If a labor union successfully practices collective bargaining against a monopsonist, then

One of the principal arguments for inclusion of labor standards in the WTO is that weak core labor standards provide an illegitimate boost to competitiveness and may result in a "race to the bottom" in labor standards worldwide. We show that, if the violation of labor standards results from discrimination against particular workers in export industries, employment, output, and competitiveness will be reduced since employment is determined by the short side of the market. If the problems arise from abuse of market power by employers, competitiveness will be similarly reduced. If freedom of association and collective bargaining were intended to allow workers in some sectors to restrict output and drive up wages, then the absence of such standards would raise competitiveness. However, if product markets are competitive, it is likely that association rights would increase output and competitiveness by raising productivity. In most cases, trade barriers imposed against countries with weak core labor standards would be counterproductive if their goal is to improve the well-being of workers. Thus, the competitiveness argument seems to reflect either analytical confusion or to represent a cover for protectionist interests.

1. Introduction

The issue of requiring minimum national standards for the protection of workers� fundamental rights is prominent in the international policy arena. There is considerable international agreement that certain core rights should be globally recognized and protected. These core labor standards (CLS) are (i) elimination of exploitative use of child labor; (ii) prohibition of forced labor; (iii) elimination of discrimination in employment; (iv) freedom of association; and (v) provision of the right to organize and bargain collectively. This consensus stems from the equation of these labor rights with fundamental human rights, as enshrined in international conventions maintained by the United Nations and the International Labor Organization (Maskus, 1997).

However, there is little consensus over the appropriate means for ensuring such protection. A number of proposals have been put forward for linking trade policy to protection of labor rights (Rodrik, 1996, 1997; de Wet, 1995, Woolcock, 1995). Indeed, in the latter stages of the Uruguay Round and in the period leading up to the WTO Ministerial Meeting in Singapore in 1996, a number of member countries pressed strongly for the inclusion of basic labor standards in the WTO. It is likely that the United States and some European nations will bring up the subject at the Seattle Ministerial Meeting in 1999 in the context of setting the agenda for the Millennium Round of trade negotiations.

This enthusiasm for incorporating labor standards into the world trading system appears to be based largely on three major concerns. First, there are altruistic concerns for the rights of workers in poor countries. It is clear that the demand for strong labor standards rises with per-capita income (Maskus, 1997, Basu 1999). Thus, we would expect some disutility among rich-country consumers as they become more aware of the frequently appalling conditions of work in poor nations.

Second, claims are made that the legitimacy of the trading system itself might be eroded if it does not ensure that workers� rights in developing countries are protected. Thus, there are concerns about a "race to the bottom" in setting weak labor standards, which in turn would place pressures on higher-standards countries to relax their regulations. In this view, a failure to implement CLS constitutes an unfair trade practice that reduces confidence in the trading system.

Third, weak standards and inadequate enforcement of standards are viewed by some observers in the high-income economies as means for generating artificially low wages and augmenting the natural comparative advantage low-wage countries have in labor-intensive goods. This additional wage margin is seen as a threat to employment and incomes of workers in the developed countries, and hence as underlying concerns about a "race to the bottom" discussed above. This concern is expressed with particular force about labor practices in export processing zones. In some countries the rights to free association and collective bargaining are denied in these zones, giving firms operating in them an evident advantage based on lower wages. Similarly, those firms able to exploit child labor, to force laborers to work against their will, or to discriminate against particular groups of workers are seen as gaining a competitive advantage.

In this paper we consider the logical basis for the third claim, which we term the "competitiveness" argument. We contend that the argument is fundamentally invalid. Rather than providing competitive advantages, weak core labor standards actually reduce efficiency and raise costs. Indeed, improving CLS is likely to increase economic efficiency in both the short run and the long run. Paradoxically, then, the adoption and enforcement by developing countries of CLS would not reduce competitive pressures on workers in rich nations. In this sense, arguments for a multilateral trade agreement that would link trade sanctions to weak provision of labor rights, to the extent those arguments are based on competitiveness claims, should be viewed as disguised calls for trade protection.

