Memorandum by Ms Linda Kaucher, Researcher,
London School of Economics
SUMMARY
The EU Trade Commission is including offers
of labour liberalisation in its trade agreement negotiations on
both multilateral and bilateral agreements. There is now, without
doubt, a very high level of public concern in the UK on immigration,
including labour migration, to date mostly focused on the commitments
within the EU. Yet trade negotiations involving labour immigration
from the rest of the world, are proceeding without public information
or debate, or Parliamentary or press attention. Trade commitments,
including those on labour liberalisation, are effectively irreversible,
and member states will lose their power to adjust their labour
immigration once those commitments are finalised.
This submission draws attention to this aspect
of EU trade policy, focusing primarily on the EU GATS offer, tabled
on 2 June 2005, and the EU/India Free Trade Agreement, due to
be finalised in Spring 2009. In addition, the relevance and implications
of the European Court of Justice decision on the Laval case are
highlighted.
This submission has most relevance to question
2 on the Call for Evidence—What role can European trade
policy play to stimulate growth and create jobs in Europe?
This submission indicates how EU labour liberalisation
trade commitments may negatively affect EU workers, as well as
potential negative broader effects.
I would be happy to attend an oral submission
session in relation to the issues raised here.
1. The general understanding is that "trade
agreements" are concerned with cross border trade in agriculture
and manufactured goods. Considering the importance of services
to the economies of the global North, there may also be an expectation
that these are included. But there would be a little expectation
that labour liberalisation, referred to in the General Agreement
on Trade in Services (GATS) as "the movement of natural persons"
or "Mode 4", is also included in the EU's trade policy,
negotiations and commitments.
2. Despite the high level of public concern
in the UK about migration and labour migration, information on
such commitments that the EU Trade Commission is making on behalf
of EU member states and affecting their populations, is difficult
to obtain, is not put into the public sphere and is not debated
in the UK Parliament.
3. The labour liberalisation aspect of EU
trade policy trade is the focus of this submission.
4. The high level of public concern in the
UK about labour migration is mostly focused on labour migration
within the EU. As a member state, the UK is committed to the free
movement of labour within the EU, under the current rules of the
EU. However trade agreement commitments to labour liberalisation
that the Trade Commissioner is making on our behalf, involve the
movement of labour from outside of the EU, into the EU.
5. In the UK, newly introduced immigration
regulations concur with the trade agreement offers that are being
made, in prioritising highly skilled and skilled temporary workers.
However unlike national immigration regulation, trade agreement
commitments, including those on labour migration, are effectively
permanent. Once finalised, such commitments at the EU level override
member states' right to regulate in order to adjust labour migration.
An offer under the GATS is subject to the Most Favoured Nation
rule, which means that it is an offer to all 150 WTO member states.
6. Neither the recently introduced UK immigration
regulations, despite their focus on "skills shortages",
as yet undefined, or the labour liberalisation offers that the
EU has included in its revised GATS offer (tabled at WTO 2 June
2005) have any numerical limits.
7. For these reasons, this Committee may
be minded to give due consideration to this particular aspect
of EU trade negotiating.
8. The fact that trade agreement commitments
are effectively irreversible once made serves to emphasise the
importance of full public debate, with consideration of the implications
of such commitments, before they are made, on labour migration
and on the full range of trade liberalisation commitments.
9. In Brussels, the lobbying mechanism for
transnational capital, the European Services Forum, led by Lib
Dem Lord Valance of Tummel, pursues labour liberalisation at both
the multilateral level, in the WTO GATS, and in the opportunities
afforded by bilateral Free Trade Agreements (FTAs) such as the
EU/India Free Trade Agreement.
10. Corporate sector lobbying to encourage
labour liberalisation may have several congruent aims. One is
to increase the easily available supply of ready-trained workers,
while encouraging a competitive wage market with downward pressure
on wages and working conditions to increase profit, or "competitiveness".
But in addition, labour liberalisation enables overseas companies
providing outsourcing operations to bring their own imported workforce.
Thus it serves to facilitate low cost outsourcing here, allowing
corporations to offload employer responsibilities, without the
disadvantages associated with offshoring.
11. Clearly, however there are other perspectives
to be considered, related to jobs, effects on labour standards,
and the broader social effects of such employment shifts, as well
as the implications of increased migration, for instance affecting
housing supply and public services.
12. Women, of whom a high percentage are
employed in services areas, may be particularly disadvantaged
by labour liberalisation especially in its inherent encouragement
of outsourcing. The female labour force is traditionally "expendable",
when labour conditions change; and women are often in effect disadvantaged
in employment by the legal requirements of maternity leave. With
a significant shift to further outsourcing, employment security
for women is likely to suffer. This is due both to shifts in labour
demand from parent company to outsource company, which often entails
a shift from secure jobs to temporary contract employment, or,
worse, the loss of jobs to migrant workers. Consequently, financial
insecurity flowing on from labour liberalisation may negatively
affect the birthrate of the indigenous population.
13. Similarly, the effect on the skills
training of young people should be taken into account. While the
Government has encouraged young people to acquire a "skills
edge" by undertaking university education, the trade commitments
in labour migration apply to highly skilled and skilled labour.
