International Trade & Labor Standards: A Proposal for Linkage

Bringing together the approaches of ethics and economics, Christian Barry and Sanjay G. Reddy propose ways in which the international trading system can support poor countries in promoting the well-being of their peoples. Barry and Reddy elaborate their argument in their new book International Trade and Labor Standards: A Proposal for Linkage and challenge those who argue that protecting workers in developing countries will raise labor costs and make them less competitive.

The authors lay out and show how the creation of new rules for global trade can be linked to the protection of workers in ways that will continue to foster growth. The authors have put forth some of the ideas found in International Trade and Labor Standards in articles over the past few years. For more on their proposal for linkage you might also want to read some of their previous articles: “The False Dilemmas of the Sweatshop,” “Promoting Poorer Countries’ Interests,” “Labor Standards and International Trade: A Proposal,” and “Alternative ways to link trade with labour standards.”

Here is an excerpt from “The False Dilemma of the Sweatshop”:

Defenders of the status quo are concerned that improved labour standards will raise the cost of production, leading countries that implement them to become less attractive locations for export-oriented production. Under present international trade rules, companies can profit by choosing to operate in a country in which labour standards are more lax, or are un-enforced.

Such diversion of trade and investment would not occur if global trading rules instead rewarded countries that promote labour standards by offering them additional access to export markets in rich countries and by providing them with financial assistance that could be used to neutralise the cost-raising effects of worker-friendly reforms (through measures such as wage subsidies paid to employers that improve labour standards). The competition between poorer countries to attract trade and investment by lowering labour standards can be diminished.

What about the competition between richer and poorer countries? Even if improvements in labour standards raise labour costs in poorer countries, these costs will remain much lower than in rich countries and there will be a strong incentive to manufacture in poorer countries and to trade with them. A poorer country that improves labour standards can remain an attractive site for export-oriented production, especially if other poorer countries simultaneously improve labour standards.

The global trading system should be designed in a manner that recognises the limited resources and enforcement powers of governments in poorer countries and that respects relevant differences in priorities and social norms. It should tailor expectations concerning labour standards to the level of development of each country so as to promote workers’ interests without setting expectations that are unreasonably high.

Countries that are indifferent to the most egregious and systematic violations of basic labour standards should be isolated within the world trading system. Such countries (whether they are sites of production or of registration, ownership or management of companies engaged in such violations) should be denied the preferential trading opportunities and other benefits accorded to countries that seek to promote workers’ interests.

New worker-friendly rules for international trade can provide powerful assistance to workers in poor countries. Those who care about fighting poverty and exploitation should stop cheering for sweatshops and help in the struggle to make worker-friendly rules for international trade a reality.