GENEVA (ILO News) – Labour provisions * in trade agreements do not lead to a reduction or diversion of trade flows, and ease labour market access, a new study of the International Labour Organization (ILO) finds.

The research shows that a trade agreement which includes labour provisions actually increases the value of trade by 28 per cent on average, similar to 26 per cent for an agreement without labour provisions.

The study also finds that labour provisions support labour market access, particularly for working-age women. Labour provisions impact positively on labour force participation rates, bringing larger proportions of both, male and female working age populations into the labour force.

These are the main findings of the new ILO Growth with Equity report entitled “Assessment of labour provisions in trade and investment arrangements” which analyses the design, implementation and outcomes of labour provisions in trade agreements.

The study produced by the ILO Research Department highlights a significant increase in the number of trade agreements worldwide, showing that in 2014 almost 55 per cent of exports took place within the framework of bi- and plurilateral trade agreements – compared to just 42 per cent in 1995.

“It is increasingly common for new trade agreements to include labour provisions,” said Marva Corley, ILO Senior Economist and lead author of the report.

“As of December 2015, there were 76 trade agreements in place (covering 135 economies) that include labour provisions, nearly half of which were concluded after 2008. Over 80 per cent of agreements that came into force since 2013 contain such provisions,” she added.

Currently a quarter of the value of trade taking place within trade agreements falls under the scope of such provisions which were almost non-existent until the mid-1990s.

Bridging the gap between economic and social outcomes

The report warns that the impact of trade on labour markets shows a mixed picture, especially when it comes to job quality and wage increases. It insists on the fact that income inequality has tended to widen since the 1980’s, which is partly due to trade and investment liberalization.

“The winners from trade are not adequately compensating those who lose in terms of jobs and incomes,” the study observes.

Looking at the nature of labour provisions, the authors say that in the great majority of cases, trade agreements that include labour provisions are based on the commitment not to lower labour standards or stray from labour laws to boost competitiveness. They also aim at ensuring national labour laws are effectively enforced and consistent with already existing labour standards. 72 per cent of trade-related labour provisions make reference to ILO instruments.

The authors also say that trade agreements that contain labour provisions can boost capacity-building, and, in some cases, improvements in working conditions at the sectoral level.

Involving social partners and the role of the ILO

Looking at how labour provisions can be more effective, the ILO research suggests that trade negotiations become less opaque by involving stakeholders, especially the social partners – and not just governments – in the making and implementation of labour provisions in trade agreements.

With respect to labour market outcomes, the report highlights the strong interconnection between legal reforms, capacity-building and monitoring mechanisms – while social dialogue between government and the social partners plays a key role in this process.

Finally, the authors explain that ILO expertise, if properly mobilised, can help in making labour provisions more effective, for example by enhancing coherence between labour provisions and the international system of labour standards.

“The trends identified in this report and the continued widening of income inequalities highlight the need for more research on specific provisions in trade agreements and their effect on labour standards, as well as the role the ILO can play in this respect,” Deborah Greenfield, ILO Deputy Director-General for Policy concluded.

(*): Trade-related labour provisions take into consideration any standard which addresses labour relations or minimum working terms or conditions, mechanisms for monitoring or promoting compliance, and/or a framework for cooperation. This definition groups together a broad range of labour provisions.