This section provides a short overview of how the main variables are operationalized. Table2.1 reports summary statistics for all of them.
Labour conditions. Measuring de facto labour conditions in a cross-national setting is an extremely arduous task. In most developing countries, ‘reliable data on employment practices and working conditions over time have been almost impossible to obtain’ (Berliner et al. 2015at
32The estimates are calculated via a pilot STATA command that is under development by Hwang, Kang, and Lee (2019). While estimates and standard errors are reported in Table2.7, I do not use these as the main estimation
strategy because it is not possible to compute Hansens’j statistic with the pilot command.
2.5. OPERATIONALIZING KEY VARIABLES CHAPTER 2
p. 198). These countries often suffer from poor infrastructure and bureaucracies and are unable, if not unwilling, to collect such information (Greenhill, Mosley, and Prakash 2009; Flanagan 2006). To measure the dependent variable, this study employs the comprehensive labour standard index developed by Mosley and Uno (2007) as integrated by Marx et al. (2015).33 The original dataset covers 135 countries from 1985 to 2002 and consists of ‘an annual measure of labour rights violations’ calculated by looking at 37 types of violations relating to the freedom of association and the right to bargain collectively (FACB) (Mosley and Uno 2007 at p. 924). These violations are weighted to account for their gravity. The data is further refined to distinguishing violations in law and practice (Greenhill, Mosley, and Prakash2009). The final labour practice index, which is the key dependent variable of this study, ranges from 0 to 27.5, where higher values represent better labour practices. Marx et al. (2015) have updated this dataset for 73 countries from 2003 to 2012. Following the recent scholarship, I integrate these two databases and run the analysis on an unbalanced panel dataset with 108 developing countries over a period of 28 years (Ye 2019;
Pond 2018).34 Admittedly, this data has some limitations. Most notably, the data measures FACB rights, which is only a second-order measure of de facto labour conditions. To use this data I have to rely on the assumption that, in countries where fundamental working rights are increasingly violated, firms and government will also restrict and violate FACB rights to “reduce demands for wages and nonwage benefits” (Mosley and Uno 2007 at p. 927). To my knowledge, however, this is the best data available as it provides a rigorous, consistent and cross-national measure of labour practices, and it has been used in numerous recent studies (Adolph, Quince, and Prakash 2017; Gamso 2017; Ye 2019; Pond 2018). It is also important to note that the paper also takes a country-level approach because, to my knowledge, reliable cross-national data on factories working conditions is not available. In particular, while there is data on firms participating in private regulations, it is much harder to have information about labour standards of competing firms, not participating in these initiatives. A preliminary examination of the data suggests that, if anything, increasing trade openness has led to a drop in labour standards.35 Figure 2.3, shows that labour practices have declined, on average, both in OECD and non-OECD coun-tries. This decline, however, has been swifter for developing countries rather than for OECD ones.36
33Content analysis is based on reports from US State Department, the ILO’s Committee of Experts on the Applications of Conventions and Recommendations, the Committee on Freedom of Association and the International Confederation of Free Trade Unions (Mosley and Uno2007).
34The list of countries is reported in Table2.6of the Annexes.
35Indeed, trade volumes have constantly increased in the sample period
36Note that after 2002, the sample size changes. This is why the overall means for OECD countries are overrepresented when compared to the period 1985–2002.
Figure 2.3: Labour practices trends
Stringency of the labour clauses in trade agreements. A total of 77 free trade agreements with the US and the EU are considered in this study.37 Here, I rely on the work of Lisa Lechner to evaluate the stringency of their labour provisions (2016). As part of the Design of Trade Agreement Project (Dür, Baccini, and Elsig 2014), Lechner has created a comprehensive dataset covering over 663 trade agreements signed from 1948 to 2016 and classified them according to their level of legalisation of non-trade issues (NTI) (2016; W. Abbott and Snidal 2000). Every non-trade issue clause is weighted by the level of precision, obligation, and delegation that it entails, and these scores are summed to assess the overall level of legalisation of NTI. Lechner produces a measure focusing specifically on economic and social rights directly targeting labour rights clauses. I use this measure to account for the stringency of labour clauses in LABPTAs.38 This measure goes from a minimum score of 0, taken by the trade agreement between the European Community and Iceland (1972), to a maximum of 18, taken by the US-Bahrain Trade agreement (2006). Figure2.4
37Table2.5reports the list of treaties. The list also includes trade agreements signed before 1985.
38Note that the economic and social rights measure includes all of the following: “the right to work, rights at work (right to collective bargaining, the elimination of all forms of forced and compulsory labour, the effective abolition of child labour, the elimination of discrimination in respect of employment and occupation, minimum wage, and the right for leisure), right to education, the right to development, and the right to health” (Lechner2018, at p.1). I use the variable in its aggregated from esr_all_sum.
2.5. OPERATIONALIZING KEY VARIABLES CHAPTER 2
shows that while the EU has signed more trade agreements with labour conditions, the US tends to sign agreements that are more legalised.39 This does not come as a surprise as it is well known in the scholarship that while LABPTAs with the US tend to include enforcement mechanisms and sanctions, LABPTAs with the EU rely on dialogue and best practices as a means to imple-ment labour provisions (Raess and Sari2018; Leeg2018; Postnikov and Bastiaens2014; Kim2012).
