Rebalancing the Economy: Trade and Investment
HC 735 Rebalancing the Economy: Trade and Investment
Written evidence from Linda Kaucher
Introduction
Part 1 of this submission deals with trade issues, particularly `Mode 4'. Mode 4 concessions allow transnational corporations to move temporary migrant workers across borders, as `trade'.
Not only is Mode 4 the aspect of the trade agenda likely to have the greatest impact on people in the UK, but effects of the EU's Mode 4 commitments will also be felt disproportionately in the UK in comparison with other EU Member States.
Mode 4 concessions are included in all EU trade deals, including Doha, but the EU/India Free Trade Agreement, currently being negotiated, is a particular focus here. Evidence shows that, in this Agreement, India will not sign up without Mode 4, that Mode 4 labour access is the single demand from India, indicating its commercial significance, and that the UK is the main and willing target for Mode 4 access.
Cheaper labour brought from outside of the EU by transnational corporations displaces workers here and undermines economic recovery. Yet information on Mode 4 is kept from the UK public.
Trade commitments are the means by which the UK is tied into enforceable international trade law. The right of Member State parliaments to veto trade agreements negotiated and signed up in Brussels was lost when the Lisbon Treaty came into force, so proposed commitments should be considered in a precautionary, timely way and in a context of full information.
I have provided links to further information that I have produced on Mode 4 including a presentation to the EU Trade Commission's civil society dialogue session on Services [1].
If Mode 4 has not, to date, been brought to the attention of the Committee, it is a major omission for which some rescheduling should perhaps be considered.
Part 2 of this submission relates to the Select Committee's oversight of BIS administration and policy. In relation to BIS administration, issues are raised about the process followed for the Call for Evidence for the Trade and Investment White Paper, which have prevented information reaching the Committee. The BIS policy issues relate to policy on the conduct of submissions, trade policy, and policy on dealing with alternative views.
Part 1: Trade issues, with an emphasis on Mode 4
Sections
a) Mode 4
b) `Investor Protection' and EU trade policy
c) Trade liberalisation and climate change
d) Secrecy about the international trade agenda (liberalisation, services, Mode 4)
a) Mode 4 (IV)
A very important aspect of the trade commitments being made at the EU level on our behalf is Mode 4. (Mode IV).
It is called Mode 4 because four `modes' of delivering services across borders have been defined by the WTO [2] : Mode 1 by internet or post, Mode 2 by the customer crossing the border as in tourism or foreign student services, Mode 3 by cross border establishment, and Mode 4 by moving workers across borders. So EU trade concessions on Mode 4 allow transnational companies to bring in temporary labour from outside the EU.
Information from the EU Trade Commission, documentary evidence obtained via other Member States and the structural arrangements now in place in the UK, combined, indicate that the UK is the main and willing target for this, though the UK public are not told.
But Mode 4 actually allows transnational corporations to capitalise on the differential between wages in poorer countries outside of the EU and those in EU Member States, particularly the UK. Thus while Mode 4 allows transnational firms to increase profits, the consequences are likely to be extremely negative both for displaced UK resident workers and for the national economy.
Despite a lingering idea that `trade' is mainly about goods, both agricultural and manufactured, `services' is now a main part of the trade agenda. Unlike the border measures that are the substance of trade-in-goods liberalisation, liberalising services means increasing the rights of transnational corporations while reducing the rights of national parliaments and of the European Parliament to regulate them.
'Services' includes banking and financial services, and underpins all other trade. It also includes moving workers across borders.
The EU's Mode 4 commitments are not general across the EU. They depend on Member States labour migration regulations. The UK government has created structures within the Points Base System to allow this labour movement now, without numerical limits, in preparation for Mode 4 commitments.
With the stalling of the WTO Doha Development Round, the EU has embarked on a program of bilateral and regional trade agreements [3]. The EU's WTO Doha offer [4], and its bilateral and regional trade agreements, including Economic Partnership Agreements (EPAs) with poorer regions, all include Mode 4 concessions.
Transnational corporations of both partner countries in a trade deal can utilise Mode 4. In the Doha deal, the Most Favoured Nation rule that means the transnational corporations of all 152 WTO Member States.
India is the main country, globally, seeking Mode 4 access to the EU, and an EU/India Free Trade Agreement attention is currently being negotiated. Attention is particularly drawn to this Agreement, because of the central importance to India of Mode 4 concessions and because of the central role of the UK in these Mode 4 concessions. Information from the Commission is that this is `85% a UK deal' [5] .
Although the text and negotiations on bilateral trade deals are secret until negotiations are effectively completed [6], the Commission's chief negotiator has stated definitively that the Indian government will not sign up without Mode 4 concessions [7] and a senior member of the Trade Commission staff has confirmed [8] that Mode 4 is the single request from the Indian government. The priority given to this request indicates the expected commercial significance of Mode 4 concessions to Indian transnational corporations.
In addition, leaked documents from within the EU [9] show that the UK is prepared to take 40% of the EU's commitment on a main Mode 4 labour migration category. But, further, while other Member States have consulted with their labour organisations and are taking very much smaller shares of the EU commitment as ceiling percentage/figures, the UK has failed to consult with UK labour organisations, is taking the lion's share of the EU labour migration commitment, and, importantly, has removed any numerical limits from the relevant categories of the Points Based System, indicating its intention for the Mode 4 commitment to be a `floor', rather than a ceiling. Thus even the disproportionate allocation of commitment is not a ceiling for numbers of Mode 4 workers that the UK will accept. That is effectively limitless.
