Inhumane Arbeitsbedingungen auf dem globalen Markt — Wer kann, wer soll handeln?

Workers in Asian factories producing for Western markets suffer under inhumane working conditions. Suicides at Chinese suppliers of computer manufacturers and a fire in a Bangladesh garment factory recently drew public attention to this problem. But would workers in developing countries really benefit from better working conditions and higher wages? It may be more likely that countries implementing these improvements would lose in global competition. Therefore, developing countries are limited in their ability to raise labour standards on their own. This competitive situation, however, is the very reason why labour rights have to be negotiated internationally. Existing voluntary international standards of the UN, ILO or OECD are useful but not sufficient, and trade sanctions in the WTO framework pose dangers of disguised protectionism. More promising but still imperfect avenues are Free Trade Agreements that could be used to enforce minimum ILO labour standards and transparent certifications, e.g. for fair trade products.     

Developing countries in competition for foreign investment

This study analyzes the competition for foreign direct investment (FDI) among countries at different stages of development. It is assumed that domestic companies in a more-developed country use more capital in production and that wages in a less-developed country are lower. Countries can compete for FDI by increasing the supply of public inputs in the economy, in addition to (or instead of) offering subsidies or tax reliefs to foreign investors. The results reveal that if governments of competing countries are not allowed to discriminate between domestic and foreign firms, there may be situations in which a less-developed economy will attract FDI depending on the labor cost differential and the responsiveness of foreign investor's and domestic companies' output to changes in the supply of public inputs. If tax discrimination between domestic and foreign firms is permitted, both countries will optimally raise the supply of public inputs, but the more-developed country will always win the foreign investment despite higher labor costs. Thus, governments of less-developed countries may have an incentive to work on an international agreement to disallow tax discrimination.     

Understanding Developing Country Strategic Responses to the Enhancement of Food Safety Standards

This paper explores the competing concepts of ‘standards as barriers’ and ‘standards as catalysts’ in the context of food safety standards in international trade in agricultural and food products. Through a review of existing evidence of the impact of food safety standards on developing country exports of agricultural and food products and the results of a series of country‐ and product‐specific case studies, it is suggested that food safety standards can act as both a barrier to trade and the basis of competitive positioning for developing countries in international markets. This suggests that broad conclusions about the trade effects of food safety standards on developing countries are problematic, rather the level and ways in which agricultural and food exports are impacted can be product, country, standard and even firm‐specific.     

International Migration and Child labour in Developing Countries

This paper investigates the labor market effect of international migration on child work in countries of origin. We use an original cross‐country survey dataset, which combines information on international migration with detailed  individual‐level data on child labour at age 5–14 in a wide range of developing countries. By exploiting both within and cross‐country variation and controlling for country fixed effects, we find strong and robust evidence on the role of international mobility of workers in reducing child labour in disadvantaged households through changes in the local labour market.     

Mini‐symposium on the WTO Non‐agricultural Market Access (NAMA) Negotiations

NAMA liberalisation alone will not be sufficient to achieve the development goals of the Doha Round. The structure of developing countries’ economies and weaknesses in their infrastructure and institutions mean that adjustment to liberalisation is often costly and export responses slow. To make NAMA work, developing countries will need technical and financial support to raise their ability to adapt to greater openness and globalisation pressures and to increase their export capabilities. Although developing countries should decide how to raise their ability to adjust and to increase exports, bilateral donors and multilateral agencies will need to fund NAMA support programmes. The WTO, however, is not the appropriate or competent international agency to provide or disburse such funding. It can provide technical advice and offers a negotiating vehicle for industrial countries to signal that the development aims of the Doha Round are recognised in substantive terms. If industrial countries support developing countries’ NAMA‐related adjustment costs in addition to offering NAMA tariff cuts, the chances of a successful Doha agreement and genuine pro‐development outcomes will be boosted significantly.     

