Incorporating labour standards in trade agreements: protectionist ploy or legitimate trade policy issue?

Abstract

The relationship between labour standards in developing countries and trade flows has become a major trade policy issue with efforts in some developed countries to have labour standards provisions included in multilateral and regional trade agreements. This has been fiercely resisted by developing countries. Central to the argument is the degree to which low or poorly enforced labour standards affect comparative advantage. This paper finds limited evidence that only some labour standards – degree of unionisation and forced labour – have a small impact on a country's international competitiveness. Given this result, the question of how to include labour standards in international agreements is discussed.