LABOUR LAW – II PROJECT

“SHOULD SOCIAL CLAUSES BE INCLUDED IN

INTERNATIONAL TRADE AGREEMENTS?”
Submitted by:-

Ritu Kumari

NLS ID: 2499

XV Trimester, V Year

Date of Submission: 19.04.2023

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 TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3

PRESENCE OF SOCIAL CLAUSES IN ITA......................................................................................5

TRADE-LABOUR LINKAGE.......................................................................................................5

EXTERNAL INTERVENTION......................................................................................................7

IMPACT VS IMPORTANCE...........................................................................................................10

INCONCLUSIVITY...................................................................................................................11

ILLUSTRATIONS.....................................................................................................................12

CONCLUSION.............................................................................................................................15

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 INTRODUCTION

For many years, the topic of how, if at all, should global imposition of labour standards
condition, or even be linked to, trade relations has been a major cause of contention.
Substantive to impassioned discussions on the economic desirability of such standards and
their parallel scope of protectionism and exploitation has covered the range of arguments
within this debate. And this has, in the recent past, posed major limelight on the incorporation
of social clauses in international trade agreements (“ITA”) as one of the better ways of
imposing minimum labour standards, mostly on developing nations to facilitate their
conformation to free and fair labour.1

The current economic and political context of the world-economy is rather different than
when the idea of social clauses was born. With more than 170 international agreements on
workers’ rights and social conditions, the International Labour Organization (“ILO”) and the
World Trade Organization (“WTO”) have been discussing this issue frequently and in-depth
since years.2 Previously the economic perspectives dominated these deliberations, assessing
the possible implications of labour standards on product costs in countries who were at
relatively comparable development stages. There were exceptions allowed in the initial ILO
Conventions to the rules enacted in favour of particularly specified countries whose economic
development was seen to be less advanced. However, it’s the suspicion towards the Third-
world nations commanding them now; how they are resistant of social clauses and ratification
of ILO Conventions because they only eye to gain decisive advantages for their exports and
sale of goods. They are accused of assuming a laissez-faire approach to labour issues to fund
their economic boom by stifling their workers’ legitimate interests. This is resultant of the
varying outcomes of inclusion and exclusion of social clauses overtime, unique to specific
countries, governments, societies, and interest groups and their influence.

This paper however very narrowly deals with the primary question of whether social clauses
should even be included in ITAs or not. The author has attempted to formulate an answer by
relying on both, the economic theories and case studies, surrounding the question on trade-
labour linkage.

1
“Fair labour standards should be internationally agreed in order to prevent unfair competition and to
facilitate trade liberalisation” Miguel Wionczek, ‘The Brandt Report’ (1981) 3:1 TWQ 104.
2
Christopher Scherrer, ‘Protecting Labour in the global Economy: A Social Clause in Trade Agreements?’
(1998) 20(1) New Political Science 53.

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 PRESENCE OF SOCIAL CLAUSES IN ITA

There is a long history on the measures taken to establish the relationship between
international trade and workers’ rights. The governments of importing countries have been
pressurised by interest groups to use access to their markets as a bargaining chip for
improving the appalling working conditions in exporting countries and their potential impact
on the quality and quantity of local employment. Exporting countries have typically opposed
such actions. I argue that the presence of a regulatory mechanism in bilateral or multilateral
ITAs is inevitable since; i) there exists an intricate link between trade and labour and; ii) it’s
almost inalienable for world trade to not grow at the expense of workers’ socioeconomic
rights. Therefore, absence of a social clause addressing such linkages and their consequences
on labour is more harmful than its presence.

TRADE-LABOUR LINKAGE

In order to understand the trade-labour linkage, it’s important to look at both the economic
and social arguments for and against social clauses. Economically, labour costs and standards
cannot be disassociated from one another. According to trade theory, nations focus on
producing goods and services they have a comparative advantage in, i.e. where they can do so
more cheaply than other nations.3 However, a nation can produce goods more profitably
under stricter labour standards if it exploits its workers and pays them low. This race in
exports is affordable with a competitive advantage in some industries which further results in
a race to the bottom in terms of labour standards by curtailing workers’ rights. It’s essentially
to attract foreign investments as companies prefer moving production to countries with cheap
labour, and exporting countries eventually focus on productions they have comparative
advantages in. There is also a simultaneous potential for specialization, production efficiency,
technology upgradation and economic growth that can create or reduce jobs and increase or
decrease wages, subject to a nation’s dependence on higher or lower labour standards.4

