U.S. Free Trade Agreements and Enforcement of Labor Law in Latin America

22 October 2014

Robust provisions in free trade agreements can provide the appropriate incentives, oversight and capacity- building assistance to bolster a country's ability to effectively enforce its labor laws and regulations.

The United States has free trade agreements in force in twenty countries, eleven of which are LAC countries. All of the agreements signed between the United States and LAC between 2000 and 2010 – the duration that this study covers – contain labor provisions.

Examining these agreements provides insight into

(i) the evolution of the debate over the inclusion and content of labor provisions in trade agreements and

(ii) whether the trade agreements themselves ultimately led to a change in enforcement.

The authors measure the change in enforcement before and after the enactment of the FTAs signed between 2000 and 2012, and exploit variation across countries by using non-signing countries as a comparison group. Estimates suggest that signing an FTA on average produced a 20 percent increase in the number of labor inspectors and a 60 percent increase in the number of inspections relative to countries without an FTA.