade and Climate Policy’. December 2022
[i] Anthony Anghie, Imperialism, Sovereignty and the Making of International Law (CUP 2008) 194-195
[ii] Gbenga Oduntan ‘International Law and the Discontented: How the West Underdeveloped International Laws’ in Parashar, Archana and Dhanda, Amita (eds.) Decolonisation of Legal Knowledge in India (Routledge 2009) 118-119
[iii] Ha-Joon Chang Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism (Bloomsbury 2013) 31-39
[iv] David Harvey A Brief History of Neoliberalism (OUP 2007) 8
[v] Michael Trebilcock, Robert Howse and Antonia Eliason The Regulation of International Trade (Fourth edn, Routledge 2013) 8
[vi] Gbenga Oduntan ‘The “Reimaginarium” of Lex Mercatoria Manchester Journal of International Law, (April 2016) 1, 16
[vii] Toby Ord ‘Global Poverty and the Demand of Morality’ in: J. Perry (ed.) God, the Good and Utilitarianism: Perspectives on Peter Singer (CUP 2014) 179
[viii] Jan Fichtner and Eelke M. Heemskerk, 'The New Permanent Universal Owners: Index Funds, Patient Capital, and the Distinction between Feeble and Forceful Stewardship' (2020) 49 Economy and Society 493, 503
[ix] Eileen Appelbaum and Rosemary Batt, 'A Primer on Private Equity' (September/October 2012) vol. 55 Challenge 5, 17
[x] Yanis Varoufakis, Techno Feudalism: What Killed Capitalism? (The Bodley Head 2023) 116
[xi] Lucas Chancel, Philipp Bothe, Tancrede Voituriez, (2023)‘Fair taxes for a sustainable future in the Global South’. Climate Inequality Report 2023, World Inequality Lab study 2023/1, 9
[xii] Herman Daly and Joshua Farley, Ecological Economics: Principles and Applications (Island Press 2004) 175
[xiii] Migratory Bird Treaty (1916); Ramsar Convention on Wetlands (1971); Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES, 1973); Convention on Long-Range Transboundary Air Pollution (1979); Vienna Convention for the Protection of the Ozone Layer (1985) and its subsequent Montreal Protocol on Substances that Deplete the Ozone Layer (1987); United Nations Framework Convention on Climate Change (UNFCCC, 1992), Convention on Biological Diversity (CBD, 1992), and United Nations Convention to Combat Desertification (1994); Kyoto Protocol (1997); Paris Agreement (2015)
[xiv] Joel Balkan The Corporation: The Pathological Pursuit of Profit and Power (Constable, London 2004) 60
[xv] Bobby V Reddy 'Thinking Outside the Box-Eliminating the Perniciousness of Box-Ticking in the New Corporate Governance Code' (2019) 82 (4) The Modern Law Review 694
[xvi] Jeremy Bentham, who also made significant contributions to legal positivism, is often regarded as the father of teleological or utilitarian morality. He developed the foundational ideas of the utilitarian approach, most notably in his work "An Introduction to the Principles of Morals and Legislation" (1789), where he articulates the principle of utility or the greatest happiness principle. These ideas were further elaborated by his pupil, John Stuart Mill, particularly in Mill's seminal work "Utilitarianism" (1863), which provided a more refined and expansive treatment of utilitarian ethics. Bentham's and Mill's works can be argued to be among the main determinants of our current global Eurocentric legal system, which originated in Europe and profoundly influences legal practices worldwide.
[xvii] Deontological ethics, emphasising duty and adherence to moral rules, is significantly shaped by the works of Immanuel Kant. In his foundational texts, "Fundamental Principals of the Metaphysics of Morals” Kant establishes a framework for ethics based on the principle of duty and the concept of the categorical imperative, which dictates that actions must be universally applicable as moral laws. Aristotle, though often associated with virtue ethics, also contributed to deontological thinking through his emphasis on moral virtues and the rational pursuit of good life, as detailed in his work "Nicomachean Ethics.
[xviii] H.L.A. Hart, whose influential book "The Concept of Law" refined the positivist approach by introducing the concept of primary and secondary rules and the 'rule of recognition' in legal systems.
[xix] Natural law, a key legal and philosophical theory, is founded on the idea that certain moral principles are inherent in human nature and observable through reason. Prominent figures include Thomas Aquinas, whose "Summa Theologica" integrates Christian theology with Aristotelian philosophy to propose divine law discernible by human reason, and John Locke, whose "Two Treatises of Government" argue for inherent rights grounded in natural law. This tradition emphasises the intrinsic link between law and morality, significantly influencing Western legal and political systems.
