Wages as a Trade Governance Problem
This post argues that adequate wages should be understood as a trade governance problem, not merely as a labor or human rights issue. Legal scholarship increasingly recognizes that poor labor practices in global supply chains are in part caused by the purchasing practices of multinational buyers.[i] If corporate trade activities shape what employers can pay their workers, then trade governance should have a role in addressing wage inadequacy. Yet trade and labor law remain institutionally separated in a way that leaves the commercial drivers of low wages largely unregulated.[ii] Bridging this divide requires recognizing how different legal instruments—from due diligence legislation to facility-specific enforcement mechanisms—can reach different links in the supply chain.
Goods produced through global supply chains often reach consumers at prices made possible by very low labor costs.[iii] Workers in those supply chains are routinely paid wages below subsistence levels, even where employers comply with domestic wage law.[iv] In Bangladesh, for example, garment workers earn a minimum of USD 113 per month,[v] while living expenses for a basic, but decent standard of living were estimated at USD 248 per month.[vi] In global supply chains, this gap reflects a broader wage governance problem: legal wage compliance does not necessarily ensure adequate wages for workers.[vii]
International human rights law recognizes the right of every worker to an adequate wage through the Universal Declaration of Human Rights (UDHR)[viii] and the International Covenant on Economic, Social and Cultural Rights (ICESCR).[ix] As defined by the International Labour Organization (ILO), a “living wage” is the wage level necessary for a worker and their family to afford a basic, but decent standard of living; this generally includes the costs of food, housing, healthcare, and education.[x] Additionally, living wage estimates consider a country’s circumstances and the normal hours of work.[xi] The minimum wage, as distinguished from a living wage, is the legal wage floor set by each national government.[xii] It is not uncommon that the minimum wage falls well below any given living wage estimate.[xiii]
Living wages are recognized in human rights and labor law frameworks, but they are not a trade obligation imposed by the World Trade Organization (WTO).[xiv] There exists a long history of resistance to the WTO imposing labor standards on its members.[xv] Early efforts to link trade and labor appeared in the formation of the International Trade Organization (ITO); its founding documents contemplated a “social clause” conditioning trade benefits on respect for labor rights, including fair wages related to productivity.[xvi] However, at the 1996 Singapore Ministerial Conference, WTO members formally endorsed the ILO as the proper forum for labor standards, declaring that “the comparative advantage of countries, particularly low-wage developing countries, must in no way be put into question.”[xvii] Developing countries, among others, objected that such standards would serve as protectionist tools for developed economies to undermine the comparative advantage of low-wage markets.[xviii] Modern trade regimes, including the WTO, continue to avoid introducing labor standards into their regulatory frameworks, reflecting those concerns.[xix]
Labor and trade thus exist in separate legal regimes, each with their own forms of regulation and oversight. The ILO promotes standards concerning adequate wages and decent living,[xx] but its conventions (e.g., Convention No. 131) address wage-setting procedures, not wage levels, and cannot impose mandatory obligations.[xxi] To enforce its standards, the ILO relies on state implementation, labor inspectorates, and supervisory or soft-law mechanisms.[xxii] Trade law, by contrast, operates through enforceable rules governing market access, competition, and cross-border commerce.[xxiii] This institutional division means that labor law recognizes wage adequacy as a legal concern, while trade law largely excludes wages from its regulatory purview, even as trade and supply chain structures directly influence what suppliers can pay.[xxiv]
In highly competitive global markets, substantial downward pressure is absorbed by labor.[xxv] Multinational brands pressure suppliers to reduce costs, shorten lead times, and produce a variety of products in smaller batches.[xxvi] Suppliers adjust labor costs because they are often the only variable within their control—reducing employee benefits, imposing excessive hours, or suppressing wages to meet unit prices and other terms dictated by buyers.[xxvii]
Even when global buyers invest in corporate social responsibility (CSR) programs, their own upstream business practices—product development, commercialization, purchasing—inadvertently undermine those efforts.[xxviii] At the same time, developing-country governments often refuse to enforce their own domestic labor laws for fear that doing so could drive up costs and drive away foreign investment, sometimes granting manufacturers exemptions from wage, work hour, and social insurance regulations to provide a more hospitable business environment.[xxix] What results is a structural dynamic wherein commercial arrangements make higher wages unviable. Low wages thus persist not only because the legal wage floors themselves are inadequate, but also because supplier firms are economically constrained from exceeding them.[xxx]
Living wages must therefore be addressed partly through trade governance. This does not mean trade law should displace labor law. Rather, different legal instruments can address different points of intervention along the supply chain. The protectionism critique—that labor-trade linkage serves as a tool for developed countries to undermine developing countries’ comparative advantage—has force when labor standards are wielded to restrict market access for low-wage economies.[xxxi] But it has less purchase when the legal obligation falls on the multinational buyer, whose purchasing practices structure wage outcomes, rather than on the exporting country or its factories. The central question is not whether to punish exporters in developing countries with trade sanctions, but whether to require the firms that profit most from low-cost sourcing to account for how their commercial practices affect wages downstream.
