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Free-Trade Agreements

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Economists have long viewed free trade as an ideal. In 1821 economist David Ricardo argued that each country should export those commodities it could produce with comparative advantage. Although Ricardo considered only a single factor of production, labour, later theorists of relative factor proportions extended this framework to capital, natural resources and other factors. Most modern economists believe that restrictions on trade—protective tariffs, export subsidies and import quotas—create economic inefficiencies, distorting the incentives of both producers and consumers and costing nations money. They argue that in restricted national markets small firms proliferate to serve small markets, violating economies of scale, and that incentives for producers to innovate and compete are blunted. Free-trade advocates believe that arguments for trade restrictions, while often based on “the national interest”, are usually disguised claims on behalf of special interests.

However, there are several economic arguments against free trade. One is based on domestic market failures. If a domestic market such as the labour market does not function properly, then deviation from free trade may help to restore that market or may yield compensatory gains in other parts of the domestic economy. A second argument is that a fundamental assumption of free-trade theory, immobility of capital, is no longer correct, so free trade may disadvantage some countries. Daly and Cobb (1994) write:

The free flow of capital and goods (instead of goods only) means that investment is governed by absolute profitability and not by comparative advantage. The absence of a free flow of labour means that opportunities for employment decline for workers in the country in which investments are not being made. This represents a more nearly accurate account of the world in which we live than does the principle of comparative advantage, however applicable that may have been in Ricardo’s day.

Within a free-trade area, the prices of goods that are traded tend to equalize. According to the factor price equalization theorem, this is also true of factors of production, including wages, costs of regulatory compliance, and perhaps externalized factors such as air pollution. That leads to a third argument against free trade: it may exert downward pressure on wages, on health, safety, and environmental practices, and on other factors of production, towards the lowest levels of any of the trading countries. This raises serious occupational health and safety concerns.

Since the Second World War, industry has become increasingly international. Communications and transportation have advanced rapidly. Information and capital are increasingly mobile. Multinational firms have become an ever more prominent part of the world economy. In the process, production patterns change, plants relocate, and employment is destabilized. Unlike capital, labour is relatively immobile, both geographically and in terms of skills. Industrial relocation has therefore placed considerable strains on workers.

Against this background free trade has steadily increased. Eight rounds of multilateral trade negotiations have taken place since 1947 under the General Agreement on Tariffs and Trade (GATT). The most recent, the Uruguay Round, concluded in 1994 with the formation of the World Trade Organization (WTO). GATT (and now WTO) member nations agree to three general principles: they refrain from export subsidies (except in agriculture); they refrain from unilateral import quotas (except when imports threaten “market disruption”); and any new or increased tariffs must be offset by reductions in other tariffs to compensate trading partners. The WTO does not eliminate tariffs but it limits and regulates them. Over 130 nations, many of them developing or “transition” nations, are WTO members. Total membership is expected to exceed 150.

Since the 1980s further moves towards free trade have occurred on a regional level, through preferential trading agreements. Under these agreements, countries agree to eliminate tariffs on trade with each other while continuing to maintain tariff barriers against the rest of the world. These agreements are known as customs unions, common markets or free-trade areas; examples include the European Union and the three nations of North America. More loosely knit economic alliances, such as the Asian Pacific Economic Cooperation (APEC), the Association of South-East Asian Nations (ASEAN) and the Mercado Común del Sur (MERCOSUR), also promote trade among their members.

Job Health and Safety in Free-Trade Agreements

Free-trade agreements are designed to promote trade and economic development and most address social issues such as worker health and safety only indirectly, if at all. However, a wide range of issues affecting job health and safety may arise in the context of free-trade agreements.

Worker dislocation, unemployment and migration

Free-trade agreements occur in the context of larger economic and social trends, and may in turn influence these trends. Consider free trade between two countries with different levels of development, different wage scales and different employment opportunities. In this situation industries may relocate, displacing workers from their jobs and creating unemployment in the country of origin. The newly unemployed workers may then migrate to areas of greater employment opportunity, especially if, as in Europe, barriers to emigration have also been lifted.
Unemployment, fear of unemployment, migration and the accompanying stress and social disruption have a profound impact on the health of workers and their families. Some governments have attempted to mitigate these effects with social programmes, including job retraining, relocation assistance and similar supports, with mixed success.

Job health and safety standards

The member countries of a free-trade agreement may differ in their job health and safety standards. This implies lower production costs for the countries with less stringent standards, an important trade advantage. One likely result is political pressure within more protective countries to lower their standards, and within less protective countries not to advance their standards, in order to preserve trade advantages. Advocates of occupational health and safety cite this scenario as one of the major adverse consequences of free trade.

Another likely result is also worrisome. A country may decide to block the importation of certain hazardous materials or equipment to advance its occupational health agenda. Its trading partners may charge it with unfair trade practices, viewing this policy as a disguised trade barrier. In 1989, under the US-Canada Free Trade Agreement, Canada accused the United States of unfair trading when the United States moved to phase out asbestos imports. Such disputes can undermine the health and safety standards of a country with more stringent standards.

On the other hand, free trade may also provide an opportunity to improve standards through collaborative standard-setting, sharing of the technical information on which standards are based and harmonization of disparate standards up to high levels. This is true of both occupational health and safety standards and related labour standards such as child labour laws, minimum-wage requirements and collective-bargaining regulations. A major obstacle to harmonization has been the issue of national sovereignty; some countries have been reluctant to negotiate away any control over their labour standards.

