Ex Ante Due Diligence: Formation of PTAs and Protection of Labor Rights

Do fair trade PTAs—trade agreements that contain provisions for protection of labor rights—lead to improvements in labor protection in PTA partner states? If so, how do the PTAs bring about such improvements? I argue that trade partner states are likely to engage in ex ante due diligence and improve the protection of labor rights at home before they sign or even enter into negotiations for a PTA. Given that large developed economies have increasingly placed value on strong labor protection, trade partners of these economies act on the belief that, holding other factors constant, having stronger labor protection will increase their attractiveness as a potential or a prospective PTA partner. I test this argument in the context of the United States and its trade partners between 1982 and 2005. The evidence shows that trade partner states indeed are much more likely to improve labor protection (i) prior to the 2002 Trade Act publicizing the importance of labor protection and (ii) prior to signing a PTA with the United States.