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TUC Evidence to BIS on Trade and Investment for 'Balance of Competences' Review

Issue date
TUC submission to BIS

Balance of Competences review

August 2013


The Trades Union Congress (TUC) has 54 affiliated unions, representing almost six million members, who work in a wide variety of sectors and occupations. The TUC welcomes the opportunity to respond to the Department for Business Innovation and Skills' Call for Evidence on Trade and Investment competences.

The submission will consider in turn the questions in the Call to Evidence document on which we have particular concerns.

The Call to Evidence document repeatedly makes reference to 'national interest'. In its submission to this Call for Evidence, the TUC interprets 'national interest' as the protection of rights, safety and quality of life of those working and living in the UK. From this perspective our concern with trade and investment is its ability to encourage decent working and living standards and respect for human rights, both in the EU and internationally.

The TUC has only answered the questions where we feel we have most to contribute.

Call for Evidence: Questions

1. What are the advantages and disadvantages of the EU's competence over trade and investment, particularly in relation to international trade and investment negotiations?

The UK is undoubtedly advantaged by making trade negotiations as part of the EU bloc owing to its size and importance in the global market. The EU is the world's largest trading block and the largest trader of manufactured goods and services in the world. The EU ranks first in both inbound and outbound international investments and is the top trading partner for 80 countries. By comparison the US is the top trading partner for a little over 20 countries.

EU states combined offer a far more attractive package to international partners that the UK does alone. This has become particularly clear in relation to the proposed Transatlantic Trade and Investment Partnership between the EU and USA. The US Government made this clear to David Cameron during a visit to Washington in May this year that the USA 'had very little appetite' to forge a separate trade deal with the UK outside of the EU bloc. The UK's membership of the EU trading bloc has already given the country access to strategically important markets through EU Free Trade Agreements with Mexico (2000) and the Republic of Korea (2012).

The TUC believes it is important for the UK to be part of EU trade negotiations due to the principles of human rights and sustainable development which guide them. The Treaty of Lisbon (2009) defined sustainable development as a guiding principle and established the European External Action Service to coordinate economic activity and diplomatic work by the EU internationally. These principles and structures taken together provide the mechanism to promote labour rights and decent living standards in some of the poorest countries in the world where the EU does business.

There is potential in the EU's Generalised System of Preferences (GSP), which offers access to EU markets for developing countries in exchange for them improving their respect for key human rights and environmental standards. The GSP system has certainly had an impact encouraging countries to adhere to international labour standards. The TUC has reservations about the operation of the GSP system to practically tackle labour rights abuses, however. This is borne out by the fact countries such as Georgia and Colombia, where trade unions have been violently suppressed, have not had their 'GSP+' status removed as on paper both have legally fulfilled 27 key human rights and environmental conventions. The TUC hopes that the revised version of the GSP system due to be launched in 2014 will be made open to public input and be more transparent to allow better reporting and response to incidents of abuses.

The TUC is also concerned by the current form of the Economic Partnership Agreements (EPAs) currently being negotiated by the EU with Africa, Caribbean, Pacific (ACP) countries. As reported to the Government's Review of the Balance of Competences in Development Cooperation and Humanitarian Aid, the TUC and the International Trade Union Confederation (ITUC), which includes trade unions in ACP, are critical of the fact EPAs require premature and inflexible liberalisation for developing nations which may restrict their industrial development, have adverse impact on food security and reduce tariff revenue.

EPAs are also not conducive to trade within regional groupings. Moreover, developing nations are required to open their markets to EU exports under EPAs often prematurely, which has caused considerable difficulties for them. The TUC believes EPAs must focus more on the development needs of countries rather than encouraging open markets out of context that can have destabilising effects on developing countries' markets and regional stability.

2. What are the advantages and disadvantages of having trade and investment promotion largely at the national level? How well has this delivered on UK objectives?

4. What are the likely advantages and disadvantages of moving from national to EU competence in relation to investment protection?

