1 Nov 2012    Books/ Book Chapters

Regional Trade Agreements and Domestic Labour Market Regulation

by Christian Häberli (WTI), Marion Jansen (ILO) and José Antonio Monteiro (Université de Neuchâtel)

This paper discusses the relationship between labour market regulation and regional trade agreements from both a legal and an economic angle. We examine empirically whether regional trade liberalisation is associated with deterioration of domestic labour standards beyond those reflected in the 1998 ILO Declaration on the Fundamental Principles and Rights at Work (“race to the bottom”). Using a panel of 90 developed and developing countries, covering the years from 1980 to 2005, we find that after the entry into force of a regional trade agreement (RTA), labour standards applying to employment protection and unemployment benefits are sometimes significantly weakened. We show that such a lowering of protection levels occurs only in high income countries and that this effect mainly stems from RTAs among such countries rather than with low or middle income countries.

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