29 May 2021
Labor clauses in trade agreements: Hidden protectionism?
Journal article by Céline Carrère, Marcelo Olarreaga and Damian Raess in "The Review of International Organizations", published by Springer (2021).
Abstract adapted to the lay public:
- The article explores the effect of the introduction and design of labor clauses (LCs) in preferential trade agreements (PTAs) on bilateral trade flows.
- It is not a priori clear if the inclusion of LCs in PTAs will decrease or increase bilateral trade.
- We expect: 1) to observe the (negative or positive) impact of LCs in the South-North trade configuration; 2) stronger LCs to yield stronger (negative or positive) effects on bilateral trade flows.
- Using the novel LABPTA (Labor Provisions in Trade Agreements) dataset, we find that 1) the introduction of LCs increases exports of developing countries with weaker labor standards in North-South trade agreements; 2) this positive impact is mostly driven by LCs with institutionalized cooperation provisions.
- The results are inconsistent with the ideas that LCs are set for protectionist reasons or have protectionist effects, casting doubt on the logic for the reluctance of many developing countries to include LCs in their trade agreements.
An op-ed written by Dr. Raess in the French-language newspaper "Le Temps", entitled "Clauses sociales: protectionnisme masqué?", can be accessed here.