Do Labour Standards have a Role in International Trade?: Private Standards, Preferential Trade Agreements or the WTO

It is now common for producers (economic protectionism), consumers and social advocates (humanitarian motives) to urge for the inclusion of labour standards in international trade agreements. In spite of this, there has been little empirical work to determine whether low labour standards lead to trade distortions. This paper provides some empirical evidence pertaining to this question. Consumer groups, social advocates and traditional vested interests such as labour unions have attempted to have labour standards included in WTO disciplines. In the absence of success at the WTO, the relationship between labour standards and international trade has, however, been evolving in the areas of private standards and preferential trade agreements. Given the role that preferential trade agreements sometimes take in establishing future directions in multilateral trade agreements and the increasing dissatisfaction with the WTO’s treatment of consumer issues in general, in the future labour standards may well work their way into multilateral trade agreements. The empirical results show that low labour standards lead to trade distortions. These effects appear to be small. Further research in this area is suggested.