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

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  • Isao Kamatai

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.

Suggested Citation

  • Isao Kamatai, 2014. "Regional Trade Agreements with Labor Clauses: Effects on Labor Standards and Trade," Discussion papers e-13-007, Graduate School of Economics Project Center, Kyoto University.
  • Handle: RePEc:kue:dpaper:e-13-007
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    More about this item

    Keywords

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

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor
    • J81 - Labor and Demographic Economics - - Labor Standards - - - Working Conditions
    • J83 - Labor and Demographic Economics - - Labor Standards - - - Workers' Rights

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