We organize our discussion as follows. In the next section we present a series of simple models to illustrate our basic point that a failure to establish and enforce CLS, in most cases, reduces an economy�s efficiency and interferes with its comparative advantage. In the third section we review briefly the limited empirical evidence on the relationship between weak CLS and export performance. That evidence cannot detect any significant relationship in the data. In the fourth section we develop implications for the structure of international trade policy, making two points. First, imposing trade sanctions on nations with weak CLS generally would worsen the negative impacts of poor labor rights, thereby damaging prospects for trade and growth. Second, international efforts to improve CLS in poor countries should focus on direct remedies rather than trade sanctions, implying that labor rights should remain outside the World Trade Organization.

2. Core Labor Standards and Economic Efficiency

As noted above, much of the ire of those advocating the incorporation of labor standards into the international trading system focuses on the perceived opportunities provided for enterprises in developing countries to become more competitive by violating those standards. This competitive advantage is widely viewed to be short-run in nature, because violations of the implicit human rights are typically seen as imposing long-run efficiency costs. Exploited workers may be expected to invest sub-optimally in human capital, to be poorly motivated on the job, and to perform below their maximum potential levels of effort. The World Development Report: 1995 (World Bank, 1995) graphically illustrated the benefits obtainable from having free trade unions in the context of competitive product markets. Most of the analysis in a recent OECD study (OECD, 1996) supports the conclusion that raising labor standards would increase competitiveness and efficiency in the long run.

While the five identified CLS cover a wide range of situations, they have the common feature that violations of these standards could result in workers being paid less than the marginal value product of their labor. For the cases of forced labor and discrimination, this interpretation is particularly clear. Exploitative child labor clearly embodies this feature as well. Refusals to allow workers to organize and bargain collectively could lead to this outcome if the labor market is not initially competitive. Rights to free association are included in large part as a means to allow workers to organize and bargain collectively.

The concept of competitiveness is open to a variety of interpretations (Krugman, 1994). However, all such interpretations claim that more competitive firms increase their market shares at the expense of less competitive firms. The conclusion that firms and industries can increase their competitiveness by lowering core labor standards is, in our view, based on an excessively partial view that considers only the demand side of labor markets. Once we take supply relationships into account, the conclusion on competitiveness is reversed.1

The main source of this confusion is that the economic assumptions underlying the arguments about competitiveness are rarely made explicit. For example, it is typically unclear whether the labor market is assumed to begin from an initial equilibrium or from an imperfectly competitive situation. Similarly, it is not clear whether employers are assumed to have the ability to compel workers to supply labor at points off their labor-supply functions. To account for these situations, we must consider a number of cases.

The situations we analyze include those where the labor market is initially competitive and where it is characterized by monopsony or monopoly power. Further, we compare cases where workers supply labor according to their preferences and hence, in simple graphical terms, remain on their labor-supply curves. Throughout, we consider the case where all goods are tradeable and there are no distortions in the labor market. This greatly simplifies the analysis by allowing us to focus only on production. We assume further that induced income changes in labor markets affect output demands only slightly, permitting us to identify changes in output one-for-one with changes in trade volumes.

Case 1: Discrimination in a competitive labor market: workers on their supply curves

In Figure 1 we consider the case where the market for a particular category of labor, such as women, is initially in equilibrium, with the wage at w*. Assume that the government, or a group of employers, arbitrarily discriminates against use of this type of labor in a particular sector, imposing a maximum wage at w', below the market-determined wage and below the marginal value product of women. An analysis that focused solely on the demand side would lead to the conclusion that employment and output (and hence competitiveness in the product and export markets) would rise. This outcome would be consistent with a rise in employment to qd. However, in such a disequilibrium situation, it is the short side of the market that rules. Employment would be determined on the supply side, with excess demand for women being (qd - qs). In this case, it is clear that employment, output, and competitiveness would all fall, rather than rise, in the directly affected sector. Because firms can hire fewer female workers than in the competitive equilibrium, the marginal value product of an additional female worker, at w'', is above the equilibrium wage.

If there is another, unregulated sector in the economy, the labor rendered surplus in the market with discrimination would flow into it, driving down female wages in that sector. For the initial sector to retain any of the employees against whom discrimination is practiced, the wage in the residual sector must be driven below w'. As long as this condition is satisfied, the resulting outcome will be stable. In this case, discrimination in the primary market will increase the competitiveness of the residual market - a quite different outcome from that which appears to have motivated concerns about competitiveness and trade.

