Labor Clauses in Trade Agreements: Worker Protection or Protectionism?

38 Pages Posted: 11 Sep 2017

See all articles by Céline Carrère

Céline Carrère

University of Geneva

Marcelo Olarreaga

University of Geneva; Centre for Economic Policy Research (CEPR)

Damian Raess

University of Geneva

Date Written: August 2017

Abstract

We explore the impact on bilateral trade flows of the inclusion of a labor clause (LC) in Trade Agreements (TAs). Using a gravity type framework, we find that the introduction of LCs has on average no impact on bilateral trade flows. However, there is some interesting heterogeneity. Exports of low-income countries benefit from the introduction of LCs in North-South trade agreements. Interestingly, the impact is stronger when accompanied by deep cooperation. On the other hand, stronger enforcement mechanisms, at best, marginally reinforce the impact of LCs. The results are clearly inconsistent with the idea that LC are set for protectionist reasons, casting doubt on the reluctance by low-income countries to include labor clauses in their trade agreements.

Keywords: Free Trade Agreements, Gravity Equation, Labor Clauses

JEL Classification: F16

Suggested Citation

Carrère, Céline and Olarreaga, Marcelo and Raess, Damian, Labor Clauses in Trade Agreements: Worker Protection or Protectionism? (August 2017). CEPR Discussion Paper No. DP12251, Available at SSRN: https://ssrn.com/abstract=3031888

Céline Carrère (Contact Author)

University of Geneva ( email )

102 Bd Carl-Vogt
Genève, CH - 1205
Switzerland

Marcelo Olarreaga

University of Geneva ( email )

40 Boulevard du Pont-d'Arve
Genève, CH - 1205
Switzerland

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Damian Raess

University of Geneva ( email )

102 Bd Carl-Vogt
Genève, CH - 1205
Switzerland

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