The TUC believes that the role of the government to legislate in the public interest is clearly acknowledged in EU legislation. Protection of the public interest is laid out in Article 14 of the Treaty on the Functioning of the European Union which states that the Union and the Member States shall take care that:

' of general economic interest in the shared values of the Union as well as their role in promoting social and territorial cohesion... operate on the basis of principles and conditions, particularly economic and financial conditions, which enable them to fulfil their missions.'

The TUC is calling for the EU's negotiating position on trade to be more strongly guided by the principles of 'social cohesion' and human rights. Ensuring robust measures in these area could do more to lift developing countries out of poverty than aid.

The TUC is concerned that social cohesion must not be sacrificed for the interest of private investors and states should be able to protect and enhance public services without being accused of expropriation by investors. In order to provide a safeguard for public services, the TUC believes investor-state settlement procedures should not be used in trade negotiations, where alternatives already exist. Clauses providing market access to foreign investors should only be offered through a 'positive list approach' and government procurement should be exempt. Core labour and environmental standards must also be protected in investment agreements.

In concert with the ETUC and our sister organisation in the USA, the AFL-CIO, the TUC is calling for such provisions in the upcoming Transatlantic Trade and Investment Partnership (TTIP).

5. How well are UK objectives met and interests taken into account through a) EU trade defence investigations, and b) the EU representing the UK in trade defence cases against the EU and more generally in trade disputes with other WTO members?

The EU is considered one entity by the WTO which reduces the likelihood of EU member states being drawn into disputes. Furthermore, operating as part of a large regional bloc increases the UK's position within the WTO.

6. What future challenges/opportunities might we face on trade and investment policy and what impact might these have on the UK national interest?

The TUC is concerned by the threat of labour market exploitation and undercutting posed by the EU-India Free Trade Agreement currently being negotiated. This FTA proposes to bring a significant number of workers to the EU, and the majority to Britain, under Mode 4 arrangements.

In 2011 TUC Congress passed a Motion opposing the Agreement in part due to the Mode 4 arrangements in the deal. The TUC is concerned that there are no assurances in the deal that the Indian workers receive at least an equivalent reward package to those already undertaking the same work and no safeguard mechanism that allows member states the right to close off entry to Mode 4 workers into a particular sector where pre-determined distortions, such as unemployment, occur in the local labour market.

This could undermine collective agreements and risks worker exploitation in the IT sector - where the majority of Indian workers are likely to be employed.

The TUC believes Mode 4 provisions in EU trade agreements must be agreed with the trade unions concerned and ensure the observance of core labour standards and national labour law (incorporating and going beyond those standards) in the country where the service is delivered. Workers should be covered by existing collective agreements in the host country and have access to social security and insurance schemes on the same basis as local workers. Furthermore, impact assessments should be conducted to make sure there is not undercutting or unemployment of those already in the resident labour market.

A further potential challenge is presented by the implications for workers, jobs and society of the Transatlantic Trade and Investment Partnership which was launched in June 2013 between the EU and the USA on the. If concluded, this would create the largest free trade area in the world.

The TUC regards the TTIP as providing an opportunity for improving labour standards and creating more jobs and prosperity in the UK as well as in other EU states and the USA. However, the prosperity gains of the agreement must be fairly distributed and the jobs created must be of a decent quality, and the downsides of the agreement must be minimised and remedied. The involvement of trade unions in the negotiation of the TTIP is essential in this process. Without consulting social partners, there is a real danger that the employment opportunities created are more of the kind of insecure, low-skill jobs that have proliferated in the UK.

The TUC is concerned that the impact assessment of the potential effects of the TTIP by the Centre for Economic Policy Research[10] only estimates gains in terms of an overall sum and the average gain for a family of four rather than the likely actual distribution of income from the TTIP. The TUC is concerned that additional revenue from the TTIP should not be distributed in the same uneven manner presently found in the UK, where the average chief executive's wage is 145 times more than the average, whilst the share of national income taken by the bottom half of the income distribution has fallen by 25% since the 1970s.

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