Now it depends whether there is a requirement of an external intervention in the operation of

trade to balance labour standards and workers’ conditions. One can employ the neo-classical
and neo-institutional schools of economic thoughts to study the same. The neo-classical

3
Kevin Kolben, ‘The New Politics of Linkage: India’s Opposition to the Workers’ Rights’ (2006) 13 IJGLS 225.
4
Martin Myant, ‘Labour Rights in Trade Agreements: Five New Stories’ Working Paper 2022.08 ETUI
https://www.etui.org/sites/default/files/2022-03/Labour%20rights%20in%20trade%20agreements-five%20new
%20stories-2022.pdf.

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school contends that ITAs should solely focus on economic efficiency and liberalization.5
They find no empirical or theoretical basis for administering core labour standards through
ITAs, because as per them an open market economy, free trade and unregulated competition
are prerequisites for economic growth. Social clauses are an unnecessary form of
protectionism that raise costs and undermine this growth, and that basic labour standards aid
in the realisation of objectives that are absolutely opposed to what’s intended. On the other
hand, proponents of the neo-institutional school find social clauses to be an important part of
ITAs for creating fair and equitable trading relationships, preventing exploitation, bettering
the governance and rule of law. They claim that there must be a structure of regulations
creating enforceable rights, obligations and dispute-resolution mechanisms, within which
domestic and international markets should function, and that the market cannot be left on its
own to take care of social and welfare outcomes. Social and economic objectives will always
clash against the catastrophic outcomes produced by a free market mechanism.6

Neo-institutional school can be relied upon to explain the need for social clauses because if
we follow neo-classicalists, there would be no argument favouring either international or
domestic labour standards since regulations would be considered to impede efficiency,
interfere with market forces, disincentivize investments, and create suboptimal labour
allocations. Reconciling regulatory mechanisms through multilateral agreements on labour
would be a challenge to the logic and principle of trade itself because national differences are
a necessary precondition for international trade. Thus, the existence of any universal labour
standard and a trade-labour linkage should be justified on the basis of economic, regulatory
and human rights, and not efficiency alone.

This can be related to the concept of merit goods originated by Musgrave as an economic
justification for the presence of social clauses. A merit good is a good that has positive
externalities, whose consumption not only benefits the individual consumer but also benefits
the society. The provision of merit goods is considered an important goal of public policy
because they generate these externalities that would not be provided by the market alone. If
left to the market forces, these goods are not the ones that will be favoured in terms of supply,
not that the market would not technically provide them, but a certain government intervention
would be needed because they satisfy needs (‘merit needs’) of high social importance. The

5
Hoe Lim, ‘The Social Clause: Issues and Challenges’
<https://training.itcilo.org/actrav_cdrom1/english/global/guide/hoelim.htm#3.%20THE%20SOCIAL
%20CLAUSE:%20WHAT%20IS%20IT%20ALL%20ABOUT?>
6
ibid; Herbert Feis, ‘International Labour Legislation in the light of Economic Theory’ (1996) 135:3 ILR.

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aim of such government policy is to increase that level of consumption compared to what
individuals would have consumed under a pure market allocation. So, either through
regulation or taxation, the state will aim to decrease the consumption of ‘demerit goods.’ 7
Here, social clause is the merit good which fixates certain rights and duties as inalienable and
challenges the commodification of humans. 

For example, absence of social clauses dealing with child labour is a demerit good, which
outrightly permits and promotes child exploitation. We may understand the linkage between
international trade and child labour’s emergence in the broader context of social dumping,
referring to the sale of goods in foreign markets at prices lower than normal prices. 8 This is
due to the low productions costs and wages enforced under poor labour conditions within the
normalized environment of preferring cheap and free child-labourers for their lower demands,
submissiveness, and relative skilful physicality. It benefits both the trading partner nations in
their accrued profit-margin, and establishes them as mixed institutional settings of markets
and politics overtime, resulting in social compromises between different values, hidden from
direct public eye such that they achieve the lowest moral cost.

