The False Altruism of Trade Deals' Labor Protections

Jagdish Bhagwati and Arvind Panagariya have an excellent op-ed in today's Times of India on the disingenuousness of US and EU labor unions' vocal demands that free trade agreements contain enforceable labor standards.  The crux of the piece is here:

When the unions in the US and the EU insist on a set of labour standards in the developing countries with which they compete for markets at home and abroad, they take an altruistic line: we are doing this out of solidarity; we are doing it for your workers. But when you push them hard, they always say: it is "unfair" to have to compete with others who do not have our standards. Now, the latter is an argument about competition; it is about losing out in trade. So it is an argument motivated by self-interest, not altruism.

The traditional demand by the American unions has been that others should have the same standards as the US does. But this argument is comic, were it not tragic. Is the US a paragon of virtue on labour standards? After all, less than 10 per cent of its private workforce is now unionised. And this is because the main weapon that unions have, the right to strike, has been crippled by the Taft-Hartley legislation of over 50 years ago. Even liberal universities have refused to let their administrative employees organise. In consequence, Human Rights Watch, which has investigated the right to unionise, a central feature of the ILO principles, has found that this is far from being guaranteed in the US.

So, US unions have shifted to asking for ILO "core standards" instead. But this will not wash either. The US has not even ratified many of these core conventions. So, in effect, this version is also to be aimed at others, not themselves.

The truth of the matter is that, frightened by competition from our exports, the American and European unions seek relief. This can be obtained by conventional import protectionism. But, if this is constrained by WTO obligations, then it can be obtained by raising the cost of production of the foreign rivals. Raising their labour obligations is one way of doing this. Therefore, we have called it a form of "export protectionism", like the Voluntary Export Restraints, where the exporting country restrains its exports.

As good as the authors' explanation is, none of it is novel: developed country labor unions have been shrouding their vicious protectionism in false altruism for decades.  What is novel, however, is this disconcerting bit of news that has been relatively unreported here in the United States (emphasis mine):

Lagging employment recovery and continuing high levels of unemployment have marked the macroeconomic scenario in the United States. So, it is natural that the United States, which chaired the G-20 meeting in Pittsburgh, would use its privileged position as the host to invite the US secretary of labour, a well-known union activist, to convene a meeting of the employment and labour ministers on the jobs situation prior to the next G-20 heads of state meeting in Canada.

The macroeconomic aspects of the labour situation are indeed a proper focus of such a meeting. But the Pittsburgh declaration goes further and urges the G-20 countries not to "disregard or weaken internationally recognised labour standards" and to "implement policies consistent with ILO fundamental principles and rights at work".

Led by their federation, the AFL-CIO, the US labour unions have had a long history of pushing for a "social clause" into trade treaties at every forum. For international economists familiar with this history and the stranglehold the unions exercise on the Democratic Party and Congress today, the G-20 declaration constitutes a carefully designed trap. It is drafted in a way in which the US and the European Union can get developing-country employment and labour ministers unfamiliar with the agenda and influence of developed-country unions, to endorse measures that have a "feel good" fagade but are, in fact, a protectionist dagger aimed at our jugulars. Indeed, the US undersecretary of labour, Sandra Polanski, who has been put in charge of the meeting, is well known to us as a long-standing proponent of such measures and a relentless activist on their behalf.

In other words, the White House has put a labor union champion (Ms. Polanski) - one who has long advocated "feel good protectionism" in trade agreements - in charge of an under-the-radar meeting of the G-20 countries' labor ministers prior to the June 26-27, 2010 G-20 Summit in Toronto.  (Polanski bio here.)

What could possibly go wrong?