Question

Does having low labor standards (relative to other countries) enable a country to export more than it might otherwise? Explain your reasoning.

Answer 1

There is no evidence that low labor rates have significant impact on trade flows in themselves. Several studies have failed to link labor standards interventions to foreign trade flows or direct investment flows. The OECD has concluded that core labor standards are not instrumental in shaping trade efficiency. The view that low-standard countries will benefit from gains in export market shares to the detriment of high-standard countries seems to lack strong support

Free trade is meant to remove unfair barriers to global trade, and to raise the economy in both developed and developing nations. But free trade can and has had many negative effects, notably deplorable working conditions, job losses, economic damage to some countries, and global environmental damage. Yet the World Trade Organization, much to the detriment of some national economies and millions of workers, continues to promote open and unfettered trade.