Labor and Trade

Over the past decades trade and financial flows have played an increasingly important role in the world economy, contributing significantly to economic growth both at the global level and within individual countries. However, trade and financial openness increase interdependence and therefore expose countries, workers and businesses to external shocks and volatility with possibly severe consequences for employment, as illustrated during the recent global financial and economic crisis.

The effect of globalization during and after the crisis highlights a set of challenges: not all households within a country will benefit equally from globalization; not all companies will manage to become part of international supply chains; and not all countries will manage to integrate into the world economy in the same way and generate new employment opportunities from openness. The design and implementation of solutions to these challenges deserve our continuous attention.

Trade and foreign investment have important effects on employment and labor market conditions. Fostering fair working conditions and respecting the right of workers is crucial so that workers benefit from globalization. The challenge is to better understand how trade and finance policy options affect decent work opportunities and to assist policy-makers at global and national levels to design policy solutions that optimize the positive effects of trade and finance on employment.

The ILO’s Global Jobs Pact (2009) emphasizes the need for trade and financial flows to take place within a well-regulated global framework. Good crisis management also requires strong social dialogue between employers, workers and governments. The ILO is working to increase knowledge and understanding of the social and economic impacts of globalization to assist in the formulation of effective national employment strategies.

The US Promotes Labor Standards in Trade Agreements 

The United States has over time built a framework for promoting labor rights and improved livelihoods through trade preference programs and free trade agreements (FTAs). Since 1984, the US laws governing trade preference programs have required that developing countries take steps to ensure respect for internationally recognized workers’ rights. The labor chapters in FTAs with the US incorporate references to the countries’ obligations as members of the ILO and commitments under the 1998 ILO Declaration on Fundamental Principles and Rights at Work and its Follow-Up.

On May 11, 2011, Sandra Polaski, at the time the Deputy Undersecretary for International Affairs at the US Department of Labor, and current ILO Deputy Director for Policy, testified before the US Senate Finance Committee stating, in part:

“President Obama is committed to pursuing an ambitious trade agenda that will help grow our economy and support good jobs for U.S. workers by opening new markets. An essential component of this agenda is ensuring that our trading partners respect fundamental labor rights. This is consistent with our core values as a nation and important so that U.S. businesses and workers compete on a level playing field”.