In the absence of multilateral trade governance that incorporates labor standards, a fragmented architecture of national legislation, bilateral trade agreements, and unilateral preference programs emerged to fill the gap.[xxxii] These instruments operate at different governance levels and reach different links in the supply chain—but their proliferation itself demonstrates the inadequacy of the current international division between trade and labor.
Mandatory human rights due diligence (mHRDD) laws place legal obligations on the lead firm, the entity that controls pricing and sourcing, rather than on the supplier or the supplier’s government.[xxxiii] The German Supply Chain Due Diligence Act requires companies headquartered in Germany to conduct risk analyses covering their direct suppliers and to adopt “appropriate procurement strategies and purchasing practices” as preventive measures, including with respect to violations of adequate remuneration.[xxxiv] The French Law on the Duty of Vigilance creates civil liability when a company’s failure to implement its vigilance plan causes harm in its supply chain.[xxxv] Each mHRDD framework follows the causal chain described above: if buyer conduct structures wage outcomes, then law should reach the buyer.
A different model operates at the facility level. The USMCA’s Facility-Specific Rapid Response Mechanism (RRM) allows the United States to take enforcement actions against individual factories in Mexico that deny workers freedom of association and collective bargaining rights, with consequences including suspension of preferential tariffs or denial of entry of goods.[xxxvi] In its first cases involving General Motors in Silao and Tridonex in Matamoros the RRM achieved remediation in roughly 90 to 140 days; this represented a dramatic improvement over the nearly ten years consumed by the Guatemala CAFTA-DR labor dispute.[xxxvii] The RRM is not intended to address wages or buyer pricing power and its enforcement model targets factories and governments, not upstream multinational buyers.[xxxviii] Still, the RRM demonstrates a crucial insight: that enforceable, facility-level trade consequences can alter firm behavior rapidly when commercial stakes are concrete and immediate. It also serves to illustrate why buyer-facing due diligence obligations remain necessary as the RRM reaches the production site but not the pricing decisions that structurally suppress wages.
A final instrument targets the exporting country’s regulatory environment. The Generalized System of Preferences (GSP), maintained by both the U.S. and the E.U., conditions preferential tariff treatment on compliance with labor rights criteria, including acceptable conditions of work with respect to minimum wages.[xxxix] Beneficiary countries that fail to meet these standards risk suspension or withdrawal of preferences, as when the United States revoked several of Bangladesh’s GSP benefits after Rana Plaza, or when the EU partially withdrew Cambodia’s Everything But Arms (EBA) preferences in 2020.[xl] Unlike mHRDD laws, which target the buyer, or the RRM, which targets individual facilities, GSP conditionality leverages the threat of lost market access to pressure governments into strengthening domestic labor governance.
These examples suggest that inadequate wages need not (and cannot) be addressed through a single instrument. Modern mHRDD legislation targets the commercial relationship between buyer and supplier, reaching the upstream pricing decisions that may drive wage suppression. Facility-level mechanisms like the RRM target production-site compliance and show that labor enforcement has impact when consequences are swift and commercially meaningful. GSP conditionality targets the regulatory environment maintained by exporting-country governments. Each addresses a different link in the causal chain. A legal framework adequate to the problem of inadequate wages in global supply chains would combine these approaches rather than relying on employer-side labor regulation via ILO soft-law alone.
Julia Rallo is a staff member of Fordham International Law Journal Volume XLIX.