It is difficult to anticipate the effects of Mode 4 trade commitments in advance, but after trade deals are signed up it is too late to affect changes. Under these circumstances, current mechanisms are useful indicators, such as the effects of free movement of labour and services within the EU, and current UK Points Based System labour migration provision and how it is being used.
With A8 enlargement, in contrast to most other EU Member States, the UK opened straightaway to free movement of workers, with a prediction that was completely inadequate, that 13 000 workers would come. The reality has been estimated to be closer to 1 ½ million.
At one point the Trade Commission produced an estimate for Mode 4 entry for the whole of the EU [10] that was below the figure for workers currently coming into the UK under similar national labour migration provision. This equally unrealistic figure has not re-emerged.
There are four worker categories included in Mode 4 [11] . Of significance for high numbers are `intracorporate transferees' (ICTs), that is workers brought from outside of the EU to work in the same company established within the EU, and Contractual Service Suppliers (CSS), workers brought in by a transnational corporation utilising Mode 4, to be supplied into other companies, including those who do not have access to using Mode 4.
The current situation for labour entry from outside of the EU into the UK, as it relates to the Mode 4 categories is discussed here.
Currently, national UK labour migration regulations allow for companies to bring in Intracorporate Transferees (ICTs). The ICT category, in Tier 2 of the UK Points Based System, has been excluded from any numerical limits.
In addition, the huge potential of Contractual Service Suppliers is accommodated in `international agreements' under Tier 5 of the Points Based System, also without numerical limits, in preparation for Mode 4 commitments. Although the term CSS is not used in the Points Based System, the UKBA has confirmed that this is the case [12] .
The Contractual Service Supplier category was the subject of the leaked document showing the UK prepared to a hugely disproportionate share of the EU commitment, discussed earlier.
Currently the UK government is allowing ICT workers brought in for less than a year to be paid the Minimum Wage, in fact even less until Parliamentary Questions were asked about it [13] , with the wage made up only to the low end of the scale of normal rates for the work by means of `tax-free expenses'. These workers are also exempt from employee and employer National Insurance contributions. Overall, they are therefore cheaper than UK resident workers.
Most ICT workers are being brought in for less than a year. And in fact, most workers brought in as ICTs, to work in the same company in which they work overseas and on which their employment visa relies, and with the financial advantage that the government is granting, are, even now, actually being supplied into other firms as Contractual Service Suppliers [14] .
Set irrevocably into trade agreements, Mode 4 entry, with no numerical limits on the two categories of most importance, is perfectly structured for Indian transnational corporations to offer a supply of workers, and also onshore outsourcing, on a broad scale, as UK managers seek to cut expenditure.
This combination of evidence shows that we are very close to being committed to accepting numerically limitless numbers of workers brought in from India by transnational corporations, disproportionately to the rest of the EU, and effectively irreversibly.
But in this process, UK workers are displaced, with implications for the national economy.
The EU stipulates that workers brought in under Mode 4 are `skilled' or `highly skilled' workers. `Highly skilled' generally means graduate level. Low skilled worker migration into the UK is already happening, without numerical limits, with EU free movement of workers and of services. NB the high rate of graduate unemployment in the UK.
The Trade Commission has referred to the Minimum Wage as the `safeguard' for maintaining labour standards. However, if it is skilled work that is in question, the safeguard mechanism of the `Minimum Wage' of Member States, (if this holds - it has been undermined by decisions of the European Court of Justice), is either inappropriate, or is ominous.
Mode 4 has not come to public attention because of secrecy and spin. If this very significant part of the trade agenda is mentioned, the tendency if for it to be immediately labelled, as `sensitive', a signal to avoid reference to it.
The spin term `brightest and best', used, including in the White Paper [15] , in attempts to maintain counterintuitive public approval for the entry of cheap labour and the structures set up to facilitate it, hides the reality. Interestingly, at the EU level the term `best and brightest' is used for the same purpose.
It is in fact now admitted that the ICT labour migration pathway is not being used for the `brightest and best' and the managers for whom it was supposedly intended - evidenced by the low wages and. the IT worker categories that predominate.
Mode 4 commitments effectively hand control of national labour migration policy to transnational corporations. Any perceived failure to keep to trade commitments, including on Mode 4, is liable to state-to-state trade dispute challenge, enforceable in international trade law. Because of this threat, trade commitments, including on Mode 4, are effectively permanent, thus affecting future generations.
Now the Trade Commission is seeking a mandate to introduce investor protection [16] into its trade agreements, which will allow investor-state trade dispute challenges. This will allow transnational corporations to instigate legal action, and seek financial compensation, not only in regard to any perceived failure to keep to commitments, but also for the effects on all future profits of any proposed national or EU legislation that has the potential to affect those profits, called `expropriation'.
In this way, EU Mode 4 commitments effectively hand control of UK labour migration to transnational corporations, with the accompanying loss of national policy space to regulate, and loss of democracy.
