Abstract
Free trade generates macroeconomic gains but also creates winners and losers. Historically, to reconcile this tension, governments compensated globalization losers with social spending in exchange for support for free trade, known as the embedded liberalism compromise. In the neoliberal era, what other policies can governments pursue to strengthen support for globalization? We assess the effect of social standards in preferential trade agreements (PTAs) on individual preferences for free trade. We analyze data from an original survey experiment and find that respondents in advanced industrialized countries have greater support for free trade when PTAs include social standards. Differences do exist in how these social standards are perceived: while we do find evidence of an embedded liberalism compromise recast, fair trade norms have the most salience. An external validity check using the PEW global attitudes survey confirms the hypothesis. Our analysis has serious implications for the legitimacy of the global trading system suffering from neo-mercantilist creep.
Similar content being viewed by others
Notes
The race to the bottom logic dictates that countries loosen taxes, regulations, and social protections to be competitive under conditions of mobile capital. This race to the bottom is taken for granted by the public, organized businesses, and governments, despite mixed evidence of it actually happening (Drezner 2000; Mosley 2005; Rudra 2008).
Social standards are rarely included in South-South PTAs and remain non-enforceable when they are. Conversely, the fear of social dislocation is lower in North-North agreements which are centered on regulatory coordination and easing intra-industry trade. While North-North agreements also include social standards, they rarely generate as much contestation among constituents (e.g. the US-Australia FTA). The recent example of the Transatlantic Trade and Investment Partnership (TTIP) (increasingly unlikely to materialize) is a unique case. TTIP controversies over labor and environmental issues largely reflect public concerns over the degree of potential regulatory convergence as both the EU and the US already include (and implement) strict social standards in their respective PTAs and in their local policy arenas.
See Milewicz et al. (2016) for various reasons behind the inclusion of non-trade issues in PTAs.
Legal mechanisms of dispute resolution are similar across EU and US PTAs, although the enforcement method differs. In EU agreements, for example, expert panel rulings (rendered in cases of non-compliance) are implemented through inter-state dialogue and meetings.
PTAs with social standards increase foreign direct investment in green and high-skilled labor industries while decreasing it in polluting and low-skilled labor ones (Lechner 2018).
We use OECD membership to distinguish the Global North and South.
1500 US organizations signed a letter opposing the TPP because it did not provide sufficient protection for labor and the environment (Citizens Trade Campaign 2016).
The 2007 US Bipartisan Trade Deal mandates the inclusion of enforceable labor and environmental provisions in all US PTAs and is the direct result of lobbying by American labor and environmentalists (Postnikov 2019).
Low-skilled workers working in the service sector also have an incentive to level the playing field. Rosenblum et al. (2000) highlight that the service sector is a significant component of overall US emissions, waste, and energy consumption (in part because it is such a large part of the US economy). Transportation, electricity, and sanitation pollutants are central to the service industry.
As previously discussed, North-South PTAs induce change in the Southern partner, the Northern state already meets (and typically exceeds) the social standard requirements.
MTurk is an online platform that recruits and compensates individuals for performing tasks.
We excluded defunct agreements. See Milewicz et al. (2016) for another dataset on PTAs.
Trade agreement texts are available on: bilaterals.org; trade.ec.europe.eu; ustr.gov.
All supplementary material (Appendices A-E) is available at the Review of International Organizations’ webpage.
MTurk is widely used in political science (Berinsky et al. 2012), yet we remain cautious as it does not have representative samples of national populations.
We consider members of the OECD to be developed countries. Despite an overall diversity of countries listed, respondents from the United States dominate the survey sample. Results are robust to excluding the United States as well as estimating our models on respondents from the United States only (see Appendix A.1 and A.2).
This framing is conservative due to the inherent skepticism about social standards.
We use the most recent data available (year of 2010) for industrial employment for the United States to reduce missing observations.
Mexico and Turkey are OECD members, but not high-income countries. Bahrain, Croatia, Cyprus, Kuwait, Lithuania, Saudi Arabia, Singapore, Trinidad and Tobago, and the United Arab Emirates are high-income countries, but not OECD members.
PTAs with labor provisions are 0.8 correlated with PTAs with environmental provisions.
