Conference on Organized labour
Responses to the Conference Paper
Dan Cunniah
Director, ICFTU Geneva Office
10 February 1999
Please find attached a report of the Budapest Globalisation Seminar which could be fed in the labour and society network for further discussion.
Regional Seminar for Workers' Organizations on Globalization and Trade Unions in Central and Eastern Europe
Budapest, 22-24 November 1998
Final Conclusions of the Seminar
WHAT TRADE UNIONS SHOULD DO TO MEET THE CHALLENGE OF GLOBALIZATION, AND HOW THE ILO SHOULD HELP
1. Strengthening trade unions
a. Making the organization of workers the number-one priority, by: · Establishing specific programmes and structures and allocating adequate resources to them · Targeting specific groups, such as: the private sector, small and medium-sized enterprises, services, white-collar workers, women and the young · Retaining membership in multinational corporations and privatized enterprises · Addressing the informal sector
b. Developing collective bargaining capacities and techniques
c. Servicing members' needs, by ensuring internal democracy, responsiveness to views of the membership and the capacity to act on them
d. Ensuring optimal management and administration of trade unions in a highly professional manner, projecting the message and values of trade unions through innovative communications activities
2. Protecting and promoting basic workers' rights
a. Being alert and assertive in ensuring respect for the fundamental workers' rights set out in the ILO Declaration on Fundamental Principles and Rights at Work and Its Follow-up
b. Fighting corruption, and being exemplary in their own behaviour (it is only possible to protect workers' rights where the rule of law truly operates; corruption threatens the rule of law)
3. Strengthening national institutions and processes
a. Promoting effective operation of the institutions of social dialogue, and high-quality trade union participation in these institutions (including mechanisms for enforcing the application of agreements)
b. Developing mechanisms and procedures for collective bargaining at appropriate levels, notably at the industry level
c. Implementing adequate procedures for the review and enforcement of labour legislation, in conformance with EU standards
d. Ensuring the efficient operation of dispute settlement machinery, both mediation-conciliation and tribunals
4. Tackling the international financial institutions
a. Seeking and using available opportunities at the national level to engage the international financial institutions in discussion on the design and implementation of their policy recommendations (requires careful preparation of credible alternative policy proposals)
b. Joining with others in the international trade union movement in seeking an overall reorientation of the IMF and World Bank policy outlook, using the present moment of opportunity to engage in a major lobbying effort
5. Influencing the agenda on EU accession
Being active partners in setting national priorities within the agenda set by the EU on convergence, given the high national priority accorded to EU accession in many countries
6. Consolidating international trade union cooperation
Continuing the tradition of international trade union assistance and solidarity that has been a major feature of the developments over the past decade, since these aspects retain all their importance today:
a. General exchange of information and experience
b. Concerted cooperation in exerting pressure on multinational enterprises through organization of workers and collective bargaining
c. Active involvement in international trade union campaigns, providing solidarity as well as receiving it
7. The role of the ILO
The ILO has responsibilities that cut across all of the above points. Its role is to support trade unions in all of these areas of endeavour, notably through the work of the Multidisciplinary Teams in the region. Since the ILO's resources are limited, it is obliged, like other organizations, to set priorities:
a. Capacity-building in areas under heading 1 above
b. Campaigns for application of standards, especially those of the Declaration on Fundamental Principles and Rights at Work and Its Follow-up Regional Seminar for Workers' Organizations on
Globalization and Trade Unions in Central and Eastern Europe
Budapest, 22-24 November 1998
Report on Proceedings
Sunday, 22 November
1. Welcome and opening statements · Moderator: Oscar de Vries Reilingh (Director, ILO-CEET)
· Guy Ryder (Director, ACTRAV)
· László Sándor (Acting President of the workers' side of Hungary's Interest Reconciliation Council)
Globalization is not a new phenomenon; it has been going on for at least three decades. However, the magnitude of globalization and the speed with which decisions and transactions are made has changed in recent years. While globalization has effects on countries in every region, the countries of Central and Eastern Europe (CEE countries) are in fact facing three parallel processes of change:
1. Globalization
2. Political and economic transition
3. European integration (particularly as related to EU accession).
These three processes all have their own logic, demands and enormous challenges, which are not always compatible. Central and Eastern Europe is at the centre of regional integration issues, even on a global scale. The changes here were arguably the catalyst for the current trend of globalization, and the decade of globalization has coincided with the decade of transition.