The discrimination represented in Figure 1 may be caused by employer prejudices against women, with the margin of discrimination (w* - w') determined by the least-prejudiced employer (Cain, 1986). However, in the long run it is inconsistent with rational behavior by employers. It would pay an employer to offer more than the discriminatory wage rate, w', to attract the services of an additional worker, whose marginal contribution to revenue, w'', would be above that wage. Profit-maximizing employers would do so until the marginal value product of female workers declined to w* and the wage rate required to induce an additional unit of labor into the market rose to the same level. In a competitive market in which employers possessed accurate information about worker productivity, it is difficult to envisage how such discrimination could be maintained for long. In this context, the maintenance of discrimination evidently reflects government regulation, weak information, or persistent cultural traditions. Government efforts to reduce discrimination would raise market efficiency.

Turning to trade implications, export volume would fall as a result of discrimination if the problem is in the exportable sector but import volume would rise if it is in the import-competing sector. Suppose the industry depicted in Figure 1 is the exporter and the residual sector competes with imports. A tariff imposed by the rest of the world (ROW) in protest would shift down the demand for female labor in the exportable. This would have no effect on employment of women unless demand shifts sufficiently to make the wage constraint non-binding and induces a fall in the wage--in which case its impact on the affected women would be negative. If discrimination exists in the import-competing good, the ROW tariff on exports would reduce demand for women in the (residual) export sector, tending to reduce female wages in both sectors below its constrained level. In this model, then, a foreign tariff could not help women and could harm them.2

These results come from a partial-equilibrium model. In general equilibrium the effects would depend on the female-labor intensity of the exportable versus the importable (Maskus, 1997). In the case that dominates competitiveness concerns, with the exportable being female-worker intensive and the locus of discrimination, a foreign tariff would raise male wages but have either no effect or a depressive effect on female wages. It would exacerbate the inefficiency effects of the discrimination.

An even more striking result emerges from a general-equilibrium model in which there is general wage discrimination and a positive elasticity of female labor supply. The discrimination shifts in the production frontier and reduces output in the good that makes intensive use of women. If this sector were the export good, export competitiveness would be impaired; if it were the import-competing sector, import volume would rise. In the former case, eliminating the discrimination would expand exports, implying an efficiency gain though also potentially a terms-of-trade loss for a large developing country. This outcome is just opposite to the main conclusion in Brown, Deardorff, and Stern (1996), who model a stronger labor standard as one that reduces the effective supply of labor, rather than increaseing it. Turning to the ROW tariff, it would harm female wages where exports are intensive in female labor but would place upward pressure on those wages where exports intensively use male labor, perhaps inducing employers to relax the wage constraint.

Case 2: Collective bargaining rights in a competitive labor market

Suppose that the collective bargaining rights are introduced into one sector of a perfectly competitive economy and the outcome is to set an above-market minimum wage in that sector. The simple partial-equilibrium diagram in Figure 2 depicts this case. The monopoly power of labor suppliers permits them to increase wages. In this situation, a net-return-maximizing labor union sets wages (or employment levels) so that the marginal revenue obtained from selling an additional unit of labor equals the wage obtainable in other industries. In the diagram, the wage in the monopoly union case is wm, as against the competitive wage of wf. Employment in this sector falls from qf to qm, implying a fall in competitiveness and market share in this industry.

A similar possibility stems from the Harris-Todaro (1970) model, which has been extensively analyzed in the trade literature. Suppose a higher-than-market wage is set in the import-competing sector, corresponding to the ideas that developing countries import capital-intensive manufactures and that these industries are more amenable to unionization. This higher wage is sustained by limited entry into the labor union from workers in the export sector, which has an equilibrium wage equal to the expected wage in manufacturing. Unemployment exists in equilibrium, reducing the economy�s production set. Output effects are ambiguous in principle. Both outputs could fall or one could rise and the other could fall, though it is likely that output would fall in the unionized import-competing sector (Corden and Findlay, 1975). This ambiguity means that trade effects also would be ambiguous, although the implicit inefficiency suggests lower trade offers would result overall. If the export sector were not unionized, a ROW tariff would reduce demand for labor in that sector, causing greater unemployment.