We attribute this result in the developed world to limited variation in access to water.
Results are robust to controlling for national sentiment: “Are you satisfied or dissatisfied with the way things are going in our country today.”
Operationalizing the winners and losers using income (whereby the losers are below the average income in the sample) is also robust in showing support for the positive relationship between social standards and free trade among both winners and losers (results available upon request).
In addition, low income people have been shown to have stronger perceptions of long-term environmental risks as they are potentially more threatened by climate change which means even greater material insecurity (Lo 2014).
The definition of fair trade by the World Trade Organization and various fair trade organizations also emphasizes the working conditions of farmers, poverty, and ethical business practices.
Developing countries oppose linking trade with labor and environmental standards at the multilateral level (Kolben 2006). Yet, developing countries do increasingly sign PTAs with developed states containing such clauses. This is because bilaterally developed countries have larger bargaining power and developing countries need to compete for access to their lucrative markets (Chan and Ross 2003).
Our findings are robust to a sample of respondents from India only or a sample excluding respondents from India, controlling for union membership, political ideology, and government spending and excluding individuals with prior awareness of social standards.
The PEW developing country sample and the descriptive statistics on each country’s North-South PTAs are listed in Appendix E.10.
References
Aaronson, S. A., & Zimmerman, J. M. (2007). Trade imbalance: The struggle to weigh human rights concerns in trade policymaking. New York: Cambridge University Press.
Abdelal, R., & Ruggie, J. G. (2009). The Principles of Embedded Liberalism: Social Legitimacy and Global Capitalism. In D. Moss & J. Cisternino (Eds.), New Perspectives on Regulation. Cambridge: Tobin Project.
Abrams, Rachel and Maher Sattar. (2017). “Protests in Bangladesh Shake a Global Workshop for Apparel.” January 22, 2017. New York Times. Accessed April 2, 2017 at: https://www.nytimes.com/2017/01/22/business/bangladesh-protest-apparel-clothing.html
Aklin, M. (2015). Re-exploring the trade and environment Nexus through the diffusion of pollution. Environmental and Resource Economics, 64, 663–682. https://doi.org/10.1007/s10640-015-9893-1.
Baccini, L., & Urpelainen, J. (2014). Cutting the Gordian knot of economic reform: When and how international institutions help. Oxford: Oxford University Press.
Bailey, M. (2001). Quiet influence: The representation of diffuse interests on trade policy, 1983–94. Legislative Studies Quarterly, 26(1), 45–80.
Bastiaens, I., & Postnikov, E. (2017). Greening up: The effects of environmental standards in EU and US trade agreements. Environmental Politics., 26(5), 847–869.
Berinsky, A. J., Huber, G. A., & Lenz, G. S. (2012). Evaluating online labor Markets for Experimental Research: Amazon.com’s mechanical Turk. Political Analysis, 20(3), 351–368.
Bernauer, T., & Nguyen, Q. (2015). Free trade and/or environmental protection. Global Environmental Politics, 15(4), 105–129.
Bhagwati, J. (1995). Trade liberalization and ‘fair trade’ demands: Addressing the environmental and labour standards issues. The World Economy., 18(6), 745–759.
Bullard, Robert. (1999). “Leveling the Playing Field through Environmental Justice.” 23 Vt. L. Rev. 453.
Cameron, D. R. (1978). The expansion of the public economy: A comparative analysis. American Political Science Review., 72(4), 1243–1261.
Chan, A., & Ross, R. J. S. (2003). Racing to the bottom: International trade without a social clause. Third World Quarterly, 24(6), 1011–1028.
Charnovitz, S. (1992). Environmental and labour standards in terade. The World Economy., 15(3), 335–356.
Citizens Trade Campaign. (2016). Over 1500 Organizations Urge Opposition to the TPP. Available at: www.citizenstrade.org/ctc/wp-content/uploads/2016/01/TPPOppositionLetter_010716.pdf. Accessed 19 Apr 2016
Dreher, A., Sturm, J.-E., & Ursprung, H. W. (2008). The impact of globalization on the composition of government expenditures: Evidence from panel data. Public Choice, 134(3/4), 263–292.
