The simple economics of labor standards and the Gatt
How should the issue of domestic labor standards be handled in the GATT/ WTO? This question is part of a broader debate over the appropriate scope of international economic institutions such as the GATT, where member-countries are considering proposals for a new round of n3 negotiations that would move beyond GATT's focus on trade barriers and cover domestic' issues such as labor and environmental standards and regulatory reform which have traditionally been treated with benign neglect' within GATT. Such proposals encroach on traditional limits of national sovereignty, and they raise fundamental challenges to the existing structure of international economics relations among sovereign states. In this paper we consider several approaches to the treatment of domestic labor standards within a trade agreement. We use simple economic arguments to show that, while the benign neglect of labor standards within a trade agreement will result in inefficient choices for both trade barriers and labor standards, direct negotiations over labor standards are not required to reach efficient outcomes. Specifically, we describe two tafiff negotiating structures that deliver efficient outcomes while preserving varying degrees of national sovereignty over policy choices. A first approach combines tariff negotiations with subsequent Kemp-Wan adjustments, under which each government is free to alter unilaterally its policy mix so long as trade volumes are not affected. A second approach adds to the first, under which afte tariff negotiations each governement can alter unilaterally its tariff, but its trading partner is then free to issue a tariff response to stabilize export prices. We show that both approaches deliver govts. to the efficiency frontier but that the second approach provides govts. with greater sovereignty over policy choices and bears a strong resemblance to the negotiating procedures in G
(This abstract was borrowed from another version of this item.)
|Date of creation:||1998|
|Date of revision:|
|Contact details of provider:|| Postal: UNIVERSITY OF WISCONSIN MADISON, SOCIAL SYSTEMS RESEARCH INSTITUTE(S.S.R.I.), MADISON WISCONSIN 53706 U.S.A.|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bagwell, Kyle & Staiger, Robert W., 2001.
"Reciprocity, non-discrimination and preferential agreements in the multilateral trading system,"
European Journal of Political Economy,
Elsevier, vol. 17(2), pages 281-325, June.
- Kyle Bagwell & Robert W. Staiger, 1997. "Reciprocity, Non-discrimination and Preferential Agreements in the Multilateral Trading System," NBER Working Papers 5932, National Bureau of Economic Research, Inc.
- Drusilla Brown & Alan Deardorff & Robert Stern, 1998.
"Trade and Labor Standards,"
Open Economies Review,
Springer, vol. 9(2), pages 171-194, April.
- Bagwell, K. & Staiger, R.W., 1996.
"Reciprocal Trade Liberalization,"
9602, Wisconsin Madison - Social Systems.
- Kyle Bagwell & Robert W. Staiger, 1996. "Reciprocal Trade Liberalization," NBER Working Papers 5488, National Bureau of Economic Research, Inc.
- Kyle Bagwell & Robert W. Staiger, 1996. "Reciprocal Trade Liberalization," Discussion Papers 1150, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Brown, D.K. & Dearorff, A.V. & Stern, R.M., 1993. "International Labor Standards and Trade: A Theoretical Analysis," Working Papers 333, Research Seminar in International Economics, University of Michigan.
- Kyle Bagwell & Robert W. Staiger, 2001.
"Domestic Policies, National Sovereignty, and International Economic Institutions,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 116(2), pages 519-562.
- Kyle Bagwell & Robert W. Staiger, 1999. "Domestic Policies, National Sovereignty and International Economic Institutions," NBER Working Papers 7293, National Bureau of Economic Research, Inc.
- repec:fth:michin:394 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:att:wimass:19989. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ailsenne Sumwalt)
If references are entirely missing, you can add them using this form.