As we reach the climax of the great battle over trade with China, it's worth taking a closer look at the main sticking point of this and every other major global agreement likely to arise in future years. There's widespread acceptance of the need for "global labor standards" and "global environmental standards." But apart from agreeing that no nation should permit forced labor, slave labor, employment of six-year-old children in factories seven days a week, and ocean dumping of nuclear wastes, there's almost no agreement on what labor and environmental standards actually mean. That's where the trouble begins.
On one side are those who believe that workers in the third world are seriously exploited. For example, Students Against Sweatshops, backed by UNITE (the textile and apparel union), faults Nike's production in China, where workers are paid $1.50 for a pair of shoes that retail for $100 in America. And environments in poor countries are becoming depleted--consider the extent of air and ground pollution in poor industrialized areas of Asia and Latin America. Worse, by this view, competition for global capital will drive down advanced-country wages and working conditions, and will undermine environmental protections. Thus, it is held, foreign trade should be conditioned upon generally higher global labor and environmental standards, and we should not trade with nations whose standards are low or nonexistent.
On the other side are those who believe it's foolish to expect workers and the environment to be treated everywhere as well as they are in advanced nations. Any attempt to raise labor standards internationally, backed by trade sanctions against countries that fall short, will just deepen the poverty of poor nations because global capital won't have any reason to go there. What looks to us like a global "sweatshop" provides jobs paying better than the meager living otherwise available. And as bad as air and water pollution are, life would be even worse if factories were to close. Imposing high labor and environmental standards on poor countries would simply protect rich-country markets from poor-country competition. Thus, global labor and environmental standards must be low, or else they should be understood as vague aspirations rather than as practical objectives.
Although politicians try to finesse the difference, these are deeply incompatible views. Whether within the upcoming deal over China trade or in some subsequent showdown over global trade and investment, expect both sides to solemnly agree to pursue labor and environmental standards without acknowledging the incompatibility. Global capital moves to poor nations in large part because labor is cheap there and regulations are minimal. So any compromise--say, labor and environmental standards halfway between where poor and rich countries are now-- inevitably will deter some global capital from going to poor nations if the standards are strictly enforced.
But here's an approach that might work. It requires that both sides accept a reality that neither is now prepared to see: First, poor nations cannot afford the high standards of advanced nations. Second, through trade and development, they'll be able to afford higher standards than they now provide.
Those who now argue for high standards will have to acknowledge the truth of the contention that global capital won't go to places where people are relatively unproductive--unproductive because they lack adequate education, the roads and bridges and ports are lousy, energy sources are unpredictable, and governments are unstable--unless labor is cheap there and regulations are undemanding. But those who argue for low standards must accept that poor nations do in fact gain from trade--that's the whole point of their engaging in it--and that those gains could be used to improve wages, working conditions, and environmental quality. Our interest in raising their standards isn't necessarily a fig leaf for protectionism. We have a stake in the development of strong and growing middle classes in these nations, which will stabilize democracy and also buy our exports.
A practical agreement over labor and environmental standards could work this way: Poor nations agree that as they become wealthier--by the standard yardstick of gross domestic product as measured by several international agencies--their labor and environmental standards will improve according to a predetermined scale of improvements: Median wages will rise, as will the minimum wage; workplace health and safety standards will ascend in tandem; environmental standards will gain ground. These nations will be able to afford the higher standards to the extent they've invested their added wealth to improve the productivity of their people--through better education, infrastructure, reliable energy, and democratic institutions. Thus, the higher costs of labor and of safeguarding the environment will be offset by the added productivity.
This won't be easy to pull off. There will be disputes about measurements and skirmishes over enforcement. But the same disputes and skirmishes would accompany any set of internationally agreed-upon labor and environmental standards. The virtue of the system I'm suggesting is that it creates exactly the right incentives. It allows poor nations to get the capital they need to grow and prosper, and it also pushes them to invest their added prosperity in ways that improve the well-being of all their citizens. Would that America had to adhere to a similar set of international rules. ¤