[xx] Jane Jacobs Systems of Survival: A Dialogue on the Moral Foundations of Commerce and Politics (Hodder and Stoughton 1992) 42
[xxi] Ibid 49
[xxii] See John Rawls, A Theory of Justice (OUP 1973, Copyright President and Fellows of Harvard College 1971) for an argument supporting principles of justice and fair distribution of wealth, and Robert Nozick, Anarchy, State, and Utopia (Blackwell 1980, first published by Basic Books 1974) for a critique of redistributive policies and support of minimal state intervention. This debate between Rawls and Nozick encapsulates the philosophical divide on the role of redistribution and the relationship between law and morality.
[xxiii] Andrew Johnston 'The Shrinking Scope of CSR in UK Corporate Law' (2017) 74 Washington and Lee Law Review 1001, 1018
[xxiv] James Davies, Medieval Market Morality: Life, Law and Ethics in the English Marketplace 1200-1500 (CUP 2012) 148
[xxv] Peter Murray, Poverty and Welfare 1815-1950 (2nd ed. Hodder Murray 2006) 18
[xxvi] Ibid 95
[xxvii] Alan Boyle and Catherine Redgwell, International Law and the Environment, (4th edn. OUP 2021) p794
[xxviii] Andy Bounds and Javier Espinoza ‘Rich world uses green policies to hold back the poor, says UN trade chief. Interview with Unctad secretary-general Rebeca Grynspan ‘ Financial Times, (London 24 December 2023) https://www.ft.com/content/e8b9d884-a210-46a7-9ad2-00cb07cfb08e accessed 13 January 2024
[xxix] Stephen Drinkwater and Catherine Robinson ‘The Impact of Customs and Trade Regulations on the Operation of African Firms’ Journal of Business Research (165) 2023, 1, 8
[xxx] Eyal Zamir and Barak Medina Law, Economics and Morality (OUP 2010) 257
[xxxi] Ibid 311
[xxxii] Ibid 77
[xxxiii] Bounds and Espinoza (n28)
[xxxiv] Gbenga Oduntan, International Moral Legalism and the Competence over Prosecution of Corruption Crimes African Journal of Law and Criminology, 1 (1) 78, 85
[xxxv] Gbenga Oduntan, Tracing Noxious Funds International Trade and Business Law Review, XIII (2010) 104, 134
[xxxvi] Robert W. McGee ‘Ethics in International Trade’ Journal of Global trade, Ethics and Law Volume 1 Issie 2 2023 67, 81
[xxxvii] Ibid (n13)
[xxxviii] Thompson C, ‘Co-producing CITES and the African Elephant’ in: Jasanoff, S. States of Knowledge (Routledge 2004) 78
[xxxix] Alan Beattie ‘EU puts green trade squeeze on developing world’ Financial Times (London 27 November 2023) < https://www.ft.com/content/895c6bf2-8c99-462e-9699-e73624c78cd3> [accessed 15 January 2023]
[xl] Mike Hulme, Climate Change Isn’t Everything: Liberating Climate Politics from Alarmism (Polity 2023) 116
[xli] Hulme (n40) 102
[xlii] Mariana Mazzucato and Rosie Collington, The Big Con: How the Consulting Industry Weakens our Businesses, Infantilizes our Governments and Warps our Economies (Allen Lane 2023) 213
[xliii]Arturo Escobar, Encountering Development: The Making and Unmaking of Third World (Prinston University Press 1995) 195
[xliv] European Commission, 'Proposal for a Directive of the European Parliament and of the Council on Corporate Sustainability Due Diligence and amending Directive (EU) 2019/1937' COM(2022) 71 final (23 February 2022)
[xlv] European Commission, 'Proposal for a Regulation on Prohibiting Products Made with Forced Labour on the Union Market' COM(2022) 453 final (14 September 2022) Arts 15-21, pp. 31-33 (PDF file)
[xlvi] Regulation (EU) No 952/2013 of the European Parliament and of the Council of 9 October 2013 laying down the Union Customs Code (recast) art 197-198 (PDF file)
[xlvii] Regulation (EU) 2023/1115 of the European Parliament and of the Council of 31 May 2023 on the making available on the Union market and the export from the Union of certain commodities and products associated with deforestation and forest degradation and repealing Regulation (EU) No 995/2010 [2023] OJL 150/206
[xlviii] Ibid, Article 16
[xlix] Ibid, Article 26
[l] Ibid, Annex 2
[li] Ibid (n47) Annex 1
[lii] Robert Francis, 'EU deforestation regulation: 17 countries want legislation ‘repaired’', Borderlex.net (11 September 2023) < https://borderlex.net/2023/09/11/eu-deforestation-regulation-17-countries-want-legislation-repaired/> accessed [accessed 14 January 2024]