[i] See Sarosh Kuruvilla & Chunyun Li, Brand Purchasing Practices and Labor Outcomes in Apparel and Footwear Supply Chains: The Case of Multi-Buyer Suppliers 2 (Cornell Univ. & London Sch. of Econ., Working Paper, July 1, 2025), https://www.ilr.cornell.edu/sites/default/files-d8/2025-07/brand-purchasing-practices-gli-report.pdf; Mark Anner, Squeezing Workers’ Rights in Global Supply Chains: Purchasing Practices in the Bangladesh Global Export Sector in Comparative Perspective, 27 Rev. Of Int’l Pol. Econ. 320, 320–21 (2019); Mark Starmanns, Purchasing Practices and Low Wages in Global Supply Chains: Empirical Cases from the Garment Industry (ILO, Conditions of Work and Employment Series No. 86, 2017).
[ii] See Jean-Marc Siroën, Labour Provisions in Preferential Trade Agreements: Current Practice and Outlook, 152 Int’l Lab. Rev. 85, 85–86 (2013); James J. Brudney, Hiding in Plain Sight: An ILO Convention on Labor Standards in Global Supply Chains, 23 Chi. J. Int’l L. 272, 276–85 (2023) (documenting the failure of both public law approaches in developing countries and private CSR approaches to address labor conditions in global supply chains, and arguing that existing frameworks leave "a wide gap" between labor standards and practice).
[iii] See Labour Behind the Label, Fashion Facts: Your Guide to Big Fashion and How We Change It 6 (2025), https://labourbehindthelabel.org/wp-content/uploads/2025/09/FashionFacts2025.pdf (“Workers who make our clothes rarely earn more than 5% of the cost that consumers pay for garments.”).
[iv] See Annika Surmeier, Ines Meyer & Molefe Maleka, Living Wages in Global Value Chains: Pitfalls and Pathways to Successful Implementation, Organizational Dynamics, 2025 at 1.
[v] See Asia Floor Wage All., Global Living Wage Priorities: Union-Led Solutions, at 7 (2025), https://asia.floorwage.org/wp-content/uploads/2026/03/Living-Wage-Roundtable-Report.pdf.
[vi] See Guillermo Guzmán Prudencio et al., Living Wage Update Report: Dhaka and Satellite Cities, Bangladesh, 2025 at 1, 5 (2025), https://www.ankerresearchinstitute.org/bangladesh-benchmarks/livingwage-nonmetroargentina-2020-emhn8-6k6ew-59zrl-bpbkr-gr7r6-x8622-met58-6kxed-g8a6z-78twb-wdfy4.
[vii] See ILO, International Labour Standards on Wages, https://www.ilo.org/international-labour-standards/international-labour-standards-wages (last visited May 7, 2026).
[viii] See Universal Declaration of Human Rights, art. 23(3), Dec. 8, 1948, G.A. Res. 217A (III), U.N. Doc. A/810 (“Everyone who works has the right to just and favourable remuneration ensuring for himself and his family an existence worthy of human dignity”); see also UDHR, art. 25(1) ("Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care…").
[ix] See International Covenant on Economic, Social and Cultural Rights, art. 7, Dec. 16, 1966, 993 U.N.T.S. 3 (recognizing the right of everyone to "just and favourable conditions of work" ensuring "fair wages" and "a decent living for themselves and their families").
[x] See ILO, Meeting of Experts on Wage Policies, Including Living Wages, Doc. MEWPLW/2024/7, at 3 (Mar. 14, 2024), https://www.ilo.org/resource/adopted-conclusions.
[xi] See id.
[xii] See OECD, Handbook on Due Diligence for Enabling Living Incomes and Living Wages in Agriculture, Garment and Footwear Supply Chains, at 9–13 (2024), https://doi.org/10.1787/6ff52567-en (noting that minimum wages are binding and have the force of law, whereas living wage estimates are "voluntary reference values" and that the two "are often incorrectly used interchangeably.")
[xiii] See Surmeier, Meyer & Maleka, supra note 4, at 1; see also OECD Handbook, supra note 12, at 6, 9–13 (“While the minimum wage represents the lowest legal pay set by governments to protect workers from exploitation, it often falls short of covering all essential expenses”).
