The Pro-Trade Bias of Offshoring

Subhayu Bandyopadhyay, Arnab Basu, Nancy Chau and Devashish Mitra ()

No 313773, Working Papers from Cornell University, Department of Applied Economics and Management

Abstract: Technological advance and improvements in communication technologies have facilitated the offshoring of jobs worldwide, where a typical scene following the supply chain involves developing countries importing finished products from developed countries that contain developing country labor content. We demonstrate that this pattern of offshoring can harbor a pro-trade bias, but only among countries upstream along the global supply chain. This upstream-downstream asymmetry has important implications on countries’ (i) incentive to violate trade agreements, and (ii) ability to leverage the dispute settlement procedures to punish violators. We then show that a well-enforced set of labor standards in developing countries, such as a binding minimum wage, resolves this conundrum by reviving the ability of the developing countries to use countervailing tariffs to punish trade agreement violators.

Keywords: Labor; and; Human; Capital (search for similar items in EconPapers)
Pages: 29
Date: 2021-09-01
New Economics Papers: this item is included in nep-cwa, nep-ict, nep-int and nep-lma
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Persistent link: https://EconPapers.repec.org/RePEc:ags:cudawp:313773

DOI: 10.22004/ag.econ.313773

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