Labor Standards and Trade:
A Review of Recent
Empirical Evidence
Over the last two decades, labor standards have become a major issue in
international trade. Three developments mark the rise of this issue: first,
an international consensus was reached on a set of core labor standards
established by the International Labour Organization (ILO); second, bilateral
and regional trade agreements have increasingly included more labor
standards provisions; and third, consumers have increasingly demanded
products produced under better labor conditions. This study evaluates
research on the effects of labor standards commitments on labor conditions;
the influence of trade openness on labor conditions; and the impact
of compliance with labor standards on trade performance.
The research suggests that the ratification of ILO conventions does not
result in improved labor conditions. On the other hand, research appears
to show that agreements, when reinforced by factors such as enforcement
mechanisms, positive incentives, and market forces, may improve compliance
with labor standards, bringing about better labor conditions. Another
line of research suggests that trade openness may improve rather than
degrade labor conditions. Finally, the research finds no clear evidence that
The views expressed in this paper are those of the authors alone. They do not necessarily
reflect the views of the U.S. International Trade Commission or any of its individual Commissioners.
The authors would like to thank Jennifer Baumert Powell for her insightful comments.
2
countries can improve their trade performance by maintaining poor labor conditions, contrary to the “race to the bottom” point of view.
Labour union lobbies and their political friends have decided that the ideal defence against competition from the poor countries is to raise their costs of production by forcing their standards up, claiming that competition with countries with lower standards is “unfair.” “Free but fair trade” becomes an exercise in insidious protectionism that few recognise as such.
——Jagdish Bhagwati,“Obama and Trade: An Alarm Sounds,” Financial Times, January 9, 2009.
As long as poor labor standards exist in one country, workers everywhere will be hurt. Governments that neglect or oppress their laborers make the choice to strip their own citizens of their rights as human beings. Not only this, but they create unfair pressure in the global economy. If one country offers oppressively cheap labor, other countries become compelled to do the same to merely remain competitive. This global “race to the bottom” creates poor conditions and loss of freedom in the global South, and causes workers in the global North to lose their jobs to cheap outsourced labor.
——International Labor Rights Foundation,“Changing Global Trade Rules”
(accessed February 15, 2012).
Labor Standards and Trade:
A Review of Recent
Empirical Evidence
Over the last two decades, labor standards have become a major issue in
international trade. Three developments mark the rise of this issue: first,
an international consensus was reached on a set of core labor standards
established by the International Labour Organization (ILO); second, bilateral
and regional trade agreements have increasingly included more labor
standards provisions; and third, consumers have increasingly demanded
products produced under better labor conditions. This study evaluates
research on the effects of labor standards commitments on labor conditions;
the influence of trade openness on labor conditions; and the impact
of compliance with labor standards on trade performance.
The research suggests that the ratification of ILO conventions does not
result in improved labor conditions. On the other hand, research appears
to show that agreements, when reinforced by factors such as enforcement
mechanisms, positive incentives, and market forces, may improve compliance
with labor standards, bringing about better labor conditions. Another
line of research suggests that trade openness may improve rather than
degrade labor conditions. Finally, the research finds no clear evidence that
The views expressed in this paper are those of the authors alone. They do not necessarily
reflect the views of the U.S. International Trade Commission or any of its individual Commissioners.
The authors would like to thank Jennifer Baumert Powell for her insightful comments.
2
countries can improve their trade performance by maintaining poor labor conditions, contrary to the “race to the bottom” point of view.
Labour union lobbies and their political friends have decided that the ideal defence against competition from the poor countries is to raise their costs of production by forcing their standards up, claiming that competition with countries with lower standards is “unfair.” “Free but fair trade” becomes an exercise in insidious protectionism that few recognise as such.
——Jagdish Bhagwati,“Obama and Trade: An Alarm Sounds,” Financial Times, January 9, 2009.
As long as poor labor standards exist in one country, workers everywhere will be hurt. Governments that neglect or oppress their laborers make the choice to strip their own citizens of their rights as human beings. Not only this, but they create unfair pressure in the global economy. If one country offers oppressively cheap labor, other countries become compelled to do the same to merely remain competitive. This global “race to the bottom” creates poor conditions and loss of freedom in the global South, and causes workers in the global North to lose their jobs to cheap outsourced labor.
——International Labor Rights Foundation,“Changing Global Trade Rules”
(accessed February 15, 2012).
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