Drezner, D. W. (2000). Bottom Feeders. Foreign Policy, 121, 64–70.
Dür, A., Baccini, L., & Elsig, M. (2014). The Design of International Trade Agreements: Introducing a new dataset. The Review of International Organizations., 9(3), 353–375.
Eckhardt, J., & Arlo, P. (2016). “The Politics of Global Value Chains: Import-Dependent Firms and EU-Asia Trade Agreements.” Journal of European Public Policy. 23(10), 1543–1562.
Ehrlich, S. D. (2010). The fair trade challenge to embedded liberalism. International Studies Quarterly., 54(4), 1013–1033.
Ehrlich, S. D. (2018). The politics of fair trade: Moving beyond free trade and protection. New York: Oxford University Press.
Ehrlich, S. D., & Hearn, E. (2014). Does compensating the losers increase support for trade? An experimental test of the embedded liberalism compromise thesis. Foreign Policy Analysis., 10(2), 149–164.
Fox, Ben. (2016). “Peru president warns of threats to free trade.” The Salt Lake Tribune. Accessed April 2, 2017 at: http://www.sltrib.com/home/4605899-155/peru-president-warns-of-threats-to
FTA Resistance in Columbia. (2007). Accessed August 7, 2018 at http://www.bilaterals.org/?fta-resistance-in-colombia.
Gabel. (1998). Interests and integration: Market liberalization, public opinion, and European Union. Ann Arbor: University of Michigan Press.
Glatzer, M., & Rueschemeyer, D. (Eds.). (2005). Globalization and the future of welfare states. Pittsburgh: Pittsburgh University Press.
Gregson, N., Crang, M., Botticello, J., Calestani, M., & Krzywoszynska, A. (2016). Doing the ‘dirty work’ of the green economy: Resource recovery and migrant labour in the EU. European Urban and Regional Studies., 23(4), 541–555.
Gresser, E. (2010). Labor and environment in trade since NAFTA. Activists have achieved less, and more, than they realize. Wake Forest Law Review, 45(2), 491–525.
Guisinger, A. (2009). Determining trade policy: Do voters hold politicians accountable? International Organization, 63, 533–557.
Hafner-Burton, E. M. (2009). Forced to be good: Why trade agreements boost human rights. Ithaca: Cornell University Press.
Hafner-Burton, Emilie M., Layna Mosley, and Robert Galantucci. (2018). “Protecting Workers Abroad and Industries at Home: Rights-Based Conditionality in Trade Preference Programs.” Journal of Conflict Resolution. 1–30.
Haftel, Y. Z. (2011). Regional economic institutions and conflict mitigation: Design, implementation, and the promise of peace. Ann Arbor: University of Michigan Press.
Hays, J. C., Ehrlich, S. D., & Peinhardt, C. (2005). Government spending and public support for trade in the OECD: An empirical test of the embedded liberalism compromise thesis. International Organization., 59(2), 473–494.
Hiscox, M. J. (2002). Commerce, coalitions, and factor mobility: Evidence from congressional votes on trade legislation. American Political Science Review, 96(3), 593–608.
Hiscox, M. J. (2006). Through a glass and darkly: Attitudes toward international trade and the curious effects of issue framing. International Organization, 60(3), 755–780.
Hiscox, M., & Hainmueller, J. (2006). Learning to love globalization: The effects of education on individual attitudes towards international trade. International Organization, 60(2), 469–498.
IMF. (2017). Government Finance Statistics Database. http://data.imf.org/?sk=388DFA60-1D26-4ADE-B505-A05A558D9A42. 3 Apr 2017
Inglehart, R. (1997). Modernization and Postmodernization: Cultural, economic, and political change in 43 societies. Princeton: Princeton University Press.
Jäckel, I. C., & Smolka, M. (2013). Individual attitudes towards trade: Stolper-Samuelson revisited. Open Economies Review, 24(4), 731–761.
Jinnah, S., & Lindsay, A. (2016). Diffusion through issue linkage: Environmental norms in U.S. trade agreements. Global Environmental Politics, 16(3), 41–61.
