References to domestic labour standards in PTAs: An effective way of avoiding races to the bottom or regulatory chilling in social policies?

An increasing number of preferential trade agreements contain three types of references to labour standards or social policies:

• An explicit commitment by treaty members to international labour standards, like the ILO's Fundamental Principles and Rights at Work
• A commitment not to lower existing domestic labour standards or social policies with a view of attracting FDI or increasing exports
• Commitments to ‘aid for trade’ support to the strengthening of labour or social policies

Only the first of those three types of provisions has received significant attention in the existing legal and economic literature. The proposed research project will focus on the second type of references and will as such fill a gap in the existing literature. In particular, references to domestic social policies and labour standards pose interesting legal, economic and political questions. On the legal side, the question arises as to how much clout such provisions have, as they may be very difficult to enforce. From the economic point of view the parallels between the wording of type 2 provisions and the mechanisms triggered in situations of ‘races to the bottom’ is striking and deserves further analysis. In the context of multilateral (vs. bilateral) trade negotiations, the interesting question arises whether type 2 provisions may be a way out of the present impasse in multilateral trade agreements.