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Political economy of labor provisions in free trade agreements

Author

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  • Sato, Hitoshi

Abstract

This paper examines the effects of the inclusion of labor provisions in free trade agreements (FTAs) on the external tariffs imposed on non-member countries and the political viability of FTAs within a political economy model in which oligopolistic industry may make political contributions on import tariffs against non-member countries. Labor provisions encourage external tariff reductions by party countries with low labor standards, while weakening the external tariff reduction effect for the party countries for which labor standards are sufficiently high so that the provisions are non-binding. Labor provisions also influence the political viability of FTAs. When an FTA has a labor provision, its political viability will increase in counties even with the highest labor standards.

Suggested Citation

  • Sato, Hitoshi, 2020. "Political economy of labor provisions in free trade agreements," IDE Discussion Papers 780, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper780
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    File URL: https://ir.ide.go.jp/?action=repository_action_common_download&item_id=51719&item_no=1&attribute_id=22&file_no=1
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    More about this item

    Keywords

    labor provisions; free trade agreements; political economy; oligopolistic trade; International trade;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor

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