Globalization, international trade and labour standards

Globalization has forced countries to become increasingly dependent on each other due to the globalization of production and the increasing volume of global trade. This dependency has enhanced the importance of labor standards, varying between countries day by day. According to developed countries, developing countries have an unfair competitive advantage in global trade owing to the lower labour standards. Moreover, MNCs use the lower labour cost, which exists in these countries, as a means of competitive advantage in global trade. Thus for developing countries, an ethical link should be established between international trade and labour standards. On the other hand, the developing countries which are against such a link between trade and labour standards, developed countries' attempts are similar to the idea of protectionism. This is because the only competitive advantage the developing countries are the lower labour cost and unskilled labour force. Thus employing this advantage in global trade as a source of comparative advantage is normal for them. It is the purpose of this thesis is to investigate whether it is necessary to set up a link between international trade and labour standards. For this, the impact of lower labour standards on global trade will be analyzed and commented through a literature survey and the available data. This thesis argues that the impact of the lower labour standars has been exaggerated and the labour standards may be better implemented via philanthropic organizations.