Labor Standards and Human Resources: A Natural Experiment in an Unlikely Laboratory

Do international labor standards impede or facilitate industrial upgrading? The Dominican Republic (DR) offers a quasi-experimental answer. While the island nation’s policymakers responded to foreign pressure by adopting a new labor code in the 1990s, and thereby brought their laws and edicts into compliance with internationally recognized norms and standards, they allocated their enforcement resources unevenly, and thereby created a natural experiment. I analyze the experiment by examining qualitative and quantitative data collected in the Dominican Republic in 2004 and 2005. I find a positive relationship between the degree of labor law enforcement and the propensity to upgrade human resources across the DR’s 30 provinces net of other factors and I therefore suggest that qualified labor inspectors not only block the low road of sweated labor and despotic industrial relations but pave the high road of skill formation and human resource development as well. Draft: Not for circulation or citation ___________________________________________________________________________________________________________ * I would like to thank Marcus Kurtz, Michael Piore, Richard Locke, Victoria Murillo, Gay Seidman, Ken Shadlen, Judith Tendler, and my various sources and interlocutors in the Dominican Republic—most particularly Vice President Rafael Alburquerque—for their generous contributions of time and insight. The usual caveats apply. All translations from Spanish are my own. Introduction The United States (US) and Canada are beginning to impose labor standards on their less developed trading partners. The Generalized System of Preferences (GSP) conditions “better-than-most favored nation” access to the US market on evidence that beneficiary countries are taking (or have taken) steps to defend “internationally recognized worker rights” including not only collective rights to organize, associate, and bargain collectively but individual rights to “acceptable conditions of work with respect to minimum wages, hours of work and occupational safety and health” (USTR 2005, p. 19; see also Compa and Vogt 2001). The parties to the North American Free Trade Agreement (NAFTA) have an admittedly controversial labor “side agreement” of their own (GAO 2001; Compa 2001). And NAFTA’s various rivals and successors—e.g., the US-Jordan FTA, the Canada-Chile FTA, the US-Cambodia textile agreement, the African Growth and Opportunity Act, and the recently negotiated US-Dominican Republic-Central American FTA—include labor standards as well (Polaski 2004). Latin American policymakers are particularly vulnerable to the efforts and entreaties of their North American counterparts for at least two reasons. First, Latin American exporters are disproportionately dependent on North American trade preferences. The US and Canadian markets already absorb almost 60 percent of the region’s merchandise exports (WTO 2004, Table III.21, p. 51) and China’s recent accession to the World Trade Organization will in all likelihood reinforce, rather than relieve, the temptation to trade sovereignty for market access in the future (Shadlen 1 Japan, Australia, and the European Union condition better than MFN access to their domestic markets on compliance with international labor standards as well (Compa and Vogt 2001, p. 237). Bilateral and multilateral agreements are more variable across Europe and Asia. While the Japan-Singapore FTA includes labor provisions (World bank 2005aa, p. 35, Table 2.2), the EU’s various trade agreements include a more general “human rights and democracy” clause (Der-chin Horng 2003).