A Race to the Top: Should Labour Standards be Included in Trade Agreements?

Abstract

The trade and labour debate is a sensitive and controversial issue. For a long time, critics and advocates have debated the link between labour standards and trade. Salem and Rozental (2012) indicate that the argument at the heart of this debate is that developing countries will end up raising the standards for their workers, and risk losing their comparative advantage, ultimately suffering a decline in export performance, leading to a dwindling per capita income. Industrialized or developed countries argue that developing countries have abusive working conditions and their wages are suppressed. Advocates of trade-linked labour standards aim to halt a ‘race to the bottom’ in which national labour conditions are reduced in an attempt to lower production costs, expanding international trade and competition. These advocates believe that labour standards provided in trade agreements level the playing field because they require countries to meet an acceptable level of labour conditions and eliminate a source of ‘unfair’ economic advantage (Salem & Rozental, 2012). Although labour standards vary from country to country, depending on the stage of development, per capita income, political, social and cultural conditions and institutions, efforts have been made to identify and achieve consensus on a group of core labour standards that should ideally apply universally (Stern & Terrell, 2003).