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2 March 2006 Edition

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Europe's Pay Attack

• This news feature is funded by the European United Left/Nordic Green Left (GUE/NGL)

Europe's Pay Attack


The European Union's single internal market is being used to force down wages. Following the accession of eastern European states in May 2004, Ireland, Britain and Sweden allowed unrestricted access to their labour markets. As a result, migrant labour has been rapidly moving west, while east European countries are experiencing population falls and an inevitable brain drain. In Latvia alone, over 50,000 migrants have left a country of less than two million people. This has led to a loss of skilled labour and young people and an uncertain future of underdevelopment. In the three western states, meanwhile, wages have been dragged downwards in a process known as "social dumping," as vulnerable and cheaper foreign labour replaces the indigenous workforce and trade union bargaining power is severely weakened.

A Swedish case, currently before the EU European Court of Justice (ECJ), highlights how EU diktats use cheap foreign labour to batter down national standards. Latvian company Laval was refurbishing a school in Vaxholm, outside Stockholm, using its own workers. The Swedish Building Workers Union (SBWU) demanded a collective agreement with exactly the same conditions as those that Swedish building firms normally sign. Laval refused and referred to a Latvian collective agreement instead. Latvian workers were being paid about a third of the Swedish wage without adequate insurance. As this was a clear case of social dumping, the SBWU, with the support of other unions, initiated industrial action.

Laval argued that this action was not in compliance with EU law and brought the case to the Swedish labour court, which decided to ask for a preliminary ruling by the ardently Euro-Federalist European Court of Justice. The court is to decide if industrial action in support of demands for a collective agreement is in compliance with European law.

¥ EU internal market Commissioner Charlie McCreevy While visiting Stockholm, EU internal market Commissioner Charlie McCreevy made clear that the Commission fully backed the Latvian company and the "social dumping" that it had created. "If member states continue to shield themselves from foreign company takeovers and competition, then I fear that the internal market will begin to dissolve. The question here is whether or not Sweden has implemented Article 49 in the treaty on free movement," he said.

Understandably, the main Swedish trade union federation (LO), which backed euro membership in a 2002 referendum when the people rejected it, has indicated that it would withdraw support for Swedish EU membership altogether if the court rules against collective bargaining legislation.

LO Vice-President Wanja Lundby-Wedin points out that industrial action is, by its very nature, an obstacle to the activities of a company and free movement. "However, the right to collective action is, together with freedom of association and the right to negotiate and conclude collective agreements, recognised as a fundamental right in international conventions," she says.

As a result, if the ECJ finds that the industrial action taken in Vaxholm is against EU law, it would have serious consequences and not just for Nordic industrial relations systems. "What, until now, have been regarded as fundamental rights of workers in all democratic states would be undermined in the name of free movement," says Lundby-Wedin.

These problems have also arisen in Ireland, most notably in the Irish Ferries dispute, when the company announced plans to replace nearly 600 Irish seafarers with labour from eastern Europe at considerably lower rates of pay. This provoked huge protests across Ireland and even Taoiseach Bertie Ahern was left wringing his hands about the injustice of the situation. Yet the Irish government is supporting the introduction of the EU Services Directive which would actually accelerate "social dumping."

Around a quarter of a million migrants, mainly from Poland and Latvia, now work in Ireland. Often, this is for cash pay considerably below the legal minimum wage. Ireland is now facing the problems that arise from merging an Irish labour force of just two million with an east European labour force of over 70 million. The Irish Congress of Trade Unions is demanding measures to protect particularly unskilled workers where social dumping is threatening jobs. "It is an iron law of economics that an abundant supply of labour pushes down its cost. It is insulting people's intelligence to pretend otherwise," it says in a statement.

This theme was a source of satisfaction for Bank of England governor Mervyn King last year, when he declared that immigration from eastern Europe had "reduced wage inflation" in Britain. "In an economy that can call on unlimited supplies of migrant labour, the concept of output gap is meaningless," he said. This phenomenon will be exacerbated when Romania and Bulgaria join the EU in 2007 or 2008.

A recent US congressional budget report also triumphantly declared that increased immigration of low-skilled workers from Mexico and central America had pushed down wages.

Across Europe, it is clear that we are a witnessing large movement of capital eastwards as labour heads west. This is happening in accordance to the principles of the single European market, which allow the free movement of goods, capital, services and people, regardless of the consequences. The single market is a mechanism to remove the powers of nation states to control the movement of capital and people in the pursuit of corporate profit. At the same time, it truncates all forms of democracy, including rights to fair wages, working conditions, social protection and collective bargaining by trade unions. These policies also ultimately feed the poison of racism and fascism, the last refuge of the corporate beast in crisis.

EU Commission President Jose Manuel Barroso also plans openly to "lure talent" from the South and to "capitalise on the lucrative international education market" by offering top African students instant EU citizenship. Leading South African MP Kader Asmal slammed the plans as "another form of discreet colonialism."

"EU countries assist in developing higher education in the South and then wish to take the cream of the PhD students by seducing them with the offer of citizenship. This is not a brain drain, but a destruction of the intellectual capital of the South," Asmal said.

