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Regional Trade Agreements with Labor Clauses: Effects on Labor Standards and Trade

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  • Isao Kamatai
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    Abstract

    An increasing number of regional trade agreements (RTAs) include “labor clauses” that require or urge the signatory countries to commit to maintaining a certain level of labor standards. This paper, starting by classifying more than 200 currently effective RTAs depending on the nature and extent of labor provisions, empirically analyzes the effect of a RTA with labor clauses on domestic labor conditions in the signatory countries as well as the effect on trade growth between the countries, using data for up to 220 countries for the years 1995 through 2012. The study finds that (i) intensive trade with the partner(s) of a labor-clause-inclusive RTA may have a positive impact on labor earnings that concentrate on middle-income countries; but also that (ii) labor clauses may reduce the trade-promoting effect of the RTA for the middle-income countries, especially when the RTA partner is a high-income country. These results offer a policy implication that the inclusion of labor clauses in a trade agreement should involve non-negligible costs for possible benefits that may not be expected for every country.

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    File URL: http://www.econ.kyoto-u.ac.jp/projectcenter/Paper/e-13-007.pdf
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    Bibliographic Info

    Paper provided by Graduate School of Economics Project Center, Kyoto University in its series Discussion papers with number e-13-007.

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    Length: 47 pages
    Date of creation: Mar 2014
    Date of revision:
    Handle: RePEc:kue:dpaper:e-13-007

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    Keywords: International trade; Regional trade agreements; Labor standards; Labor clauses;

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    1. Edmonds, Eric V & Pavcnik, Nina, 2004. "International Trade and Child Labour: Cross-Country Evidence," CEPR Discussion Papers 4309, C.E.P.R. Discussion Papers.
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    8. Vivek Dehejia & Yiagadeesen Samy, 2004. "Trade and labour standards: theory and new empirical evidence," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 13(2), pages 179-198.
    9. Jai S. Mah, 1997. "Core Labour Standards and Export Performance in Developing Countries," The World Economy, Wiley Blackwell, vol. 20(6), pages 773-785, 09.
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