International Labor Standards and Trade Measures: Implications and Concerns

Harmonization of standards

Two or more countries adopt a common set of standards

Mutual recognition of standards

Countries maintain their own standards, but accept the standards of others as valid and sufficient

Separate standards

Countries maintain their own standards and refuse to recognize the standards of others

• The International Labor Organization (ILO) proposed five labor standards as basic rights, revised by OECD:
• Prohibition of forced labor
• Freedom of association
• The right to organize and bargain collectively
• An end to the exploitation of child labor
• Nondiscrimination in employment

• Economists express four concerns over the use of trade measures to enforce standards:
• Effectiveness:
  • (a) only large countries or coalitions of countries can use trade barriers successfully to enforce standards, since small countries do not have a large enough impact on global demand
  • (b) use of sanctions could be counterproductive for boosting working conditions: improved enforcement in the target country may cause producers to shift to the unregulated and uninspected informal economy
• Hazy Borderline between Protectionism and Concern: special interests sometimes use the issue of foreign labor standards in order to attain their real goal, protection against foreign competition
• The Specific Content of Labor Standards: there is no international agreement on the specific content and language of labor standards- Justifying the specific goal of sanctions to the international community is difficult; may lead to conflict in international economic relations
• The Potential to Set Off a Trade War: use of sanctions is discriminatory and infraction of WTO

• Two types of claims:
• Without adequate enforcement of standards, countries engage in an environmental race to the bottom to boost industrial competitiveness
• Lack of enforcement of standards in developing countries induce dirty rich country industries to “export pollution” and thus create pollution havens

Transboundary environmental impacts happen when one country’s pollution spills over into a second country