A4-0335/96

Resolution on industrial restructuring and relocation in the European Union

The European Parliament,

- having regard to the deliberations at the joint hearing of the Committee on Economic and Monetary Affairs and Industrial Policy and the Committee on Social Affairs and Employment on the subject held on 29 May 1996,

- having regard to its resolution of 15 December 1994 on the conclusions of the Uruguay Round and future activities of the WTO ((OJ C 18, 23.1.1995, p. 165.)),

- having regard to its resolutions on relocation of companies within the EU of 17 February 1995, 13 July 1995 and 21 September 1995 ((OJ C 56, 6.3.1995, p. 197; OJ C 249, 25.9.1995, p. 152; OJC269, 16.10.1995, p. 172.)),

- having regard to its resolution of 14 December 1995 on the Communication from the Commission entitled 'a level playing field for Direct Investment world-wide¨ ((OJ C 17, 22.1.1996, p. 175.)),

- having regard to its resolution of 9 May 1996 on the Commission's Annual Economic report for 1996 ((OJ C 152, 27.5.1996, p. 68.)),

- having regard to its resolution of 24 May 1996 on negotiations in the WTO on trade and the environment ((OJ C 166, 10.6.1996, p. 260.)),

- having regard to Articles 5, 7, 11, 17, 18 and 19 of the Community Charter of the Fundamental Social Rights of Workers,

- having regard to Council Directive 94/45/EC of 22 September 1994 concerning the European Works Council ((OJ L 254, 30.9.1994, p. 64.)),

- having regard to Directive 75/129/EEC ((OJ L 48, 22.2.1975, p. 29.)), as modified by Directive 92/56/EEC ((OJ L 245, 26.8.1992, p. 3.)), concerning collective dismissal, and Directive 77/187/EEC ((OJ L 61, 5.3.1977, p. 26.)) on the retention of employee rights in the event of transfers of undertakings,

- having regard to the White Paper on Growth, Competitiveness and Employment, the White Paper on European Social Policy and the Confidence Pact for Employment,

- having regard to the Conclusions of the European Councils of Essen, Cannes, Madrid and Florence,

- having regard to the Committee of the Regions' opinion on the relocation of international businesses (CdR 228/95) and its report (CdR 279/94),

- having regard to Articles 2, 3, 3a(1), 102a, 118 and 130 of the EC Treaty,

- having regard to the motion for a resolution tabled by Mr Caudron on industrial restructuration and relocation in the European Union (B4-0178/94),

- having regard to Rule 148 of its Rules of Procedure,

- having regard to the report of the Committee on Economic and Monetary Affairs and Industrial Policy and the opinions of the Committee on Social Affairs and Employment and the Committee on Regional Policy (A4-0335/96),

A. whereas relocation and restructuring of industry are not new, but their scale and contexts have changed significantly in the process of making the global economy a reality,

B. whereas industrial relocation can take many forms, both in terms of the factors which influence it and in terms of its economic impact in the regions or countries concerned,

C. whereas industrial relocation can occur within the Community and between the Community and third countries,

D. whereas relocations form part of a global process of economic rationalization and cost-cutting, industrial modernization and scaling-up, adaptation and restructuring,

E. whereas the pace of relocation and globalization is reflected in the spectacular growth of Foreign Direct Investment (FDI), which tripled in the last ten years, and by strong growth of international trade, which grew twice as much as the world output in the same period,

F. whereas transnational corporations are the key players in relocation and restructuring, accounting for some two-thirds of all world trade and conducting one-third as intra-company trade,

G. whereas relocation is no longer a matter of the physical movement of a facility, performing the same task in a different location, but takes place in a wider variety of ways, including subcontracting, strategic alliances between firms, portfolio investments and the like,

H. whereas relocation affects not only the 'traditional¨, i.e. labour-intensive industries such as the textile, footwear, or toy making industries, but also capital-intensive industries such as the steel, shipbuilding, machine tool, aircraft and electronic equipment industries, as well as important areas of the service sector such as software development and financial, information and logistic services,

I. whereas the motivations of firms to relocate are manifold, including seeking access to emerging markets, overcoming local content clauses, wage competition, subsidies competition, 'free¨ infrastructure opportunities, tax avoidance,

J. whereas stability in currency markets is of paramount importance if relocation decisions are not to be distorted or counterproductive,

K. whereas a common currency in the EU will contribute to a stable environment for generating constructive relocation and restructuring effects in the economy, if based on convergence of nominal economies, and on efficient macro-economic coordination,

L. whereas relocation of business activities may on the one hand be positive if it creates employment in areas suffering from high unemployment and poverty and gives businesses a foothold in new markets but on the other hand has adverse effects where it removes employment from regions which do not (yet) have any alternative,

M. whereas the special coincidence of the incoherent development of the internal market, the convergence requirements for the single currency, the accelerated introduction of new technology and new systems of labour saving organization methods, now makes relocation and restructuring a unique and particular challenge to politics, in that it adds to the EU's already legion difficulties in addressing employment and economic development,

N. whereas the EU is the world's most significant player, it has obligations, through its trading and internal market policies, to ensure global accountability for responsible conduct in the interests of its citizens and others in the global economy,

