Trade and Domestic Policy Linkage in International Agreements

Abstract

A central question in discussions of integrating negotiations over domestic policy (e.g., environmental policy or labor standards) into traditional trade agreements is the degree to which the trade policy and domestic policy provisions of an agreement should be explicitly linked. For example, should the WTO enforce domestic policy obligations with the threat of the suspension of trade concessions? This paper considers the conditions under which linking trade and domestic policy agreements within a self-enforcing agreement is beneficial, and argues that the benefits of such policy linkage may be lower than is commonly thought.

Keywords: trade policy, environmental standards, labor standards, international agreements

JEL Classification: F1, F13, K33, H2