With EU Mode 4 commitments, the return of workers at the end of the work period, visas etc, are all the responsibility of the Member State. With the UK taking by far the majority of Mode 4 work entry, this burden will be significant and the current enforcement situation creates doubt about whether measures and procedures will be adequate.
Because only transnational corporations can utilise Mode 4 [17] to bring in cheaper temporary workers from outside of the EU, it discriminates against SMEs and national firms, giving a further advantage to transnational corporations, in addition to their ability to utilise cheap labour overseas, wider access to credit etc.
Mode 4 commodifies labour, with a very narrow conception of `efficiency' that is only for individual firms. While it provides transnational corporations with the cheapest labour and a lucrative business in labour supply and allows other firms to offload all employer responsibility, this does not take account of the effects on UK workers or on the UK national economy.
While cheap labour benefits the individual firm, the negative effects for the overall UK economy include:
- The loss of the earn/spend cycle, so important to economic recovery, as workers are displaced
- The loss of NI and tax to the Treasury
- Wages repatriated overseas [18]
- Increased welfare bill as UK workers are displaced
- Loss of skills
- Loss of the means for skills transfer
While the Indian government's emphasis on Mode 4 access shows the degree of commercial expectations from it, there can be no pretence that, in the current economic conditions in the UK that Mode 4 is about `extra' jobs. It means job losses among UK resident workers, a situation likely to be exacerbated with cost-cutting programs.
On skills, even the `Call for Evidence' document makes reference to the loss of skills in the engineering construction industry, mostly due to current EU `service liberalisations'. This has wider implications for the UK's energy security.
In University computing degree courses, numbers have slumped by almost half in a decade as IT workers have been brought in from India [19] .
With cheap overseas skilled labour available, investment in training by firms becomes unnecessary, and the individual's investment in their own skills becomes pointless.
Yet few people in the UK would know that this is what the UK is signing up to, and perhaps only a few people in the UK Government know too.
In difficult economic times, with high unemployment, all political parties claim policies that `create jobs'. But no Keynesian-style initiatives are possible under the current labour migration structure. ONS data repeatedly indicates that that almost all jobs created over the last few years have gone to workers born overseas. Therefore government spending to create jobs for UK workers goes, metaphorically, into a bucket with holes in it. And there can be no realistic jobs policy while Mode 4 offers are being made in the trade agenda because the Mode 4 concessions will intensify this, with no escape clause.
This key aspect of the trade agenda must be brought into the open and discussed.
a) `Investor Protection' [20] and EU Trade Policy
The Commission is currently seeking a mandate to introduce investor protection, with the intention of applying it initially into several of its Free Trade Agreements including the EU/India FTA.
Investor protection in the NAFTA has already caused Canada to abandon proposed environmental legislation on petroleum additives because of the threat of being sued by US corporations.
Australia has recently refused to include investor protection in any of its trade deals, because of the effects on Australia and on developing countries. In contrast with the emphasis in the UK and EU on the need to be `competitive' with all other countries, the Australian government has inherently lined up the interests of people in Australia with those of people in developing countries, and acted to protect them against assaults by transnational capital on public monies.
If the introduction of Investor Protection at EU level has not been considered in the Select Committee's deliberations, this is a serious omission.
c) Trade liberalisation and climate change
The international trade agenda is driven by transnational corporations. Although states (or in our case the EU) negotiate trade agreements, it is actually on behalf of corporations and it is transnational corporate giants that have the most influence.
The domination of the trade agenda in Brussels is documented [21] and the influence of IFSL on UK input to EU trade policy, in its Liberalisation of Trade in Services (LOTIS) committee meetings with UK Trade and Industry personnel, has been witnessed [22] .
A commercial agenda dominated by transnational corporations, acting in the interests of their shareholders and corporate profits, is inimical to addressing climate change.
Within the current `trade' agenda, disastrous climate change effects are corporate `trade opportunities'. Thus the trade agenda as it is developing will not lead to measures that prioritise action on climate change.
Trade-in-Services commitments in trade agreements limit control that developing and developed countries (and the EU) have over the power of transnational companies operating within their borders, with a loss of the policy space, especially where investor protection is introduced.
It is nation state policy space to control corporations which must be maintained to allow for climate change measures to be taken.
The Call for Evidence for the Trade and Investment White Paper allows only for a `larger role' for trade in climate change action but not the diminution of that role.
Rather than the inclusion of climate change considerations in the international trade agenda, a reduction in the prevalence and power of the corporate trade regime is imperative for climate change action.
If the limiting of national (and EU) policy space in the process of trade-in-service liberalisations in relation to climate change action have not been considered by the Select Committee, it appears to be a serious omission.
d) Trade agenda secrecy
It may seem strange that such a huge issue as Mode 4 could have remained so hidden, but the processes of the UK's involvement in international trade negotiations and the EU trade processes lack transparency throughout.
In the UK, International Financial Services London has a secretive [23] Liberalisation of Trade in Services committee (LOTIS), wherein the demands of transnational Financial Services firms in relation to UK trade policy are imposed on government officials.
In this Committee representatives of major transnational financial services corporations based in London give instructions to the Government bureaucrats who will attend Brussels trade meetings. There are no minutes available despite the importance to the UK.
UK civil society has no such access to UK trade policy making.