[liii] Alice Hancock, ‘EU deforestation rules risk ‘catastrophic’ impact on global trade, says ITC chief‘ Financial Times (London 20 August 2023) < https://www.ft.com/content/9119d448-ff1c-434d-b07f-27b1bf11c041> [accessed 14 January 2024]
[liv] Alice Hancock et al, ‘Food industry calls for more time to implement EU deforestation rules ‘ Financial Times (London 13 November 2023) < https://www.ft.com/content/9f0c3e88-b72b-4570-bed5-8a9d36c3f7bc> [accessed 14 January 2024]
[lv] Regulation (EU) 2023/956 of the European Parliament and of the Council of 10 May 2023 establishing a carbon border adjustment mechanism [2023] OJL130 Article 32
[lvi] European Commission, 'Proposal for a Regulation of the European Parliament and of the Council establishing a carbon border adjustment mechanism' COM(2021) 564 final (14 July 2021)
[lvii] Gianluca Selicato, ‘The EU proposal for a Carbon Border Adjustment Mechanism: an advanced tool to combat ‘carbon leakage’, a new EU own resource of ‘moral suasion’ for third countries?’ (2022) Vol.50 No.3 Review of European and Comparative Law 25, 29
[lviii] Ibid(n55) Articles 4-6
[lix]Regulation (EU) 2023/956 (n56) 1.4.3. Expected Results and Impact page 48 (pdf)
[lx] European Commission, 'Guidance Document: The Monitoring and Reporting Regulation-General Guidance for Installations' (Brussels, 20 February 2023)
[lxi] Regulation (EU) 2023/956 (n55) Article 26
[lxii] UK Climate and Trade Commission ‘Policy Brief: Towards a Fair and Strategic Trade and Climate Policy’. December 2022
[lxiii]Africa Climate Foundation and The London School of Economics and Political Science, ‘Implications for African Counties of a Carbon Border Adjustment Mechanism in the EU’ 2023; Gu et al, ‘Impact of the EU carbon Border Adjustment Mechanism n Economic Growth and Resource Supply in the BASIC countires’ Resource Policy 85 (2023); Perdana S and Vielle M, ‘Making the EU Carbon Border Adjustment Mechanism Acceptable and Climate Friendly for Least Developed Countires’ Energy Policy 170 (2022)
[lxiv] Aristotle, The Nicomachean Ethics (Wordsworth Editions 1996) 119
[lxv] Paris Agreement (adopted 12 December 2015, entered into force 4 November 2016) 993 UNTS 3, Arts 4.4-4,6, p 4, Art 4.19 p 6
[lxvi] General Agreement on Tariffs and Trade (GATT) 1994, Article XVIII, Geneva, July 1986, 4(a) 4(b) p 29
[lxvii] Bounds and Espinoza (n28)
[lxviii] Paris Agreement, Art 9 p13
[lxix] Sanna Markkanen , Jorge Vinuales, Hector Pollitt, Bence Kiss-Dobronyi, Arushi Vaishnav. et al. 'On the Borderline: The EU CBAM and its Place in the World of Trade' (University of Cambridge, Institute of Sustainable Leadership Working Paper, 2023) 17
[lxx] Donatella Alessandrini, A Not So ‘New Dawn’ for International Economic Law and Development: Towards a Social Reproduction Approach to GVCs EJIL (2022) Vol. XX, 1, 23-24
[lxxi] David Aikman, Yao Dong, Evangelos Drellias, Swarali Havaldar, Marc Lepere, Matthias Nilsson, 'Emissions Gaming? A Gap in the GHG Protocol may be Facilitating Gaming in Accounting of GHG Emissions' (KBS Research Impact Paper No 1, King's Business School June 2023)1, 18
[lxxii] See Alice Hancock and Sarah White, ‘France seeks weaker EU due diligence rules for banks’ Financial Times (Paris 13 December 2023) https://www.ft.com/content/18d52021-c551-4a19-95ff-6b5c864c83bf [accessed 16 January 2024]; Alice Hancock, ‘France scores diplomatic wins on banks and nuclear in new EU rules‘ Financial Times (Brussels 14 December 2023) <https://www.ft.com/content/a4f7c547-1a58-482f-889e-f6400c44bbf7> [accessed 16 January 2024]
[lxxiii] Jim Pickard and Anna Gross, ‘Tory MP Chris Skidmore quits with attack on UK climate policy’ Financial Times (London 6 January 2024) <https://www.ft.com/content/cbb95208-6820-4bd4-8781-594f1d747bed> [accessed 16 January 2024]
[lxxiv] Daly and Farley (n12) 360
[lxxv] Christoph Boehringer, Carolyn Fischer, Knut Einar Rosendahl, and Thomas Fox Rutheford ‘ Potential Impact and Challenges of Carbon Adjustments’ Nature Climate Change Vol.20 (January 2022) 22, 27
[lxxvi] Robert Stavins, ‘Carbon Taxes vs. Cap and trade: Theory and Practice’. Discussion Paper ES19-9, The Harvard Project on Climate Agreements, Harvard Kennedy School November 2019, 19
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