Thinking outside the Box: Globalization, Labor Rights, and the Making of Preferential Trade Agreements

Abstract

Abstract States can seemingly defy the dictates of globalization. In practice, although being pressured by their competitors, states rarely engage in the race to the bottom by downgrading labor rights laws that are politically costly to pursue. I argue that states’ resistance is made possible by adopting more viable policy alternatives, i.e., concluding preferential trade agreements (PTAs). PTAs can generate considerable economic gains in a less politically costly way than does reducing legal labor protection. As a result, it is expected that a pair of states is more likely to form a PTA in the face of policy pressure to lower legal labor protection. I also argue that facing such pressure, these states are more likely to include strong labor provisions in PTAs. Finally, in the face of the policy pressure, states may feel that signing a PTA is a bit less urgent when they are able to diminish practical labor protection. Applying structural equivalence technique to a new global labor rights dataset to capture the policy pressure to lower legal labor protection, I find robust evidence in support of these conjectures.