Factor Prices,Factor Substitution and Exporting in US Manufacturing Affiliates Abroad

This paper uses the unique matched individual parent and affiliate data from the foreign investment survey of the Bureau of Economic Analysis to examine how US firms of different industries and capital intensities at home adapt to lower costs of labour and other host‐country characteristics in their foreign production. We find that foreign affiliates of US multinationals carry their parent firms’ technology with them in producing abroad. That is, affiliates of capital‐intensive parents produce in a relatively capital‐intensive manner wherever they are located. Despite these resemblances to their parents, affiliates produce in a more labour‐intensive manner where labour is cheaper and also where the scale of production is small. We found no evidence that more labour‐intensive firms selected production locations where labour was cheaper. Labour costs dominated the methods of production but not its location. Affiliates that export are more responsive in their factor proportions to the labour costs where they produced than affiliates selling only in their host countries. The probability that an affiliate would export, however, did not seem to be much affected by factor proportions. It was much more closely related to the scale of the affiliate's operations; larger affiliates were more likely to be exporters.     

Distance,Transaction Costs,and Preferences in European Trade

Beckerman (1956) and Linder (1961) have suggested that international trade is not determined by supply-side factors alone—perceptions about foreign countries and country preferences matter. We explore the relation between exports, cultural distance, and country preferences in Europe. The results show that several distance and preference-related variables, based on Hofstede’s cultural dimensions, income gaps, and voting patterns in the Eurovision Song Contest, are significantly related to bilateral trade. We conclude that cultural distance and preferences influence trade through several channels, both indirectly through transaction costs and more directly, as countries seem to prefer some trade partners before others.     

Heterogeneous effects of competitiveness shocks on macroeconomic performance across euro area countries

This paper considers how competitiveness impacts macroeconomic performance in 11 euro area countries. VAR models are estimated for the individual countries using quarterly data from 1995Q4 to 2013Q4. Besides unit labour costs as a competitiveness measure, the models include GDP, the current account balance and domestic credit. The empirical analyses show that changes in unit labour costs help explain GDP dynamics in the short and medium term in most countries, whereas they have little explanatory power for the current account balance or domestic credit for most countries. Overall, the effects of the unit labour costs vary substantially across the countries in the euro area. The heterogeneity suggests that policy measures aiming to improve economic growth, correct current account imbalances and ensure financial stability need to take country‐specific features into account.     

The Impacts of Alignment with Global Product Standards on Exports of Firms in Developing Countries

Complying with global standards and technical norms can be costly, making them potential impediments to trade, but it can also expand export opportunities. Two policies available to governments are alignment of domestic technical regulations with international standards and entry into mutual recognition agreements (MRAs). We study the effects of such decisions on the volume of exports to developed markets by firms in developing countries, using data from a World Bank firm‐level survey of awareness of global product norms. Both standards alignment and MRAs are associated with more exports to developed countries, but only MRAs significantly promote exports. This finding is consistent with theoretical predictions that MRAs should reduce the fixed costs of exporting more than standards alignment, permitting more firms to enter export markets in higher volumes. Governments in developing countries hoping to encourage exports may wish to favour the negotiation of mutual recognition of testing and certification procedures with major trading partners as a more affirmative avenue to expanding international sales.     

‘Profligacy in the encouragement of thrift’: Savings banks in Ireland, 1817–1914

We describe the legal rules underlying corporate governance of banks in Germany during the 1870s as well as the rules of governance fixed in corporate charters collected from a sample of 202 charters for the year 1872. Governance standards were – on average – below the legal default. In particular, voting rights as well as monitoring rights of shareholders were restricted. Most governance provisions did not affect the level of Tobin's Q in 1872, the change of the market-to-book ratio during 1873, and the probability of firm survival until 1880. Yet large banks having adopted a ‘one share–one vote’ provision and large banks having a governmental concession had a higher Tobin's Q, whereas the reverse holds for small banks. Moreover, the probability of firm survival was larger if small shareholders had voting rights or if shareholders could elect the supervisory board.     

Is FDI Integrating the World Economy?

