Opinion | Can international trade agreements help to introduce labour reforms?
Labour advocates have long complained international trade agreements are driven by corporate agendas and pay little attention to the interests of working people. The preamble of the World Trade Organisation Agreement mentions the objective of “full employment”, but otherwise labour standards remain outside the scope of the multilateral trade regime. The only exception is a clause, left over from the 1947 General Agreement on Tariffs and Trade (the precursor to WTO), which permits governments to restrict imports that are produced with prison labour.
Regional trade agreements, by contrast, have long taken labour standards aboard. The linkage in these agreements between preferential market access and adherence to core labour rights has become increasingly explicit. In the original North American Free Trade Agreement, signed in 1992, labour standards were shunted to a side agreement. Since then, US trade agreements have typically included a labour chapter.
According to its proponents, the Trans-Pacific Partnership would have required Vietnam, Malaysia and Brunei to improve their labour practices significantly – and Vietnam to recognise independent trade unions. And US President Donald Trump’s administration claims its revamped agreement with Mexico contains the strongest labour provisions of any trade agreement.
Developing countries have generally resisted inclusion of labour standards in trade agreements for fear that advanced countries will abuse such provisions for protectionist purposes. This fear can be justified when the requirements go beyond core labour rights and make specific wage and other material demands. For example, the new US-Mexico agreement requires that 40-45 per cent of a car be made by workers earning at least US$16 an hour.
Car companies can certainly afford to pay higher wages, and this provision on its own may not undermine employment prospects in Mexico. But it is not an altogether salutary precedent either, insofar as it sets an unrealistic wage floor – many multiples higher than the average for the Mexican manufacturing sector as a whole.
On the other hand, developing countries have little reason to reject labour standards that address bargaining asymmetries in the workplace and fundamental human rights. Core labour standards such as freedom of association, collective bargaining rights and prohibition of compulsory labour are not costly to economic development. In fact, they are essential to it.