EU trade policy is then formulated in the fortnightly meetings of the EU Trade Policy Committee (formerly the `133 Committee') that Member States' trade officials attend.
The UK officials who attend have no public profile, and the nature of the input they take to Brussels and the nature of the influence on that input are not public.
Minutes of the Trade Policy Committee are not public. This means that, apart from information via other Member State officials, it is not possible to identify the nature of UK national input to the Committee.
The Trade Commission's competency to negotiate on trade on behalf of the Member States increased when the Lisbon Treaty came into force, and Member state governments lost their right to veto trade agreements, though this was not made public when the Treaty was being pushed through.
There is evidence that the Trade Commission is captive to the interests of transnational corporations, which are global rather than `EU' [24] . There is currently a legal challenge in regard to the degree of privileged access granted to transnational firms in relation to the EU/India FTA [25] . The evidence includes letters written by Peter Mandelson in his role as Trade Commissioner.
Because of the amount of business dealt with by the European Parliament, the committee stage is very important in the Parliament's `assent' to trade agreements, the role it now has in the trade agenda.
The International Trade Committee (INTA) of the European Parliament can be manipulated by information being hidden from it, including by MEPs [26] .
The Trade Commission's position is given academic backing by the Brussels think-tank `ECIPE' [27] . This is run by Dr Razeen Sally of the LSE, and Mr Stephen Woolcock, also from LSE. Although Mr Woolcock lacks any other title, he has been introduced to INTA MEPs as `professor'. Alongside the transnational service investors' actual lobbying mechanism, the European Services Forum, ECIPE has a regular role in supporting the passage of the heavily corporate-influenced agenda of the Trade Commission.
The negotiations and texts of bilateral trade agreements are not public, except in the barest form [28] . The standard reasoning is that confidentiality is necessary for the negotiating process. But clearly opposite numbers in negotiations know what is on the table, and if business lobbyists have access to information and indeed make it clear what they want, as appears to be the case, then it is only the public, in whose interests negotiations are nominally taking place, that is being denied information.
At the end of negotiations and before the formal EP `assent' process, the text of trade agreements are public, yet the Trade Commission deliberately does not inform the public of the content or the implications [29] until EP `assent' has been achieved. This appears to undermine the democratic function of the Parliament.
Now, agreements are being `provisionally implemented' after EP assent, before they have gone to Member State parliaments, taking full advantage of the fact that agreements can no longer be vetoed by MS parliaments.
The current crop of free trade agreements was given the official go-ahead in a Council of Ministers meeting, attended by Margaret Beckett, in her capacity at that time as Minister for Foreign Affairs. Peter Mandelson in his role as Trade Commissioner launched the negotiations on these agreements, but in the high profile UK government position he subsequently held, he, like Margaret Becket, failed to provide any information to the UK public on what they were being signed up to e.g. Mode 4.
It appears that Mode 4 and the rest of the trade agenda is deliberately kept from the UK public. When Prime Minister Cameron and Secretary of State for BIS, Vince Cable, led a trade visit to India in July 2010, the EU/India FTA and Mode 4 did not appear in the extensive reporting by the UK press that followed the delegation, indicating that it was not mentioned.
Similarly, the connection between the formal exemption of Intra-Corporate Transferees (ICTs), in UK national labour migration regulation in the supposed `immigration cap', and Mode 4 trade commitments, is not made public.
In relation to the BIS Call for Evidence processes for the Trade and Investment White Paper, alternative views to its full support for the `free trade agenda' were not invited, while the document failed to give information either on current trade negotiations or on Mode 4.
The White Paper similarly precludes alternative views while still failing to give key information.
Part 2 - BIS administration and policy issues
Sections
a) Administration: BIS process in relation to the Call for Evidence process
b) Policy: BIS policy on conducting consultations (i), on trade (ii), on alternative views (iii)
a) Administration: BIS process in relation to the Call for Evidence process
Against a backdrop of lack of public information on the trade agenda in the UK including how commitments made in Brussels affect the UK and of transparency on trade policy making, the BIS Department put out a Call for Evidence towards a Trade and Investment White Paper in November 2010. An earlier closure date was later extended, beyond the Christmas closedown period, to 14th January 2011.
If the aims of public consultation processes are defined, it is reasonable to assume that they would include obtaining a diversity of informed views, and also to assume that there would be an accountability process for whether a consultation had been conducted in such a way as to maximise the opportunity for those aims to be met.
However, the framing of questions in the Call for Evidence document left no room for any views other than support for an unquestioned free trade agenda, while failing to explain that agenda.
My experience in making a submission to the BIS Call for Evidence suggests that there are no such aims defined for BIS consultations or Calls for Evidence, or, if there are, that there is no accountability process, of if there is, it needs to be activated.
I made a submission, evidenced and referenced, expressing alternative views to the polemic Call for Evidence (CforE) document issued by BIS.
My submission was acknowledged by email as I had requested.
But my name was not listed in the BIS Response to Submissions document and nothing from my substantial, informed submission was included in the document. Needless to say, nothing of my alternative viewpoint, providing information and questioning the assertions in the CforE, was included in the White Paper.
BIS has informed me that all this was `wholly consistent with BIS regulatory requirements' [30] . However, I assume that this process of serial omission resulted in the Select Committee neither having any access to the alternative information that I had submitted nor being informed that alternative evidence and views exist.
