Could the United States create and maintain an international trade system that respects labor standards, even if it wanted to? If so, what might that system look like, and what effect would it have on the economies of East Asia?
My colleague Erik Loomis has tried to answer those questions in Out of Sight, a book coming out in March. Loomis argues that the United States, by managing import standards, has in the past and can in the future substantially modify the employer-employee relationship in countries that export to the United States. Loomis suggests that the United States create import restrictions based on labor standards, a practice that has enjoyed some success in the past.
Loomis’ argument is relevant for the Asia-Pacific in that the proposed regulations would directly target many countries in Asia and Latin America; indeed, virtually all of the exports the U.S. draws from developing countries come from these regions. A more labor-friendly foreign policy could have significant social and economic effects across the region.
The standard account of globalization is that it inherently favors capital over labor; capital tends to be far more mobile than labor (even within a given jurisdiction, much less across states), and so capital can relocate in favor of cost when labor cannot. Labor gets part of this loss back in import driven jobs, general economic growth, and lower prices, but globalization seems almost invariably to result in the growth of economic inequality within states.
In some sense, this seeks to create an alternative to Thomas Piketty’s much derided “capital tax;” a successfully executed program of improving labor standards would, at least potentially, serve to reduce inequality both in the United States and in the countries targeted for sanction.
But there are two caveats.
First, the establishment of import labor standards would represent a far reaching intervention into the politics and internal affairs of many states that export goods into the United States, intervention that will surely be unwelcome to elements of the population. We can obviously expect local capital and transnational capital to deeply oppose such regulations, but I suspect that there would also be resistance among some sectors of labor; oil workers and garment producers have very different interests. Moreover, in many target countries capital and labor map uneasily onto existing ethnic and regional divides, opening the prospect of identity-based conflict.
This would hardly represent the most extensive intervention by the United States into the domestic politics of foreign states, and in any case the flow of capital from the U.S. to South and Southeast Asia has already wrought significant social and economic changes. But we should recognize that not everyone in the target area will welcome such interventions, and that the interventions can have unexpected consequences.
Second, as the examples Loomis uses suggest, the management of labor standard protections on imports requires a great deal of legislative and executive fine-tuning, which may be beyond the capacity of the U.S. government to manage in an effective fashion. Exporting countries, regions, and firms will differ greatly in their ability to meet U.S. standards. An approach geared to protecting Bangladeshi labor would fail if standards effectively shut Bangladeshi firms out of the U.S. market.
Even in the best of times, with broad bipartisan agreement, it’s a struggle to envision Congress and the executive branch managing the technocratic aspect of labor-based import controls successfully, especially as such controls would touch upon a wide range of economic interests. But these are not the best of times; capital mobility touches on a core interest for one (or both) U.S. political parties, and we can expect partisan conflict over not merely the technocratic aspects of import controls, but also over their very existence.
As so while these thoughts amount to an intriguing idea, they still require some work from a technocratic perspective, as well as a more compelling political narrative.