Social issues: The missing link of industrial policy


This article is part of our special report Industrial Policy.

SPECIAL REPORT / The absence of any reference to social issues in the European Commission's upcoming communication on industrial policy – seen by EURACTIV – reflects an ongoing logjam over social policy among EU member states.

This is despite wide recognition from policymakers, business organisations, and trade unions alike that social policy is the missing link in the EU's efforts to revive its industrial base.

"This is not the only missing piece but it is certainly a major piece," said François Gayet, general delegate at the Cercle de l'Industrie, an association representing executives of major French industrial groups.

The lack of coordination of social policy within the European Union was illustrated again on Tuesday (25 September) when Belgian lorry drivers staged a mass ‘go-slow’ in response to perceived "social dumping" from eastern European colleagues.

The rallying cry against unfair competition from low-wage East European member states was reminiscent of the infamous debate in France over the "Polish plumber", which contributed to the rejection of the proposed EU Constitution in a 2005 referendum.

Wall of silence

This week's protest by Belgian lorry drivers demonstrated that social issues were knocking on the EU's door, even if they are barely mentioned in the European Commission's upcoming communication on industrial policy, to be published on 10 October.

“The advent of a new industrial economy is likely to generate readjustments and restructuring in labour markets,” the communication says, advising that industry needs to “encompass training programmes that guarantee the employability of their workforce.”

That small reference to unemployment and outsourcing – one of the only nods to social Europe in the paper – is unlikely to silence organised labour on the issue.

A Party of European Socialists report on industry policy, released in the spring, said: “The ideas and skills of workers must be involved as early and as effectively as possible in the process of industrial restructuring.”

Meanwhile, the European Trade Union Confederation (ETUC) will call for negotiation and consultation with its members – both notably absent from the paper – to be included within the document.

“A social dimension to industrial policies, necessary for the sake of social cohesion which is being undermined by the [economic] crisis, needs to be integrated into the European agenda,” says a resolution on worker participation passed by ETUC this spring.

“The social dialogue also needs to be promoted through the introduction of new models of information and consultation all along the value chains, and by the implementation of new rights for workers,” the resolution added.

Social issues cause friction on European agenda

The lack of progress in attempts to incorporate social issues into the wider European single market agenda helps to explain why Industry Commissioner Antonio Tajani decided to omit the issue from his paper.

Last year, the Commission tried to add a social dimension to the single market by tabling proposals for ID cards in a range of professions including mountain guides, midwives and pharmacists, with little result so far.

In fact, the Commission has almost no say when it comes to social policy, which remains largely a national competence. And when it attempts to make a contribution, it is usually vetoed by wary member states and social partners.

Rules affecting posted workers, the controversial update to the Working Time Directive, and attempts to bring professional qualifications and portability of pension rights into alignment across member states, have all met with varying degrees of resistance.

The latest example came on 21 March when the Commission tried passing new rules to increase the protection of workers when they are temporarily posted abroad. This came alongside related proposals to strengthen EU rules governing the right to strike, the so-called 'Monti II Regulation'.

The proposal was rounded on by the business community, with BusinessEurope – the employers’ group – claiming it would create new obligations for companies in the construction sector in 19 countries and shift the responsibility to enforce social rules to companies, creating new administrative burdens for them.

“Companies’ role is not to monitor the wages and pay slips of their suppliers’ workers in a different language,” said Philippe de Buck, BusinessEurope's director general. Business interests had similar complaints about the proposed update of the Monti II Regulation, which addresses concerns that, in the single market, economic freedoms would prevail over the right to strike.

‘Social Europe’ lies beyond competency of EU Treaty

The EU executive’s proposals on posted workers comes after years of wrangling originating in the Laval case (also known as the Vaxholm case), a Latvian company operating in Sweden which had refused to respect local laws on working conditions and minimum wages.

An update to the Working Time Directive within the European institutions remains in limbo, with the ‘social partners’ – trades unions and employers’ groups – involved in a stand-off over the scope and rights that would be afforded by the paper.

Attempts to encourage member states to recognise mutual professional qualifications across the single market have also come up against numerous local blocking tactics ensuring that local employees are protected. Attempts to launch a professional 'Green Card' for ski teachers as a way to encourage mobility has created jitters in the profession, which fears a massive influx of low-wage workers from eastern countries.

If social issues are difficult to address individually, let alone within the ambit of industrial policy, that reflects the fact that they remain outside the core competency of the EU Treaty.

Member states such as Britain are happy for matters to remain that way.

“Social issues are neither the focus of the industrial paper, nor should they be, there are no references to pension rights, Laval and the Monti clause,” said a British industrialist, who preferred to remain anonymous.

Ways and means of placing social issues on EU agenda

If the Commission hopes that social issues will be swept aside from debate of its industrial strategy, however, that may be wishful thinking. First, the ongoing economic and sovereign debt crisis is instilling a new sense of urgency.

And the Lisbon Treaty has opened the way for a caucus of member states to take social issues forward on their own terms, using the ‘enhanced co-operation’ procedure, which enables a qualified majority of at least nine countries to move forward against opposition from others.

François Gayet of the Cercle de l'Industrie said France and Germany might be tempted to begin harmonising their social and taxation policies and then enlarge the initiative to other member states. "I think the Europeans have now understood that having tax systems as divergent as in Ireland, France and Germany cannot continue indefinitely, otherwise the risk is that industry will transfer its activities according to changes in taxation."

But he admits that this might take time and will likely meet with resistance. "I don't see what the Commission could do, the tax system and labour costs remain an largely a national issue," he said. "What we can hope is that, step by step, we bring the [social] systems of each country closer together, but it is a huge project and we are not there yet."

Meanwhile, Gayet said industrialists will continue to optimise their production by locating factories where labour costs and other conditions are the most favourable. "Everyone seeks the best equations, if possible, while respecting the laws in force in each country."

The European Parliament is also set to bear its teeth on social rights. In June, its employment committee produced a draft report recommending that worker consultation be included in corporate restructuring situations, calling for the Commission to safeguard this right in its industrial policy. The report – written by MEP and rapporteur Alejandro Cercas (Spain; Socialists & Democrats) – will come before the committee again this autumn for potential adoption as a resolution.

Workers increasingly disgruntled

Meanwhile, the real world is rattling outside the gates of the Commission’s Berlaymont building in Brussels.

The 500 Belgian truck drivers involved in a  go-slow this week were complaining about social dumping in their sector, angry that they are unable to compete with temporary workers arriving from eastern Europe, who receive lower wages as a result of laxer employment conditions in those countries.

“We are demanding more controls by the Belgian government, because there are rules, and these are often ignored,” said Frank Moreels, a spokesman for the General Federation of Belgian Labour union.

He added: “Here we clearly have to direct our call to Europe to introduce rules which enable us better to fight against the social dumping phenomenon.”

That is a message which is likely to become louder as unemployment worsens.

In 2010, the European Commission launched a flagship initiative called 'An integrated Industrial Policy for the Globalisation Era', under its 'Europe 2020' strategy for sustainable growth. This set out a new approach to industrial policy emphasising the importance of industry to the economy.

Since then the EU economy has continued to tailspin in the crisis. At the end of June this year, industrial production stood at 10% lower than its pre-crisis levels, and more than three million industrial jobs have been lost.

Following a consultation launched earlier this year, the Commission will publish a new communication – called “Industrial Policy Communication Update – a contribution to growth and economic recovery” – on 10 October.

  • 10 Oct. 2012: Commissioner Antonio Tajani to unveil new Industrial Policy communication

European Institutions

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Cercle de l'Industrie: Recommendations on the Commission's consultation (EN) (FR)

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