Challenge for Europe

Conditioning Sales on the European market with respect to Social Criteria

Europe is the world’s leading market. No multinational, no matter how important they are, can write it off without losing massive market share to their competitors. We therefore have the power to force these giant businesses to respect our conditions for market access. If globalization weakened the capacity of states to impose constraints on businesses who produce within their territories, it did not limit their capacity to legislate the terms of market access.

The following proposition is a solution which balances, on one hand, unregulated free trade which incites a global “race to the bottom” and, on the other, nationalist protectionism that considers a foreign product inferior by virtue of its very foreign-ness. It should be accompanied by others which encourage the EU to facilitate adaptation strategies abroad.

The European Union could decide that; in order to sell products in Europe and elsewhere, businesses need to respect certain social and environmental norms. This is beyond what it did in late 2006 with REACH, which forces the chemical industry to trace the substances they use in order to reduce their harmful impact on health and the environment. The European chemical industry could relocate to China, Brazil, or to India, but it would not avoid the constraint that, in order to sell its substances in the European Union, it needs to prove conformity with REACH.

In 2008, the EU took similar action against the tropical timber industry. It adopted a text called FLEGT16, which stipulates that tropical timber which cannot be certified as legal throughout the supply chain cannot enter the European market. Today, close to 50% of tropical timber imported from the Congo basin in Africa is illegal: either because the exploiter does not have the right to supply in a given region, because it passed production quotas on a protected tree species, or because it did not pay its taxes to the state. With the new European regulation, this wood will no longer be sold on the shop floors of our Do-It-Yourself stores.

In this way, Europe plays a very positive role since it gives a short-term comparative advantage to those who respect the law and will therefore gain market share. On the other hand, it aggravates those who cut corners.

These two examples show how the EU can act. But we now need to go further and make regulations limiting market access more systematic on the basis of social criteria (respect for the basic conventions of the International Labour Organization concerning the freedom to organize, the prohibition of child labour, forced labour; etc.) and environmental criteria (the Convention on Biological Diversity, the climate change agreement to be negotiated in December 2009 that will replace the existing Kyoto Protocol after 2012, etc.).

Convincing the WTO

Is this type of legislation even possible under the current World Trade Organization (WTO) regime? On environmental questions, the response is positive. The health of consumers or the protection of endangered species, for example, are reasons recognized by the WTO for placing limits on free trade. For this reason, three years after the adoption of REACH, not a single complaint was brought before the WTO. This rule is now in the process of being replicated in Japan. As another example, when the World Health Organization identifies an outbreak of foot and mouth disease in one country all other countries have the right to close their markets to exports without the possibility of WTO opposition.

On the social map, the response is more uncertain. But this is a political battle worth fighting. We propose that the EU adopt a text, beginning in 2009, progressively conditioning access to its market based on the capacity of a business to prove the conventions of the ILO were respected. This first step will certainly generate contentions as long as economic interests and geopolitical threats are strong. Some countries will certainly attack the EU at the WTO. But this will put us at the heart of a major battle for the regulation of globalisation. And, in light of widespread social conflict in emerging economies, there is no reason to believe this fight would not be a great chance for their citizens, who rebel more and more against authoritarian power.

For example, the prospect of a cooperative China in this project is imaginable. The Chinese authorities understand all too well the degradation of the social situation in their country. Since 2006, they have begun to enact a number of social regulations forcing businesses; for example, to pay employees for overtime hours. However it quickly limited its ambitions under the pressure of foreign multinationals that have been implanted onto its territory, who threatened to relocate to Vietnam or Bangladesh if the cost of labour rose in China. With the European regulation, the threat of relocation is limited since neither Vietnam nor Bangladesh respects the international conventions of the ILO. The effect of relocating production destined for Europe would therefore be moot.

We Call For …

Reinforcement of European Regulations which require businesses selling their products on European territory to respect strict constraints concerning environmental matters, in line with REACH and FLEGT16.

Extension of European regulations to the social sector requiring businesses selling their products on European territory to respect strict and specific norms. Steps should be taken to make the regulations limiting access to the European market more systematic on the basis of social criteria such as respect for the basic agreements of the ILO on the freedom of organisation, the prohibition of child labour, forced labour, etc.

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