Labour Standards as a Justification for Trade Barriers: Consumer Concerns, Protectionism and the Evidence

In this article, justifications by producers (economic protectionism), consumers and social advocates (humanitarian motives) for including labour standards in international trade agreements are discussed. To date, little work has been undertaken to determine empirically whether low labour standards lead to trade distortions. This article provides some empirical evidence pertaining to this question. Consumer groups, social advocates and traditional vested interests such as labour unions have attempted to have labour standards included in WTO disciplines. In the absence of success at the WTO, the relationship between labour standards and international trade has, however, been evolving in the areas of private standards and preferential trade agreements. Given the leading role that preferential trade agreements sometimes take in establishing future directions in multilateral trade agreements and the increasing dissatisfaction with the WTO’s treatment of consumer issues in general, in the future labour standards may well work their way into multilateral trade agreements. The empirical results show that low labour standards could potentially lead to trade distortions, but more empirical work is required before a legitimate case might be made to have labour standards considered in multilateral trade negotiations.