FDI's spectacular growth, in diverse forms, during the past two decades represented an important force generating greater economic integration. FDI increased substantially in relation to global productive capacity, cross border mergers and acquisitions component of FDI put domestic corporate laggards on notice, and the spread of FDI to non‐tradable service sectors generated the possibility that these traditionally low productivity sectors would be brought closer to the standards of international efficiency. Yet, FDI did not perform an integrating role in a more fundamental sense. There is little evidence that FDI served to speed up income convergence across countries. This was the case for two reasons. First, FDI flows remained highly concentrated. Second, the benefits from FDI appear to have accrued principally where conditions were already conducive to investment and growth. Hence, though cross‐country disciplines through bilateral, regional and multilateral efforts are important in reducing the distortions that lead to misallocation of capital, domestic efforts to raise absorptive capacity will ultimately be critical. Efforts to increase labour mobility, as foreseen, for example, under GATS, could have a significant effect in raising the benefits from FDI as the more mobile labour serves to bridge the cultural, institutional and contractual differences across nations.     

Globalisation,Women's Economic Rights and Forced Labour

Globalisation critics are concerned that increased trade openness and foreign direct investment exacerbate existing economic disadvantages of women and foster conditions for forced labour. Defenders of globalisation argue instead that as countries become more open and competition intensifies, discrimination against any group, including women, becomes more difficult to sustain and is therefore likely to recede. The same is argued with respect to forced labour. This article puts these competing claims to an empirical test. We find that countries that are more open to trade provide better economic rights to women and have a lower incidence of forced labour. This effect holds in a global sample as well as in a developing country sub‐sample and holds also when potential feedback effects are controlled via instrumental variable regression. The extent of an economy's ‘penetration’ by foreign direct investment by and large has no statistically significant impact. Globalisation might weaken the general bargaining position of labour such that outcome‐related labour standards might suffer. However, being more open toward trade is likely to promote rather than hinder the realisation of two labour rights considered as core or fundamental by the International Labour Organisation, namely the elimination of economic discrimination and of forced labour.     

Distorted Agricultural Incentives and Economic Development: Asia's Experience

Earnings from farming in many low‐income countries have been depressed by a pro‐urban bias in own‐country policies, as well as by governments of richer countries favouring their farmers with import barriers and subsidies. Both sets of policies reduce national and global economic welfare. The rapid development of many Asian emerging economies has been accompanied by a gradual reduction in their anti‐agricultural policies, but many distortions remain and some countries have moved from negative to positive assistance for farmers, following the earlier examples of first Japan and then Korea and Taiwan. Drawing on results from a new multi‐country research project, this paper examines the extent of these changes relative to those of other developing countries over the past five decades. It concludes by pointing to prospects for further policy reform in Asia.     

The role of education and training in enhancing labour productivity in Arab countries in Africa

Labour productivity in Arab countries is low by international standards and this problem occurs in Arab countries both inside and outside Africa. There are 10 Arab countries in Africa: Egypt, Libya, Tunisia, Algeria, Morocco, Mauritania, Sudan, Somalia, Djibouti and Comoros. Enhancing labour productivity is a major challenge for Arab countries. Improving labour productivity should increase competitiveness, economic growth, job availability and living standards. Key factors in low Arab labour productivity include weak education and training systems, a mismatch between training outputs and labour market demands, lack of technology and innovation and poor management of the workforce. This article seeks to put forward innovative education and training policies which can enhance labour productivity. It does so after examining Arab education and training systems and their links with industry. It is concluded that modern governance arrangements need to be applied in Arab universities. Universities need to be re‐envisioned so that curricula are market‐driven and bridge the gap between education supply and market demand. Entrepreneurial teaching and learning practices need to be emphasized and improved technical and vocational training should be a priority. The Arab countries also have to adopt responsive and practical strategies for research and development and link the research and development institutes to industry.     

Labour and Environmental Standards: The ‘Lemons Problem’ in International Trade Policy

Environmental and labour standards have become an important international trade issue. This article examines and ranks alternative trade policy responses available to an importing country with concerns over such standards. While a full import embargo may sometimes be preferable to allowing unrestricted access to unlabeled noconforming imports, a partial embargo that allows imports which demonstrably conform to the standard is always a better policy; and labeling solutions, which separate conforming and non‐conforming imports, are typically better still. Consequently, full import embargoes based on non‐conformity with labour or environmental standards are poor policy choices and should generally remain prohibited by WTO rules.     

