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Does free trade result in a “race to the bottom” in which production and jobs move to countries with the weakest labour and environmental standards?

No. Free trade generally results in an improvement in labour and environmental standards in both importing and exporting countries – in other words it creates a race to the top. There are several reasons for this.

  

  • First, free trade leads to innovation, as competing companies seek to identify better ways of providing consumers with goods and services. These increases in productivity benefit consumers, but also those people who lend resources to the process: the workers (who lend their labour and are able to demand better wages and more commodious working environments) and the investors (who lend their capital and are able to demand bigger dividends).
  • Second, the same innovations make production cleaner. They result in better, less expensive goods and services, produced using fewer inputs – and generating less waste. In other words, free trade directly drives eco-innovation, reducing environmental impacts while improving goods and services.
  • Third, as economies grow and people become wealthier – as a result of free trade – they demand better conditions for workers and the environment.

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