This simple case suggests that introducing bargaining rights could reduce efficiency, counter to our basic proposition. In such cases, a law removing free association and collective bargaining rights could result in lower manufacturing wages and higher levels of employment and output. In these situations, there would be a positive association between competitiveness and weak labor standards.

This case is probably what many advocates of labor standards have in mind when they call for extension of bargaining rights to workers in export processing zones. If workers in these zones were able to raise wages and reduce output in line with firms in the same industries in other parts of the economy, their competitiveness would fall. However, this would have highly questionable equity implications. The workers forced out of employment in export processing industries would be forced into employment in the residual, competitive sectors of the economy, where wages were depressed by the restrictions on job-creation in the export sector.

While theoretically possible, this outcome is probably more the exception than the rule, especially in competitive export markets such as those for the labor-intensive manufactures that dominate the export structures of labor-abundant developing countries. As has been widely argued (World Bank, 1995), unions operating under appropriate legal frameworks are more likely to contribute to productivity and hence to output than to reduce employment and output. In this situation, suppression of workers� rights to organize and bargain collectively would generate inefficiencies.

Case 3: Monopsony in the labor market

A common concern expressed about weak union rights is that labor markets are not competitive and that the free operation of labor unions can offset the implicit inefficiency. The most obvious case emerges where employers have monopsony power in hiring workers.

Thus, consider the situation in which a single firm, or a small set of collusive firms, has market power in the labor market. Monopsony could be natural in a small market in which there are a limited number of firms or it could be supported by government barriers to entry of other employers. Thus, it seems likely to be more common in small nations, in regional labor markets within countries, or in countries with extensive protection against competition.

Suppose the monopsony exists in the export sector, which is labor-intensive. This is the case typically mentioned in the policy debate, but there are many possibilities. For the moment, suppose the economy is small and the monopsony firm producing output accepts a price fixed by external competition. The firm drives a wedge between foreign and domestic wages through limiting employment in a localized labor market. In Figure 3, if there were no monopsony the market wage would be w*. However the employer bases the hiring decision on the marginal cost of employing labor, MCL, taking into account the cost of the increase in the wage of existing workers required when the wage is raised to induce increases in the quantity of labor supplied. The rent-maximizing employer thus chooses employment level qp and pays the wage wp as a result of this market imperfection. Thus, the monopsony hiring practices suppress wages, as is generally alleged in the policy debate. However, they also reduce employment, output, and competitiveness in the sector relative to what they would be in a competitive labor market. Considering the economy as a whole, those workers displaced from the monopsonized industry move into other sectors, driving down wages there and increasing output. Thus, it is in these residual sectors that competitiveness rises, albeit because of the market inefficiency.

Suppose that ROW were to impose a tariff on exports of the good produced in Figure 3 to protest the absence of union bargaining rights. The effect would be to reduce the export price and shift the labor-demand curve down, inducing the monopsonist to choose yet a lower employment level and offer a lower wage. Thus, the tariff would reduce wages and introduce additional inefficiency into the economy.3

In theory, the optimal policy response would be for the government to remove the monopsony through additional product-market entry or removal of restrictions on labor mobility. However, an alternative approach would be to allow workers to organize a union and bargain with the employer. The outcome of such bargaining would depend on the union�s objective with respect to the given labor-demand curve. In principle, the union could bargain for the competitive solution, which would restore efficiency and expand employment, output, and competitiveness. Thus, union rights certainly could support the efficient functioning of labor markets, which would, paradoxically, frustrate the hopes of those who believe that stronger rights would limit exports. It is also possible that the union would set employment levels in an effort to raise the wage. If the union were successful in maximizing the net returns of its members by acting as a monopoly supplier of labor, the employment level, relative to the previous monopoly situation, would depend upon the elasticity of demand for labor relative to the elasticity of supply. If the product market were competitive, and the union were not granted an excessively strong position by the prevailing labor market rules, it is likely that the resulting outcome would involve a higher level of employment and output than the monopsony However, a range of outcomes is possible, with employment either rising or falling depending on union preferences and relative bargaining power of the union and the employer (Maskus, 1997).