EXTERNAL INTERVENTION

Attempts to form the trade-labour linkage within a multilateral framework began in the
1940s, when an international treaty prohibiting the movement of goods manufactured in
violation of labour standards such as the right to organise, minimum working hours,
minimum wages, and the prohibition on child labour was called for by trade-unions in the
United States and Britain. The first opportunity to make this a reality came in 1947, during
the failed establishment of the International Trade Organisation (“ITO”). The ITO’s charter
included a provision mandating member countries to “take whatever action may be
appropriate and feasible to eliminate [unfair labour] conditions within its territory.”9 This
failed as it perpetuated the industrialized nations to design unilateral and biased measures of
sanctions, tariffs, restrictive quotas, trade-barriers, product bans, only discouraging
international cooperation. The successive General Agreement on Tariffs and Trade then did
not prescribe anything on labour rights.10

7
 Maxime, Desmaires-Tremblay, ‘Calabresi on Merit Goods’ Forthcoming, Global Jurist (2019)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3390399.
8
Usual prices at which goods are sold in the producer/exporting country subject to its resource endowments,
technology and market conditions.
9
United Nations Conference on Trade and Employment, 24 March 1948, Final Act: Havana Charter for an
International Trade Organization, Art. 7, para. 1,U.N. Doc. E/CONF.2/78.
10
Kolben (n 3).

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The Uruguay Round of 1986 was probably the next important precedent which clarified the
underlying idea behind social clause to be that of ensuring that all nations, irrespective of
cross-cultural differences comply with a set of basic minimum labour standards to engage in
international trade on a level-playing field. And this was followed by a string of diverse ITAs
with social clauses of differing impacts whose effectiveness is questionably uncertain till this
date.

A social clause is essentially a legal provision in a trade agreement that allows importing
countries to take trade measures against exporting countries that fail to adhere to a set of
internationally agreed minimum labour standards. Its imbibed with positive and negative
incentives; of compliances getting rewarded with preferential trade treatments, and violations
attracting higher trade-barriers, in the aim of promoting free and fair labour on paper.11
However, the practice of including social clauses has mostly been criticized as redundant;
driven by protectionist interests for the workers of developed nations rather than welfare
concerns, and a weapon for killing the third-world’s comparative advantage and hijacking
their sovereignty.

This is primarily because the ILO holds no power to enforce compliance and accountability
for social clauses, and rather resorts to persuasion and peer pressure without a punitive
mechanism. But it can also be because social clauses have mostly operated under the First-
world’s economic doctrines that presuppose a highly implausible world where the only
relevant outcomes are exchange and production of goods and services that happen as per
market demand, and anything that does not maximise this creation is not rationally and
economically acceptable. And this is not to say that social clauses are not pareto-optimal.

The presumption of the neo-classical school that no country on economic grounds would care
about the policy choices of other individual countries is completely off the mark because
even if a country’s particular action has no effect on the world price, it still significantly
impacts trade patterns and inevitably result in a relative gain or loss.12 Therefore, countries
are keenly interested in other nations’ political issues from an economic standpoint as and
when globalisation progresses. Hence, I assert that commercial policies cannot be the first
best tool to realise non-economic objectives and distortions in domestic markets, but rather
targeted domestic policy interventions of taxes and subsidies can. And social clauses in ITAs
at least open that door.
11
Erika de Wet, ‘Labor Standards in the Globalized Economy: The Inclusion of a Social Clause in the General
Agreement on Tariff and Trade/World Trade Organization’ (1995) 17 HRQ 443.
12
Hoe Lim (n 5).

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Yes, this drive for upward harmonization of standards is opposed by developing nations for
weakening economic principles that underpin trade, namely comparative advantage and cost
disparities. The imposition of trade penalties against exporters only because they sell their
goods for less than market value due to labour costs associated with their stage of economic
and social development is not supported economically. It does strip them off their advantage
in labour-intensive productions while ignoring the roots of such structural labour-market
distortions, loss of employment, proliferation of informal sectors, dismissal of workers into
vulnerable and hidden spaces etc.

