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- Can Trade Agreements Be a Friend to Labor? by Dani Rodrik - Project Syndicate
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In the original North American Free Trade Agreement, signed in , labor standards were shunted to a side agreement.
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Since then, US trade agreements have typically included a labor chapter. According to its proponents, the Trans-Pacific Partnership would have required Vietnam, Malaysia, and Brunei to improve their labor practices significantly — and Vietnam to recognize independent trade unions. Developing countries have generally resisted inclusion of labor standards in trade agreements for fear that advanced countries will abuse such provisions for protectionist purposes.
This fear can be justified when the requirements go beyond core labor rights and make specific wage and other material demands. Auto companies can certainly afford to pay higher wages, and this provision on its own may not undermine employment prospects in Mexico. But it is not an altogether salutary precedent either, insofar as it sets an unrealistic wage floor — many multiples higher than the average for the Mexican manufacturing sector as a whole.
On the other hand, developing countries have little reason to reject labor standards that address bargaining asymmetries in the workplace and fundamental human rights. Core labor standards such as freedom of association, collective bargaining rights, and prohibition of compulsory labor are not costly to economic development; in fact, they are essential to it. A key concern is enforcement.
For one thing, charges of labor-rights violations can be brought only by governments, not by trade unions or human rights organizations. By contrast, investment disputes can be launched by corporations themselves.
Can Trade Agreements Be a Friend to Labor? by Dani Rodrik - Project Syndicate
Critics rightly worry that governments that are not particularly friendly to labor causes will not be keen to follow through. Following two years of complaints by US and Guatemalan trade unions, the US government formally launched a case against Guatemala in When a final decision was announced in , nearly a decade after the initial grievances were aired, the arbitration panel decided against the US, but not because Guatemala lived up to its labor rights obligations under its own laws.
The panel did find violations of Guatemalan labor laws. For example, court orders against employers who had dismissed workers for engaging in union activities were not enforced.
There are two reasons to care about labor standards. First, we may have a humanitarian desire to improve working conditions everywhere.
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In this case, we should have equal regard for workers in the domestic economy and those employed in export industries. Focusing on the latter may even backfire, by deepening dualistic labor-market structures. In principle, we could expand enforceable labor clauses in trade agreements to cover working conditions in the entire economy.
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