Monday, March 22, 2004; Page A20

THE ETHICAL basis of free markets is that they reflect free, individual choices. Workers may be paid little, but if they sign up for jobs voluntarily, then those jobs must be the best options available. Removing those jobs, for example, by closing factories on the grounds that they are "sweatshops," will make workers' lives worse. But what if the workers' choices are not free -- what if workers are locked up in factory dormitories and brutalized when they protest? In that case capitalism has lost its ethical foundation. Capitalism may remain a wonderful engine of economic growth, and growth in the long term tends to bring freedom. But in the meantime it will not be just.

This is why the trade complaint against China, filed by the AFL-CIO last week, deserves qualified sympathy. China's police state abuses workers, who sometimes go unpaid and then get beaten up when they demand what is owed to them; it has punished labor leaders with harsh prison sentences handed down after fake trials. The AFL-CIO is right that such treatment violates the principle that free economics should be rooted in free politics. If the effect of the petition is to goad the U.S. government into protesting human-rights abuses in China, it will be constructive.

But the unions' ambitions go beyond that. Their petition demands that the Bush administration punish China with trade sanctions, arguing that Chinese abuses drive down wages and increase the competitive pressure on American workers. In fact, ending abuses in China would not save many American jobs. China has 800 million people living in the countryside, where underemployment afflicts one in three workers; for these people, wages of $2 a day represent an attractive income. Market forces, not denial of workers' rights, are overwhelmingly the main reason for China's low wages.

Still, China's abusive labor practices are abhorrent, so one can agree with the unions' objective without accepting their supporting argument. The question is whether trade sanctions are the right way to help Chinese workers. Sanctions can sometimes work, especially if their aim is to extract specific concessions: that certain prisoners be released, for example, or that a particular labor practice be stopped. The unions' demand is that China set up an administrative system to enforce labor rights throughout its vast manufacturing sector. That might prove more than the communist regime can stomach, in which case the trade sanctions would disrupt trade without improving labor rights -- retarding the economic progress that may bring political freedom in the long run.

The Bush administration must decide whether to consider the petition and what sanctions if any to apply. If it accepted the idea of imposing trade penalties on China, the Chinese would likely appeal to the World Trade Organization's arbitration panel, and the appeal might well be successful, forcing the United States to lift its sanctions. If, on the other hand, the panel sided with the United States, the WTO would for the first time have imposed on its members a duty to protect labor standards.

Would this be a good thing? Yes, provided that these labor standards governed basic political freedoms rather than mandating minimum wages or even minimum standards of safety. Imposing economic regulation on poor countries would harm poor workers by destroying their jobs. But even if the new standards were reasonable, they might cause a backlash from developing countries, which regard external imposition of labor standards as protectionism in disguise. If developing countries withdrew from the WTO as a consequence, trade would be disrupted, and workers would suffer once again.

In short, if trade is used as a lever to promote a revolution in international labor rights, the lever will break. Still, the unions are pursuing a good cause, and the administration should agree to consider their petition. Here's a small proposal: To allay poor countries' fears of disguised protectionism, the United States should couple measured promotion of labor rights with bigger cuts in U.S. tariffs on products such as textiles and sugar. That would displease some U.S. unions and businesses, but it would further the interests of the world's poorest workers.