Labor Standards and the World Trade Organization

This policy brief takes the position that international labor standards should not be incorporated into the WTO and other trade agreements as we argue that this will not achieve either of the two professed goals: a) improving the wages and working conditions of workers in poor countries and b) keeping more jobs in the industrialized countries. In fact, empirical evidence shows that such mandates can reduce the number of workers with better working conditions and increase the number in poorer conditions, hence creating further inequality. The literature also shows that low labor standards do not provide developing countries with an unfair advantage in their export trade nor do they drive FDI. We recommend alternative policies be deployed through existing institutions. For the poor countries, sustainable improvement of the wages and working conditions of workers can only be achieved through solid economic and social development policies, deployed with the assistance of international organizations (regional banks, NGOs, etc). For the industrialized countries, we recommend that more effort be focused on preparing workers to be able to adapt to the evolving global economy. The process of economic change is complex and cannot be managed by mandates. The alternative policies we propose will be far more effective in making workers and the economies better off.