THE passage this month of free trade agreements may be a victory not only for President Obama, but also for workers in Colombia, Panama and South Korea. Although the anticipated economic consequences of these agreements are small, these pacts also offer a mechanism for improving workers’ rights in partner countries.
Some of the delay in completing the agreements was a result of concerns among legislators and activists about labor-related issues in Colombia and Panama. Since the early 1980s, various Congressional acts have required American trade negotiators to include conditions intended to insure fair labor treatment in free trade agreements. While the conditions can vary somewhat, they generally require promises from partner countries to prevent the use of child and forced labor, to require “acceptable” conditions of work, and to allow workers the rights to organize unions and bargain collectively.
But such commitments are often difficult to enforce, and the Obama administration expressed concerns that it might have little leverage over enforcement once the trade agreements were in place. In fact, even when bilateral trade agreements include mechanisms for addressing violations of such promises, the mechanisms are rarely invoked.
There is, however, a more general way in which trade agreements — and the economic ties they generate — benefit workers in developing nations. As Colombia and Panama expand their trade relationships with the United States, workers stand to gain more than just the job creation and higher wages that often come with expanded trade. Research I conducted over the last several years with the political scientists Brian Greenhill and Aseem Prakash suggests that trade with developed nations helps developing countries expand labor rights themselves.
Why? International trade gives producers incentives to meet the standards of their export markets. When developing nations export more to countries with better labor standards, their labor rights laws and practices tend to improve. Our findings, which are based on newly collected measures of labor rights around the world, demonstrate a “California effect” on workers’ rights, in which exporting nations are influenced by the labor rights conditions that prevail in their main trading partners.
The Berkeley economist David Vogel coined the phrase “California effect” for that state’s ability to raise standards throughout the United States by setting stricter auto emissions standards within California’s own borders. Once these standards were enacted in the 1980s, automakers in the United States and Europe began manufacturing vehicles that satisfied them — and applied those standards to the rest of their production as well, rather than go to the expense of setting different production standards for different markets. In that way, exports and sales to the huge California market facilitated a “climb to the top” in environmental standards across the country.
A similar process works for labor standards, we have found. Our research demonstrates that when a developing country with low labor standards trades with higher-standards countries like the United States and those in Europe, it comes under influences from the market itself that improve its labor standards. And this has a greater impact on developing nations than including labor conditions in trade agreements.
This California effect works in two ways, both based on global producers’ own calculations of self-interest.
First, multinational companies often carry their management and production technologies with them when they produce goods abroad because, like automakers selling to California’s consumers, they find it efficient to standardize their practices in plants, regardless of location. Those practices — including rules for the appropriate treatment of workers — then set an example for other employers throughout the host economy.
Second, the multinational company knows that many consumers, activists and shareholders in its home country will judge its imported products on whether they were produced in ways that reflect the firm’s public commitment to corporate social responsibility. This spurs multinational firms and importers to press locally owned companies in their supply chains for working conditions that meet internationally recognized labor standards.
Of course, trade is not a panacea for workers’ rights: repressive national governments can override the pressures for a California effect.
But trade ties matter, and they matter in a nuanced way. And, for consumers, activists and governments that worry about labor rights abroad (as well as at home), the most appropriate way to raise labor standards is engagement, rather than limiting commercial relationships. Engagement will expose developing countries’ firms, workers and governments to the higher labor standards that prevail in wealthy nations, promoting the improvements that workers around the world so desperately need.
Layna Mosley is a professor of political science at the University of North Carolina, Chapel Hill.