However, the question of rights and welfare is equally important which the third-world by
default and out-of-choice attends under force and for returns. Social clause is a beginning,
insufficient alone when applied in a simplistic manner that allows unequal bargaining power.
It can only reach the interiors when gradual and comprehensive measures of prevention and
penalization accompany them. Meanwhile, this does not justify the absolute deletion of core
labour standards from ITAs. Langille in his analysis of free trade speaks about how even with
compliance when tariff levels become nil, because of trade distortions it will be replaced by
the question on the extent of changes in governmental competition regulation. 13 There would
be no discernible difference between the effects of a tariff, direct subsidy, relaxation in
employment law obligation and an overall refrainment from regulating in this regard. In this
scenario, neo-classicalists will have to answer what precisely qualifies as a neutral or natural
amount of regulation. Their remedy would be international regulatory competition,
essentially implying that market must choose the best degree of regulation. But this flawed,
circular reasoning will perpetuate socially unacceptable results by rational, self-interested
behaviour of market actors, which could be prevented by cooperation.14 In relation to
international regulatory competition, a mandate for merit goods in the global market can
expand to avoid the prisoner’s dilemma of say the third-world nations from one-upping each
other in lowering their regulatory costs. They realise that without any repercussions for
investment altogether, reducing labour standards is in their interests. This reasonable
engagement in race to bottom however is avoidable if there is a worldwide yield to
collaborate, which at the moment is obstructed by superior bargaining positions of the
industrialized nations in designing the ITAs.

13
B. Langille, “Labor Standards in the Globalized Economy and the Free Trade/Fair Trade Debate” in W.
Sengenberger and D. Campbell (eds), International Labor Standards and Economic Interdependence
(International Institute for Labour Studies, Geneva, 1994).
14
ibid.

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 IMPACT VS IMPORTANCE

All schools of economic thinking practically assume that trade and international economic
integration produce benefits, however, its clear that they are not automatic or/and always
evenly shared. Some nations have experienced very rapid growth and development due to
increased exports of manufactured goods, but they have not always been the best to heed
international agencies’ recommendations to liberalise imports and capital flows and vice-
versa. So allegations of unfair competition arising from the denial of recognised labour rights
have existed long before the current disputes too. The 1996 WTO Ministerial Conference in
Singapore notably decided that it had no direct responsibility for labour concerns, impacting
the recent history of labour clauses within free-trade agreements (“FTA”).

ITAs involving some of the most important development of labour provisions include the
United States and the European Union, hence I shall confine my research to their FTAs. In
exchange for benefits to businesses, their FTAs grant lower-income countries easier access to
markets for goods in those sectors that are still subject to heavy protection. The gains for the
majority of people in high-income countries may be insignificant or even adverse; like in the
U.S, large firms and wealthy households appear to be the sole beneficiaries. 15 Whereas, an
export-oriented development model, perhaps in return for losses in rural regions and from
greater food imports, is given to the lower-income countries. As more such provisions are
included as binding obligations on both nations, the pressure for change remains clearly more
on the lower-income ones.

The U.S and EU have evolved in their designs of FTAs overtime, exhibiting some notable
variations and considerable similarities.16 North Atlantic Free Trade Agreement (“NAFTA”),
was the first multilaterally negotiated trade agreement to contain social clauses, and it with its
flaws and incorrectness laid the founding brick for a useful multilateral forum to consider
labour rights violations for future guidance. Its share of issues included; say how it did not
establish a set of minimum standards and rather required enforcement of national labour laws,
so due to the wide variancies between the labour laws of the various parties to this agreement,
certain rights could be granted in one country but denied in others. Or, how actions violating

15
K. Gallagher, S. Polaski, ‘Reforming U.S. Trade Policy for Shared Prosperity’ American Affairs Journal
(2020) 4:2 https://americanaffairsjournal.org/2020/05/reforming-u-s-trade-policy-for-shared-prosperity/.
16
A Smith, Free Trade Agreements and Global Labour Governance: the European Union’s Trade-Labour
linkage in a Value Chain World (Routledge, London, 2020).

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national laws relating to freedom of association, right to organize, collective bargaining,
strikes etc. were not sanctionable under it.17

But ITAs now contain a number of significant ILO commitments, Fundamental Conventions’
standards and also incorporate civil society participation through mechanisms and structures
for consultation and dispute resolution. But until date, these have always needed
governments’ or European Commissions’ initiatives and have been targeted at the partner
government rather than at specific employers for failing to uphold the standards.

INCONCLUSIVITY

Through and post several studies, a consistent conclusion has been reached that social clauses
achieve little or nothing. Whereas many studies emphasise on how the time period, data, and
efforts to gauge the ground-level impact of ITAs in reality are uncertain to conclude on their
absolute ineffectiveness. When the presence of social clauses in countries’ agreements are
compared to their subsequent revisions, there shows some improvements in letters of
legislations, although not greatly in employment, but there is no substance to presume
causality in either way in this circumstance.18

When individual cases are studied, evidence of any impact becomes considerably thinner. As
labour measures are made conditions for ratifying an ITA or implementing new reforms under
international guidance, its mostly like to have positive legislative outcomes.19 But in general,
examination of bargaining procedures show that negotiators do not press labour concerns and
accept parties’ good faith after securing some pledges. They are simply not prioritized by
governments in lieu of smooth commercial, political relations. The strength of laws
safeguarding business interests and the zeal with which they are pushed stand in stark
contrast and this has multidimensional causation relations in different countries.

