Question

Why labor standards vary across countries? Compare at least two countries’ labor standards, how they differ, and what the implications on international trade are.

Answer 1

This comparison of labor laws has shown many differences across countries. Thus, despite the pressures to adopt similar protections that may derive from mimetic isomorphism and generally accepted principles of fairness do not account for all the provisions of labor laws in different countries.

For example, while all 3 countries do provide that certain specific days should be recognized as holidays, the specifics vary greatly across countries. Thus, it can be said that the designation of special days as holidays remains an example of the equality-based principle of fairness, being the same for all employees; but the standard by which equality can be perceived applies within countries, not across countries.

Also, when it comes to paid vacations, all 3 countries allow employees to take time off from work with pay. However, only China and Russia make this a general legal requirement. Although it could be argued that the equity-based principle of fairness is the primary driver of labor law provisions for vacations, because those who have worked more years for their employer earn more vacation in China. However, in Russia all employees receive 28 days of vacation. This seems more like an equality-based example of fairness since everybody is treated equally.

However, an alternative rationale for providing paid vacations is the need-based rationale for fairness. The needs-based rationale would posit that employees need some time off from work, i.e., they can’t work all year around. It would seem that employees in different country all have the same need to take some time off from work. Therefore, while the needs-based principle of fairness does support why labor laws would require paid vacations, only China and Russia have made this a nationally consistent requirement. In addition, the needs-based rationale does not explain why employees in China earn more vacation by working more years, but in Russia everyone gets at least 28 days. Do employees in Russia need more vacation, or is it more likely that the law makers in their country have decided as a matter of policy to provide these for workers? More in-depth research could further explore questions like this.

Similarly, both China and Russia have a requirement that employment contracts be in writing, whereas the US does not. This suggests that China and Russia may be more likely to use need and equality motivations as the rationale for their requirements for written contracts.

By contrast, there are significant differences across countries in the federal laws regarding non-compete agreements. While China permits the enforceability of non-compete agreements, Russia generally does not, and the US does not have any federal law that requires or prohibits them. While equity may be the basis for the enforceability of non-compete agreements in China, it could be argued that Russia prefers to take a more needs-based view by not allowing them.
The following five points will highlight the five harmful effects of International Trade. They are: 1. Dual Economies 2. Not Much Beneficial for Poor Countries 3. Limited Possibility of Gain 4. Adverse Effect on ‘Demonstration Effect’ and 5. Secular Deterioration in the Terms of Trade.
1. Dual Economies:
International trade has resulted in creating ‘dual economies’ in underdeveloped countries as a result of which the export sector became an island of development while the rest of the economy remained backward.

The effects of foreign factor movements have been that of creating a highly unbalanced structure of production of these countries. No doubt, the opening up of the export markets gave a fillip to their export sector which led to the development of this sector while ignoring other sectors of the economy.
2. Not Much Beneficial for Poor Countries:
The foreign trade has also not been entirely beneficial to poor countries because of the adverse effects of foreign investments on their economy. It has been maintained that the inflow of foreign capital and developed a country’s natural resources only for export purposes, to the neglect of production in the domestic sector.In these countries the export sector remains an island of development surrounded by a backward low-productivity sector. Thus, the inflow of foreign capital in underdeveloped countries has not resulted either in the development of the domestic sector or of the people in these countries. Despite huge foreign investments, the people have remained backward in their countries.

Prof. H.W. Singer is also of the opinion that the benefits of technological progress have gone disproportionately to the advanced countries. According to him, “Benefits of foreign trade and investment have not been equally shared between the two groups of countries.
  
3. Limited Possibility of Gain:
According to Prof. Nurkse the possibility of gain from foreign trade to underdeveloped countries is restricted or limited. It is simply due to the reason that underdeveloped countries export mainly primary goods
4. Adverse Effect on ‘Demonstration Effect’:
Another harmful effect is that the international operation of the ‘demonstration effect’ has been a handicap for the poor countries. It has been responsible for reducing the capacity for capital formation. The desire for luxury, show-off for higher standard of living and patterns of consumption of advanced countries has been an important factor responsible for low level of domestic savings in underdeveloped countries.

Higher income groups in these countries are trying to adopt the consumption standards of advanced countries which have pushed up their propensity to consume and thereby limited capital accumulation and economic growth. This leads to corruption and black marketing. Thus, these evils have adverse effect on the economy.
5. Secular Deterioration in the Terms of Trade:
Another important criticism of foreign trade has been that it has resulted in an international transfer of income from the poor to the rich countries through a secular deterioration in the commodity terms of trade of the poor countries. In the opinion of Prof. Raul Prebisch, there has been a secular deterioration in the terms of trade of underdeveloped countries.