Despite the list above, globalization should not simply be regarded as one problem among many - it underpins all the challenges faced by trade unions today. Some regard globalization as a threat, and others as a solution. But there is no denying that it is a powerful force that must be considered in trade union actions. This seminar is meant to provide an overview and an approach to these problems, helping trade unions in their efforts to tackle them. Trade unions should share their experiences - not to place blame, but to analyse their common problems and work out solutions.
We must remember that there is nothing inevitable about globalization. It is the result of conscious policy decisions, and attempts to direct the process are positive. Trade unions may and must seek to change globalization itself. There are indeed signs of a new receptiveness to trade union proposals today. At the same time, trade unions must work within their given environment, which has a great impact. An important goal of this seminar will be to arrive at suggestions for trade unions to react to practical issues they are facing. There are many questions we can ask of ourselves. For example, how does globalization fare with regard to social justice? Does it have legitimacy? Do we have the means to control it? How does it impact on the international financial institutions?
The ILO has been active in creating a framework for regulation and supervision in the area of labour and social policies. The ILO's role results from its position at the heart of international debate on workers' rights. The Declaration on Fundamental Principles and Rights at Work, passed in June 1998, was a very significant event in this regard.
2. Keynote address
· Richard Falbr (ILO Governing Body)
The people of Central and Eastern Europe have been hit hard by globalization, and we need to be familiar with the concepts of trade, supra-nationalism, technological developments, and modern financial transactions that can demolish entire sectors within seconds. But it is doubtful whether it is worthwhile to ask whether globalization is "good" or "bad" for workers. We do need to know if we can combat it, if we can adapt to it, or if we are just spectators to the process who must passively accept it.
Globalization is accompanied by risks. It can lead to a widening of the gap between rich and poor, both within a single country and between countries. It can undermine the rights of workers, as incorporated in international rules. It can also lead to crises in one region spreading to other regions, as the recent global financial crises have illustrated.
Views about the role of the social dimension in policy are changing. Formerly, we heard that economic growth in Asia was possible because the social dimension was neglected, and that Europe was unsuccessful precisely because of its heavy social burdens. Now, the Asian crises are causing the greatest problems where the social sphere is weak, and Europe is a dynamically growing region. In the Philippines, for example, there are proposals to suspend collective bargaining for 10 years. The trade unions must accept this, it is said, or "they will disappear as their jobs disappear." We cannot accept this view.
The Russian crisis serves as evidence that Milton Friedman was right when he said that the IMF should have disappeared at the end of the 1970s. The market will not solve all problems automatically, and under the measures imposed by the IMF, it is the socially disadvantaged that pay the most. In some CEE countries, the influence of trade unions has diminished, and they cannot influence government policies.
Regarding the three phenomena of globalization, transition and European integration, we ask what trade unions can do today and in the future. It is also important to examine what they have achieved so far. The role of the trade unions is crucial in the ILO and in international efforts in the area of labour law, such as the system supported by the new Declaration on Fundamental Principles and Rights at Work approved earlier this year.
The most important tendency at the last meeting of the ILO Governing Body was that the driving force today is a more self-conscious group of employees faced with less self-conscious employers. Governments have also started talking about the legitimacy of international labour standards. What we can achieve is a better enforcement of labour rights. We should also warn governments that threats to the national economy should be neither over- nor underestimated. Governments should know that without social standards, globalization will only bring disaster. The international financial institutions are even beginning to realize this, as they find that globalization is a process that follows its own rules.
Finally, I would note that those of us from the countries of the region have too often tried to cooperate only with western centres. But it would be more than useful for us to share experiences with each other, as well. My own country is a good example - until recently, the Czech Republic was viewed as a "leader" in transition. Now we see that this is not true. We need each other's experience.
3. Panel discussion: Overview of the challenges generated for trade unions in Central and Eastern Europe by globalization
· Moderator: Oscar de Vries Reilingh (Director, ILO-CEET)
· Stephen Pursey (ICFTU)
· Krastyo Petkov (Bulgaria)
· Richard Falbr (ILO Governing Body)
· Dimitrina Dimitrova (ACTRAV)
The processes of globalization, EU integration, and transition are not always compatible. Globalization is a multidimensional process, and in addition to its economic impact, it has geopolitical, security and cultural aspects. Globalization has not occurred spontaneously, but rather as the result of deliberate policies. It is not a new phenomenon; the debate on interdependence has continued in much of the post-war period, and often defined in North-South terms. The proponents of globalization claim that it has universal benefits, but this response is ideological. Some countries have benefited more than others, and capital benefits more than labour. Some companies also have fewer possibilities to deal with the process of globalization - especially in CEE countries.
