The Political Economy of International Labor Standards

Abstract

In the first postwar decades, dramatic steps toward trade liberalization were taken by the developed countries (the “North”) through the General Agreement on Tariffs and Trade (GATT) negotiations. At that time, most developing countries (the “South”) were pursuing protectionist import-substitution policies and calling for a “New International Economic Order” to redress the alleged unfairness of the international economic system, while remaining on the sidelines of GATT negotiations.1 More recently, high unemployment rates in Western Europe and stagnant wages of unskilled workers in the United States have contributed to a new ambivalence in the developed countries about the benefits of trade with less developed countries. Many fear that Northern wages and benefits are forced down by competition from countries with much lower labor costs. Meanwhile, the East Asian “miracle” and the collapse of communism have persuaded much of the developing world to liberalize trade and participate actively in the new World Trade Organization (WTO), the successor to the GATT. Even China now eagerly seeks membership in the WTO as it emerges as a major exporter.