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Labor Summary

The question of whether or not the WTO should establish a multilateral agreement on labor standards is one of the most controversial issues facing the WTO today. Labor organizations all over the world argue that WTO rules permit the exploitation of labor, the degradation of the environment, and the undermining of national regulations designed to protect the health and safety of citizens. [1] Within the WTO, the debate revolves around questions of whether the WTO is the appropriate institution for enforcing labor standards, and what impact such standards would have on the comparative advantage of countries that depend on labor-intensive industries. The 1996 Ministerial Declaration stated that the WTO would work with the International Labor Organization (ILO) to establish and enforce core labor standards to be applied to WTO member nations. But beyond that, the WTO has left labor off the negotiating agenda altogether, arguing the labor standards go beyond its scope.[2]

ILO Core Standards

The ILO was the first to establish a set of four labor standards that are applicable universally. Freedom from forced labor and freedom from discrimination are enforced on a global level, however, freedom of association and collective bargaining, and prevention of child labor are far more controversial. Developing countries argue that some forms of child labor are essential to the survival of extremely poor families that rely on the income generated by every family member. These countries fear that permitting the creation of unions will cause multinational companies who are interested in investing in countries with low labor costs and low labor activism to disinvest. [3] Economists are still debating what the net effect of legalizing unions and outlawing child labor will have on the growth of these countries.[4] While most of the 177 ILO member countries enforce these core standards, many of the developing countries are wary of making a legal commitment to upholding labor standards through the WTO.[5]

Enforcing Labor Standards in the WTO

The US, the EU, and Canada contend that the only way to ensure that countries uphold labor standards is with the threat of economic sanctions by the WTO. [6] They also believe that incorporating labor issues into the WTO broadens support for and reduce criticism of the WTO. [7] Yet there is currently no framework for enforcing labor standards in the WTO: the GATT does not mention violation of core labor rights as a basis upon which countries may raise barriers to trade against an offending country. However, some countries have cited Article XX of the GATT in defense of sanctions, arguing that unsatisfactory labor standards threaten "public morals" and "human life and health." They have also cited Article XXIII on dumping, asserting that inferior labor standards constitute "social dumping."[8]

Very few regional trade agreements link trade and labor issues. At present, only the North American Agreement on Labor Cooperation (NAALC), a side agreement to the North American Free Trade Agreement (NAFTA) and the U.S.-Jordan Free Trade Agreement incorporate labor provisions into the related trade agreements.[9] Thus, there is little opportunity to explore whether labor standards can be enforced through trade sanctions without overly disrupting global free trade.

Standards vs. Globalization

Those who oppose enforcing labor standards believe that true improvements in labor conditions will only come about with the assistance of economic growth from globalization.[10] In the case of the controversial core labor standards, many developing countries argue that such standards are merely another form of protectionism on the part of the developed world. Given that most developing countries' exports are labor-intensive, they believe that restrictions on trade due to labor standards would further restrict their access to the developed world's markets.[11]

The US has been pushing hard for the incorporation of labor standards into the WTO. However, developing countries have successfully thwarted all efforts to create a working party on trade and labor standards.[12] As a result, labor standards were not included in the Doha negotiations and it seems unlikely that a multilateral agreement on labor standards will be achieved through the WTO in the near future. Some see this as a victory for developing countries - by allowing them to benefit from trade - while others see it as a defeat for their citizens, who will continue to work in very poor conditions.

The labor issue presents an interesting role reversal in the WTO, whereby NGOs and civil society organizations are supportive of the US's pro-labor standard position, and developing countries succeed in tailoring the agenda to fit their interests. Strong domestic labor lobbies in developed countries, as well as a growing concern amongst multinational corporations that consumers demand better labor standards both create an overlap in the positions of developed nations and NGOs.[13] However, despite the negotiating strength of the US, the developing countries are highly unified against adding labor standards to the agenda and acting with one voice, they have managed to keep the issue out of the WTO.

Last updated April 2004.


[1] AFL-CIO Executive Council Statement, 8/4/99.
[2] http://www.wto.org
[3] http://www.iie.com/publications/wp/2003/03-7.pdf Elliot, Kimberly Ann. "Labor Standards and the Free Trade Area of the Americas." International Institute for Economics, Policy Paper. August 2003.
[4] Elliot, Kimberly Ann. "Labor Standards and the Free Trade Area of the Americas."
[5] http://www.fpif.org/briefs/vol5/v5n15wtolabor.html Brewster, Grace. "WTO Trade and Labor Standards." Foreign Policy in Focus policy brief, Vol. 5 No. 15, April 2000.
[6] Gary Burtless. "Workers' Rights: Labor standards and global trade." Brookings Institute, Fall 2001 Vol.19 No.4.
[7] James V. Grimaldi. "Clinton Offers Critics a Seat at WTO Event." Seattle Times, October 14, 1999.
[8] See http://www.wto.org/english/docs_e/legal_e/legal_e.htm
[9] http://www.iie.com/publications/wp/2003/03-7.pdf Elliot, Kimberly Ann. "Labor Standards and the Free Trade Area of the Americas." International Institute for Economics, Policy Paper. August 2003.
[10] Gary Burtless. "Workers' Rights: Labor standards and global trade." Brookings Institute, Fall 2001 Vol.19 No.4.
[11] Robert M. Stern and Katherine Terrell, "Labor standards and the World Trade Organization: A Position Paper." University of Michigan, August 2003.
[12] Martin Khor. "The WTO and the Battle Over Labor Standards." Third World Network, January 13, 1997.
[13] Bernstein, Aaron. "Do-It-Yourself Labor Standards: while the WTO bickers, companies are writing the rules." Businessweek Magazine Online, November 19