Regional Trade Agreements and Domestic Labour Market Regulation

International Labour Office Employment Sector Working Paper No. 120

67 Pages Posted: 15 Oct 2012

See all articles by Christian Häberli

Christian Häberli

World Trade Institute

Marion Jansen

International Trade Centre

José-Antonio Monteiro

World Trade Organization (WTO) - Economic Research and Analysis Division

Date Written: June 15, 2012

Abstract

In this paper we discuss 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 (“race to the bottom”) of domestic labour standards beyond those reflected in the 1998 ILO Declaration on the Fundamental Principles and Rights at Work. 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 significantly weakened. We show that such a lowering of protection levels tends to occur in high income countries and that this effect mainly stems from RTAs among such countries rather than with low or middle income countries.

Concern about competitive pressure to weaken domestic labour regulation is reflected in a variety of undertakings in RTAs not to administer labour laws with a view to improving one’s competitive position in trade or foreign direct investment (FDI). The above-mentioned empirical findings indicate that such provisions could potentially become relevant, and that this is more likely to be the case for high income members of RTAs. Our analysis, from a legal point of view, of relevant institutional and procedural mechanisms indicates however that enforceability of the relevant provisions is weak for most of the existing legal texts.

Keywords: international trade, labour market regulation, RTAs

JEL Classification: F15, J65

Suggested Citation

Häberli, Christian Martin and Jansen, Marion and Monteiro, José-Antonio, Regional Trade Agreements and Domestic Labour Market Regulation (June 15, 2012). International Labour Office Employment Sector Working Paper No. 120, Available at SSRN: https://ssrn.com/abstract=2162023 or http://dx.doi.org/10.2139/ssrn.2162023

Christian Martin Häberli

World Trade Institute ( email )

Hallerstrasse 6/8
Berne, CH-3012
Switzerland

HOME PAGE: http://https://www.wti.org/institute/people/44/haberli-christian/

Marion Jansen (Contact Author)

International Trade Centre ( email )

54-56 Rue de Montbrillant
Geneva
Switzerland

José-Antonio Monteiro

World Trade Organization (WTO) - Economic Research and Analysis Division ( email )

Rue de Lausanne 154
CH-1211 Geneva
Switzerland

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