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Address by General President Jack O'Connor at the launch of the Union's campaign against the proposed Services Directive, January 13, 2006

The proposed Services Directive, has enormous implications for labour standards in Ireland. Indeed, it is no understatement to say that if implemented in its present form the Directive has the potential to destroy gains made by the trade union movement over a period of 30 years or more.

The Draft Directive proposes to create greater access to a large array of services, from architects, management consultants and travel agents, to car rental companies. More ominously it also covers areas such as employment agencies and health care services. The key concern of workers and trade unionists is the proposed ‘country of origin’ (CoOP) principle, which would mean that service providers would be subject to the laws of their country of origin rather than of the country where the service is provided. 

This would not only allow companies in other EU member states with poor labour standards to supply services here and displace existing workers, but it would allow Irish companies to relocate their operations in those states as well returning to compete here on the basis of those low standards. It would be left to the statutory authorities in the ‘country of origin’, to ensure that people employed by service providers were covered by local labour laws and, in the case of workers recruited from third countries, were eligible to work within the EU. The host country would have no role in overseeing the process, even though the employees concerned would be living and working within their jurisdiction. 

Given the current difficulties that we are encountering in ensuring that unscrupulous employers respect our labour legislation, the system proposed in the draft Directive would provide a licence for gross exploitation. 

We can see the rationale for a measure that overcomes regulatory obstacles to the internal market for services in Europe.  It would allow consumers to benefit from greater competition and economies of scale. But there is considerable evidence to suggest that, in its current form the Directive will not achieve these objectives. For instance, a recent in-depth study of UK firms by Price Waterhouse Coopers for the British Department of Trade and Industry suggests that regulatory barriers are not a major impediment to the establishment or cross-border provision of services. It found the main barriers to be ‘natural ones such as business, culture and language’.  

It is also worth noting that a study produced for the European Commission last year by Copenhagen Economics, suggests that the economic value of the country of origin principle element is marginal and only accounts for ten per cent of the savings that would be generated by the draft Directive. 

The enthusiasm for the imposition of this measure should also be viewed in the context that the EU is already the biggest provider of services to the world economy and that share is rising. The US, which is regularly cited as a role model in this areas actually saw its share of the market fall between 1997 and 2003.  We do not believe that a convincing economic case has been made for the need for the draft Directive. Trade in services increased by 10.8 per cent among EU member states between 2000 and 2003. Trade in services between the EU and the rest of the world increased by 6.4 per cent over the same period and, at 25.8 per cent of the global market, the EU is market leader.

The present draft Services Directive is being sold as an economic cure all for slow growth in the EU but there is little evidence to support this, or suggest a dramatic improvement in a very creditable existing performance. Copenhagen Economics, in its report to the Commission, estimates that the overall impact of the draft Directive will be to reduce the cost of entering new markets within the EU for companies in the services traded sectors will be just 0.7 per cent in distribution and 0.3 per cent in business services.  

The only area where it will have a significant impact is in the professions, where entry costs will be reduced by an estimated 9.3 per cent and it is likely to have the most beneficial impact for consumers. But even this figure has to be treated sceptically because of the cultural barriers to cross-border provision of services identified by PwC. For instance, the reason why so many Irish hospitals are still recruiting doctors and nurses in third countries such as India and the Philippines, rather than the new EU accession states, is because health professionals some third countries have a better working knowledge of English.

In these circumstances the claims by champions of the current draft Directive that it will automatically benefit EU consumers and promote economic growth need to be more rigorously examined.

Fortunately, more and more people are beginning to appreciate the disproportionate impact the draft Directive will have on the pay, working conditions and living standards of EU citizens if it is passed in its present form. And there is also a developing appreciation of the negative economic and social implications of undermining pay and employment standards. This has resulted in an attempt to ameliorate its provisions by excluding labour law from the subject matter of the Directive.  This would be the position if the conclusions of the influential Internal Market and Consumer Protection Committee (IMCo) of the European Parliament are adopted.    

Some supporters of the business agenda have latched onto this proposal to lull us into a false sense of security. While this would go a considerable way towards tackling the threat to working conditions in some EU member states that have statutory protection for Collective Agreements it would not deal with the situation in Ireland. Here pay and working conditions for unionised and non-unionised workers alike are largely determined through our voluntarist system of negotiation. The reality is that in an Irish context such an amendment will only ensure that the National Minimum Wage is paid to service workers,  (€15,500 a year when the average industrial wage is €30,000).  