Enforcement practices

Identical concerns arise with regard to enforcement of regulations that are on the books. Even if two trading partners have comparable occupational health and safety standards, one may enforce them less scrupulously than the other, lowering production costs and gaining a competitive advantage. Remedies include a dispute resolution process to allow countries to appeal an alleged unfair trade practice, and collaborative efforts to harmonize enforcement practices.

Hazard communication

Hazard communication refers to a wide range of practices: worker training, provision of written materials on hazards and protective measures, container labelling and worker access to medical and exposure records. These practices are widely recognized as key components of successful occupational health and safety programmes. Free trade and international commerce more generally have an impact on hazard communication in at least two ways.

First, if hazardous chemicals or processes are transported across national borders, workers in the receiving country may be placed at risk. The receiving country may lack the capacity for appropriate hazard communication. Information sheets, training materials and warning labels need to be provided in the language of the receiving country, at a reading level appropriate for the exposed workers, as part of the import-export process.

Second, inconsistent requirements for hazard communication place a burden on companies that operate in more than one country. Uniform requirements, such as a single format for chemical information sheets, help address this problem, and may be encouraged in the context of free trade.

Training and human resource development

When trading partners differ in their levels of economic development, they are likely also to differ in their human resources. Less affluent nations face shortages of industrial hygienists, safety engineers, occupational physicians and nurses, trained labour educators and other key professionals. Even when two nations have comparable levels of development, they may differ in their technical approaches to occupational health and safety. Free-trade agreements provide an opportunity to reconcile these disparities. Through parallel structures the occupational health and safety professionals from trading nations can meet, compare their practices, and agree on common procedures when appropriate. Similarly, when a country has a shortage of certain professionals relative to one or more of its trading partners, they can cooperate in offering formal training, short courses and other means of human resource development. Such efforts are a necessary part of harmonizing occupational health practice effectively.

Data collection

An important aspect of coordinated efforts to protect worker health and safety is data collection. Under a free-trade agreement several kinds of data collection may bear on worker health and safety. First, information on each country’s occupational health practices, particularly its means of implementing workplace standards, is necessary. Such information helps monitor progress towards harmonization and can disclose violations that may constitute unfair trade practices. Data on workplace exposures must be collected, not only for these reasons but also as part of routine occupational health practice. Exposure data must be collected according to good industrial hygiene practice; if member countries use consistent measurement procedures then comparisons among them are possible. Similarly, morbidity and mortality data are essential as part of good occupational health and safety programmes. If the countries of a free-trade agreement use consistent methods of collecting this information, then they can compare their health effects, identify problem areas and target interventions. This may be difficult to achieve since many countries collect their health and safety data from workers’ compensation statistics, and compensation schemes vary widely.

Prevention

Finally, free trade provides an opportunity for harmonization of preventive approaches, technical assistance among member nations and sharing of solutions. This may occur in the private sector when a company operates in several countries and can implement a preventive practice or technology across borders. Companies that specialize in occupational health services may themselves function internationally, spurred by a free-trade agreement, and function to diffuse preventive practices among member countries. National labour unions in a free-trade agreement may also collaborate. For example, the European Trade Union Technical Bureau for Health and Safety in Brussels was created by the European Parliament with the support of key unions. Such efforts can push member countries towards upward harmonization of preventive activities. Harmonization of preventive approaches may also occur at the governmental level, through collaboration in technology development, training and other activities. Ultimately, the most positive effect of free trade on occupational health and safety is improved prevention in each of the member countries.

Conclusion

Free-trade agreements are primarily designed to lower trade barriers and most do not directly address social issues such as worker health and safety (see also "Case Study: World Trade Organization"). In Europe, free trade developed over several decades in a process that embraced social concerns to an unusual extent. The organizations in Europe responsible for occupational health and safety are well funded, include representation from all sectors, and can pass directives that are binding on member countries; this is clearly the most advanced of the world’s free-trade agreements with respect to worker health. In North America, NAFTA includes a detailed dispute resolution process that extends to occupational health and safety, but few other initiatives to improve working conditions in the three member countries. Other regional trade pacts have not incorporated occupational health and safety initiatives.

Economic integration of the world’s nations is moving forward, due to rapid advances in communications, transportation and capital investment strategies. Free-trade agreements govern some but not all of this increased trade among nations. The changes in commercial patterns and the expansion of international trade have major implications for worker health and safety. It is essential to link trade issues with occupational health and safety issues, using free-trade agreements and other means, to ensure that advances in commerce are accompanied by advances in worker protection.

 

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Contents

Preface
Part I. The Body
Part II. Health Care
Part III. Management & Policy
Development, Technology, and Trade
Resources
Disability and Work
Education and Training
Ethical Issues
Labour Relations and Human Resource Management
Resources: Information and OSH
Resources, Institutional, Structural and Legal
Topics In Workers Compensation Systems
Work and Workers
Worker's Compensation Systems
Part IV. Tools and Approaches
Part V. Psychosocial and Organizational Factors
Part VI. General Hazards
Part VII. The Environment
Part VIII. Accidents and Safety Management
Part IX. Chemicals
Part X. Industries Based on Biological Resources
Part XI. Industries Based on Natural Resources
Part XII. Chemical Industries
Part XIII. Manufacturing Industries
Part XIV. Textile and Apparel Industries
Part XV. Transport Industries
Part XVI. Construction
Part XVII. Services and Trade
Part XVIII. Guides

Development, Technology and Trade Additional Resources

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Development, Technology and Trade References

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