Comparative Advantage and Labor Protections in Free Trade Agreements: Making Labor Protections in Trade Agreements Practical and Effective


The tension between competitiveness in international trade and the improvement of living standards has become a central controversy in negotiating trade agreements. Under pressure from the labor rights movement over the course of the last twenty-five years, the United States has regularly advocated for the inclusion of labor standards in trade relationships. Generally, governments in developing countries resist the incorporation of labor protections in trade agreements because of a belief that labor protections diminish a nation’s competitiveness in the international marketplace. Labor rights advocates, particularly in the United States, have fought for the inclusion of labor rights in trade agreements as a means of lifting living standards in developing countries, and preserving them in developed countries, to avoid and international “race to the bottom” where countries try to out-compete each other by keeping labor costs as low as possible.

This article argues that trade agreements should include labor provisions that provide effective protection for core labor rights. Such protection should ensure that countries have domestic laws protecting core labor rights and that those countries enforce those laws. Further, the labor standards provisions must include (1) a compelling incentive program to reward developing nations that improve labor conditions and comply with labor standards and (2) an effective enforcement mechanism to penalize countries that violate the labor provisions.

Section one of this article provides a short summary of the history of labor standards in United States trade policy and some of the debates surrounding the movement to include labor protections in the North American Free Trade Agreement (NAFTA) and the Central American-Dominican Republic Free Trade Agreement (CAFTA-DR, referred to in this article simply as “CAFTA”). Section two provides an overview of traditional economic theory supporting free trade and several arguments that call that theory into question. Finally, section three offers a defense regulating trade and makes specific policy recommendations regarding the inclusion of labor standards provisions in future trade agreements.


Antitrust and Trade Regulation | International Law | International Trade Law | Labor and Employment Law

Date of this Version

February 2006