[Public Opinion Brief No. 11] Labor and Environment as Standards in Trade Agreements

Ten countries around the world speak with one voice: Environmental and labor standards must be applied in the process of concluding trade agreements.

- Environmental and labor standards are also key issues. They can act as a double-edged sword.

- Korean companies expanding overseas need to improve their systems to comply with environmental and labor standards.

Jeong Han-oul (Deputy Director, EAI Public Opinion Analysis Center)

As the final round of negotiations for the Korea-U.S. Free Trade Agreement (FTA) is expected to take place at the Korea-U.S. Trade Ministers' Meeting on March 26, U.S. Chief Negotiator Wendy Cutler highlighted strong "labor" and "environment" provisions alongside the U.S. objectives of △ opening the Korean agricultural market △ eliminating tariffs and non-tariff barriers on automobiles △ expanding access to telecommunications and pharmaceutical services markets △ and investor protection provisions (Korea Economic Daily, 2007/03/22).



While attention on the Korea-U.S. FTA is focused on "rice" and "automobiles," the U.S. intention in bringing up "labor and environment" issues at this late stage of negotiations should not be easily dismissed. In fact, few would oppose the argument for strictly adhering to "labor and environmental standards" if taken at face value. However, it is not easy to approach this issue solely based on such a moral imperative.



From the perspective of developed countries, which incur significant costs to uphold labor and environmental standards, the strict application of these standards can reduce the gap in price competitiveness between developed and developing countries. Conversely, developing countries, which must maintain price competitiveness in large markets like the U.S. and Europe, tend to view the introduction of labor and environmental standards as a new form of protectionism by developed countries. Considering that the U.S., which has delayed its ratification of the Kyoto Protocol and is not known for a high level of labor rights protection among developed nations, has raised labor and environmental issues in the Korea-U.S. FTA, this background is crucial. Ultimately, as universal values of labor and environment have been placed on the trade negotiation agenda, they have become a double-edged sword.



In terms of public perception, while there were differences in degree between developed and developing countries, the majority of the public in most countries supported the introduction of labor and environmental standards. According to an international public opinion survey conducted in 2006 by EAI (East Asia Institute, Director Kim Byong-kook, Professor at Korea University) in cooperation with the Chicago Council on Global Affairs in the U.S. across 17 countries, the majority of respondents in 10 surveyed countries agreed that the parties to an agreement should require minimum labor and environmental standards from each other. 93% of Americans supported the introduction of labor standards, and 91% supported environmental standards.



Even in developing countries like China and India, a majority of the public supported the application of environmental and labor standards within trade agreements. 84% of Chinese citizens supported the introduction of labor standards, and 85% supported the introduction of environmental standards. While the support rate in India was lower than in China, 56% and 60% respectively responded that labor and environmental standards were necessary, significantly exceeding the majority.



China is already recognized as Korea's most important trading partner, and India is also receiving special attention as an overseas investment destination for domestic companies. Of course, it is unlikely that the governments of these countries will suddenly shift towards strictly enforcing labor and environmental standards in their domestic markets to maintain the price competitiveness of their exports. However, given that these countries are also actively participating in trade agreements, it remains uncertain how long they can maintain their current positions. Recalling the Nike case in 1999, which nearly led to a crisis due to the employment of child labor in Southeast Asia, individual companies cannot afford to be complacent. There is a possibility of facing unexpected consumer activism if they rely too heavily on the relatively weaker labor and environmental regulations in China and India compared to Korea.



It is difficult to abandon universal values such as labor rights and the environment. However, it also feels naive for us alone to approach these issues from the perspective of values and ethics when other countries are treating them as matters of economic logic. It is time to reflect on whether we have overlooked important issues while our society has been solely focused on "whether the FTA will be concluded" or on "rice" and "automobiles."

[Figure] Public Opinion on "Environmental Standards" and "Labor Standards" as Requirements in Trade Agreements (%)

Note: The question asked was, "Do you think that specific countries should be required to meet minimum environmental (labor) standards in international trade agreements, or should they not be required?" This entry represents the percentage who responded "Should be required" (CCGA 2006).

- This question was excluded from the survey in Korea. This was due not only to limitations on the number of questions but also because the question had the potential to elicit "socially desirable responses" that might not reflect the respondents' true thoughts. In essence, the core of the question is whether environmental and labor values should become standards in trade agreements; if respondents interpret it as a simple pro/con on labor and environmental values, there is a high likelihood of overwhelmingly positive responses. The figures from the survey results mentioned above are likely to include some of these responses to some extent. Therefore, the survey results should be understood as indicating general trends rather than being assigned absolute meaning to the numerical values.