Why Countries Use Trade Deals To Avoid Weakening Labor Laws

Insights from the Field

Labor rights

Preferential trade

Race-to-bottom

Structural equivalence

Globalization

International Relations

ISQ

1 Other

Dataverse

Thinking Outside the Box: Globalization, Labor Rights, and the Making of Preferential Trade Agreements was authored by Zhiyuan Wang. It was published by Oxford in ISQ in 2020.

States often face pressure from globalization to lower legal labor protections, yet rarely engage in a politically costly race to the bottom. A different path is proposed: concluding preferential trade agreements (PTAs) that deliver substantial economic gains while avoiding the domestic costs of rolling back labor law.

🧭 Theory and Expectations

This research argues that, under policy pressure to reduce legal labor protection, pairs of states are more likely to:

Form a PTA as a less politically costly alternative to legal deregulation.
Include stronger labor provisions inside the PTA itself.
Delay urgency to sign a PTA when the ability to diminish practical (enforced) labor protection reduces the immediate need for a trade-based solution.

📊 How policy pressure was measured and tested

A new global labor rights dataset was used to capture variation in states' legal labor protections.
Structural equivalence techniques were applied to that dataset to identify the policy pressure exerted by competitors (i.e., which states are positioned to create incentives to lower legal labor protection).
Dyadic PTA formation and the content of PTAs (presence and strength of labor provisions) were analyzed against this measure of policy pressure.

🔎 Key findings

Evidence shows pairs of states under pressure to lower legal labor protection are more likely to form PTAs.
Those PTAs are, on average, more likely to include strong labor provisions when formed under such pressure.
When states can reduce practical enforcement of labor protections, the urgency to conclude a PTA diminishes, consistent with the argument that practical weakening can substitute for a trade-based policy response.
Results are robust across specifications using the structural equivalence pressure measure and the new labor-rights data.

💡 Why it matters

Preferential trade agreements can function as politically feasible alternatives to legal deregulation under globalization. This reframes PTAs not only as economic instruments but also as strategic tools that can preserve or even strengthen labor protections when legal rollback would be too costly domestically.