Working Paper: CEPR ID: DP1158
Authors: Kym Anderson
Abstract: While environmental and labour issues are not new to the GATT, nor to other trade policy fora, they are likely to have a more prominent role in trade policy discussions in the years ahead for the newly formed World Trade Organization (WTO). Many developing countries perceive the entwining of these social issues with trade policy as a threat to both their sovereignty and their economies, while significant groups in advanced economies consider it unfair, ecologically unsound, even immoral, to trade with countries adopting much lower standards than their own. This paper examines why these issues are becoming more prominent, whether the WTO is an appropriate forum to discuss them, and how they affect developing and other economies. It concludes that: (a) the direct effect on developing economies is likely to be small and for some may even be positive through improved terms of trade and/or compensatory transfer payments; but (b) there is an important indirect negative effect on them and other economies, namely the potential erosion of the rules-based multilateral trading system that would result from an over-use of trade measures to pursue environmental or labour market objectives.
Keywords: Environmental Standards; Labour Standards; Trade Policy; GATT
JEL Codes: F1; J3; K33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Reduction of trade barriers (F13) | Increased focus on domestic policies (F59) |
| Perception of threat (F52) | Response to trade policies (F13) |
| Higher standards (L15) | Direct effects on developing economies (F69) |
| Erosion of multilateral trading system (F13) | Significant negative consequences (I12) |