Fin(d)ing our way on trade and labor standards?

With the impasse over whether and how to link labor standards and trade agreements stretching into its eighth year, attention has turned to "monetary assessments," or fines, as alternatives to trade sanctions.

Fines have the advantage of adding "teeth" to agreements on labor standards without impeding trade and may be more palatable to developing countries than trade measures. Fines may therefore at least partially solve the impasse created by the trade-labor linkage debate. Unless such mechanisms are carefully designed, however, they may do little to improve working conditions. This policy brief tries to illuminate the issues involved in designing an effective system of fines to promote adequate enforcement of labor laws.

Conclusion:

Internationally agreed fines could be useful in bolstering enforcement of labor standards if appropriately designed. Increased scrutiny and international consultation procedures, combined with the threat of a fine is likely to be sufficient in most cases to trigger stronger national enforcement, including fines against scofflaw firms as provided under national labor laws. If the threat is not sufficient, the actual imposition of fines should serve as a mechanism to redirect resources to strengthen national capacity to enforce labor laws. The analysis here suggests that trade agreements incorporating such fines, without any link to trade measures, would be most appropriate when:

• the labor laws of the parties are broadly consistent with international norms
• the parties have well-functioning judicial systems
• the ILO can be brought in to provide training and assistance

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