Globalization has had few effects in many CEE countries. It has been noticed most significantly in the activities of two types of organizations - the international financial institutions and multinational corporations. Governments have had no choice but to turn to the IMF, and adopt structural adjustment programmes. But the policy packages implemented were not adjusted properly to the needs and circumstances of specific countries. While the effects of these programmes have been diverse, they have not led to growth everywhere. Instead, they have often endangered political stability. Governments have also sought FDI at any price, but FDI does not lead automatically to growth - especially without forward and backward linkages in the economy as a whole. Overall foreign investment has been low, except in Hungary. Agreements with the IMF and the World Bank have not resulted in the promised inflows of investment. Shock therapies, the transfer of institutions from other countries and attempts at social engineering have in most countries failed to bring about the promised growth and improvements in living standards.
Competition between CEE countries creates the conditions for a downward spiral. CEE countries compete for EU membership, which is seen as a guarantee of growth and integration into the world economy. However, the structural adjustment programmes called for by the IMF advocate low-wage policies, which are in contradiction with the logic of EU enlargement. The current EU member states fear "social dumping" and demand a rise in incomes and living standards to close the current gap. Restrictive wage policies present the danger of reinforcing the current regional disparities in incomes. Policies should therefore address both the national and supra-national levels.
Complex forces are undermining the role of the nation-state. Citizens in the region tend to have unrealistic expectations regarding the state's role as provider, in a period of scarce government resources. Governments also face pressure to fulfil the structural adjustment programmes, which limit their autonomy. These forces have undermined political stability and led to a crisis of the state in region, as observed, for example, in low election turnouts. Privatization has also brought problems, especially corruption.
Workers need to discuss the role of governments in globalization, to see how they can influence distorting processes that undermine both the rule of law and prospects for economic recovery, as resources flee the country or are used for luxury consumption. Trade unions cannot maintain a neutral position on these issues.
Regarding the three tendencies mentioned above, we note that there is a tendency to use the terms globalization and transition very freely. What do these mean? Globalization has only come into currency recently. It includes liberalization (reductions in barriers and rules, etc.), technological change, and a political dimension. We should remember that trade unions, not capital, brought down the Berlin Wall. The specific occasion for the crucial Solidarnosc event in 1988 that triggered many of the changes was a discussion of ILO documents. Trade unions started these changes, and should not complain about them now. This region has not been passive, but the world has changed quickly, too - especially in financial markets. Trade unions should participate in the discussions of a "new architecture" that are occurring in various forums today.
The term transition is also important to examine more closely. Transition to what? And for how long? The IMF forecasts growth in the next two years in Central and Eastern Europe (excluding the former Soviet Union) that is more than twice as fast as in the developed world. If the region has faster growth than the rest of the world, does that mean the transition is over? Although this is a rhetorical question, it is an important one. The term transition has a psychological impact, and reinforces the problems facing the region. Can trade unions afford to think this way any more? We should give serious thought regarding when we will stop using this word.
Globalization in this part of the world has been an East-West process. The "hub" for the region has shifted from the former Soviet Union to the European Union. This is seen in trade figures, where the 11 countries of the euro account for the majority of exports from the region. A 1% growth in output in the euro region should translate directly into something like 0.5% growth in output in Central and Europe. In addition, the euro will replace the dollar as the main reserve currency, which will also have implications.
The countries here will be judged by European criteria, such as the Maastricht criteria for budget deficits and growth and the Copenhagen criteria for enlargement. The structural adjustment programmes imposed on countries of the region often push them towards a type of neo-liberal model more closely aligned with North America or Latin America than with Europe, and this should also be noted. Political stability depends on social dialogue, in which trade unions play an important role. European and international labour standards will also be dominant in the region, and therefore temporary, home and part-time work will probably continue to grow. Although these trends represent a type of deregulation in local terms, there is still regulation based on EU standards.
With the Asian crisis, the view of various regions is changing. Korea (with its B unions) is beginning to emerge from the crisis, while Indonesia (where trade unions are repressed) is still in free fall. In Russia, however, the situation is different. Flawed policies have affected the budget and financial markets, and changes have been less far-reaching than in many other countries. There are no checks and balances on political power. Trade unions should play an important role in changing this, but they are rather forced to react to the critical issue of wage arrears.
