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Challenging the Value of Global Labor StandardsAugust, 2002 ECONOMISTS, POLITICIANS, AND ACTIVISTS have long debated whether countries that do not adopt international labor standards gain an advantage in trade and investment at the expense of those who do. This issue is at the heart of the protests at recent meetings of the World Trade Organization (WTO). The debaters have strong opinions but little evidence to support their views, says Robert Flanagan, the Konosuke Matsushita Professor of International Labor Economics and Policy Analysis. Flanagan recently tested the arguments through a comparative study of about 100 countries at various stages of development from 1980 to 1999. He looked at how these nations adopted standards developed by the International Labor Organization (ILO), such as abolishing forced labor or granting workers the right to bargain collectively. One view, held by many politicians in industrialized countries, is hat nations face competitive pressures to have the lowest labor standards possible in order to increase their share of exports and investment÷known as "the race to the bottom." This view assumes that when a government ratifies one or more ILO standards, labor costs rise. On the other hand, advocates of free trade argue that labor costs and conditions are determined by other factors, and that standards created by the ILO, a United Nations agency, only reflect the working conditions that already exist. Some advocates of the race-to-the-bottom position have argued that countries that refuse to adopt the standards should be denied the lower tariffs established in WTO negotiations. Many politicians in developing countries oppose linking trade negotiations to labor standards, Flanagan says, because they see lower labor costs as their country's comparative advantage. Flanagan compared labor conditions in the selected countries to those in the same nations five years earlier. "I did not find that earlier ratification influences later labor conditions," he said. "On the other hand, when I reversed the process, I did find that labor conditions, say, in 1975, influenced the number of ratifications a country had made five years later. By time-ordering the data, I've straightened out the causality." Flanagan's research showed that economic development and an open trade policy÷not ratifying ILO standards÷improve labor conditions and wages. In other words, domestic policies can raise labor productivity, which, in turn, creates higher wages. Take, for instance, the lowest and highest wage countries÷Kenya and the United States. "In my data, the U.S. wage was 183 times higher than the wage in Kenya. Kenya has ratified more labor standards than the U.S., but the productivity difference between the countries is very similar to the wage difference, which implies that the best way for a country to raise wages is to improve productivity," he said. Flanagan also found that countries suffer negligible penalties for failing to ratify ILO conventions, not surprising since there are only weak mechanisms for enforcing the standards. The United States, for example, is one of four countries÷along with China, Armenia, and Myanmar÷that ratified only two of the eight conventions devoted to fundamental human rights. This is despite the existence of strong domestic laws in that category in the United States. When you look at the list of countries that have ratified all the standards, about a third of those studied, Flanagan said, "you realize there has to be something fishy in the race-to-the-bottom argument, because these are often fairly undeveloped countries with poor labor conditions," such as Botswana and Senegal. Based on his research, Flanagan said, it would be best if the WTO negotiations were conducted as they always have been: focused primarily on trade policy between countries, while labor standards issues are left to the ILO or nongovernmental organizations. ÷DEBORAH GARDINER
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Challenging the Value of Global Labor Standards 
