Labor Provisions in Preferential Trade Agreements: Trade Effects, Worker Outcomes, and the Turn Toward Enforcement and Supply-Chain Governance

Lourenco Paz

No 18937, IZA Discussion Papers from IZA Network @ LISER

Abstract: This survey examines how labor provisions in preferential trade agreements affect trade, worker outcomes, and the governance of global production, organizing the literature around three generations of work. An earlier generation debated whether labor clauses were social protection or disguised protectionism. A second, using improved coding and structural gravity methods, finds no systematic trade-reducing effect: results are neutral or conditionally positive, though robustness to staggered-treatment methods remains untested. A third turns to implementation, arguing that provisions matter most when monitoring bodies, complaint systems, and due-diligence obligations change incentives for governments, firms, and suppliers. Across the literature, the most consistent evidence concerns legal commitments, institutional capacity, and enforcement credibility rather than broad wage gains. The survey's contribution is to read these findings as vantage points on a single transformation: labor provisions are no longer peripheral clauses inside trade agreements but components of a wider system linking states, firms, workers, and supply chains, whose effects remain only partially measured and only partially identified.

Keywords: due diligence; enforcement and compliance; global value chains; labor provisions; preferential trade agreements; trade and labor standards (search for similar items in EconPapers)
JEL-codes: F16 F55 J83 K33 (search for similar items in EconPapers)
Date: 2026-09
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