The Unexpected Connection between Workers’ Rights and Mercantilism

Yesterday, President Obama announced the suspension of Generalized System of Preferences (GSP) benefits for Bangladesh. The suspension comes on the heels of outrage regarding labor conditions after an April factory collapse in the South-Asian nation killed more than 1,200 people. According to Obama, Bangladesh was not taking steps to protect internationally recognized standards of workers’ rights to its employees.

This removal of tariff breaks by United States makes a compelling statement, not only to Bangladesh, but also the rest of the world, about the importance of embracing accepted global standards to drive innovation and economic growth. As Bangladesh’s biggest trading partner after the European Union, the United States is well-positioned to leverage its trade policy in order to exert significant pressure on the Bengali government to reform its labor practices. As USTR Michael Froman stated, “The Obama Administration is committed to reflecting American values in our trade policy, including with regard to the rights of workers worldwide.”

GSP benefits are a privilege and should only extend to those countries that put into place policies that spur innovation and economic development. In other words, preferences need to go to countries that play by the rules of the international trade arena. Low labor standards for worker safety are just another mercantilist tool that emerging countries are mistakenly employing to leapfrog the development process. They encourage countries to view short term profits as the end goal, instead of long term sustainability and growth.

ITIF has already called for a suspension of GSP benefits to India because of its localization barriers to trade. This Bengali suspension demonstrates that America, and the rest of the developed world, should not tolerate innovation mercantilism, especially when it threatens the safety of workers.