Trade union structures should be a function of their purpose, and should include elements for both tripartite and bipartite activities. At the tripartite level, trade unions should influence political processes and national social policy.
Globalization and its problems call for counterbalancing action from trade unions. Changes that would represent a new direction include increased participation in union activities, supervisory activities (eg of pension funds), political activism and "open" unionism to include participation from the organizations of civil society.
Two common problems should be addressed by all unions in the region. First, 40 years of dictatorship has resulted in a situation where unionists at the shop-floor level still think problems will be solved from above. Second, there is a growing problem in collecting union dues from the shop-floor level. Trade unions in the region now want to be western-style unions, but they also seek to maintain the perks of the past, such as extensive recreational activities. As a result, the union dues collected often do not leave the shop-floor level. This puts national unions in a critical situation.
There are a number of questions trade unions should ask themselves in an effort to increase their effectiveness. Are local trade unions plugged into the international trade union networks within multinational companies? Is the media used effectively? How is the image of trade unions being improved? What impressions are made on foreigners - including the IMF, the World Bank and the European Union? The situation in the region does not seem very good in these respects. Eight years ago at the ICFTU conference in Vienna, unions expected to have more respect by now. They should start planning now for the future.
There will be two important events in international institutions in 1999 - the WTO general meeting in Washington in December, and the World Bank's development of a social code, with a target date of spring 1999. The ILO Declaration should be a part of the latter code, but we have to fight for this. The Central and Eastern European region has been very quiet in the ILO, UN, WTO and other forums.
Monday, 23 November
4. Keynote address: The role of the ILO and the Tripartite Declaration of Fundamental Principles and Rights at Work and Its Follow-up
· Moderator: Lajos Héthy (Research Institute for Labour, Hungary)
· Kari Tapiola (Deputy Director-General, ILO)
Before the transition, we could foresee that transition was necessary, that there would be shocks along the way, that privatization and restructuring would have consequences, and that transition would be difficult for trade unions. Policy makers forgot about social policies, such as social security. Without attention to social policy, we end up in a situation like the one in Russia, a kind of half-way house between a planned and functioning market economy. In Russia, the non-payment of wages must be regarded as a joint economic and social failure.
We could not foresee in 1991 that privatization would have the political dimension that it later assumed. Nor could we foresee that the internationalization of production that began becoming B in the 1970s and 1980s would develop to its present point, where economic activities are now conducted in real time across borders. The fall of the Berlin Wall gave new impetus to these trends. Communist systems were not compatible with transborder, real-time decision making and action. The nature of multinational corporations has also changed - they are no longer the octopuses of the past, with their head in the home country and their tentacles spread out across the world. As ABB says, they practice the "art of being local wordwide."
With the end of the Cold War, a new global labour market started to emerge, in which all workers in the world directly compete with one another. Some argue that there are still barriers, but there are certainly fewer than ever before. For example, in today's environment, Swissair can perform its ticketing in Bombay, in real time. And for the first time since World War I, there is no competing political-economic system internationally.
The competitive advantage of Central and Eastern Europe is closer to that of the developing world than it is to that of the developed world, but it is not in the region's interests to align with the developing world (for example, in the WTO). This would damage its chances for accession to the European Union. This basic problem also poses a dilemma for the region's trade unions. While western trade unions lecture about how to fight multinationals, the unions here want them to come in, because they bring investment and modernization, including modern models of industrial relations. Therefore, western and regional unions either talk past one another, or they cannot reconcile their diverging views on FDI.
After 1991, there was a B regional focus in the international community, which lasted until about 1994. The ILO even thought that its future was in question. The ILO, after all, was established after World War I to offer a "democratic alternative" to communist revolution. Now that communism was gone, was the ILO still needed? In this period the ILO, too, sought regional solutions. Then we realized that global, not regional developments pose the real threats to employment. The root causes of the problems the ILO was created to deal with were still there - poverty, unemployment, social inequality. In fact, they had grown Ber. These are the reasons why we have core labour standards as a "minimum social agenda" for the entire world. The ILO's goal was always to set a certain minimum, so that development would not occur at the expense of workers' basic interests.
