Brussels, 07/07/2006
To be checked against delivery
Hardly a day goes by without European workers being reminded of China's competitive strengths, by employers, governments - and, dare I say it, by the European Commissioner for Trade.
China is presented as the inescapable face of globalisation.
But, in this debate, globalisation sometimes becomes an argument that social Europe is no longer affordable and is a barrier to necessary reforms and to competitiveness.
That conclusion is simplistic and counterproductive.
The natural reaction will be inward-looking. That will lead to economic nationalism, be it European or country-specific, up a dead-end road.
We need to distinguish clearly between the globalisation debate and that on welfare reform and the European Social Model. Both are important.
Our research shows that the key determinants of the material welfare of Europe's workers and citizens - productivity, employment opportunities, income distribution and public welfare provision - are almost exclusively determined by our policies at home.
So our policy makers should focus on specific adjustment policies including structural and industrial policy. They should go for macroeconomic policies that maintain high levels of employment to assist the process of moving to new and more productive jobs. And we need to deal with the new ‘casino capitalism' we now all face.
Europe prides itself, rightly, for being as open a trading area as you will find. Much of our trade is, however, internal or with other advanced capitalist countries. The result is that we, in the EU, are almost exactly as open - or closed - as the US or Japan, with exports representing about ten per cent of output.
I am not arguing for complacency, but for clear thinking. We sometimes need to remind ourselves that the EU records an overall trade surplus, albeit small, in contrast to the US - the other bloc we are often urged to emulate.
Of course, trade with China is the exception - recently reaching 12 per cent of our imports against 5 per cent of our exports - about the same size as our surplus with the United States.
So we need to ask ourselves why is China the exception, and whether this is a passing or more permanent feature. And that begs the question as to whether we should view China as a single homogeneous economic entity. Is it a developing, transition or developed country?
Of course it is very big and very diverse.
Trade will have a ‘rebalancing' effect in the open sectors. Wages are rising in China, for them. At the same time there is rising inequality. The World Bank reports a “sharp” (I quote) decline in the living standards of the rural population since WTO accession in 2001.
Rising inequality is not a Chinese monopoly. The application of WTO rules, unmoderated, contributes to this.
China is seeking a route to ‘harmonious development' among its 31 provinces all at different stages of development and undergoing a vast privatisation process. And with big challenges over environmental issues and labour mobility. It may not be the same as the EU, but there are recognisable features there in the context of our own enlargement.
We have a common interest in developing a dialogue on sustainable development in all its forms, and the European trade union Movement would be happy to engage on this agenda.
We also need to look at the nature of imports from China. The question is no longer that of trading one Airbus against lots of tee-shirts. While the headlines focus on complaints by European retailers that EU restrictions are stopping them meet the demand for sweat-shop produced clothes and shoes, the figures show that, by value, electrical and electronic machinery and equipment are way ahead on the list of imports.
A lot has been said about intellectual property, and I agree that ideas-theft is unacceptable and must be stopped. But we must also appreciate China's massive investment in learning and research. And we need to ask ourselves whether Europe is doing enough. As you might guess, my answer to that is no.
So, we must take a measured look at the issues. That is why we welcome the Commission's initiative today and hope that the dialogue will continue as policy is evolved and implemented.
We also need to take a rounded look at the issues. The buzz-word is coherence.
Trade and investment should go together with considerations about employment, development, values and preferences. And we don't buy trickle-down theories, be they in relation to our Lisbon agenda or more widely.
We recognise - indeed welcome - China's opening and apparent wish to engage in the multilateral system of governance. But we don't think that this can be conducted on an à la carte basis.
All the rules should apply together with equal force. That means no special pleading in the WTO to preserve high custom duties; that means ratification and observance of all ILO Core Labour Standards; that means no reservations on the freedom of association provisions of the UN covenants.
The other day, Peter Mandelson urged us not to race to the bottom, but to the top. I agree that is the direction we should take and hope that our European social partners will also. European companies should behave outside Europe as they are supposed to do inside. They should certainly not act to drive standards down.
I must say that recent reports that European companies in China may reconsider new investment or continuing their activities in response to proposals to improve labour laws give us food for thought to say the least. I think it urgent that we reach some understanding about what is acceptable behaviour and propose that we have a proper discussion about this.
We welcome the Memorandum of Understanding agreed between China and the EU last September that set up a structured dialogue on labour, employment, and social affairs. The EU social partners should be fully involved in the MoU processes, including the setting of agendas. This may provide a platform for us to agree approaches to investment in China in particular.
Social dialogue is a central feature of the European social model and we insist that it should also be a central tool in seeking to meet the China challenge. We are concerned at the pre-eminent position given to employers, and in particular CEOs of multinational companies, in accompanying official contacts, bypassing normal social partner arrangements.
It is clear that the Chinese authorities are interested in promoting Corporate Social Responsibility, possibly with a view to presenting an acceptable face internationally while excluding trade union participation.
The ETUC is already critical of Commission approaches to CSR at home, and the EU authorities should not compound their mistakes in this area by providing China with undeserved credibility.
The Chinese authorities should be persuaded to engage in discussions on substance - for example as a starting point in relation to the OECD code of conduct for multinational companies - rather than a CSR 'soft option'.
We recognise that social dialogue approaches on the Chinese side are hindered by the lack of autonomy from the Chinese Communist Party of the official All China Federation of Trade Unions.
Economic liberalisation is creating internal tensions, manifested in particular by increasing industrial unrest. The Chinese authorities seek to manage these developments by urging the ACFTU to ‘represent workers', but this is not working. The level of unionisation in the growing private sector is low, and indeed is hardly recognisable as unionisation as we know it. Few collective agreements actually talk about wages.
Helping the development of collective bargaining, starting in TNCs operating in China, is an avenue being pursued by a number of international trade union organisations.
The development of free collective bargaining should be a priority issue to be tackled under the MoU.
One of the key issues of the EU-China talks is China's request to be extended Market Economy Status. The Commission has been reluctant to extend MES to China particularly because of 'state interference' - but interference in trade union affairs and the lack of free collective bargaining has not been discussed in this context.
We believe that it should. For a start we would be interested in reviewing with the Commission data relating to labour market recruitment and wage formation in China. The Commission say that they keep these under surveillance. But we understand that information such as “revised wage policies and plans concerning enterprises at the national level” is regarded in China as “highly secret”. There is a need for transparency, and these issues should be incorporated in the work of the Commission's China Economic Observatory.
We do not approach the issues from a protectionist perspective, but rather from one aimed at promoting human and trade union rights and sustainable development everywhere.
I am often struck by the interest shown in the European social model in many parts of the world, including China. Rather than hindering Europe in the world, it helps give us a welcoming and positive face. It could be one of our greatest exports.