I only found out very recently and by chance that the Committee conducts its own public consultation, when the (belated) response to my complaint to BIS led me to phone your Committee Clerk. BIS, having failed to acknowledge my input, did not inform me of the Committee's consultation.
Without the chance phone call, you would not have had information on the issues to which I have drawn your attention in Part 1, notably the issue of Mode 4, which is very significant trade information in the UK context.
In Brussels I have had the opportunity to see some of the underhand practices employed to keep key information from MEPs, and the influence of transnational corporations on policy-making. It seems possible that similar practices may be employed here, even if `wholly consistent with BIS regulatory requirements'.
The Trade and Investment White Paper was publicised on the same day as Project Merlin, with reference to the hot topic of bankers' bonuses. It would not have been difficult to predict which the media would focus on. The minimal media attention to the White Paper was to the reference in the White Paper to support for SMEs. In fact not only is the reference to support for SMEs in the document both minimal and tentative, but any such support is in fact cancelled out by the overall thrust of the White Paper, which advantages transnational corporations.
BIS policy appears to be at fault in following a procedure that has resulted in a failure to provide information that has been submitted to the Committee.
There may be a case to review the processes by which the Committee can be excluded from receiving information by the Department it is charged with overseeing.
b) BIS trade policy
Three aspects of BIS trade policy are identified as problematic:
(i) The policy on conducting consultations or `Calls to Evidence'
(ii) The central issue of the nature of BIS trade policy which is explicit in both the Call for Evidence document and the Trade and Investment White Paper
(iii) The BIS policy for dealing with alternative view
(i) The policy on conducting consultations or `Calls to Evidence'
The framing of the CforE document left no room to question what has been accepted `trade theory' or its claimed benefits, or for debate on the benefits and costs of the trade agenda, when there is evidence now to question many aspects of all of these. Thus the plurality of views that the CforE should have elicited were excluded by the nature of the document.
In addition, while this consultation document calls for `evidence' from those engaging with it, there is a distinct lack of evidence for the claims made throughout the document. Rather than a document to stimulate input and discussion, it is, undeniably, a propagandist document.
Policy in relation to the production of such a document, on such a key topic, should be reviewed.
(ii) The nature of BIS trade policy that is evident in both the Call for Evidence document and the Trade and Investment White Paper
Many aspects of the unmitigated `free trade' policy throughout both these documents are now subject to question, including the Mode 4 aspects that are omitted from the document but are central to BIS trade policy.
It is my experience that vested interests, particularly of transnational financial corporations, dominate UK trade policy and UK input to EU policy. The nature of BIS trade policy and of the process for producing the White Paper is in accordance with this.
Below (a-k) are some of the assumptions that are taken as given in BIS trade policy but which should be public debated, with public information, while such debate has been excluded in the BIS CforE process.
a) Liberalisation (the basis of the trade agenda, and which the UK follows unilaterally) is always a desirable direction. The nature of trade-in-services liberalisation is not well understood, that it means opening investment opportunities to transnational investors, and then committing these openings permanently to trade agreements. The effects e.g. the extent of transnational takeovers of UK firms, on jobs (Mode 4) and on public services (liberalised privatisations becoming irreversible) are not generally known or debated.
b) `Trade liberalisation produces development'. In conventional trade theory there are no claims for redistribution and it is admitted that in trade liberalisation there are winners and losers. While `adjustment' is the conventional trade solution for `losers', the funding driver is undefined. While corporations benefit, whose responsibility is it to fund `adjustment'?
Trade liberalisation, favouring transnational corporate investors, is producing inequality across developed and developing countries and this is well evidenced.
c) `The theory of "comparative advantage" is robust'. It actually entrenches advantages and inequalities, and is undermined anyway when capital, and workforce, can be moved across borders.
d) Inward investment is the main goal. Inward investment into the UK is almost entirely `brownfield', that is acquisitions of existing companies, or taking advantage of public service privatisations.
When foreign firms acquire UK businesses in sectors similar to their home country operations, they gain control over production that is in effect in competition with their home country production. Home country production is likely to be cheaper production. So while UK activity may continue so long as UK government subsidies are available, the possibility is there to diminish industry or economic activity here to boost cheaper home country production, reducing supply and reducing competition.
Foreign ownership via FDI is unlikely to have the commitment of national firms to the UK. Thus the question is raised of where national UK national interest lies in relation to liberalised FDI. Other countries make alternative choices.
e) `Movement of labour boosts the UK economy. With Mode 4, there is the potential for foreign firms to bring in their own labour, taking advantage of the relatively stable UK environment, the UK social environment with public services, and the profit potential, but to the detriment of workers in the UK.
There are also obvious negative effects for the UK economy.
If movement of labour is good for people in the UK it raises the question of why Mode 4 commitments are being kept secret and why such a ridiculously low estimate was produced in regard to A8, to hide the reality.
f) Reducing tariffs and non-tariff barriers produces `savings'. The `savings' referred to in the BIS documentation in relation to tariff and non-tariff barriers reductions are, in fact, direct losses to government revenue, the means by which governments make social provision. With trade liberalisation, this revenue is redirected to transnational corporation shareholders.