It is clear that, to reverse this increasingly perverse situation, all nation states must have democratic control over immigration policy and to apply national legislation over employment. This includes the right to introduce laws in defence of migrant and indigenous workers as well as the removal of legislation restricting trade unions taking solidarity action.

The need for these measures was very evident in the recent Gate Gourmet dispute, when British Airways baggage handlers struck in support of Gate Gourmet workers. In the end, hundreds of Gate Gourmet workers, mainly British Asian women, were made redundant and replaced by eastern European workers on much lower wages.

Brian Denny is a spokesman for Trade Unionists Against the EU Constitution.

Ten reasons to oppose the Services Directive

  1. It puts downward pressure on wages, and provides companies with numerous loopholes which they can exploit to pay less than the minimum wage. Workers doing similar work could be paid at widely different rates.
  2. It provides an incentive to service providers to move to low-wage, low-tax countries, with poorer standards of regulation thereby encouraging a "race to the bottom" in relation to employment conditions, health and safety standards, quality and accessibility guarantees.
  3. It undermines employment law, collective bargaining and industrial relations, reducing the ability of trade unions to act on behalf of their members.
  4. It undermines the right of elected authorities to determine the laws and policies applicable to all companies operating in its geographical areas.
  5. An Irish government would be unable to protect workers and consumers in the 26 Counties.
  6. The government of the country in which the service is provided will have no responsibility for supervising the service provider.
  7. It fails to recognise the concept of public services and thereby fails to protect these essential services.
  8. There is no guarantee of after-sales service, quality, accessibility or consumer rights.
  9. It places a financial burden on member states to make the system work.
  10. Unlike previous EU Directives, it includes all services, rather than those where a need has been identified.

MEP's Diary....


The February session of the European Parliament was dominated by the vote on the EU Services Directive. Those of us opposed to the directive spent much of the week before the Thursday vote, lobbying and campaigning for its defeat.

We took to the streets of Strasbourg in our thousands to participate in a mass demonstration against the drive to privatise public services and the full frontal attack upon the rights of workers across the EU. The march was an indicator of the depth of opposition amongst many MEPs, trade unionists, NGO's and the general public to the directive and the rightward thrust of the EU.

Throughout the course of the week I was involved in a series of meetings, including one with John Monks of the European Trade Union Confederation (ETUC), and Irish trade unionists, including SIPTU.

In the end, and despite the cosy consensus reached by the two largest groups in the Parliament (the right wing European People's Party and the Socialists), 215 MEPs voted to reject the Services Directive, with 394 in favour and 33 abstentions.

In spite of the spin and hype advanced by the Irish Labour party in particular, a substantial number of MEPs were tuned in to the fact that the Services Directive is a bad deal for workers across the EU.

The European Parliament (often helped by the votes of the Labour Party) rejected amendments that explicitly excluded various important sectors from the directive: public services; consumer protection; services of general economic interest; health-related services; education; waste; water management; energy; postal services; storage of dangerous goods; culture; environmental services. They also included in the directive the construction industry, architects, accountants, the information technology industry, etc.

I remain steadfastly opposed to this directive. We put down a number of amendments to remove sectors from the scope of the directive as well as an amendment to reject the proposal as a whole. We have argued vociferously that the directive will in effect commercialise almost all services within the EU and will deny millions of people the quality public services which they deserve. It also represents a considerable blow against workers' rights and social protections. It is on this basis that I voted against the Services Directive.

It is particularly important, now more than ever, that the Trade Union movement mounts a stern proactive campaign against this proposed legislation and it is also imperative that the Irish Government takes a lead on this issue also. In the current 'privatise any thing that moves' climate, the Government must reject the directive if and when it comes before them for ratification.

Strasbourg In Brief

• Bird Flu

EU leaders last week agreed to launch a public awareness campaign on health and food safety as bird flu spreads across the European Union. Bairbre de Brún has been proactive in highlighting this issue over the past year and said that "People need to be reassured that national governments and those who sit in Brussels are doing all they can to prevent the spread of this disease. Therefore, the communication of up-to-date and relevant information is essential. Clear, relevant and balanced information is key to ensuring that those within the EU have a realistic idea of what lies ahead and how to deal with it'.

Meanwhile, EU Trade Commissioner Peter Mandelson urged EU trading partners not to over-react to an outbreak of H5N1 bird flu at a farm in Ain, eastern France, which killed 400 turkeys.

• Renewable Energy

MEPs discussed a report by Methchild Rothe which recommended an increase in the use of renewable energy across the EU. Proposals included calls to increase the share of renewable energies used in heating and cooling in the EU from the present level of approximately 10% to a realistic and ambitious figure of at least double that by 2020. Welcoming the report Bairbre de Brún said 'In the current context of climate change we need to seek new sources of renewable energy and alternative sources of energy in order to reduce the harmful effect of emissions from fossil fuels. Alternative fuel production could bring considerable economic benefits in the time ahead.'

• Funding to Palestine

The European Commission has this week agreed to push for the unblocking of €34 million funding to the Palestinian Authority, in the wake of the Hamas victory in the recent elections

An Phoblacht Magazine


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