Labor Standards and Trade: A Review of Recent Empirical Evidence

Author(s)

Samira Salem, Fina Rozental

Over the last two decades, labor standards have become a major issue in international trade. Three developments mark the rise of this issue: first, an international consensus was reached on a set of core labor standards established by the International Labour Organization (ILO); second, bilateral and regional trade agreements have increasingly included more labor standards provisions; and third, consumers have increasingly demanded products produced under better labor conditions. This study evaluates research on the effects of labor standards commitments on labor conditions; the influence of trade openness on labor conditions; and the impact of compliance with labor standards on trade performance.

The research suggests that the ratification of ILO conventions does not result in improved labor conditions. On the other hand, research appears to show that agreements, when reinforced by factors such as enforcement mechanisms, positive incentives, and market forces, may improve compliance with labor standards, bringing about better labor conditions. Another line of research suggests that trade openness may improve rather than degrade labor conditions. Finally, the research finds no clear evidence that countries can improve their trade performance by maintaining poor labor conditions, contrary to the “race to the bottom” point of view.