It is worth making observations about the situation in which the exporting economy is large in the world market for its labor-intensive goods. It is often claimed that the absence of union rights in the exporting country (or set of countries) depresses wages abroad by pushing down the world prices of its exports. As the analysis here shows, however, if the monopsony lies in the export commodity its effect would be to limit export competitiveness even as it depresses home wages. This would tend to raise the global prices of labor-intensive goods, thereby supporting higher wages abroad. Introducing union rights into this situation could actually cause foreign wages to decline to the extent they expand competitiveness of the labor-intensive exports sectors. Put more simply, it seems that the global pressures on wages of low-skilled workers in high-income economies are actually less than they would be in the absence of union rights.

3. Evidence on core labor standards and export competitiveness

There is some empirical evidence about the effects of differential levels of CLS on exports and export prices.4 The OECD (1996) related measures of export performance, both in the aggregate and, more appropriately, for labor-intensive goods, to indications of limited labor standards. No relationship appeared to exist in their data. Neither could they detect any correlations between measures of revealed comparative advantage and attempts to suppress union rights. The OECD also could not detect any effects of CLS on U.S. import prices on textiles and apparel across trading partners. Nor was there any indication that export prices for hand-made carpets were lower in countries with extensive use of child labor. They concluded that differences in CLS had little evident effect on patterns of specialization, competitiveness, or exports.

Rodrik (1996) econometrically related basic measures of labor standards across countries, such as ratification of ILO conventions covering core labor standards and an indicator of enforcement problems in child labor protection, to international trade flows. He was unable to determine any relationship in the data. Neither could Rodrik find any suggestion of a positive statistical relationship between low labor standards and inward flows of foreign direct investment (FDI) from the United States across countries. Indeed, there was some evidence that FDI is lower than expected in countries with limited CLS.

Aggarwal (1995) noted that it is common in developing countries for labor standards to be lower in less export-oriented sectors and in non-traded goods than in export-oriented industries, including even textiles and carpets. Within all manufacturing, workers in firms with high export-to-output ratios tended to receive greater wages and benefits than those in less export-oriented firms. She also discovered no association between U.S. FDI and poor labor standards in developing countries. In fact, she discovered that U.S. FDI is not concentrated in nations or sectors with weak labor standards. Moreover, countries with weaker labor rights did not have higher import-penetration rates in the United States than did countries with stronger labor rights. In summary, she found no indication that export success in developing countries is due to cost advantages based on inadequate CLS. Indeed, it appears that higher standards are associated with greater export orientation, although the direction of causation was not explored.

4. Implications for Trade Policy

The bulk of economic logic and the evidence we have reviewed points to a straightforward conclusion. Under most circumstances the absence or inadequate enforcement of core labor standards, rather than providing an export advantage, is inefficient and costly both in the short run and the long run. That some countries continue to fail to provide adequate CLS in their labor regulations reflects structural problems that prevent effective recognition of the potential gains from stronger labor rights. Such problems could be widespread, including, inter alia, the existence of monopoly enterprises in product and service markets, inadequate or unbalanced political competition favoring entrenched producer interests, inefficient flows of information regarding true productivity characteristics of workers, and rigidities in internal labor mobility. As these difficulties are reduced as a result of market liberalization, economic growth and enhanced political competition, stronger labor standards should emerge endogenously. This process characterized policy change in the United States and Western Europe in the first half of this century and in Japan and Korea more recently.

The use of international trade sanctions injects yet another inefficiency into this mix and is unlikely to improve workers� rights where they are weak. Tariffs imposed by foreign countries concerned about insufficient CLS are indirect policies that are not aimed directly at the underlying distortions. By reducing external demand for the services of disadvantaged workers, such sanctions are likely to worsen their economic prospects. For example, Maskus (1997) developed theoretical models of ten different cases, covering child labor exploitation, discrimination, and weak union rights, in which a foreign tariff might be deployed against the problem. In eight cases the tariff would reduce the wage of the labor group harmed by the weak labor standard. Moreover, it is likely that the severity of the sanctions imposed would depend on the preferences of the sanctioning country, rather than on the extent of the inherent distortion in the targeted country. This problem would exacerbate the additional inefficiency associated with the tariffs.

