Deep Integration in Trade Agreements : Labor Clauses, Tariffs, and Trade Flows
Deepening preferential trade agreements extend coverage to social issues, including labor clauses. While there is a long history of debate over the intent of labor clauses, less is known about the impact of labor clauses. Recent studies show that l...
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| Format: | Working Paper |
| Language: | English |
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World Bank, Washington, DC
2021
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| Online Access: | http://documents.worldbank.org/curated/en/405441616682154606/Deep-Integration-in-Trade-Agreements-Labor-Clauses-Tariffs-and-Trade-Flows http://hdl.handle.net/10986/35352 |
| Summary: | Deepening preferential trade agreements
extend coverage to social issues, including labor clauses.
While there is a long history of debate over the intent of
labor clauses, less is known about the impact of labor
clauses. Recent studies show that labor clauses improve
working conditions, but the impact on trade flows is still
debated. Existing studies do not include a full set of fixed
effects (to control for endogeneity and unobserved
confounding factors), other dimensions of deep agreements
that could be correlated with labor clauses (tariffs and
other “deep” clauses), and pseudo-Poisson maximum likelihood
estimation. This paper combines all three with additional
robustness checks. While the estimated effect of trade
agreements is positive overall, the estimated marginal
relationship between labor clauses and trade volume is
generally negative but varies with the type of clauses.
Freedom of Association, Forced and Child Labor, and
International Labor Standards are consistently associated
with higher trade flows. Clauses that are more likely to
eliminate illicit trade, including clauses related to
discrimination, protection of working conditions, and
third-party monitoring exhibit a negative marginal
relationship with trade flows. |
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