Impact of labor standards on Egyptian exports with special emphasis on child labor
Ahmed Farouk Ghoneim; Ulrike Grote
A large proportion of internationally traded goods are subject to labor standards and this proportion is on a continuing rise. Such developments created a hot debate about the impact of labor standards on trade, but there has been no clear international consensus on the net costs and benefits arising from such regulations on market access, export performance and competitiveness in developing countries. This study contributes to the debate by providing results from a survey of 83 firms in the textiles and ready-made garments industry in Egypt. The main result which derived from the descriptive analysis is that child labor is a phenomenon that exists in the textiles and ready-made garments industry with a relatively high share in the sample (16%). All destinations receive exports that embody child labor; however, the non Western destinations seem to receive the lion's share. Moreover, it has been found that a large proportion of firms with child labor export more than 50% of their output. The econometric findings which focus mainly on the determinants of the supply of core labor standards, suggest that first, several variables related to labor standards show a significant effect on the probability of a firm to export more than 50% of its output and exclusively to the West (namely EU and the US). Second, variables which ensure the enforcement of labor standards have a higher explanatory power for the probability of a firm to perform well in exports than compliance and awareness variables. Third, firms are likely to self-enforce labor standards based on their expectation to improve their market access and the competitiveness of their export products. Thus, the driving forces leading to the implementation of higher labor standards at the firm level are of economic nature rather than social. And finally, for those firms with a high volume of exports to Arab countries and for smaller firms (both exporting to the West or Arab countries), the effect of standards might lead to export diversification.
