Question

Labor Standards and Trade – should international trade policy also include an attempt to impose (US or European) labor standards on other, poorer countries (for example, concerning age, working conditions, number of hours worked per day, etc)? If so, whose standards should be used? Should there be any restrictions on trade in goods produced by prison, or slave, labor? What are the economic implications of doing so?

Answer 1

Yes, it is indeed true that there is a strict need to impose labor standards on many poor countries. Although, free trade and globalization in the past few decades has rapidly connected the developed and developing world, with goods, labor and capital moving freely, it has its fair share of downsides. One of the most important being the exploitation of workers in poor countries by the big multinational firms. Since labor is usually abundant in these poor countries and their governments do not have the capacity to restrict the big firms, the workers have minimal bargaining power and have to work at minimum wages in and in extreme work conditions. European labor laws are much more favorable for the workers and looking at the present needs, they should be preferred over US laws. Otherwise,international organizations like WTO need to stand up and make a set minimally acceptable standards and conditions.

There should definitely be restrictions on the trade of products produced by any form of forced labor -prison or slave. Failure to do so will set a wrong precedent and take the world back a century ago where the concept of human rights did not exist. No growth can be considered good if its coming on the back of trading such products. The economic impact can be negative in the short run as countries lose out on some trade surplus but it can improve the long term well being of employees.