For some small developing countries with a low tax base, tariffs are a major component of their means to provide any public services.
g) `Protectionism' is always bad, and `competition' is always good. Concepts of `protectionism' and `competition' need to be re-examined and discussed, with consideration of context and broader values, and on a case by case basis. Whether there should, for instance, be protection for jobs for UK resident workers, or for the energy sector for energy security, or for the environment, are valid considerations that are eliminated when trade deals are signed up.
The promotion of `competition', including with developing countries, has led to an economically-based overseas aid policy that prioritises transnational corporation's investment opportunities in developing countries over real development.
Prioritising a `competitive' environment for firms also means deregulating working conditions here and allowing the entry of cheap labour.
`Competition' between UK workers and workers elsewhere means a lowering of labour standards and wages towards equalising with the majority of the world's workers who are underpaid and lack labour organisation.
While `competition' supposedly benefits consumers, the `competitive' liberalised environment is actually increasing the power and resources of transnational corporations, and tending towards anti-competitive cartel and monopoly situations.
Thus the assumptions associated with these terms must be interrogated.
h) `Trade liberalisation benefits SMEs'. Although this rhetoric is frequently used to sell liberalisation policy, trade liberalisation actually increases transnational corporations' advantages over SMEs.
Only transnational corporations can utilise the access to cheap labour inherent in Mode 4 concessions, giving them an advantage over SMEs both in bidding and operating. It thus discriminates against SMEs and national firms.
Because SMEs are the biggest employment area in the UK, this disadvantaging of SMEs also affects workers.
i) `Trade liberalisation benefits consumers'. While trade liberalisation might produce some goods and services cheaper, it often also means that jobs are lost. The emphasis on people only as consumers is false one; they are also workers, needing to earn to consume, as well as tax payers at least if they are working, and also public service users.
j) `Trade liberalisation is worth the sacrifice of e.g. job losses for overseas investment opportunities'. The overseas investment opportunities for which Mode 4 concessions are being `traded', as in the EU/India FTA, will benefit transnational investment corporations based in London. Although e.g. pension funds may be invested in these corporations, these investment opportunities will not provide any economic stimulus or jobs in the UK and they will be paid for with Mode job displacements.
This in turn will limit who can actually be part of private pension funds, increasing inequality.
In addition the liberalisations forced on other countries are often detrimental to the people there [31] .
k) UK trade policy is for the benefit of the UK. UK trade policy is dominated by the transnational financial services corporations based in London [32] , and the main emphasis is on liberalisation which produces outward investment opportunities for those corporations, for which UK domestic policy is the willing model.
The evidence for this is what I have observed in the context of the LOTIS committee.
The exclusion of other views by BIS maintains this singular agenda.
The benefit of the UK as a whole is not the priority for UK trade policy.
There is increasing concern about corporate policy capture and influence, with some action to address this, at the EU level, and in the US. The policy position of BIS on trade suggests similar capture at the UK domestic level. However, there is not yet adequate pressure exerted for correction mechanisms to be introduced, in terms of regulations on disclosure, transparency or other means.
At the same time, the implications of trade agreements are not currently being made public, or publicly discussed at any stage of the process. The Lisbon Treaty exclusion of Member States' parliamentary veto on trade agreements potentially exacerbates this situation, because it reduces the possibility that there will be parliamentary discussion.
Instead, the documents produced by BIS on trade that maintain `trade theory' assumptions are polemic and propagandist and preclude any such debate.
This raises the question of why a supposed consultation is of such a propagandist nature.
Clearly there are debates to be had as to the economic effects of liberalisation and of trade liberalisation, especially of services. Such public debate is needed, underpinned a priori with public information on what the trade agenda now includes and the implications for people in the UK.
There is an urgent need for information, discussion and transparency rather than an automatic acceptance of narrow trade theory assumptions, and on UK and EU trade policy that is non-transparently dominated by vested interests.
The Select Committee is the vehicle to instigate these urgent changes.
(iii) BIS policy for dealing with alternative views
It is clear that despite the BIS Call for Evidence process for the Trade and Investment White Paper, alternative views were not actually being sought and would not be acknowledged in the White Paper.
This is a policy issue to address.
Conclusion
Issues have been raised here about the Mode 4 commitments being made on our behalf, as well as issues of investor protection, the trade agenda and climate change, and the overall secrecy around the trade agenda. Issues have also been raised in relation to how BIS conducted its Call for Evidence, with implications for the Select Committee's access to information, and BIS policy on how it conducts consultations, on trade, and on how it deals with alternative views.
Suggestions for change in relation to the role of the Select Committee have also been presented.
Suggestions for change in relation to the role of the Select Committee have also been presented.
2 May 2011
[1] Presentation to Trade Commission civil society dialogue Jan 2010 http://trade.ec.europa.eu/doclib/docs/2010/february/tradoc_145756.pdf
[1] Guardian http://www.guardian.co.uk/commentisfree/2008/dec/13/dohatradetalks-wto
[1] Corporate Watch http://www.corporatewatch.org/?lid=3928
[2] http://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm6_e.htm#oblig
[3] The Global Europe Strategy http://trade.ec.europa.eu/doclib/docs/2007/april/tradoc_134591.pdf
[4] The EU’s Revised GATS offer, tabled at the WTO 2.6.2005 available in the Parliamentary Library
[5] Interview with Commission Member of Staff. Can be identified in confidence.