At the Copenhagen Social Summit, it was decided that there indeed is a "short list" of fundamental workers' rights. These are:
1. Freedom of association
2. The right to collective bargaining
3. Equality
4. No forced or child labour
In 1995, the core labour standards were identified. In 1996, an OECD study on the subject used the ILO standards as a starting point. This was significant, because the OECD could have created and used its own standards, but it instead used the ILO standards. In December 1996 at the WTO, the Director General of the ILO was invited to speak, and then uninvited again - with the result that 80 speakers at the gathering mentioned the ILO. The ILO's mandate in the area of social standards was recognized by other organizations.
The current problem is that despite the new consensus on the agenda of fundamental workers' rights, there is no consensus on how to enforce them. The ILO cannot enforce these rights alone, and there is resistance to using the ILO Declaration in other organizations.
A supervisory mechanism is therefore necessary. The aim is not to point out where governments have or have not violated basic standards, but rather to assist them in improving the situation with regard to these fundamental rights. It should be possible to observe the situation regarding the core labour standards in each country, through a helpful mechanism. Nevertheless, many governments believe such a mechanism will turn into a semi-sanctioning mechanism, regardless of its stated purpose.
Regarding the role of trade unions - even if governments have ratified all seven core ILO Conventions, that is no guarantee of their full implementation. Trade unions can report in this regard to the supervisory mechanism. If the core Conventions are not ratified, the government will be asked to provide an annual report, on which trade unions may comment. The ILO has a full mandate to assist trade unions in identifying situations and bringing them to the ILO's attention.
5. Panel discussion: Governance of the global economy
· Moderator: Lajos Héthy (Research Institute for Labour, Hungary)
· Bob Kyloh (ACTRAV)
· Mihály Kopányi (World Bank representative, SAPRI programme in Hungary)
· Károly Lóránt (SAPRI, Hungary)
· Krzysztof Hagemejer (Social Security Specialist, ILO-CEET)
The deregulation of financial markets poses a particular problem for trade unions. Fund managers in financial centres such as Wall Street play a disproportionate role, and their panic selling can wipe out whole currencies or sectors within hours. In addition, the imposition of strict conditions by the international financial institutions can also lead to unjustified restrictions on national policy, and creates an atmosphere of destructive competition between countries, as they cut taxes and neglect their social standards and living conditions in order to attract investments that might otherwise be made in neighboring countries.
However, the dogma of the low-deficit, low-inflation school is now under attack. Western European governments are beginning to favour cooperative regional efforts, in which countries do not focus on competing with one another, but rather have orchestrated development policies to limit them playing of each other. Trade unions need to pay greater attention to these social and development policy issues.
The SAPRI programme (Structural Adjustment Participatory Review Initiative) involves the participation of national and international NGOs to review the long-term effects of the loans and structural adjustment programmes of the World Bank. Hungary is the only country from Central and Eastern Europe currently participating in SAPRI, although more countries may join the organization in the future. Although SAPRI's programme in Hungary does involve the participation of trade unions, it also involves actors from civil society, as well as women's and minority groups. A condition for SAPRI membership is the approval of the home government, and activities in Hungary are carried out with the support of the Prime Minister's office. SAPRI is financed by the governments of Norway, Sweden, Belgium and others.
In Hungary, high levels of debt servicing caused a solvency crisis, and the government turned to the World Bank for a Structural Adjustment Programme. This involves policy preconditions - such as liberalization, limited deficits, etc. Hungary could have asked for a part of its debts to be written off or forgiven, but the government decided against this option. Four aspects are examined by SAPRI: social reform, liberalization, privatization, and the utility sector. While focus is often placed on the negative aspects, SAPRI acknowledges the benefits of the changes as well. For example, utility services such as telephone availability has improved greatly, which has very positive economic effects.
The World Bank is not in favour of globalization, it is rather in favour of development and sustainable growth. Globalization may in fact be proceeding too rapidly. But it is crucial to recognize that financial agents such as fund managers will behave as financial agents, and not as social institutions. It is not realistic to expect otherwise - rather, it is the job of governments to behave as governments, and to limit the negative consequences of purely market solutions when necessary.
In the area of social security, government intervention is necessary, as there are market failures and problems of economic efficiency. There is no market for unemployment insurance, for example. Purely market solutions are also problematic in areas such as health insurance. Social security increases overall economic efficiency by improving the quality of human capital and increasing productivity. Social functions, equity and social justice also increase social cohesion.
