Labor Standards and Trade Agreements: Raising Standards or Raising the Walls of Protectionism?

Abstract

Several major trade agreements in recent years have included a provision that addresses labor standards. Other trade agreements that are now in the discussion stage are considering incorporating labor standards as an integral part of the final agreement. The goals of such agreements are noble - to raise the conditions under which the workers of poor countries must work. The arguments are framed in such a way that anyone who opposes raising labor standards appears to be cold and heartless. The problem with raising labor standards by law rather than by the market process is that imposition of higher labor standards has unintended consequences, some of which hurt the very people the new standards are intended to help. But worse yet, some of the people who advocate raising labor standards in poor countries do so knowing that making poor countries comply with new and higher requirements will make it more difficult for them to sell their products in international markets. This paper looks at the economics and politics of harmonizing labor standards and explores some of the unintended consequences of imposing higher labor standards on poor countries and focuses on the protectionist aspects of such policies.

Keywords: Labor Standards, Labor Agreements, Human Rights, Ethics, WTO, Child Labor, Property Rights, Contract Rights, Association Rights, Sanctions, Globalization, Protectionism, Rent-Seeking, Unintended Consequences

JEL Classification: D23, D6, D7, F13, F16, J8, J82, K1, K31, O24, P14