[6] See Part 1 Section (d) on Secrecy
[7] In a Trade Commission Civil Society Dialogue session
[8] In an email to myself. Can be identified in confidence
[9] The leaked documents can be shown in confidence
[10] Presented to me in a personal interview by Trade Commission Mode 4 specialist, Balaks Gargya
[11] Business Visitors(BV), Independent Professionals(IP), Intracorporate Transferees(ICT), Contractual Service Suppliers(CSS)
[12] Personal email communication from senior member of staff UKBA
[13] PQ by Lord Laird http://www.theyworkforyou.com/wrans/?id=2011-03-14a.26.0&s=laird#g26.1
[15] http://www.bis.gov.uk/assets/biscore/international-trade-investment-and-development/docs/t/11-717-trade-investment-for-growth.pdf
[16] See Part 1 , section (b)
[18] http://www.migrationinformation.org/Profiles/display.cfm?ID=800 According to this Polish academic research, in 2008, one third of all remittances into Poland from tiny Ireland
[19] http://e-skills.com/Documents/Research/Tech-Insights-2011/eskills_2011_TechInsights_UK.pdf
Computing course applicants declined 44% since 2001, total applicants for HE courses increased 41%
[20] http://www.corporateeurope.org/global-europe/content/2011/03/investment-rights-stifle-democracy
[21] Bursting the Brussels Bubble Alter-EU 2010
[21] Europe Inc Corporate Europe Observatory 2000
[22] By the author
[23] The existence of IFSL’s LOTIS committee was secret until it was investigated and revealed by NGO World Development Movement
[24] The membership of BusinessEurope, a major employers lobbying mechanism in Brussels includes e.g. Exxon
[25] http://www.eureporter.co/downloadmagazinepdf/1406/
[26] In January 2010, Sajjad Karim MEP NW UK Conservative, gave a presentation to the INTA on the EU/India Free Trade Agreement, without mentioning Mode 4, despite its central importance to the Agreement.
[27] The European Centre for International Political Economy
[28] EU Trade Commission report to EU/India Summit, Dec 2010
[29] At a Trade Commission civil society dialogue 26.10.2010 Mr Rupert Schegelmilch, Head of Unit, Trade Relations with South Asia, Korea and ASEAN indicated the need to avoid making public the fact of, and the implications of, the EU/South Korea Free Trade Agreement, for which negotiations have been completed, before the EP had given its ‘assent’ to the agreement. Parliamentary assent to this agreement has now been achieved (Feb 2011).
[30] BIS response to my letter of complaint. Attached.
[31] Indian resistance across many sectors of Indian society is very active: among unions, unorganised workers, dairy workers, retail workers, and concerning banking and financial services liberalisation, and most strongly, the limiting of the production of generic medicines.
[32] Organised as International Financial Services London (IFSL), now part of TheCityUK
http://www.publications.parliament.uk/pa/cm201012/cmselect/cmbis/writev/735/kaucher.htm
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The UK has opted out of this EU directive, but an EU Free Trade Agreement (FTA) with India, that the Commission says is almost entirely a UK deal, has similar provision for cheap labour entry.
In the EU/India FTA, ‘Mode 4’ labour access for transnationals to bring in their own ICTs, as well as to supply labour for any other firm, is the single demand that India is making. In preparation, the UK government has recently exempted the Tier 2 ICT labour migration category from any limits, while the ‘international agreement’ category in Tier 5 has no limits either.
In return for the Mode 4 opening, western TNCs will gain public procurement rights and investment opportunities in India. This will impact on banking, insurance, public procurement, transport, retail and the production of generic medicines there. Widespread Indian protests, including by Indian unions, contrast with the dearth of information on Mode 4 effects on workers here.
A recent, restricted Commission report on the EU-India Free Trade Agreement negotiations states “the full ambition of the FTA can not be achieved without Mode 4 - which currently faces a range of barriers like wage-parity conditions”.
So while the rest of the EU gets the ‘benefit’ of unlimited cheap labour via the directive, the UK is willing to allow transnational corporations to undermine UK workers in Mode 4 arrangements, confirmed in leaked EU documents.
German unions warn the proposed EU directive will allow a German transnational company with a branch in India to import skilled Indian workers to German factories on minimum wages, massively undermining current pay rates for German workers.
The EU directive will have a fast-track entry procedure for ‘managers’, ‘specialists’ and ‘graduate trainees', but there are big questions about how people qualify for these categories.
European TUC general secretary John Monks warns that vague categories such as "manager" and "specialist” are virtually meaningless. According to Frank Schmidt-Hull from the German union IG Bau "the only requirement for recognition as a specialist is the evidence of a witness”. He assesses that the move would "overturn the minimum wage system within the EU" and massively drive down wages.
The social dumping process is already happening within the EU as a result of the EU’s ‘four freedoms’ - of capital, goods, services and labour, a corrupted neoliberal version of the four freedoms that Roosevelt proposed - of speech and expression, of worship, from want, and from fear.
"We need a European approach on labour migration that allows our economies to receive the migrants they need," according to Cecilia Malmström, European Commissioner for Home Affairs, but not the Commissioner dealing with employment and the labour market.
