Does free trade lead to a “race to the bottom” in global labor and environmental standards?
While this is a frequently heard complaint, there is no evidence of such a “race to the bottom.” In fact, the opposite is true: expanding trade and rising incomes tend to promote higher social standards. As incomes rise in developing countries, their people and governments are able to devote more resources to protecting the environment and lifting labor standards, while an expanding middle class begins to expect and demand improvements in the environment and working conditions. Empirical evidence shows that as nations reach middle and upper income levels, their environmental policies and indicators improve. Working conditions also improve and rates of child labor fall. Foreign investment in developing countries contributes to this “race to the top” by creating better paying jobs and by “importing” better business practices and work rules. Contrary to the “race to the bottom” myth, low wages and lax environmental rules are not an irresistible magnet for foreign investment. Foreign inves