Social security is seen by some as hampering economic growth and competitiveness, but the Asian crisis shows us that economic growth cannot be sustained without minimum social protection. Most successful CEE countries are not those with the lowest levels of social expenditure, but rather those with the highest levels - e.g. Hungary, Poland and Slovenia.
Reforms in social security systems are generally decided upon together with the social partners. But there are B pressures from the international financial institutions, experts, and foreign companies to scale down social security in Central and Eastern Europe. They say that this must be done to achieve higher growth and FDI levels, but it the long run it may actually hamper economic achievement.
Although the IMF and the World Bank recommend essentially the same policies everywhere, we see variety in implementation between various countries. For example, Hungary has implemented an obligatory private pension system, and Poland will do so next year. The objective is to take into the account the ageing of societies, and scale back pension promises to avoid overcommitment by the state. However, small pension funds do not have enough power to play any real financial role. The business of pension funds involves large international investments and investment funds. While individual countries may have some range within which they can make decisions, the business of pension funds is more international than many first expect.
6. Panel discussion: Governance and the global economy
· Guy Ryder (Director, ACTRAV)
· Giuseppe Casale (Labour Law and Industrial Relations Specialist, ILO-CEET)
· Frank Hoffer (Workers' Activities Specialist, ILO Moscow)
· Peter Gajdo (Head of the Economic Department, KOZ, Slovak Republic)
The impact of globalization has been adverse for trade unions. Even where trade union membership has not declined, the ability of capital to flee weakens the unions' position. At the same time, we are witnessing a decentralization of decision making. Collective bargaining is often occurring not at the national or industry level, but at the enterprise. Or, these decisions may even occur mainly at the level of the individual employment contract.
Despite the differences between the countries of the region, there are certain common trends and issues. Without mechanisms for social dialogue, for collective bargaining, for the settlement of labour disputes, and for exercising information and consultation rights, it will be difficult to deal with the problems of globalization. An institutional framework is necessary. At the same time, we must see that we use the opportunities offered by institutional arrangements.
Particularly with regard to information and consultation rights, trade unions should not see the creation of works councils as contrary to their interests, because the experience in Western Europe has been exactly the opposite. The EU has extended information and consultation rights to cover multinational European enterprises in its Directive on European Works Councils. There is also a new draft Directive of 11 November 1998 on information and consultation at the national level, of which trade unions should be aware. This draft would allow for individual rights to be enforced through collective representation, linked with collective bargaining. It would also attempt to balance the need for security of employment with flexibility.
There is a pressing need to introduce social dialogue at the national and sectoral levels, because the EU is moving towards negotiations at the Europe-wide sectoral level. The ILO has therefore been urging trade regions in the region to concentrate activities at levels above the enterprise. To strengthen these areas, trade unions should urge the extension of collective agreements at the sectoral level, and seek to strengthen the rights of various types of workers under contract labour.
Russia presents a special problem. Nevertheless, the negative trends that have emerged in Russia are not unique to that country, and have been observed in all transition countries to some degree. It is the magnitude of Russia's problems compared with many other countries that sets the country apart. There is a danger that Russia will become globalization's greatest failure. The system of industrial relations in the former Soviet Union was one of the major reasons that it could not compete with and oppose the west. The decision of 17 August 1998 to devalue the ruble proved that the fundamental basis for a market economy is not present in the country. Russia has opened itself, but internal change has been less dramatic. Since Peter the Great, major changes in Russia have always been made on a top-down basis. A great failure was to think that this time, major changes could occur without the state. The result was the spreading of criminal activity on a previously unknown scale. Under these conditions, the owners and managers of enterprises behaved rationally - cheating and the stealing of assets were more profitable than production.
How does all this affect unions? In place of the former paternal state, there is now a "dictatorship of management", which uses its power to make personal profit. Unions are in a difficult situation, to say the least. There has been no improvement in management techniques, and limited human resource development. Factories still run in the command style. Even in the new service sector, there are strict controls on employees and overstaffing.
Making social dialogue more real - not only in Russia, but throughout the region - starts with the trade unions. Trade unions must earn trust, by developing dialogue with their own membership. The unions must be at the forefront of the fight against corruption, which is in some countries the most significant obstacle to collective agreements. They should also increase the transparency of their own organizations and operations. They must improve their level of competency in matters of economic and social policy, and come to the table with positive policy recommendations, not just criticisms of the existing situation. Trade union solidarity must be developed, which also requires the building of trust in the respective organizations. Finally, unions should show their strength, that they can take action to combat wrong policies and bad management decisions. International organizations can provide certain support in these efforts, in areas such as the transfer of information and know-how.
