Trade and Labor Standards: A Review of the Theory and New Empirical Evidence

Despite its exclusion from the Doha agenda, the issue of trade and labor standards remains an intensely discussed subject among economists, policymakers, international agencies and nongovernmental organizations. In the past few years, both World Trade Organization (WTO) and International Labor Organization (ILO) member states have agreed that labor standards should not be used for protectionist purposes and that ignorance of, and deliberate violations of core labor standards to achieve comparative advantage, should be avoided. Member states of these two organizations have also made clear commitments to the adherence of core labor standards (as evidenced, for example, by the Singapore Ministerial Declaration of 1996 or the ILO Declaration on Fundamental Principles and Rights at Work of 1998). Since the WTO Singapore Ministerial declaration, the International Labor Organization (ILO) has been very active, and it recently published a voluminous report on the “Social Dimensions of Globalization” that reaffirms its promotional approach to labor standards, regularly reporting on commitments made by countries and supporting them through technical cooperation. During the fourth round of WTO talks in Doha in 2001, ministers stated that “We reaffirm our declaration made at Singapore Ministerial Conference regarding internationally recognised core labour standards. We take note of work under way in the International Labour Organisation (ILO) on the social dimension of globalisation”. Such statements do not rule out the possibility that the WTO will be called upon in the future to link social issues to trade agreements, which in our view, would open an unnecessary window (after environmental standards) for more non-trade issues such as hum