The most efficient outcomes can be expected out of ITAs in a perfectly competitive market
which necessitates; i) availability of perfect information; ii) freedom of choice by economic
actors and; iii) no possession of power to dominate or control the market in one’s own
favour.20 However, in its absence, ITAs are bound to deliver subjectively complex results
since every domestic market comprises of actors, workers and employers, generally
constricted in their rationality and decision making powers. Numerous market segments

17
Anita Chan, Robert Ross, ‘Race to the Bottom: International Trade Without a Social Clause’ (2003) 24:6 TWQ
1011.
18
ibid.
19
ibid.
20
Christopher Scherrer (n 2).

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featuring oligopolies or monopolies experience imperfect competition where there exists
unequal power relationships. And the likelihood of these power imbalances worsening and
causing losses to efficiency is more in absence of core labour standards. That is why ILO
uniformly, universally recognizes and enforces freedom of association, non-discrimination,
freedom from forced labour, and elimination of child labour, at least.21

The mere inclusion of social clauses cannot be negated due to results which branch out of
numerous roots. A particular country’s conditions, economic policies, political leaders,
continual efforts by trade-unions, at a particular time determine their effectiveness. Its a
battle to confer appropriate strength to labour provisions in negotiations since ITAs are
centred around commercial matters. Its a matter of importance to be given to stakeholder
interactions like civil society and trade-unions to amend contracts as the pressure exerted
prior to ITA enactments are the strongest.

ILLUSTRATIONS

Vietnam has a monopoly of the Communist Party that only permits trade-unions organised
under the Vietnam General Confederation of Labour (“VGCL”), which often supresses
independent representations and abuses labour rights.22 Its recently entered Trans-Pacific
Partnership (“TPP”) and EU-Vietnam Free Trade Agreement (“EVFTA”) have similar core
elements in terms of commitments on employment conditions and rights, besides, the former
necessitates ratification of ILO Conventions and the latter only prescribes for continuous
efforts towards it. These have shown appreciable gains in Vietnam’s GDP and exports with
reduced tariff and non-tariff barriers for garments and footwear, 23 pushed for additional
adjustments for; guaranteeing membership to all union officials, criminally penalizing forced
labour alongside its abolition, and amending their discrimination laws. USA has even
volunteered to fund technical support for the improvement of their labour inspectorate via the
ILO. A pandora box of fundamental rights has opened up for discussion in Vietnam as the
TPP has a deadline, whose non-compliance can reinvite USA’s progressive tariffs. In fact,
before the EVFTA was approved, Vietnam ratified ILO Conventions No.98 on the right to
organise and collective bargaining and No.105 on abolition of forced labour. Under the TPP,
in alignment with U.S thinking, in its 2021 Labour Code it allowed formation of a grassroot
labour union imbibing the same rights as an official union, within a workplace independent of

21
ibid.
22
Its union membership is not automatic and not all foreign companies have VGCL union organisations present
within them.
23
J. Buckley, ‘Freedom of Association in Vietnam: A Heretical View’ (2021) 12:2 GLJ 79.

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the VGCL. Even though they are permitted to collaborate with worldwide organisations, they
do not have the right to have any political/policy involvements and are devoid of any state
support.24

These are termed as substantial progressions for a country that took this long to recognise
some of the basic labour rights. It’s a different domestic matter to ensure that things are
achieved given its repressive political environment and harassment of oppositions but it
nevertheless received a major confidence-boost by these FTA negotiations to further manifest
in actual practices. A similar wave of enthusiasm was witnessed in Georgia post its
Association Agreement with the EU in 2014 as it attempted to come closer to international
standards, but of course with flaws in its implementation, and laws. Its FTA surprisingly
helped with civil society participation and government’s accountability towards them.25