O. whereas outward relocations can be associated with a range of socio-economic problems in the regions, eg. increasing levels of long-term unemployment, skills mismatch, decline in spending power and loss of key markets for local producers,

P. whereas inward relocation does not necessarily overcome local problems when incoming investors rely on poaching skilled labour from local enterprises to the considerable detriment of the existing economy,

Q. whereas recent changes in the Structural Funds mean that the budgetary capacity of regions rather than need can dictate access to expenditure, thus polarizing and penalizing the very regions which are least favoured,

R. whereas agreed minimum social standards would place a floor under the labour market and force an upgrading of the labour force through investment in skills, and generate personal dignity at work,

S. whereas unemployment in the EU remains too high and persists, while, on the contrary, the objective of full employment should be pursued,

T. whereas lack or poor availability of data concerning relocations hamper an accurate assessment of the extent of the phenomenon,

U. whereas the role of CEE countries is still modest but will strongly increase in the near future and particular consideration should be given to the relocation and restructuring aspects of the enlargement process,

1. Sees an urgent need to shift the basis of the framework for international action on trade and investment from a relatively narrow focus on growth and preservation of free trade and investment, to the more complex goal of sustainable development, which means integrating economic efficiency, macroeconomic stability, social justice and environmental sustainability;

2. Emphasizes that international currency speculation is a major source of monetary instability, distorting decisions in the real economy, eg relocations, and urges the Commission to make proposals to deter speculation in derivative financial assets ; also emphasizes, in this regard, that the successful implementation of economic and monetary union will be a major step forward to address the above-mentioned problems;

3. Notes the Commission's view in 'Taxation in the European Union "(SEC (96)0487) that low taxation on geographically mobile production factors, which undermines national fiscal bases, forcing a shift of the tax burden to the less mobile factors such as labour, constitutes the greatest unmet political challenge, and calls for urgent action;

4. Notes the speed at which free movement of capital within the European Union was implemented and regrets that labour and pension mobility and the recognition of diplomas have not been given the same priority; calls on the Commission to study the consequences for relocations within the EU of greater freedom of movement for workers and greater mobility for their pension rights;

5. Calls on the Commission to take the necessary measures to eliminate factors which prevent all workers and citizens from benefiting fully from redistribution of the success of the internal market, inter alia the lack of a European approach to taxation of frontier workers, the lack of fiscal harmonization as a result of which the burden of taxation on mobile subjects of taxation fell by 10% between 1980 and 1993 while the burden of taxation on labour and income increased by 20%; calls on the Council and Member States to act on these proposals;

6. Points out that competition with regard to social provisions often plays a part in relocation of business activities, and that when the third stage of EMU begins social security, working conditions, environmental and fiscal policy will be the last remaining fields in which the Member States can compete, so that a framework of European social legislation is still a matter of urgency and must be expedited by qualified-majority decision- making;

7. Calls on the Commission and the Council to take position with regard to the internationalization of the EU´s own industry and asks the Commission to report on what coherent strategy the Commission has, if any, for dealing with the employment consequences of restructuring;

8. Expects the Commission to explain how it 'factors in' the effects of increasing rationalization of EU transnationals and their production and relocation decisions into its short and medium term assessments of employment in the EU, and whether such effects are considered in the design and implementation of its proposals for action on employment;

9. Confirms the need to rebalance the architecture of the Treaty, with a robust inclusion of labour and labour market interests so as to provide, as part of the Confidence Pact for Employment, a genuine, if minimal, confidence- creating basis;

10. Calls on the Commission to evaluate the Structural Funds with regard to distortion of competition and evidence of subsidy-shopping practices and report the results to Parliament;

11. Proposes that EU-support for companies by the Structural Funds should be conditioned by long-term commitments on employment and local development; underscores therefore the need for a role of the regional and local authorities to demand from incoming investment added value and self- sustaining linkages to the existing economy ensuring relocation is less vulnerable to easy delocation in future;

12. Urges the Commission to target strong commitment to investment in education and skills which aid the required adaptability in the event of delocations;

13. Urges that the 'race to the bottom¨ of social systems in competition for investment be terminated, by creating a level playing field in social protection and removing any opt-out provision of this aspect through the IGC;

14. Draws attention to the importance of the establishment of European Works Councils to guarantee transparency of delocation and restructuring decisions;

15. Urges the modification of the statutes of the WTO, which enshrine the absolute supremacy of free trade over any ecological or social considerations and threaten the objective of sustainable development adopted in Rio in 1992;

16. Urges the Commission to come forward with proposals on minimum environmental standards to be introduced in EU preference agreements and multinational trade agreements;

17. Believes that externalities of transport pricing, if properly accounted for, could significantly affect current FDI relocation decisions worldwide and emphasizes that a correction of transport pricing is overdue;

18. Calls on the Commission to make clear which, if any, industrial policies exist or are envisaged, and why, and why others are not; calls on the Commission to make clear whether it expects to rely on competition policies to do the job of industrial policy, and if so, what role its Industry Directorate is expected to play in the rational formulation of both industry and competition policy; calls on the Commission to formulate an explicit EU industrial policy;

