Is Race To The Bottom a Valid Reason for Standard Harmonization?

Just as there are many valid reasons against standard harmonization, there are also many credible reasons for it. But there is one reason for standard harmonization that I just can’t get around: the idea of preventing race to the bottom. The argument goes that in the current globalized world where it is so much easier for firms to relocate their production plants to low-cost locations, firms with existing plants in countries with higher standards (higher cost) can easily shift them to countries with lower standards (lower cost), resulting in job losses. To prevent such a move, countries with higher standards will revise down their requirements and spark a race to the bottom, causing lower standards across the world.

My gripe is driven by the fact that there is no clear evidence where countries have lowered their standards in order to prevent job losses. On the other hand, most countries benefiting from FDI appear to have raised their standards, partly driven by the more demanding middle class whose population share has increased. A point of note is a recent article about how Apple has raised the labour standards in China. Although critics may say that it is a one-off event caused by the widespread negative publicity, it is also correct to say that China has come a long way with regards to how it treats its labour force. Among them, the 2008 labour contract law should ring a bell to most people, not to mention the latest promise by China’s Cabinet to raise minimum wage by 13 percent a year until 2015.