Where does the organization of workers appear in trade union programmes and agendas? How are unions trying to attract new members, young people, and expand into new sectors? The ILO is asking these questions everywhere in the world. Without answers, trade union influence and the unions themselves will decline. This is the main problem of trade unions everywhere, but the problem is even more acute in CEE countries, where the impulse to organize suffered from the fact that for years trade union membership was obligatory.
The real impact of trade unions is in direct proportion to their number of members, and the effectiveness with which they defend their members' interests. The image of unions must be enhanced. Cooperation with actors in civil society and NGOs can be of great benefit. And demonstrating what trade unions can achieve is essential. In the end, the strength of our arguments may not be as decisive as the arguments of our strength.
Tuesday, 24 November
7. Panel discussion: The implications of European economic integration and innovations in labour market policy from Western Europe
· Moderator: Eckhard Jaedtke (European Union)
· Roma Dovydeniene (Lithuanian Trade Union Unification and Spokesperson for the Lithuanian Social Democratic Party on European Integration and Industrial Relations)
· David Foden (ETUC)
· Werner Sengenberger (Director, ILO Employment and Training Department)
Globalization is seen as a great threat, and rightly so. But why is this? As the ETUC representative emphasized, European trade unions are not opposed to bringing developing countries into world markets, which is a necessary development. Rather they oppose the ideological push to do this without rules. Trade unions can help set rules for the process of globalization.
The globalization process has manifested itself most Bly thus far in Western Europe, and has involved a double process. First, the single market process within the EU resembles globalization, but it has gone farther and is soon to be reinforced with monetary union. Second, the EU has been undergoing political union as well, with the ability to regulate the integration process. Social and economic processes are seen as complementary. Monetary union will also be introduced in the EU in only a few weeks' time. Trade unions should welcome the introduction of the euro for three main reasons: (1) conventional economic reasons, such as the removal of transaction costs and elimination of exchange rate risks; (2) the need to manage the European economy as a single entity; and (3) a belief that by being part of the process, trade unions will be able to influence it. But, trade unions have opposed certain elements of monetary union, such as the independent central bank, the strict rules on public finance, the absence of a European-level budget, and the implications for wages and industrial relations.
There are increasing discussions on managing Europe as a single entity. This is necessary, because over 90% of EU output is consumed and invested within the EU itself. Even in large EU countries, over 25% of output is traded, but almost all of this is with other EU countries. Therefore social policies in one EU country spill over readily to the next, making coordination essential. Soon, there will be monetary policy at the European level, economic policies at the national level, while wage policies are set at a variety of levels. Without coordination, these are likely to clash, and in the event of a clash, the central bank is likely to win.
Trade unions in the EU cannot change the terms agreed at Maastricht - at the most, they could complain about the decisions reached there. They did, however, help ensure that employment policy provisions were included in the Treaty of Amsterdam. Employment is a common concern in Europe, but a common labour market policy is impossible since there are many labour markets. A draft of the European programme for employment, including its guidelines and action plans, is to be reviewed in Vienna in 1999 prior to its implementation. Review in Vienna will also include considerations of European-level employment policies.
There are four "pillars" to the European programme: employment, entrepreneurship, adaptability and equal opportunity. Active employment policy measures are an important part of the programme, as is social partnership. The overall goal is to increase total employment. Currently, 60% of persons in prime age are employed, compared with 74% in the US and Japan. The big questions for European-level employment policy include: What are the new elements in the programme? Are they backed up by budget commitments? And where do the employers fit in the process? There is very little bargaining at the European level as yet, although trade unions are interested in discussing matters at this level.
The development of European-level employment guidelines is not enough - macroeconomic policies also need to be coordinated at the EU level. This is especially true since with monetary union, productivity differences can no longer be smoothed out using exchange rates. This presents a great challenge for trade unions, as does cooperation across borders. Some unions are already cooperating at the European level, such as in the European Metalworkers' Federation.
The decision to admit CEE countries into the EU was made at the Copenhagen summit in 1993. Association agreements were concluded with many countries of the region, and these countries must approximate their legislation to EU requirements. The EU has defined economic and political conditions for membership. Membership will provide not only economic benefits, but also political ones - including the promotion of democracy and stability.
