220.127.116.11 ‘Unfair Competition’ from Developing Countries
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“Of all the debates surrounding globalization, one of the most contentious involves trade and workers’ rights”, according to an article by Gary Burtless: Workers’ Rights: Labor standards and global trade. He discusses trade agreements which enforce workers’ rights, for both moral and economic reasons:
“By insisting on tough labor standards, the wealthy democracies could lay claim to the moral high ground. But they might have to forgo a trade pact that could help their own producers and consumers while boosting the incomes and political power of impoverished Chinese workers.”
“A trading partner that fails to enforce basic protections for its workers can gain an unfair trade advantage, boosting its market competitiveness against countries with stronger labor safeguards.”
There is widespread concern over slavery, forced labour, child labour, workplace safety, working conditions, wages and damage to the environment. Wealthier countries can demand standards for any or all of these when trading with developing countries.
Moral questions about human rights are a matter for the next chapter (4.2.4), but the perception that countries with lower costs are in some way ‘unfair’ is based on a misunderstanding of economics. Ricardo’s theory of Comparative Advantage, as described previously (18.104.22.168), shows that free trade is of mutual advantage to both high-wage and low-wage economies – increasing economic growth in both.
The countries using child labour have a temporary advantage, in lower costs, which fits into Ricardo’s theory in the same way as any other reason for low wages. The prosperity of those countries would eventually be damaged, though, because their workforce would have less education and would be unable to compete with the increasing productivity of developed countries. And there might be no better economic option for the families involved.
The economic argument is that the people concerned are choosing work rather than starvation, and that developed countries benefit from cheaper goods. Rich consumers might be persuaded to pay higher prices for ‘ethically-produced’ goods, but that is a moral issue for the next chapter (22.214.171.124).
Damage to the environment is partly a local issue, in adversely affecting the workers, but when it affects other countries it is not just a trade problem. The need to protect the global environment is a different economic matter, as discussed later in this chapter (3.5.7), a moral issue (126.96.36.199) and a political challenge (6.7.5).