MacShane Urges Unions to Defeat Job-Killing Protectionism

Note to readers. As a former trade union official I am always worried when trade unions are tempted by protectionist and isolationist arguments. They have a superficial populist appeal but are bad economic and bad politics. The Tories and anti-European ideologues who dominate in the press and on the Today programme keep chipping away at the EU in the name of national sovereignty. But the first act of the national sovereign state is to control, slow, down, check, tax, oblige to register goods, services or people who wish to be economically active across borders. If the Tories and the Daily Mail and Today win their argument, the European single market would go into reverse and we would all be poorer - not the least those who travel on low-cost airlines or who buy property in Spain, France or elsewhere in the EU. So I was cheered up when John Monks, the former head of the TUC and now general secretary of the European Trades Union Confederation told me last week that the ETUC had appealed to protectionist governments in Europe to open their borders to workers from the new EU member states in east Europe. Below is a comment on this news.

Well Done ETUC - Now Let's Have a Services Directive

The rising tide of protectionism in Europe has suffered a setback. Leaders of Europe’s trade unions called on France, Germany, Austria and other EU member states to open their borders to EU citizens from new member states. John Monks, the leader of the European Trades Union Confederation, managed to overcome the opposition of the powerful German and Austrian unions to push through a policy in a welcome signal that the Euro-protectionists can be defeated.

At a time when the French prime minister calls for “economic patriotism”, the Polish prime minister tries to stop a Polish bank from a  takeover from elsewhere in Europe, the Luxembourg prime minister says a company run by a British citizen with its head office in the Netherlands is an unwelcome bidder for a steel firm, and the European Commission refuses to break out of its agro-protectionist ideology to help move WTO talks forward, it is refreshing that one leader in Europe can take the non-protectionist road.

Monks of course is a veteran of British protectionist attitudes. He was a senior TUC official when union leaders in the 1980s denounced Japanese auto industry investment as importing “alien practices”. In  north-east England and Derbyshire these alien practices are called jobs. At the same time, the giant German trade union, IG Metall, supported Volkswagen as they opened factories in Spain, Brazil and South Africa and, later, still confident in the economics of open trade, the union backed VW investments in east Europe.

The notion of “economic patriotism” or the opposition of German unions to allowing Polish workers into the German labour market plays well with the new politics of sovereign nationalism that is tempting parties of the both the left and right.      Unfortunately, the advocates of more openness in the European economy and labour market manage to make enemies without enthusing friends. Claiming  that there is no such thing as the European social model as it clever as Mrs Thatcher’s notorious remark that there is “no such thing as society.” There are European social models in the plural. Some like the Nordic and Spanish social models are showing the way forward by creating jobs and generating growth. The Swedish social democrats have privatised their postal service and brought the private sector into education while the Spanish socialists are reducing redundancy pay-offs which remain a powerful barrier to companies hiring new workers.

Trade union protectionism delivers neither jobs, nor pay, nor union membership. This is the paradox the unions need to come to terms with. In the name of defending “social Europe”, trade unions have opposed reforms in Germany, France and Italy.  Instead they have seen job losses, a massive haemorrhaging of union membership, and in the case of Germany, a reduction in the purchasing power of workers, in contrast to the year-on-year increase of their brothers and sisters in Britain, Sweden or Ireland – countries that reject social protectionism.

It is up to the unions to invent a new social Europe – one that welcomes workers from European nations, that sends a signal around the world that Europe wants to do business and welcomes investment, and shapes new rules for the labour market that avoids out-of-date rigidities like 35-hour-weeks or retirement at 60.

A good place to start would be to increase economic activity in the service sector. Services account for four out of five firms in Europe but only a pitiful 20 per cent of Europe’s economy is based on cross-frontier trade in services. Services are everything from tourism to travel agents, insurance to employment agencies, and all the new jobs, profits and economic growth are to be found in this part of the economy. If the Euro-protectionists in left-wing unions and ultra-nationalist parties get their way this  vital part of the European economy will be excluded from competition and new entrants from the 25 EU member states. That is why the European Union produced a directive to encourage economic activity in this sector. The first proposals have been changed and today, the Services directive has been re-shaped in a fashion that should satisfy all but the die-hard protectionists.

It may be yet be defeated in the European Parliament by MEPs who wave the national flag to slow down trade across frontiers. John Monk’s appeal to Paris, Berlin and Vienna to lift their protectionist blocks against Europe’s new citizens may fall on deaf ears. The only losers will be unions and their members. Another five or ten years of low growth, high unemployment Europe – the Europe of the protectionists – will eat further into union power and authority. The ETUC took a brave decision on opening up EU labour markets. Unions should go further and support the growth and jobs the EU needs if ever it is to win back support amongst Europe’s citizens.

Denis MacShane is Labour MP for Rotherham and was Minister for Europe. His pamphlet, “Britain’s Voice in Europe : Time for Change” has just been published by the Foreign Policy Centre.