Economy

European Supply Chain Regulations and Countries in South Asia

Countries in the global North, especially those in the European Union (EU), have drawn up regulations to tackle human rights violations in supply chains, particularly those in global supply chains with extra-territorial effects. While these regulations currently only exist at a national level, the EU is discussing a harmonized regulatory framework across the EU countries. This policy paper is aimed at assessing the likely impact of the proposed regulations or mandatory human rights due diligence (mHRDD) on countries in South Asia pursued by policy interventions through which mHRDD could be made more effective.

The paper starts by briefly describing the main global supply chains or global value chains (GVCs) that connect South Asia with the EU and the main human rights violations observed in them. To set the tone for the discussions, it is important to define different wage types, such as living wages, minimum wages and actual wages. This is the prelude to the economics of human rights violations in GVCs. It shows that human rights violations have economic effects on labour, the communities and other users of environmental services, the environment itself, and overall economies of the global South. The paper further analyzes the existing and proposed human rights due diligence in the EU, with the meaning of transformative change.

In imposing transformative changes, it is significant to consider who should bear the costs of eliminating human rights violations, who the implementing authorities are and can administer mHRDD, carry out the required inspections, and take possible punitive actions. How can human rights standards be synchronized with the varying standards in the South Asian countries is equally crucial for the purpose of better policy interventions. This will pave the grounds for assessing the likely impact on supply chains, both in the EU and in South Asian countries. Finally, the paper puts forward some proposals for changes in the EU’s mHRDD framework. Among others, it seeks practical implementation and follow-up on mHRDD, as it foresees liability in the form of sanctions on lead firms for human rights violations. It also suggests that the EU should push for an international agreement, under the aegis of the ILO, on regulation to eliminate human rights abuses in supply chains.