Trade effects of non-economic provisions in trade agreements

Abstract

We assess the relationship between non-trade provisions (NTPs) pertaining to labor standards and the environment in preferential trade agreements (PTAs) and bilateral exports of environment and labor-intensive products between PTA partners, controlling for aid-for-trade, development assistance for labor and environment-related projects, and the enforceability of NTPs. NTPs are associated with greater exports of environment- and labor-intensive goods from high-income PTA members, while there is a negative relationship between NTPs and labor-intensive exports from developing countries. Bilateral exports of donors granting aid for trade are strongly associated with a higher propensity of recipients to participate in deep PTAs. Results are consistent with arguments that NTPs may increase trade costs for developing countries and that NTPs in part reflect commercial interests of high-income countries.