Working Paper: CEPR ID: DP1440
Authors: Kym Anderson
Abstract: Social policies are likely to have an ever-more prominent role in trade policy discussions in the years ahead for the new 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, and even immoral to trade with countries adopting much lower standards than theirs. 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; GATT; WTO; Trade Policy
JEL Codes: F13; F15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Decline in traditional barriers to trade (F69) | Increased importance of social policy differences (J18) |
| Increased importance of social policy differences (J18) | Influence on trade policy decisions (F13) |
| Trade policy measures (F13) | Encourage countries to adopt higher environmental or labour standards (J80) |
| Trade policy measures (F13) | Serve as a form of protectionism (F52) |
| Direct effects of integrating social policies into trade discussions (F68) | Minimal for developing countries (O10) |
| Indirect consequences of integrating social policies into trade discussions (F68) | Erosion of the rules-based multilateral trading system (F13) |
| Potential for trade disputes (F19) | Significant negative implications for global trade dynamics (F69) |