EMPLOYMENT Seminar No. 41
The impact of trade union and democracy rights on trade: An industry-level study
EMPLOYMENT Seminar #41. The seminar will present a paper that endeavours to shed light on the impact of freedom of association and collective bargaining rights on international trade by using new indicators in law and in practice developed by the authors, along with the Freedom House democracy indicators.
Background:Prompted by the debates in the 1990s on a “social clause” in international trade agreements, there were a number of empirical (econometric) studies that addressed the impact of freedom of association and collective bargaining (FACB) rights on trade. Such studies basically died out some 15 years ago. This is more the result of a dearth of credible country-level indicators of FACB rights than a lack of interest in the topic, especially in the light of the rapid growth of labour provisions in preferential trade agreements.
The seminar will present a paper that endeavors to shed light on these issues by using new indicators of FACB rights in law and in practice developed by the authors, along with the Freedom House democracy indicators. The FACB indicators are defined according to ILO “fundamental” Conventions No. 87 and No. 98 based on the coding of nine publicly available textual sources, including six sources produced by the ILO and national legislation. The paper assesses the impact of FACB rights for workers and democracy on goods exports at both the aggregate level and broken down by 17 industries in a bilateral gravity trade model for a large sample of countries. In baseline regressions, the paper finds that stronger FACB rights and democracy are associated lower goods exports at the aggregate level. These results are broadly similar for FACB rights in law and in practice and civil liberties and political rights aspects of democracy. These results are sample-sensitive, however, and are overturned with a truncated sample excluding observations with the largest trade values, a difference that is not attributable to the impact of the largest exporting countries. At the industry level, the paper finds that stronger FACB rights are associated lower exports of such labour-intensive, price-sensitive goods as textiles, apparel and footwear, but also with lower exports of several more capital-intensive industries, in both full and truncated samples. The paper considers several policy options that might be able to overcome “race to the bottom” scenarios for such industries.
Objective of the seminar:The purpose of the seminar is to present an overview of the debates on trade and labour standards particularly with respect to FACB rights; to present the method for the indicators of FACB rights well as evidence on the growth of labour provisions in preferential trade agreements; to present main methods and findings of an industry-level econometric study; and to discuss possible policy options to address concerns raised by these findings.
Participants:Chair: Sangheon Lee (Director, ILO/EMPLOYMENT)
Presentations: David Kucera (ILO, Employment Policy Department); Dora Sari (ILO, Statistics Department)