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Regional Trade Agreements with Labor Clauses: Effects on labor standards and trade

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  • KAMATA Isao

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 period 1995-2012. 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.

Suggested Citation

  • KAMATA Isao, 2014. "Regional Trade Agreements with Labor Clauses: Effects on labor standards and trade," Discussion papers 14012, Research Institute of Economy, Trade and Industry (RIETI).
  • Handle: RePEc:eti:dpaper:14012
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    File URL: https://www.rieti.go.jp/jp/publications/dp/14e012.pdf
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    References listed on IDEAS

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    Cited by:

    1. Kamata, Isao, 2018. "Can RTA labor provisions prevent the deterioration of domestic labor standards? : the cases of statutory minimum wages and employment protection regulations," IDE Discussion Papers 716, Institute of Developing Economies, Japan External Trade Organization(JETRO).

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