Could International Labor Rights Play a Role in U.S. Trade?

During its last complete business cycle, from 2001 to 2007, the United States experienced unsustainably high trade deficits. Policymakers are considering a number of measures to avoid a recurrence of such large external imbalances. One such measure is the promotion of better labor rights around the world. Proponents argue that higher labor standards would boost U.S. exports by increasing income growth abroad and reduce U.S. imports by shrinking international price differences. Opponents of such a policy move argue that it is disguised protectionism that will impede trade and harm living standards in the United States and abroad. In this paper, I combine U.S. trade data with data on international labor standards and other relevant economic variables to study if there is a link between labor rights abroad and U.S. trade. The results suggest that the United States would have benefited from more exports if there had been better worker rights around the world, while labor rights would not have had any measurable impact on U.S. imports. That is, the promotion of better worker rights around the world could contribute to fewer external imbalances without impeding international trade flows