[xiv] See WTO, Labour Standards: Consensus, Coherence and Controversy, https://www.wto.org/english/thewto_e/whatis_e/tif_e/bey5_e.htm (last visited May 7, 2026) ("The WTO agreements do not deal with labour standards."); WTO, Trade and Labour Standards: A Difficult Issue for Many WTO Member Governments, https://www.wto.org/english/thewto_e/minist_e/min01_e/brief_e/brief16_e.htm (last visited May 7, 2026) ("Labour standards are not subject to any WTO rules or disciplines at present.").
[xv] See generally Daniel Drache, The Short but Significant Life of the International Trade Organization: Lessons for Our Time (Ctr. for the Study of Globalisation & Regionalisation, Working Paper No. 62/00, Nov. 2000), https://wrap.warwick.ac.uk/id/eprint/2063/1/WRAP_Drache_wp6200.pdf.
[xvi] See id at 16–17. The ITO’s Havana Charter of 1948 declared that “unfair labour conditions, particularly in production for export, create difficulties in international trade” and required members to “take whatever action may be appropriate and feasible to eliminate such conditions.” As such, the Havana Charter provided a linkage between labor standards and the ITO's dispute settlement procedures to enable remedial action. See Havana Charter for an International Trade Organization, art. 7, Mar. 24, 1948, U.N. Doc. ICITO/1/4.
[xvii] See World Trade Organization Ministerial Conference, Singapore Ministerial Declaration, WT/MIN(96)/DEC (Dec. 13, 1996), https://www.wto.org/english/thewto_e/minist_e/min96_e/wtodec_e.htm (“We reject the use of labour standards for protectionist purposes, and agree that the comparative advantage of countries, particularly low-wage developing countries, must in no way be put into question.”).
[xviii] See World Trade Organization (WTO), Trade and Labour Standards, https://www.wto.org/english/thewto_e/minist_e/min99_e/english/about_e/18lab_e.htm (last visited Apr. 3, 2026) (“Most developing countries and many developed nations believe the issue of core labour standards does not belong in the WTO. These member governments see the issue of trade and labour standards as a guise for protectionism in developed-country markets.”).
[xix] See supra note 14.
[xx] See ILO Constitution, pmbl., June 28, 1919, 15 U.N.T.S. 40; ILO, International Labour Standards on Wages, https://www.ilo.org/international-labour-standards/international-labour-standards-wages (last visited Apr. 3, 2026).
[xxi] See ILO Conv. No. 26, Minimum Wage Fixing Machinery Convention (1928) (encouraging ILO member States to implement minimum wages “for workers employed in certain of the trades … in which no arrangements exist for the effective regulation of wages by collective agreement or otherwise and wages are exceptionally low”); ILO Conv. No. 131, Minimum Wage Fixing Convention (1970) (requiring that the needs of workers and their families, cost of living, social security benefits, and economic factors be considered in setting wages).
[xxii] See e.g, ILO, Meeting of Experts on Wage Policies, Including Living Wages, supra note 10, at 3.
[xxiii] See e.g., WTO, What We Do, https://www.wto.org/english/thewto_e/whatis_e/what_we_do_e.htm (last visited Apr. 3, 2026).
[xxiv] See Drache supra note 15 at 25 ("Without the ITO there was no institutional place for labour standards in the GATT nor later in the WTO.").
[xxv] See Surmeier, Meyer & Maleka, supra note 4, at 2.
[xxvi] See Starmanns, supra note 1, at 1, 14.
[xxvii] See Ergon Assocs., Living Wages in Global Supply Chains: A New Agenda for Business, at 23 (Joint Ethical Trading Initiatives 2015), https://www.ethicaltrade.org/sites/default/files/shared_resources/living-wages-in-global-supply-chains.pdf (“Compared to 'fixed costs' such as materials, transport or energy, labour wages are more likely to be a 'residual variable' . . . most likely to absorb downward competitive pressures.”).
[xxviii] See Kuruvilla & Li, supra note 1, at 4.
[xxix] See Siroën, supra note 2, at 85, 95.
[xxx] See Anner supra note 1, at 27 (documenting how declining unit prices leave suppliers "little choice" but to suppress wages and conditions); Starmanns, supra note 1, at 14 (finding that "suppliers absorb cost reductions primarily through wage adjustments because labour is the most flexible cost component").