Jinnah, S., & Morgera, E. (2013). Environmental provisions in American and EU free trade agreements: A preliminary comparison and research agenda. Review of European Community and International Environmental Law., 22(3), 324–339.
Kim, M. (2012). Ex ante due diligence: Formation of PTAs and protection of labor rights. International Studies Quarterly, 56(4), 704–719.
Kolben, K. (2006). The new politics of linkage: India's opposition to the Worker's rights clause. Indiana Journal of Global Legal Studies, 13(1), 225–259.
Krosnick, J. A. (1999). Survey research. Annual Review of Psychology., 50, 537–567.
Kucik, J. (2012). The domestic politics of institutional design: Producer preferences over trade agreement rules. Economics and Politics, 24(2), 95–118.
Mosley, L. (2005) Globalisation and the state: Still room to move?. New Political Economy 10 (3):355–362
Lechner, L. (2016). The domestic battle over the design of non-trade issues in preferential trade agreements. Review of International Political Economy., 23(5), 840–871.
Lechner, L. (2018). Good for some, bad for others: US investors and non-trade issues in preferential trade agreements. The Review of International Organizations., 13(2), 163–187.
Lo, A. Y. (2014). Negative income effect on perception of long-term environmental risk. Ecological Economics., 107, 51–58.
Manger, M. (2009). Investing in protection: The politics of preferential trade agreements between north and south. Cambridge: Cambridge University Press.
Mansfield, E. D., & Mutz, D. C. (2009). Support for free trade: Self-interest, Sociotropic politics, and out-group anxiety. International Organization, 63(3), 425–457.
Marshall, Monty G. and Ted Robert Gurr. (2014). Polity IV Project: Political Regime Characteristics and Transitions, 1800-2013. http://www.systemicpeace.org/polity/polity4.htm. Accessed 8 May 2015
Martinson, Karin, Alexandra Stanczyk, and Lauren Eyster. (2010). “Low-skill workers’ access to quality green jobs.” The Urban Institute Brief 13. Accessed March 20, 2019 at https://www.urban.org/research/publication/low-skill-workers-access-quality-green-jobs
Mayda, A. M., & Rodrik, D. (2005). Why are some people (and countries) more protectionist than others? European Economic Review, 49(6), 1393–1430.
McKibben, Heather and Timothy W. Taylor. (2014). “Let’s Talk About Trade: The Politicization and Framing of International Trade Policy.” APSA 2014 Annual meeting paper. Available at SSRN: https://ssrn.com/abstract=2452738. Accessed 5 July 2018
Medrano, J. D., & Braun, M. (2012). Uninformed citizens and support for free trade. Review of International Political Economy, 19(3), 448–476.
Milewicz, K., Holloway, J., Peacock, C., & Snidal, D. (2016). Beyond trade: The expanding scope of the nontrade agenda in trade agreements. The Journal of Conflict Resolution., 62, 743–773. https://doi.org/10.1177/0022002716662687.
Milner, H., & Mansfield, E. D. (2012). Votes, vetoes, and the political economy of international trade agreements. Princeton: Princeton University Press.
Morin, J.-F., & Rochette, M. (2017). Transatlantic convergence of preferential trade agreements environmental clauses. Business and Politics., 19(4), 621–658.
Naidu-Ghelani, Rajeshni. (2015). “TPP Trade Deal: Who are the Winners and Losers?” October 6, 2015. BBC News. Accessed April 2, 2017 at: http://www.bbc.com/news/business-34451423
Nooruddin, I., & Rudra, N. (2014). Are developing countries really defying the embedded liberalism compact? World Politics, 66(4), 603–640.
Nooruddin, I., & Simmons, J. W. (2009). Openness, uncertainty, and social spending: Implications for the globalization-welfare state debate. International Studies Quarterly., 53(3), 841–866.
Oehri, M. (2015). Comparing EU and US labour governance ‘near and far’ – Hierarchy vs network. Journal of European Public Policy, 22(5), 731–749.
Pew Research Center. (2014). Faith and skepticism about trade. Foreign: Investment.
Pitruzello, S. (2004). “Trade globalization, economic performance, and social protection: Nineteenth-Century British Laissez-Faire and Post-World War II U.S.-Embedded Liberalism.” International Organization, 58(4), 705–744.