Raising Rivals’ Fixed Costs

This article demonstrates that raising fixed costs can serve as a credible mechanism for a well placed firm to exclude its rivals. We identify a number of credible avenues, such as increased regulation, vexatious litigation and increased prices for essential inputs, through which such a firm can raise fixed costs. We show that for a wide range of oligopoly models this may be a profitable strategy, even if the firm’s own fixed costs are affected as much (or even more) than its rivals and even if it is less efficient. The resulting reduction in the number of firms in the market is detrimental to consumer welfare and hence worthy of scrutiny by competition and regulatory authorities.     

International Enterprises and Trade Unions

A “shipping war” has broken out between two friendly neighbouring countries: Estonia (a rather poor land; liberated of Soviet occupation in 1991), and Finland (a wealthy one; independent since 1918). Led by their trade union the Finnish dockers boycott Estonian ships demanding for Estonian sailors the salary in the same range as that is in wealthy West-European countries. Estonian Sailors' Union finds that such a war is not for their better work-conditions but against their working possibilities: the cheap labour force is the only possibility for a poor country to entice foreign investments in it. No matter how the “shipping war” will be solved – the problem will remain. This is the problem of two opposites – cheap labour force of poor countries and expensive one of wealthy countries –, and international enterprises standing between them. Could such an enterprise survive without using the cheap labour force? And if it could, how could the poor countries survive then? Could there be found a clear unambiguous ethical solution? What ought to be the role of trade unions in such international business conflicts?     

Trade Wars: The Exaggerated Impact of Trade in Economic Debate

The rules governing trade and capital flows have been at the centre of controversy as globalisation has proceeded. One reason is the belief that trade and capital flows have massive effects on the labour market – either positive, per the claims of international financial institutions and free trade enthusiasts, or negative, per the ubiquitous protestors at WTO, IMF and World Bank meetings demanding global labour standards. Comparing the claims made in this debate with the outcomes of trade agreements, this paper finds that the debate has exaggerated the effects of trade on economies and the labour market. Changes in trade policy have had modest impacts on the labour market. Other aspects of globalisation – immigration, capital flows and technology transfer – have greater impacts, with volatile capital flows creating great risk for the well-being of workers. As for labour standards, global standards do not threaten the comparative advantage of developing countries nor do poor labour standards create a ‘race to the bottom’.     

Trade and labour standards: theory and new empirical evidence

Recent trade negotiations, both at the regional and multilateral level, have seen a resurgence of the issue of trade and labour standards. Labour interests in high-standards countries argue that low labour standards are an unfair source of comparative advantage, and that increasing imports from low-standards countries will have an adverse impact on wages and working conditions in high-standards countries, thus leading to a race to the bottom of standards. For low-standards countries, there is the fear that this is just a form of disguised protectionism and that the imposition of high labour standards upon them is equally unfair since it will erode their competitiveness, the latter being largely based on labour costs. Our objective in the present paper is to cast some light on the above debate from both a theoretical and empirical perspective. In particular, we first discuss some possible theoretical links between labour standards and comparative advantage through their effects on the terms of trade. We then investigate empirically the relationship between labour standards, comparative advantage and export performance. Overall, our empirical results suggest that caution should be exercised before drawing broad conclusions on the magnitude and direction of these effects.     

Locational Competition: A Neglected Paradigm in the International Division of Labour

Krugman's verdict that competitiveness of countries is a largely meaningless concept is a serious misjudgement of the economics profession. Countries compete for the mobile factors of production, most importantly for capital and technology. The exit‐option of these factors and of firms changes the calculus of national governments. This paper sets out the main elements of the concept of competition between locations – locational competition – and analyses its impact on welfare and employment of the capital‐exporting country. It also looks at whether competition between countries necessarily results in a race to the bottom or whether it can function as a controlling mechanism for governments and as a discovery device. The paper discusses under which conditions common rules are needed to reduce transaction costs and to prevent strategic, opportunistic behaviour of countries and which common rules thus reduce transaction costs. Finally, it deals with the question whether one institutional equilibrium in the world economy can be expected or whether many national equilibriums can coexist.