Therefore home trained graduates, who have acquired a study debt,
will be subject to intense job competition and downward pressure
on earnings and labour standards, from the influx of highly skilled
and skilled migrant labour. This is a disincentive to train, as
it has proven to be in Australia in relation to Information Technology
training, even though the Australian immigration system is being
proposed as the model here. In this way, "skills shortages",
the justification for trade agreement labour liberalisation, rather
than being existing phenomena, are actually being created, in
the process.
14. A further reason for urgent attention
to the labour migration aspect of trade agreements is the fast
tracking of the EU Free Trade Agreement negotiations. In the EU/India
Free Trade Agreement, labour liberalisation, that is access for
Indian workers into the EU, is a high priority for the Indian
Government.
15. According to the Secretary of State
for BERR, Gareth Thomas, (holding answer to Parliamentary written
questions, 10 December 2007), the India/EU FTA is due for completion
in Spring 2009. This highlights the urgency of debate on these
issues.
16. For reasons of historical background,
language and the lead role the UK has in services (according to
this Committee's 14th report "services account for an even
higher share of employment in the United Kingdom than in the Eurozone"),
and especially in financial services, highly dependent on IT,
any labour liberalisation aspect of trade commitments between
the EU and India is likely to have an amplified effect in the
UK, within the EU.
17. Although the Committee's own 14th report
(2005) concluded that negative effects from migration were unlikely
in the foreseeable future, events, migration numbers and public
opinion have significantly undermined this prediction in the intervening
years. In addition, that report failed to take account of the
social consequences of significant migration.
18. Further, the report showed that the
Committee had accepted several sets of evidence, for instance
from the Immigration Minister, Tony McNulty, and from UNICE, that
were factually incorrect. For instance, EU commitments under international
trade agreements, which include the movement of temporary labour,
can indeed undermine national migration policies, as the policy
space for the government of a member state is lost once an EU
trade commitment is finalised.
19. In addition, evidence from the Commission's
Directorate General for Justice, Freedom and Security, referred
to in the Committee's conclusions on its 14th Report, claiming
that temporary workers return to their home country is now much
less likely to be true, when current UK immigration regulations
allow workers on temporary work visas to apply for residence and,
eventually, for citizenship.
20. The contributing factors in how the
entry of temporary migrant workers, without numerical limits,
may affect labour conditions here, must include reference to the
European Court of Justice decision on the Laval v Swedish Construction
Union case, handed down in December 2007.
21. Although the case involved an EU company,
this court decision is highly significant for labour liberalisation
commitments in trade commitments.
22. A subsidiary of Laval, a Latvian construction
company, was bringing Latvian workers onto Swedish work sites,
at Latvian rates of pay. The Swedish Construction Union took industrial
against the company, with the consequent bankruptcy of Laval's
subsidiary. Laval took the case to the European Court of Justice.
While the Court affirmed workers right to take industrial action,
the decision made it clear that this is subordinated, in the judgement,
to the right of business to establish. One implication of the
Court's decision is that, without a minimum wage being established
in the host country member state, a company can pay home country
rates to migrant workers. This, then, effectively forces the establishment
of a minimum wage, along with a single, minimal, national bargaining
agreement.
23. The result is a simplification of the
requirements on EU businesses establishing in another member state.
Only the minimum wage requirement, and the requirements of the
single, minimal bargaining agreement have to be met—regardless
of skills levels; indeed, the ECJ judgement suggests that the
Court will not consider as "reasonable" any industrial
action with demands beyond that.
24. It is notable that in the negotiations
on the EU/India trade agreement, not only is this very language
of business' "right to establish" being replicated,
but that this part of the negotiations that is proceeding most
smoothly, with least disagreement between BERR and the Indian
Government.
25. Within EU trade policy, liberalised
establishment conditions parallel to those for EU companies are
being offered to overseas companies. Therefore the principles
established in the recent ECJ rulings in respect of EU companies
are likely to be relevant to any similar dispute between an overseas
company establishing in the EU and EU workers.
26. The overall effect on working conditions
is potentially very severe, putting UK workers in competition
with workers from outside the EU who need only to be paid the
minimum wage, regardless of skills. Labour migration concerns
to date in the UK have been, primarily, a labour competition issue
for unskilled workers, but these trade commitments in the areas
of skilled and highly skilled work involve a competitive creep
in the attack on labour standards, up the skills ladder, including
for those who have been encouraged to enter University.
27. Meanwhile, although in some member state
parliaments EU trade offers and negotiations are discussed, the
UK public has not been allowed to know what is being negotiated
on its behalf.
28. The EU revised GATS offer, including
Mode 4, was tabled on the weekend of the Dutch and French referenda
on the EU Constitution, and was not publicised.
29. The Round of GATS negotiations for which
the EU offer is made, is not finalised. However, it is unlikely
that an offer will be retracted during negotiations, especially
as a "modelling" process is being used to encourage
greater commitments from countries; it is more likely that an
offer will be further advanced. And still more likely if those
who may be negatively affected, notably UK workers, are unaware.
30. The transnational services investment
lobby, represented in the UK by International Financial Services
London, in Brussels by the European Services Forum and in Geneva
by the Global Services Coalition, is fully aware and is actively
lobbying for the inclusion of the entry of temporary migrant labour
into the EU in trade agreements. However, this Sub Committee,
the Lords EU Committee, and members of both Houses of Parliament,
are charged to act in the interests of the UK population.
29 February 2008
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