19. Calls on the Commission to make use of the powers vested in it by Article 101 of the Treaty to eliminate the distortions arising from the lack of a common fiscal policy;

20. Urges the Commission and the Ministers meeting at the WTO Summit in Singapore to pursue the adoption of social clauses in international trade and investment agreements based on basic ILO standards covering fundamental rights, e.g. freedom of association, the right to collective bargaining, a minimum age for employment, non-discrimination, and the ban on forced labour;

21. Considers that the WTO's Singapore Summit in December should seek to revise its statutes to deliver

(a) a redefinition of Article XX relating to 'general exceptions' to the rules of free trade and to equal treatment of investment;

(b) joint declarations confirming

(i) that sustainable development, multilateral conventions on the environment and human rights must prevail over free trade;

(ii) the right of the least developed countries to promote with appropriate measures the development of their own industries;

22. Calls on the Council to instruct the Commission to advocate and actively seek instruments to secure transparency and accountability of the WTO and ensure full participation of NGOs and their expertise;

23. Takes the view that the EU, and especially the Commission, must play its full part in combating unfair competition and promoting the role of the WTO and ILO in getting to grips with matters such as the relation between labour standards and investment, the opening up of third country markets to the EU, the creation of a data base on barriers to entry, the fight against piracy of intellectual property and, most importantly, the coordination of the positions of the Member States within the WTO and OECD;

24. Calls on the Commission to proceed with the incorporation of social clauses in international agreements on the basis of the five ILO conventions classified as having priority, namely those concerning the right of association, free collective bargaining, the prohibition of child labour and forced labour and the prohibition of discrimination; calls on the Commission to encourage all Member States to ratify these conventions; calls for the implementation of these social clauses to be accompanied by positive measures and incentives to encourage countries and businesses to abide by the clauses; calls on the Commission and Council to seek priority treatment of this topic at the WTO ministerial conference in Singapore and to advocate and actively seek the setting-up by the WTO ministerial conference in Singapore of a committee on trade and human rights, which should in particular concern itself with issues relating to human rights in the field of employment;

25. Asks the Commission to make the provision of a level playing field a supreme objective in its negotiations with the other trading blocks and countries, and to put in place fully transparent evaluation systems to assess the success in meeting the above objective and for ensuring fair competition and disseminating appropriate labour standards;

26. Asks the Commission to provide Parliament with detailed figures on the extent and structure of both EU internal and EU external relocations, taking into account the social and environmental effects including consideration of new indicators;

27. Stresses the impact which the strengthening of the TRIM agreements within the WTO may have on the phenomenon of relocation and urges that, at the WTO Ministerial Conference in Singapore, the TRIM agreement be placed within the context of the economic and social impact arising from relocation and the liberalization of FDI;

28. Repeats its position that the European Parliament should be fully involved in all EU international agreements on trade and investment;

29. Considers that, by taking due account of the complexity of the phenomenon of industrial relocation, the goal of public policy should be to encourage the beneficial effects of such relocation and to mitigate its potentially negative effects;

30. Believes, therefore, that public policy dealing with the phenomenon of industrial relocation should be formulated with a view to the following objectives:

- a high level of employment,

- social and economic cohesion,

- competitiveness of Community industry,

- sustainable development,

- a fairer distribution of the gains resulting from free trade;

31. Observes that recent studies show the increasing importance of CEE countries in terms of relocation;

32. Criticizes the absence of adequate social norms and the existence of legalized social dumping, with disturbing consequences for the EU internal market;

33. Stresses the necessity of reorienting the PHARE support towards the development of wider and higher social standards in the CEE countries with a view to transposing the best practice EU social policy framework into their systems;

34. Demands that the Commission undertake an assessment of the association and accession agreements and the PHARE programme, and particularly the application of the social clauses in these agreements, with the aim of increasing support for the establishment of an effective model for social consultations, the adoption of good labour regulations and social protection;

35. Urges the Commission to 'factor in' the impact of transnational company development in the CEE countries when considering the recomposition of the Structural and Cohesion Funds in the context of enlargement within the general framework of the pursuit of the objective of economic and social cohesion, taking particular account of the situation of the countries currently receiving grants from the Structural and Cohesion Funds;

36. Calls on the Commission to keep relocation of EU industry under formal review and to consider establishing a permanent observatory on these issues; calls, in this respect, on the Commission, on the basis of the work carried out by such an observatory, to develop guidelines for Community policy which, whilst taking account of the complexity of the phenomenon of relocation, aim to promote its beneficial effects and to mitigate its negative effects, these guidelines having to be formulated with reference to the five objectives for public policy in this area outlined above and to be presented to the European Parliament and the Council;

37. Stresses that existing Community policies such as competition, industrial, trade and internal market policies influence the pattern of industrial relocation both inside and outside the Community, and expresses concern at the insufficient coordination of these policies; in this respect, regrets that the relocation phenomenon and its effects are not explicitly taken into account in the formulation and evaluation of these policies;

38. Instructs its President to forward this resolution to the Commission, the Council, the ACP-EU Joint Assembly and the Social Partners' representatives at the European level.