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

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  • Christian E. Weller

Abstract

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, Weller combines 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.

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Paper provided by Political Economy Research Institute, University of Massachusetts at Amherst in its series Working Papers with number wp196.

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Date of creation: 2009
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Handle: RePEc:uma:periwp:wp196

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Keywords: U.S. trade deficit; labor rights; relative price differences;

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  1. Christian Weller & Laura Singleton, 2004. "Political Freedom, External Liberalization and Financial Stability," International Review of Applied Economics, Taylor & Francis Journals, vol. 18(1), pages 1-22.
  2. John WEEKS, 1999. "Wages, employment and workers' rights in Latin America, 1970–98," International Labour Review, International Labour Organization, vol. 138(2), pages 151-169, 06.
  3. Busse, Matthias, 2002. "Do Labor Standards Affect Comparative Advantage in Developing Countries?," World Development, Elsevier, vol. 30(11), pages 1921-1932, November.
  4. Dani Rodrik, 1999. "Democracies Pay Higher Wages," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 707-738, August.
  5. Vivek H. Dehejia & Yiagadeesen Samy, 2007. "Trade and Labor Standards: A Review of the Theory and New Empirical Evidence," Carleton Economic Papers 07-12, Carleton University, Department of Economics.
  6. Martin, Will & Maskus, Keith E, 2001. "Core Labor Standards and Competitiveness: Implications for Global Trade Policy," Review of International Economics, Wiley Blackwell, vol. 9(2), pages 317-28, May.
  7. Neumayer, Eric & Soysa, Indra de, 2006. "Globalization and the Right to Free Association and Collective Bargaining: An Empirical Analysis," World Development, Elsevier, vol. 34(1), pages 31-49, January.
  8. Catherine L. Mann, 2002. "Perspectives on the U.S. Current Account Deficit and Sustainability," Journal of Economic Perspectives, American Economic Association, vol. 16(3), pages 131-152, Summer.
  9. Dutt, Pushan & Mitra, Devashish, 2006. "Labor versus capital in trade-policy: The role of ideology and inequality," Journal of International Economics, Elsevier, vol. 69(2), pages 310-320, July.
  10. Thomas I. Palley, 2004. "The economic case for international labour standards," Cambridge Journal of Economics, Oxford University Press, vol. 28(1), pages 21-36, January.
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