Contrary to this example is the FTA between USA, Canada and Mexico (“USMCA”) which
contains novel elements of enforceability. This was in light of NAFTA’s shortcomings in
Mexico that declined its GDP to one of the lowest among OECD members with USA being
the exporter here. Mexico’s bargaining system got 70-80 percent overtaken by protection
contracts which permitted complete employer dominance. According to surveys, these are
signed by unelected, unaccountable union representatives.26 This perpetuated lack of
awareness among workers with only minimum legal rights being advocated and accounted
for. The USMCA in addition under its new Rapid Response Labor Mechanism 27 conferred
greater power to the U.S and Canada and was concerned with granting rights of free
association and collective bargaining only to ‘priority sectors’ like mining and
manufacturing.28 While it elevated its complaint transparency with incorporation of
arbitration, the power of resolution essentially lied in the hands of National Labour Relations
Board of the U.S, with scope of differential penalties for Mexico and U.S enterprises. It
allowed an easier space in general for U.S bodies to interfere with Mexico’s rights.29

24
T. Trang, R.A. Bales, ‘On the precipice: Prospects for Free Labour Unions in Vietnam’ (2017) 19:71 SDILJ
71.
25
D. Martens, Domestic Advisory Groups in Eu Trade Agreements: Stuck at the Bottom or Moving up the
Ladder? (Berlin, Friedrich Ebert Stiftung, 2020); European Commission, Joint Staff Working Document:
Association Implementation Report on Georgia 18 final (5 February 2021)
https://eeas.europa.eu/sites/default/files/2021_association_implementation_report_in_georgia.pdf.
26
G. Benusan, K. Middlebrook, ‘Democratic Labor Reform in Mexico’ (Washington DC, 2020)
https://www.wilsoncenter.org/publication/democratic-labor-reform-mexico
27
https://ustr.gov/sites/default/files/files/agreements/FTA/USMCA/Text/31%20Dispute&20Settlement.pdf
28
Benusan and Middlebrook (n 26).
29
ibid.

12
A last reference could be the Korean labour law which has a monopoly union system,
restricting, even illegalising legitimate unionisation. Its EU FTA welcomed scale of increases
in trade however the nation never supported a consultation mechanism involving civil society
and trade-unions. Even after a positive change in government that approved labour reforms
along with more ILO ratifications, their frictional dispute amongst interest groups went to the
European Commission with Korean laws questioned to be incompatible with the ILO
Conventions.

These instances suggest all kinds of possibilities and directions that ITAs can go towards to
improve or struggle with national labour conditions. Uncertainty persists regarding the
durability of these changes and the extent to which ILO ratifications and legal amendments
would actually translate in reality. There is a need for better acknowledgement of human
rights and moral considerations altogether. The best outcomes can be anticipated when labour
laws address obvious issues with a nation’s employment practises. ILO
ratifications are only tiny steps towards improved employment relations because they do not
always cover nation needs. Ratification on the rights to association and collective bargaining
was somewhat exceptional in Korea, where trade union rights were a major issue, associated
with quite specific legislative changes. The laws emphasised in the USMCA were obviously
directed at flaws in the country’s current industrial relations framework. Due to the
Association Agreement’s larger scope, more concerns, like the requirement for a labour
inspectorate and safety and health at work, were included in Georgia. These incidents make
the effectiveness of trade restrictions more obvious than ever. The government’s willingness
to alter policies in order to lift sanctions, and accept conditions in ITAs prior to their
implementation demonstrate this. However, its obviously unclear whether countries’
employment law will completely change as a result of these modifications.

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 CONCLUSION

This paper attempted to strengthen the arguments in favour of incorporating a social clause in
ITAs by relying on the neo-institutional perspective of the market mechanism. It argued that
social clauses have to be deemed as inevitable external interventions initiated by trading
partner nations if certain social and welfare objectives are to be realised in labour conditions
and rights. It further questioned the free-market economic theory to discover the circular
nature of the neo-classical school with regard to the ideal degree of global control. It asserted
that the importance of social clauses cannot be comprehended solely by allowing the market
to determine the optimal level of international regulation by prioritizing economic efficiency
but rather must seek an empathetic understanding of developing nations’ future. Further, it
also tried to establish that there can be multidimensional factors impacting the final results of
social clauses however that is amenable to adjustments and improvements and cannot justify
the absolute deletion of addressal of labour rights in the form of these clauses. Comparative
cost advantages can be profitable in the short-run but proper living, education, and working
conditions will determine nations’ developments. Therefore, its beneficial for all individuals
as well as all trading nations.

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