Friedman, Sheldon

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Chicago-Kent College of Law

Chicago-Kent Law ReviewVolume 68Issue 3 Symposium on the Law of Slavery:Comparative Law and SlaveryArticle 18June 1993The EC vs. NAFTA: Levelling up vs. SocialDumpingSheldon FriedmanFollow this and additional works at: https://scholarship.kentlaw.iit.edu/cklawreviewPart of the Law CommonsThis The Piper Lecture is brought to you for free and open access by Scholarly Commons @ IIT Chicago-Kent College of Law. It has been accepted forinclusion in Chicago-Kent Law Review by an authorized editor of Scholarly Commons @ IIT Chicago-Kent College of Law. For more information,please contact dginsberg@kentlaw.iit.edu.Recommended CitationSheldon Friedman, The EC vs. NAFTA: Levelling up vs. Social Dumping, 68 Chi.-Kent L. Rev. 1421 (1992).Available at: https://scholarship.kentlaw.iit.edu/cklawreview/vol68/iss3/18THE EC VS. NAFTA: LEVELLING UP VS. SOCIAL DUMPINGSHELDON FRIEDMAN*Though ratification is uncertain, if the nations of the EuropeanCommunity ratify and implement the agreements reached at Maastricht,including the social protocol, the long-run implications for labor law,collective bargaining and the rest of what is commonly referred to as the"social dimension" of European economic and political integration willlikely be enormous. The industrial relations system, including labor law,will not be the only aspect of life in the Community to escape majorchange.The level of detail at which regulations and directives currently arebeing promulgated Community-wide is well illustrated in the followinghumorous tidbit:In their enthusiasm to establish a single currency and standardizeproducts for the Economic Community, the European Commissionhas run into problems determining a standard size for condoms. Allthe countries involved have agreed on a length (152 millimeters), butdeciding on a width has been more difficult. The Economist reportsthat the Italians maintain that 54 millimeters is sufficient, while thecommission is insisting that the condoms be 55 millimeters indiameter.'In a less humorous vein, though the road has been bumpy of late,the nations of the European Community still purport to be travellingtoward a common currency that will be controlled by a single EuropeanCentral Bank. If and when they get there, can the advent of Community-wide collective bargaining be far behind? Monetary union, if it isachieved, will for better or worse force a much higher degree of economicand social convergence among and between the EC nations than has beenachieved to date. In the opinion of at least some experts, such conver-gence will open the door, at the very least, to further "Europeanization"of trade union activity, creating pressure eventually for Europe-wide col-lective bargaining. 2Europe-wide collective bargaining could emerge as a trade union ob-jective at large companies which operate in two or more countries of the* Economist, Department of Economic Research AFL-CIO, Washington, D.C.1. The Short Run, DOLLARS & SENSE, Mar., 1992.2. See, e.g., Peter Coldrick, A Labor View of European Labor Markets, EUROPEAN ANDAMERICAN LABOR MARKETS: DIFFERENT MODELS AND DIFFERENT RESULTS (1991).CHICAGO-KENT LAW REVIEWEC. It could also emerge from negotiations between the European TradeUnion Confederation, (ETUC), and UNICE, the employers' association,around the implementation of basic minimum standards in areas such asthose addressed by the EC's Social Charter. At a minimum, economicand political union will enable trade unionists to improve co-ordinationof their efforts to achieve mutual collective bargaining goals, such as theshortening of standard working hours to 35 hours per week. Employerswill resist, but come monetary and political union, the forces operating inthe direction of EC-wide collective bargaining will be formidable.Professor Von Maydell suggests that the weakness of trade unioninstitutions at the EC-level currently retards development of EC-widecollective bargaining, with the result that there is little pressure for adop-tion of EC-wide labor laws. While it is true that the locus of power in theEuropean trade union movement remains at the national level, there isreason to believe that Professor Von Maydell's point about the weaknessof EC-level trade union institutions is greatly overstated.There has been substantial and rapid development of the ETUC. Itsresources and staff continue to increase, despite difficult times financiallyfor the labor movement in much of Europe as elsewhere. ETUC now has45 million workers under its umbrella, including 39 national trade unionconfederations in 21 European countries. Its affiliates represent 40% ofall of the workers of Europe, including 95% of those that are unionized.As of 1990, ETUC had 15 European industry-level committees. Theseindustry committees seek to foster the kind of international cooperationbetween trade unionists in