With the collapse of the WTO’s Doha round of trade negotiations, the EU and the US continue to expand their network of free trade agreements (FTAs). The most contentious of all has undoubtedly been the US-Colombia FTA, which entered into force last year. But the next main project in the expansion of FTAs is the proposed agreement between the European Union and the United States, the two biggest trading blocks in the world. In his State of the Union speech, Barack Obama said that:
To boost American exports, support American jobs, and level the playing field in the growing markets of Asia, we intend to complete negotiations on a Trans-Pacific Partnership. And tonight, I’m announcing that we will launch talks on a comprehensive Transatlantic Trade and Investment Partnership with the European Union, because trade that is fair and free across the Atlantic supports millions of good-paying American jobs.
The AFL-CIO is skeptical, but not completely dismissive, towards the Trans-Pacific Partnership Agreement. The list of negotiating countries includes low-wage economies like Vietnam, which undoubtedly feeds the fear that American jobs will be lost because of the trade deal. Nowhere on its website does the AFL-CIO mention the proposal to negotiate a trade deal with the EU. My assumption is that trade unions do not perceive a trade deal between two high-wage economies as a risk. As an addition assurance, an interim report that was published in June 2012 stressed that any agreement between the EU and US will include a labour clause. So what’s to worry about?
In their paper entitled “Regional Trade Agreements and domestic labour market regulation,” Christian Häberli, Marion Jansen and José-Antonio Monteiro reach the following conclusion:
The race-to-the-bottom argument is often used in conjunction with the phenomenon of North-South trade, the idea being that trade with countries having lower labour standards puts the high labour standard country under pressure to reduce its own standards.
The findings reported [...] below do not support the idea that weakening of labour market regulations in industrialized countries is driven by trade with low income countries. On the contrary: the only type of [Free Trade Agreement] for which we consistently find highly significant negative coefficients are [Free Trade Agreements] among high income countries. According to the findings reported below, it is competition among countries of a similar level of income that appears to put the highest pressure on labour market regulation in the rich world.
Apparently, American and European trade unions would be well advised to pay more attention to the US-EU trade deal. This could also open up a discussion about the stifling effect of the core labour standards paradigm in FTAs. It is nice that under the FTA, the US and EU would likely be prohibited to employ child labour, but that does not touch upon the ‘core’ of possible implications to US and EU labour markets. Any credible FTA reference to labour standards would need to be based on an analysis of potential effects of the FTA on domestic labour market regulation in the state parties, and not on four issues that happened to be the only ones that the ILO member states could reach consensus on.