An additional corollary is that because weak CLS cannot be associated with stronger competitiveness and export performance, foreign tariffs levied against exports from countries with that problem should not be expected to protect wages or employment in high-wage nations in the short run. However, to the extent these trade restrictions reduce exports and growth in the target nations, they would delay the endogenous implementation of stronger labor standards. In this sense, arguments for deploying current trade barriers against the exports of countries with inadequate CLS might well be efforts to discourage efficient future competition. This dynamic element to the protectionist use of trade barriers against labor standards has not been recognized in the economic literature.

Thus, developing countries understandably are concerned about proposals to validate the concept of "social dumping" within the WTO. This concept would view limited application or suspension of labor laws on behalf of export firms or enterprises in export processing zones as actionable subsidies in the same sense as industry-specific tax advantages or capital subsidies. Such a provision would considerably extend unilateral CVD authority to counteract (questionable) trade advantages presumed to result from social policies (as opposed to commercial policies). It would lead to numerous difficulties of interpretation and operation. Experience with antidumping and countervailing duty procedures in the United States and the European Union suggests strongly that such rules would be captured by domestic producers (Anderson, 1996). Calculation of a meaningful "social dumping margin" would be virtually impossible (Maskus, 1997). Frequently, the sign on any dumping margin based on estimates of wage suppression would be completely wrong. Depressed wages in the cases of discrimination and labor market monopsony result in reduced output and competitiveness. If action were to be taken unilaterally by the importer to try to offset these distortions to output, trade and wages in the exporting country, it should take the form of an import subsidy rather than a tax.

A prominent variant of the social clause was advanced by Rodrik (1996, 1997), based on the psychic disutility experienced by citizens in rich countries when they become aware of poor working conditions abroad. Rodrik advocated the imposition of "social safeguards" tariffs against countries that follow labor practices that may be shown, through a series of filters, to be morally reprehensible to a majority of citizens in the importing country. He argued that high-standard countries have expressed in their legislation social preferences against certain domestic production technologies, such as child labor use and discrimination. Imports from low-standard countries amount to an additional technology equivalent to importing foreign workers and permitting them to work under these unacceptable conditions. Thus, importing countries should be able to prevent use of this technology through trade restrictions.

While seemingly democratic and equitable, such a procedure is a poor basis for sound policy. It fails a basic criterion for policy making in that it does not appear to examine whether it is likely to achieve an improvement in the initial situation of the workers whose welfare is meant to be of concern.

Acceptance of this proposal would pose considerable difficulties for the trading system (Srinivasan, 1996; Maskus, 1997). Its logic would open the WTO to trade sanctions imposed against any foreign production process that failed to satisfy majority preferences in the sanctioning nation. Countries constrain or prohibit numerous processes for environmental, health, aesthetic, and other reasons. Under Rodrik�s approach, any such regulatory variations could be potentially the subject of trade barriers. Moreover, it is inevitable that sanctions would be applied on a discriminatory basis, with the level of tariffs depending on the severity of standards violations as perceived by the sanctioning countries. This difficulty would erode the fundamental principle of non-discrimination that lies at the core of the WTO.

5. Conclusions and Suggestions for Research

The basic conclusion is that trade remedies should be resisted on the ground that they would be costly in welfare terms, would be indirect instruments that worsen the problems at which they are aimed, and could burden the trading system. Nonetheless, weak core labor standards remain a problem that could be addressed more effectively through instruments that are targeted directly at improving them or moderating their negative outcomes. For example, there are cases in which limited labor standards serve to reduce a country�s economic efficiency and act as a drag on its growth. Policy analysts could advise labor officials in developing countries about such problems and the gains from removing them.

Similarly, efforts could be made to improve the quality of, and access to, primary education for poor children in order to reduce child labor exploitation. Programs to subsidize the purchase of school supplies, provide transportation, and reduce the costs of schooling seem to increase enrollments elastically in poor countries (San Martin, 1996). Further, household decisions to retain young children in the workplace often stem from a self-insurance motive when financial markets are unable to provide short-term finance to impoverished families in the event of falling incomes. This market failure suggests that programs to improve access to short-term finance could reduce child labor.

Regarding discrimination and weak union rights, a stronger multilateral monitoring system operating through the International Labor Organization could publicize egregious cases in which basic worker protection is denied. Exposing such problems to global public scrutiny can induce governments and enterprises to adopt stronger standards, as recent experience in the carpet and clothing industries attests. Further, there is scope for expanding private and public mechanisms to reveal the extent of abuse in working conditions through greater information and use of labeling programs.