European integration is and has been a long process involving the improvement of inter-country cooperation. Some of the most significant setbacks to the process since it began with the Treaty of Rome have occurred in the 1990s. There have been two main challenges: (1) unemployment and underemployment, and (2) large economic disparities, such as in competitiveness and income levels. Unless these issues are addressed, EU objectives of social cohesion and consolidating democracy will not be implemented.
Approximately 17 million people are estimated to be unemployed in the EU. However, this figure does not represent the actual situation. To create full employment under the ILO definition, about 30 million new jobs would need to be created. There is a great deal of hidden unemployment, and a high number of persons who are unregistered because they believe they will not find jobs. There is also a gender gap, with a large number of unemployed women who would like to work. Jobs must be created in order to finance the social systems in EU countries. Some would say globalization is the cause of this underemployment. But this is open to doubt - only 8% of the trade of EU member states occurs with countries outside the EU. Some say that European workers are not mobile enough, or that labour markets are too rigid. But in 1986-1991, 10 million new jobs were created in the EU, a figure similar to the level of new job creation in the US. Therefore, other factors must be at work.
The poor job creation performance is mainly caused by the restrictive monetary policies pursued in Europe. The Bundesbank has been committed first and foremost to fighting inflation, and can ignore all other objectives. (The Federal Reseve in the US, meanwhile, seeks to fight inflation, but also to promote growth, involving a more delicate balancing of policy objectives.) Stability policies have changed somewhat in recent years, with the Treaty of Amsterdam giving employment a higher priority. The job summit in Luxembourg also emphasized this point.
Closing the economic gap between EU countries in the face of existing economic disparities is a second major challenge, as mentioned above. We must avoid threats to higher labour standards in some countries, while ensuring that weaker countries are not unfairly burdened with social standards they cannot afford to support. A gradual upgrading of standards is thus called for, with the situation of no country worsening, but improving in every country. The balance of economic and social objectives will be even more difficult after the introduction of the euro. Instruments of monetary policy will disappear, making it more difficult for wage and social policies to adjust to economic performance. Social policy, in its broad sense, may become a parameter of economic performance.
It is crucial to avoid a downward spiral of wages in this environment, and a policy choice must be made between destructive and constructive competition. In destructive competition, there are winners and losers - capital moves to those locations with the lowest wages and social standards. In constructive competition, everyone wins. Competition is based on the quality of products and services and on lead times, and emphasizes the joint development of physical and social infrastructure.
To attract investors, infrastructure is necessary, and this in turn requires a certain tax level. But taxes also drive away investors. The solution is for countries to agree jointly on tax levels, rather than play off each other. Minimum social standards are also required, and a cooperative system of industrial relations. There are two instruments that can be used to these ends: the European Social Charter, and the EU's social funds. Pan-European infrastructure projects are also often spoken of.
The fundamental labour standards as embodied in the ILO Declaration are also necessary for every country in the EU. Other terms may be set in collective agreements at the national and sub-national levels. This would allow wages to be set in accordance with productivity, for example. Some trade unions have said that such a system is not enough, that social dumping will still be a danger. For example, the European Metalworkers' Federation has called for European-level collective bargaining to agree on a set of policies for each country. This may also be an element of European industrial relations.
In the context of EU enlargement, the trade unions in the EU regard social policy as not negotiable. The trade unions in the candidate countries should be involved in how the necessary elements of social policy are implemented. There should be a European-level decision-making process on these issues. In this regard, the new Employment Report of the EU has a chapter on enlargement that trade unions in the region should read. Social dialogue and maintaining a focus on the social aspects of development are important conditions for EU accession. One problem in this area is a tendency for social partnership to be managed on a "top-down" basis, as observed in Lithuania and many other countries of the region.
In implementing reforms and restructuring, policies must be developed with a view to stimulating and maintaining employment. Unfavourable economic tendencies should be countered with policies designed to protect existing workplaces and develop new ones. The tax environment must also be favourable to workplace development, and there should be a balanced policy of attracting foreign firms while at the same time stimulating local enterprise development. The development of educational and vocational training systems is also an important ingredient to successful social and employment policy.
In increasing the links and cooperation with EU countries, some important points for action include mutual recognition of degrees, qualifications, etc.; review of labour law and rules on social protection for conformity with EU legislation; multilateral and bilateral agreements on social protection and mutual employment of citizens, between countries for whom migration is a significant issue; and cooperation with the European Commission's Technical Assistance and Information Exchange (TAIEX) in the area of social protection legislation.
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