Populism, Opposition Strength, and Labor Regulations in Trade Agreements

• In Event: Populism and IPE

Abstract

Do right-wing populist governments negotiate for stronger labor provisions in trade agreements? The Trump administration's hallmark trade policy, the United States-Mexico-Canada (USMCA) agreement, includes one of the strongest labor provision enforcement mechanisms that allow the United States or Canada to sanction imports from Mexican firms that violate workers' rights to form unions or collective bargaining. This case contradicts the established understanding that left-wing governments are more likely to negotiate stronger labor provisions in trade agreements. Is this a generalizable trend or a unique one-off event? This paper first explores whether right-wing populist governments are more likely to negotiate and sign deeper preferential trade agreements (PTAs). Contrary to the existing literature, I find that right-wing governments are weakly correlated with stronger labor provisions, while more populist governments are correlated with weaker labor provisions and more shallow PTAs.

I explore why the Trump administration negotiated stronger labor provisions using evidence from case law, trade agreement text, and legal scholarship. I demonstrate that the changes in the USMCA labor provision languages are a direct and deliberate response to the institutional failure of the previous generation of labor provisions that led to the United States losing its enforcement case against Guatemala in 2017. Further, I find that the Democratic Party's reclamation of the House of Representatives in 2018 allows the opposition in Congress to negotiate with the administration for a stronger labor enforcement mechanism in the USMCA, resulting in the Rapid Response Labor Mechanism.

The case study provides a testable posterior hypothesis. I argue that a majority left-wing party in the legislature will likely utilize its veto power to extract concessions from the executive negotiating the agreement. Hence, more powerful left-wing opposition in the legislature should be correlated with stronger labor provisions in trade agreements. My results support this hypothesis, suggesting that right-wing executives are likely to be responsive when the opposition has more seats in the legislature.

Author

• Eric Thai, UC San Diego