This approach simply rehashes the old strategy of promoting competitiveness by reducing wage costs. Indeed we are already experiencing the phenomenon of actual declines in average hourly earnings in some sectors of the economy.

This is entirely consistent with the decision to open our borders from day one of the accession of the ten most recent EU member countries - without a commensurate improvement – or any improvement at all – in the enforcement of our labour legislation. It is also entirely consistent with the decision which was made by the Department of Enterprise, Trade and Employment in the middle of 2004 to block the appointment of additional Labour Inspectors after we had managed to persuade the then Minister for Finance, Charlie McCreevy, to lift the embargo in the Public Service to enable it to happen.

Incidentally, the trade union movement was never consulted about the decision to open our borders but we did not oppose it because we realised there was a need for migrant labour and, as internationalists, we welcome the arrival of people from other countries and cultures as something that will enhance our own society. However we have insisted on proper regulation and enforcement and I want to restate again for the record that our policy in this matter has been informed by the principle that regardless as to ones nationality they are entitled to be treated with dignity and respect and entitled to a proper living wage when they go to work in Ireland.

The appalling implications of their refusal to do so were exposed within twelve months by the Gama scandal. Put in simple terms, if it is implemented in its present form it would legitimise everything Gama was doing, provided they were registered in a EU member state.

There is a sustained campaign underway by those promoting a neo-liberal agenda to rubbish the idea that displacement is taking place. The evidence is there, not alone with income tax receipts coming in below target although there are 96,000 more people at work in the economy, but with wage rates actually declining in some sectors. Average hourly earnings fell in the food products, office machinery, computers, electrical machinery and other sectors between March and September of last year.

Even in traditionally strong areas such as manufacturing, earnings are not matching the increases provided for in Sustaining Progress. Hourly earnings in manufacturing rose by 2.1 per cent in the year ending September 2005, when they should have risen by four per cent. 

Commissioner Charlie McCreevy has become an enthusiastic proponent of the proposed Services Directive.  He was widely reported for a speech extolling the virtues of Mrs Thatcher.  It is no coincidence that those promoting this nefarious measure in its present form pay homage to the Thatcherite vision of the economy. Thatcher’s hatred for unions and organised labour is notorious. Less well known is her dismal economic record. While a minority certainly benefited from her policies, overall employment fell from 24.6 million when she came to power in 1979 to 21.6 million when she left in 1992. Productivity lagged behind her main EU competitors, Germany, France and Italy, while unemployment more than doubled from 4 per cent to 8.6 per cent.

The fortuitous discovery of North Sea oil actually camouflaged a truly disastrous economic record from every perspective.   It is hardly a recommendation to follow.

This draft Directive is a classic piece of Thatcherism and its effect, if implemented in its present form, will be to reverse the whole thrust of the EU project. Instead of helping the new accession states raise the productivity, working conditions and living standards of their citizens to the highest possible level, as Ireland was helped in the past, the lowest common denominator will be called into play. Conditions will be driven down to the lowest levels.

Ironically the Irish Ferries and Gama disputes did us one favour by giving us a glimpse of the future that the architects of the proposed Directive are planning for us.

We are today launching a major campaign to enlighten workers generally and wider public opinion as to the truly horrendous consequences of the measure they are proposing to foist upon us.

The need for a serious public debate is urgent. The new Austrian presidency of the European Union declared on Monday in Vienna that it is making resolution of the problems surrounding the proposed Services Directive its priority. The EU President Jose Barosso wants the improved, compromise draft by March. He indicated that this could include an inadequate amendment along the lines proposed by the IMCo committee requiring employers to recognise the employment laws of the host country.

As a result of the meeting in Vienna it is clear that the whole process will be fast tracked and a new directive could be foisted on us by June. It is incumbent on the trade union movement to make members and the general public aware of the issues and ensure that any final EU draft is not designed solely to meet the agenda of those who see the creation of a single market stripped of social constraints as the sole purpose of the European Union.

A more targeted and humane approach is essential if we are to preserve, not just labour standards, but the human integrity of the European project. The most human aspect of the Single Market is how people are treated at work. That is the benchmark by which the European Social Model must ultimately be judged and this draft Directive falls far short of meeting any acceptable criteria.

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