Figure 2.4: LABPTAs of the US and the EU by level of legalisation
Competitors engagement in LABPTA. The main explanatory variables of this study are the competitors’ engagement in LABPTAs with the EU and the US (Pj6=iW LABP T Ai,t−1). They aim to capture the incentives a country has to change its labour practices as a consequence of its competitors’ participation in LABPTAs. As discussed in the previous section, these variables are a weighted sum that accounts for differences in the level of competition and differences in the stringency of the LABPTAs. These sums are later rescaled from 0 to 10 to facilitate interpretation.
Figure2.5illustrates the mean values of these measures for every year in the sample. As expected, these measures show a positive trend and major increases are connected to a set of new trade agreements being signed.40
In creating the competitor engagement measure, I used the following rules. First, if the com-petitor signs a new trade agreement replacing the previous one, the LABPTAs stringency score is replaced. For instance, this is the case for the Canada–US trade agreement signed in 1988 that was later replaced by NAFTA. After 1992, only the stringency of NAFTA matters is shaping competitor
39With a higher legalisation score in the x-axis.
40Unit root tests for these variable can be found in Table2.8in the Annexes. Do note that while unit root tests of the competitor engagement with the US,do not show evidence of a UR, the Augmented Dickey-Fuller test suggests that there is a unit root for competitors engagement with the EU. Hence inference on the EU series should be treated with caution.
Figure 2.5: Mean competitor engagement with LABPTAs of the US and the EU
behaviour.
Second, if the competitor signed an additional protocol with labour clauses, only the treaty with the highest legalisation score is considered. This assumes that while signing an additional protocol with more stringent labour clauses can affect competitors behaviours if the additional protocol has lower labour provisions, this will not undermine the effects of the base agreement.
Third, I excluded the US and the EU from the weighted sum of competitor engagement. Based on qualitative evidence, it is argued that LABPTAs are tools developed countries use to avoid social dumping and ensure that basic labour conditions are protected abroad. They are not a progressive instrument used to advance domestic labour conditions by developing states (VanGrasstek 2013;
Sutherland 1998).41 This means that when the US and Peru sign an LABPTA, only the latter is signalling a commitment to improving labour standards, while labour standards and competitors’
views on the commitments towards the respect of labour standards in the US are unchanged.
Fourth, creating the measure of competitors’ engagement with EU LABPTAs required ad-ditional choices. The main issue is that in the timeframe considered, the EU has more than doubled its membership. Countries such as Bulgaria and Romania went from having no formal trade agreement with the EU to being full members of the European Union. This increasing membership poses questions of which country to exclude from the measure of the weighted sum
41For instance, there has been an intense debate over the inclusion of the social clause in WTO negotiations that saw the developed and developing countries taking opposing sides (Cf. VanGrasstek2013; Sutherland1998).
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of competitor engagement in LABPTAs. I opted for excluding only countries that are also part of the OECD because they belong to a group with already established high labour standards.42 Conversely, former eastern European countries are part of the competitor sample precisely because it is assumed that they were incentivised by the EU-15 group to improve their labour conditions also through increasingly stringent LABPTAs (and later EU membership). Indeed, both the
“races” and displacement perspectives predict that as these countries increasingly engaged with the EU, competing firms in states not in the process of joining the European Union would strategically adapt labour conditions to remain competitive. In other words, excluding the ef-fects of Eastern European countries is likely to downward bias the systemic efef-fects of EU LABPTAs.
Finally, an additional challenge was to assign a stringency score to European Treaties. The measure of legalisation developed by Lechner is poorly equipped to grasp the full potential of EU Treaties (2016). Indeed, her metric looks at the legalisation of the EU Treaties without taking into account the potential for direct EU regulation or the progressive jurisprudence that are directly affecting labour rights in EU members. To account for the particular stringency of EU member-ship, the legalisation scores of EU Treaties have been additively summed rather than substituted.
This avoids the paradoxical situation that emerges in the data showing that the Korea–EC trade agreement is more stringent than the membership in the Lisbon Treaty.43 This approach should be better able to reflect the higher level of commitment of EU membership relative to all other trade agreements. Admittedly, this makes the measure of competitor engagement with EU LABPTAs less precise and more subjective than its US counterpart. Alternative approaches could be taken: a multiplicative relation between EU treaties or the complete elimination from the sample of countries that become members of the EU. These strategies, however, appear to be flawed. The former risks making the competitor engagement with EU LABPTAs overly dependent on the competition with those countries that joined the Union. In this perspective, competitors of Bulgaria and Romania will have exponential incentives to strategically change their labour practices relative to anyone else. On the other hand, excluding incoming members risks severely underestimating the effect of EU LABPTAs. For these reasons, it is argued that the cumulative sum is a more sensible approach to build the variable of interest.
42Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden and the United Kingdom
43The score for the Korea-EC LABPTA is 16, while the Treaty of Lisbon is 10.