[xxxi] See WTO, Trade and Labour Standards, https://www.wto.org/english/thewto_e/minist_e/min99_e/english/about_e/18lab_e.htm (last visited May 7, 2026) ("Most developing countries and many developed nations believe the issue of core labour standards does not belong in the WTO. These member governments see the issue of trade and labour standards as a guise for protectionism in developed-country markets."); Jagdish Bhagwati et al., Third World Intellectuals and NGOs Statement Against Linkage (TWIN-SAL) , Cuts Int’l, https://cuts-international.org/third-world-intellectuals-and-ngos-statement-against-linkage/ (arguing that labor standards linked to trade "will inevitably tend to be selectively biased against developing countries").
[xxxii] See Siroën, supra note 2, at 85–87 (documenting the proliferation of labor provisions in bilateral and regional trade agreements as a response to the WTO's exclusion of labor standards).
[xxxiii] See e.g., European Parliament and Council Directive 2024/1760 of 13 June 2024 on Corporate Sustainability Due Diligence, art. 1(1), 2024 O.J. (L 1760) (imposing due diligence obligations on EU-domiciled or EU-operating companies with respect to "actual and potential adverse human rights impacts" in their "chains of activities").
[xxxiv] See German Supply Chain Act (LkSG), Federal Ministry of Labour and Social Affairs (Dec 17, 2025), https://www.csr-in-deutschland.de/EN/Legislation/German-Supply-Chain-Act/german-supply-chain-act (listing “withholding an adequate wage” among the protected human rights); Sarosh Kuruvilla & Chunyun Li, Brand Purchasing Practices and Labor Outcomes in Apparel and Footwear Supply Chains: The Case of Multi-Buyer Suppliers 2 (Cornell Univ. & London Sch. of Econ., Working Paper, July 1, 2025), https://www.ilr.cornell.edu/sites/default/files-d8/2025-07/brand-purchasing-practices-gli-report.pdf;
[xxxv] See Bus. & Hum. Rts. Res. Ctr., France's Duty of Vigilance Law (2026), https://www.business-humanrights.org/en/big-issues/corporate-legal-accountability/frances-duty-of-vigilance-law/.
[xxxvi] See Justino De La Cruz, Consequences of Non-compliance with USMCA Labor Provisions: Potential Effects on Exporting Firms 2, 13, 16 (U.S. Int'l Trade Comm'n, Economics Working Paper No. 2022–05–B, May 2022), https://www.usitc.gov/publications/332/working_papers/consequences_of_non-compliance_of_labor_provisions_5-24-2022.pdf.
[xxxvii] Id. at 10, 20.
[xxxviii] Id. at 13–16; White & Case, USTR and US Labor Unions Initiate First Proceedings Targeting Mexican Facilities Under USMCA's 'Rapid Response' Mechanism (May 17, 2021), https://www.whitecase.com/insight-alert/ustr-and-us-labor-unions-initiate-first-proceedings-targeting-mexican-facilities (“The stated goal of the Mechanism is to ensure that workers in the two countries are not denied the right of free association and collective bargaining”).
[xxxix] See ILO, Trade Unions, Labour Governance and Economic Upgradation in Value Chains 26–27 (Working Paper No. 127, Sept. 2024), https://www.ilo.org/sites/default/files/2024-09/127_web.pdf (describing U.S. and EU GSP conditionality mechanisms and their labor rights requirements).
[xl] See Stephen J. Frenkel & Elke S. Schuessler, From Rana Plaza to COVID-19: Labour Governance in Garments, 160 Int’l Lab. Rev. 589, 598 (2021) ("[I]n the immediate aftermath of Rana Plaza, the US Government responded to NGO and union pressure and suspended several of Bangladesh's advantages under the Generalized System of Preferences (GSP)."); European Commission, Cambodia Loses Duty-Free Access to the EU Market over Human Rights Concerns (Aug. 12, 2020), https://ec.europa.eu/commission/presscorner/detail/en/IP_20_1469 (announcing partial withdrawal of EBA preferences effective August 12, 2020, based on "serious and systematic violations" of human rights).
This is a student blog post and in no way represents the views of the Fordham International Law Journal.