different European countries that may lay thefoundation for collective bargaining with multi-national corporations Eu-rope-wide.Already, a number of trade union committees have been establishedto represent workers at major multi-national corporations operating intwo or more countries of Europe. These committees bring together rep-resentatives of the workers at those companies from different countries,so they can exchange information, and begin to coordinate their strate-gies. European company-wide trade union councils are in various stagesof formation at Siemens, Airbus, Unilever, Rhone Poulenc, Elf Aqui-taine, and elsewhere. At the auto companies including GM and Ford ofEurope and Volkswagen, meetings of trade unionists from all across Eu-rope have been occurring for some time.Professor Von Maydell's contention that the social dimension of Eu-ropean integration was no more than an afterthought to the primary goalof economic union also seems quite overstated. Early in the process of[Vol. 68:1421THE EC VS. NAFTAeconomic integration, trade unionists raised concerns about "socialdumping" and the need to protect workers in all nations of the Commu-nity from being pitted by their employers against one another, therebydriving down wages and undermining social protections. While the de-gree of progress achieved in preventing social dumping and in raisingsocial protections can be debated, there is little question that from a U.S.perspective the progress has been substantial.An example of that progress is an EC directive adopted as early as1975, dealing with the subject of mass layoffs. That directive requiredEC employers to consult with representatives of their workers, to seekways to avoid layoffs, minimize the number of layoffs that will be re-quired, and mitigate the resulting harm to the affected workers. A 1977EC directive dealing with corporate mergers and acquisitions guaranteedworkers the right to continue working for their company's new owner;dismissals may not occur solely as a result of a merger or acquisition.With regard to employer bankruptcies, a 1980 EC directive set forth im-portant worker rights and protections. In all three of these areas, masslayoffs, corporate mergers and acquisitions, and employer bankruptcies,EC directives set forth minimum standards which must be adhered to byevery nation of the Community which go well beyond the legal protec-tions that are provided to workers in the United States.Further progress came in the form of a Social Charter adopted inDecember 1989 by the European Council. Title I of the Charter spellsout certain "Fundamental Social Right of Workers" throughout theCommunity, including rights to health and safety protections on the job;freedom of association and collective bargaining; rights to improved liv-ing and working conditions; adequate social protections, including socialsecurity benefits; equality of treatment for women; rights to information,consultation and participation for workers with respect to their em-ployer; worker training; and protections for children, older workers andthe disabled. A 47-point "Action Program.... was developed to imple-ment these rights.3Implementation of the Social Action Program has been slow, but animportant procedural change reflected in the Maastricht Protocol makessubstantial future progress on implementation virtually certain, assumingthe new treaty is ratified. The change in question is the substitution ofqualified majority voting for the pre-Maastricht requirement of unanim-3. Greg Woodhead, Workers Rights" EC92, AFL-CIO REVIEWS THE ISSUES, Sept. 1991, Rep.No. 54.CHICAGO-KENT LAW REVIEWity among all member states, in order to approve any EC directive in thearea of employment policy.The pre-Maastricht unanimity requirement meant that a singlemember state could effectively veto implementation of any employmentpolicy-related aspect of the Social Action Program with which its gov-ernment disagreed. Typically, the veto was cast by the Conservative gov-ernment of the UK. For example, until recently the UK governmentused its veto power to block a directive that will establish a minimumrequirement of 16 weeks paid maternity leave throughout the EC. Thisdirective has now won final approval, and will take effect in 1994.4Under qualified majority voting, by contrast, the European Councilwill be able to make employment policy decisions without requiring una-nimity. When decisions are taken by a qualified majority, France, Ger-many, Italy and the United Kingdom have ten votes each; Spain haseight votes; Belgium, Greece, the Netherlands and Portugal have fivevotes each; Denmark and Ireland have three votes each; and Luxem-bourg has two votes. Out of a total of 76 votes, 54 are needed to approvea Commission proposal and enact it into law. Under the compromisereflected in the Maastricht protocol, the UK will be able to opt out ofsocial and employment policy directives with which its