Polanyi, K. (2001). The great transformation: The political and economic origins of our time (2nd ed.). Boston: Beacon Press.
Postnikov, E. (2019). Unraveling the puzzle of social standards design in EU and US trade agreements. New Political Economy., 24 (2): 181–196.
Postnikov, E., & Bastiaens, I. (2014). Does dialogue work? The effectiveness of labor standards in EU preferential trade agreements. Journal of European Public Policy., 21(6), 923–940.
Raess, D., Dür, A., & Sari, D. (2018). Protecting labor rights in preferential trade agreements: The role of trade unions, left governments, and skilled labor. Review of International Organizations., 13, 143–162.
Rosenblum, J., Horvath, A., & Hendrickson, C. (2000). Environmental implications of service industries. Policy Analysis, 34(22), 4669–4676.
Rudra, N. (2008). Globalization and the race to the bottom in developing countries: Who really gets hurt? Cambridge: Cambridge University Press.
Rudra, N., & Haggard, S. (2005). Globalization, democracy, and effective welfare spending in the developing world. Comparative Political Studies., 38(9), 1015–1049.
Ruggie, J. G. (1982). International regimes, transactions, and change: Embedded liberalism in the postwar economic order. International Organization, 36(2), 379–415.
Scheve, K. F., & Slaughter, M. J. (2001). What determines individual trade-policy preferences. Journal of International Economics, 54(2), 267–292.
Scott, B., & Bergstrand, J. (2007). Journal of International Economics, 71(1), 72–95.
Stokes, Bruce. (2014). “Most of the World Supports Globalization in Theory, but Many Question it in Practice.” PEW Research Center. Accessed June 20, 2018 at: http://www.pewresearch.org/fact-tank/2014/09/16/most-of-the-world-supports-globalization-in-theory-but-many-question-it-in-practice/
Stolper, W. F., & Samuelson, P. A. (1941). Protection and real wages. Review of Economic Studies, 9, 58–73.
Taylor, T. W. (2015). The electoral salience of trade policy: Experimental evidence on the effects of welfare and complexity. International Interactions, 41(1), 84–109.
The Guardian. (2016). 17 September 2016. “TTIP protesters take to streets across Germany.” Accessed June 27, 2018 at https://www.theguardian.com/business/2016/sep/17/ttip-protests-see-crowds-take-to-streets-of-seven-german-cities
Walter, S. (2010). Globalization and the welfare state: Testing the microfoundations of the compensation hypothesis. International Studies Quarterly, 54(2), 403–426.
Walter, S. (2017). Globalization and the demand side of politics: How globalization shapes labor market risk perceptions and policy preferences. Political Science Research and Methods, 5(1), 55–80.
World Bank. (2014). World Development Indicators Database. http://data.worldbank.org/data-catalog/world-development-indicators. Accessed 28 Oct 2015
Young, A. R. (2016). Not your Parents' trade politics: The transatlantic trade and investment partnership negotiations. Review of International Political Economy, 23, 345–378. https://doi.org/10.1080/09692290.2016.1150316.
Zaracostas, J. (1992). Developing Nations Fear Trade-Pollution Link. Journal of Commerce. May 28.
Acknowledgements
We would like to thank Sean Ehrlich, Aaron Martin, Irfan Nooruddin, Ryan Powers, Nita Rudra, as well as participants at McGill University CIPSS Speaker Series, University of Melbourne Governance Cluster, International Studies Association Annual Convention 2016, American Political Science Association Annual Meeting 2016, and Southern Political Science Association Annual Meeting 2016 for their insightful comments and suggestions. Fordham University and the University of Glasgow provided critical funding for this project. All errors are our own.
Author information
Authors and Affiliations
Corresponding author
Additional information
Publisher’s note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Electronic supplementary material
ESM 1
(DOCX 123 kb)
Rights and permissions
About this article
Cite this article
Bastiaens, I., Postnikov, E. Social standards in trade agreements and free trade preferences: An empirical investigation. Rev Int Organ 15, 793–816 (2020). https://doi.org/10.1007/s11558-019-09356-y
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11558-019-09356-y