A final observation is that additional research in this area is sorely needed to shed light on the conditions of work, their implications for prices and trade, and the effectiveness of various policy instruments in securing efficiency-enhancing changes in standards. The empirical evidence on the relationships between labor standards and trade patterns and volumes is particularly scarce and could be improved by comprehensive research that uses more sophisticated econometric techniques to identify the conditional relationships that are of central interest. It is conceivable, for example, that the weak findings discussed in Section Three stem from an inadequate ability to disaggregate goods by factor intensity and conditions of work across countries or to control for other relevant variables. Available measures of labor standards are questionable indicators of actual worker rights and could be improved.

More fundamentally, in light of our basic finding that weak CLS may be expected to reduce economic efficiency under most circumstances, more research should be devoted to understanding why governments and enterprises choose not to adopt stronger systems of worker protection. If research could reveal the sources of this policy failure, recommended policy approaches would aim at removing those sources. For example, it could be that entry restrictions in product markets maintain monopsony purchasing power in labor markets, indicating that deregulation and competition maintenance would be the appropriate solution.

References

Aggarwal, Mita, 1995. "International Trade, Labor Standards, and Labor Market Conditions: An Evaluation of the Linkages," U.S. International Trade Commission, Working Paper 95-06-C.

Anderson, Kym, 1996. "The Intrusion of Environmental and Labor Standards into Trade Policy," in Will Martin and L. Alan Winters, editors, The Uruguay Round and Developing Countries (Cambridge: Cambridge University Press), 435-462.

Brown, Drusilla, Alan V. Deardorff, and Robert M. Stern, 1996. "International Labor Standards and Trade: A Theoretical Analysis," in Jagdish Bhagwati and Robert Hudec, editors, Fair Trade and Harmonization: Prerequisites for Free Trade? (Cambridge: MIT Press), 227-280.

Cain, Glen C. 1986. "The Economic Analysis of Labor Market Discrimination: A Survey," in Orley Ashenfelter and Richard Layard, editors, Handbook of Labor Economics: Volume 1. (Amsterdam: Elsevier Science Publishers BV).

Corden, W. Max and Ronald Findlay, 1975. "Urban Unemployment, Intersectoral Capital Mobility, and Development Policy," Economica 62, 59-78.

de Wet, Erika, 1995. "Labor Standards in the Globalized Economy: The Inclusion of a Social Clause in the General Agreement on Tariffs and Trade/World Trade Organization," Human Rights Quarterly 17, 443-462.

Harris, John R. and Michael P. Todaro, 1970. "Migration, Unemployment, and Development: A Two-Sector Analysis," American Economic Review 60, 126-142.

Krugman, Paul R., 1994. Peddling Prosperity: Economic Sense and Nonsense in the Age of Diminished Expectations. (New York: Norton).

Maskus, Keith E., 1997. "Should Core Labor Standards Be Imposed through International Trade Policy?" World Bank, Policy Research Working Paper 1817.

Organization for Economic Cooperation and Development, 1996. Trade, Employment, and Labour Standards: A Study of Core Workers� Rights and International Trade. (Paris: OECD).

Rodrik, Dani, 1996. "Labor Standards in International Trade: Do They Matter and What Do We Do About Them?" Overseas Development Council, manuscript.

Rodrik, Dani, 1997. Has Globalization Gone Too Far? (Washington, DC: Institute for International Economics).

Srinivasan, T. N., 1996, "Trade and Human Rights," Yale University, manuscript.

Stern, Robert M., 1996, "Issues of Trade and International Labor Standards in the WTO System," University of Michigan, manuscript.

Woolcock, Stephen, 1995. "The Trade and Labour Standards Debate: Overburdening or Defending the Multilateral System?" Economic and Social Research Council, Working Paper no. 4.

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Contact Information: Martin: The World Bank, 1818 H Street NW, Washington, DC, 20433, [email protected]; Maskus: Department of Economics, Campus Box 256, University of Colorado, Boulder CO 80309-0256, [email protected]

What is the role of collective bargaining between labor and management?

How does collective bargaining influence the determination of wages?

What is monopoly union?

Which of the following collective bargaining issues can be classified as a permissive issue?