Why Shouldn't Trade Lift Workers Out of Poverty?

Dear Dr. Dollar:

U.S. activists have pushed to get foreign trade agreements to include higher labor standards. But then you hear that developing countries don't want that because cheaper labor without a lot of rules and regulations is what's helping them to bring industries in and build their economies. Is there a way to reconcile these views? Or are the activists just blind to the real needs of the countries they supposedly want to help? -- Philip Bereaud, Swampscott, Mass.

In 1971, General Emilio Medici, the then military dictator of Brazil, commented on economic conditions in his country with the infamous line: "The economy is doing fine, but the people aren't."

Like General Medici, the government officials of many low-income countries today see the well-being of their economies in terms of overall output and the profits of firms -- those profits that keep bringing in new investment, new industries that "build their economies." It is these officials who typically get to speak for their countries. When someone says that these "countries want" this or that -- or "don't want" this or that -- it is usually because the countries' officials have expressed this position.

Do we know what the people in these countries want? The people who work in the new, rapidly growing industries, in the mines and fields, and in the small shops and market stalls of low-income countries? Certainly they want better conditions -- more to eat, better housing, security for their children, improved health and safety. The officials claim that to obtain these better conditions, they must "build their economies." But just because "the economy is doing fine" does not mean that the people are doing fine.

In fact, in many low-income countries, economic expansion comes along with severe inequality. The people that do the work are not getting a reasonable share of the rising national income (and are sometimes worse off even in absolute terms). Brazil in the early 1970s was a prime example and, in spite of major political change, remains a highly unequal country. Today, in both India and China, as in several other countries, economic growth is coming with increasingly severe inequality.

Workers in these countries struggle to improve their positions. They form -- or try to form -- independent unions. They demand higher wages and better working conditions. They struggle for political rights. It seems obvious that we should support those struggles, just as we support parallel struggles of workers in our own country. The first principle in supporting workers' struggles, here or anywhere else, is supporting their right to struggle -- the right, in particular, to form independent unions without fear of reprisal. Indeed, in the ongoing controversy over the U.S.-Colombia Free Trade Agreement, the assassination of trade union leaders has rightly been a major issue.

Just how we offer our support -- in particular, how we incorporate that support into trade agreements -- is a complicated question. Pressure from abroad can help, but applying it is a complex process. A ban on goods produced with child labor, for example, could harm the most impoverished families that depend on children's earnings, or could force some children into worse forms of work (e.g., prostitution). On the other hand, using trade agreements to pressure governments to allow unhindered union organizing efforts by workers seems perfectly legitimate. When workers are denied the right to organize, their work is just one step up from slavery. Trade agreements can also be used to support a set of basic health and safety rights for workers. (Indeed, it might be useful if a few countries refused to enter into trade agreements with the United States until we improve workers' basic organizing rights and health and safety conditions in our own country!)