government dis-agrees, but will no longer be able to veto directives in these areas towhich a qualified majority of the other eleven member states can agree.It is unfortunate that Professor Von Maydell's paper did not includea more detailed analysis of the Maastricht Treaty, particularly its SocialProtocol. In December 1991, eleven EC member states (all of them ex-cept the UK) initialed a separate protocol on social policy. The Protocolexpands the scope of issues under the heading of the "social dimension"of European integration that will be subject to EC intervention.Based on an ETUC-UNICE agreement, the Protocol also vests sub-stantial new authority in national negotiations between union and em-ployer federations in EC member states. Where the parties mutuallyagree, certain EC social and employment policy directives can be imple-mented at the national level by means of collective bargaining ratherthan legislation. Unlike collective bargaining in the United States, theresults would be applicable to all workers and all employers, whetherunionized or not.If Maastricht is ratified, progress will be possible even on such con-troversial matters as a proposal to require the establishment of European4. European Community Adopts Directive Guaranteeing Women Paid Maternity Leave, DAILYLAB. REP., Oct. 21, 1992, at A-1 to A-2.[Vol. 68:1421THE EC VS. NAFTAworks councils, which was approved in July 1991 by the European Par-liament. Under this proposal, all firms that employ 1,000 or more work-ers, and operate two or more establishments with at least 100 workerseach in two or more member states, would be required to establish Euro-pean workers' councils, made up of representatives chosen by the work-ers or their unions. Employers would be required to disclose informationto these councils, and to consult with them about important companydecisions.The European Commission's draft directive on working time is an-other good example of a controversial employment policy issue on whichprogress may now be possible if the Maastricht treaty is ratified. Thisdirective would set forth minimum standards with respect to daily restperiods, days off per week and yearly vacation time for workers through-out the Community.Another important dimension of European economic and politicalintegration has been the establishment of large Community-wide struc-tural and social funds. The purpose of the social funds is to promoteemployment, raise living standards and facilitate adjustment to industrialchange throughout the EC. The purpose of the structural funds is todevelop the Community's least-favored regions, thereby increasing socialand economic cohesion.These funds are quite sizeable in relation to the GDPs of poorer ECmember states, and the budget for them is projected to double between1987 and 1993, amounting to 25% of the EC's total budget. The struc-tural and social funds represent a substantial commitment by the EC andits member states to ease the burdens on workers resulting from disloca-tions associated with economic integration, and to assure that the harmo-nization of social standards and protections throughout the Communityis in an upward rather than downward direction.The priority given to the social dimension of economic integration inEurope stands in marked contrast to the approach to economic integra-tion reflected in the North American Free Trade Agreement (NAFTA)recently negotiated between the United States, Mexico and Canada bythe Bush, Salinas and Mulroney administrations. Quite unlike the ap-proach being followed in the EC, the NAFTA blueprint for economicintegration is silent or, at best, ineffective by design on the critical issuesof labor standards, workers' rights, and health, safety and environmentalprotections. There is even a serious risk that the agreement will under-mine existing federal and state protections in these and other areas. Incontrast to the care which has been taken in the EC to undertake eco-1993]CHICAGO-KENT LAW REVIEWnomic integration in a manner which avoids "social dumping," NAFTAwill be an open invitation to continue and intensify this already rampantpractice. 5It is possible to conceive of a far more positive model of economicintegration than NAFTA one in which harmonization of workers' rightsand labor, health, safety and environmental standards would be upward,not downward. The model for this is the European Community, whereeconomic integration has been accompanied by massive "social funds"and a social charter that intends to provide a framework for upward har-monization, and guard against the kind of "social dumping" thatNAFTA will exacerbate.5. Sheldon Friedman, NAFTA as Social Dumping, CHALLENGE MAG., Sept.-Oct. 1992, at 27-[Vol. 68:1421

The EC vs. NAFTA: Levelling up vs. Social Dumping

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The EC vs. NAFTA: Levelling up vs. Social Dumping

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