Ironically Ms Malmström claims her proudest moment was bringing legislation against human trafficking.
These new measures will further diminish the skills base and training opportunities in Britain and other member states if transnational capital can simply tap into an inexhaustible, reserve army of migrant labour.
The directive and the Mode 4 provision are in a similar direction. Mode 4 is in all the EU trade agreements, but the Indian deal is crucial for workers because in this, Mode 4 is the main aim of the Indian government.
The directive includes manufacturing, hence the concern of the German manufacturing union, and does not require that there is any trade agreement with the labour source country. Mode 4 is for ‘service workers’, though almost all workers can now be made to fit that, especially if supplied to another company.
Combined, these legalised structures take social dumping up the skills ladder and across sectors such as manufacturing, as well as IT and other white collar industries.
While the directive has vague skills categories, undermined anyway by the additional category of ‘trainee’, the EU stipulates that Mode 4 workers should be ‘graduates or equivalent’. But India has millions of graduates and graduate unemployment here is very high.
Wages for lower skilled work is already undermined by EU free movement of workers and services.
While an EU directive will be very hard to reverse, Mode 4 commitments, made at the level of international trade law, beyond the EU, will be effectively irreversible, enforced by the threat of corporations suing governments that do not keep to commitments.
In a letter to the Trade Commissioner, the European TUC has expressed concern about the parallels between Mode 4 commitments and recent ECJ judgments. The International TUC has rejected the inclusion of Mode 4 in trade agreements.
Surely it is the role of the TUC to counteract the very deliberate official secrecy on Mode 4, the remote intricacies of EU directives, and the real nature of changes to UK labour migration regulations, for its union affiliates? A TUC information seminar on these massive assaults on labour is urgently needed.
http://no2eu.com/hp-article2.html
The secret immigration policy - EU/India Free Trade Agreement (FTA) Mode 4
British domestic policy is unsurprisingly being formulated to fit with the EU's external international trade agenda. This broader policy affects people's lives here, particularly their employment and that of their children and grandchildren in the future. Yet information on this broader picture, the parts of EU trade policy that will affect people most, is kept from them.
A very relevant and major feature of EU trade policy is the concession that allows transnational corporations to bring workers into the EU. In tradespeak this is called 'Mode 4'.
The EU is including Mode 4 concessions (moving workers across borders) in all of the deals it is currently negotiating. In fact Mode 4 is the carrot, to obtain, in exchange, investment opportunity access into trading partner countries for transnational financial services corporations, which are for the most part based in London.
Although these are EU deals, the UK is the main and willing target for the Mode 4 concessions. Thus it is UK workers who will pay the price.
A very important trade deal in this regard is the EU/India Free Trade Agreement (FTA) that has been under negotiation for four years. It has been discovered that Mode 4 concessions are the one thing that the Indian government is demanding. In addition, leaked documentation shows that the liberalised UK will be taking the bulk of the EU's Mode 4 commitment.
In fact Trade Commission staff have admitted that the EU/India FTA is, in effect , 85% a UK deal. That's the percentage of the gains which will accrue to the UK (well, the international financial firms based in London, anyway) while the UK (UK workers, this time) will get that percentage of the pain.
Financial services investment opportunities overseas will not produce jobs here. But workers will be displaced via Mode 4, especially in a time of cuts. Transnational firms will be able to offer cheap onshore outsourcing, using cheaper temporary migrant labour and will also be able to supply labour into other firms allowing them to offload all employer responsibilities.
Within the supposedly 'capped' UK points based system for labour migration, the government has ensured that the categories relevant to trade commitments have no numerical limits. There are no such limits on the 'intra-corporate transferees (ICTs) category in Tier 2 or on the 'international agreements' category in Tier 5. Neither is there any resident labour market test, which would stipulate that jobs have to be offered here first.
In fact both these restrictions are disallowed at the international trade level in respect of Mode 4.
Under the current points based system, skilled workers are currently being brought in and paid the minimum wage, which is then made up to a low industry norm with tax-free expenses and with no national insurance payable. Thus the UK government is even now encouraging the use of a cheap labour supply that not only displaces workers here but also damages the national economy in a variety of ways. Wages are repatriated overseas, the earn/spend cycle needed for recovery is broken, workers become unemployed and the welfare bill increases, the employment future for young people is further curtailed, and skills transfer are lost for the future.
As trade agreements, with Mode 4 included, are committed to hard international trade law, they become effectively permanent. This is why this handing of control of UK labour migration to transnational corporations will affect not only present but future generations. Any attempt by any future government to pull back on these commitments will potentially invoke corporate legal action to recover all anticipated profits that may be negatively affected by the government action.
International financial services corporations based in London are proactive in directing UK input to EU trade policy via their lobbying mechanism 'thecityuk' and in Brussels through the European Services Forum, the mechanism that influences EU institutions directly.
'Thecityuk' is made up of International Financial Services London (IFSL) and the Corporation of London and the UK Trade and Industry (UKTI) section of the Business, Innovation and Skills Department is closely connected. 'Thecityuk''s secretive Liberalisation of Trade in Services (LOTIS) Committee ensures that UKTI bureaucrats take financial services' own directives into EU trade policy like carrier pigeons. And UK governments ensure that domestic regulation is formulated to fit with this.
The Labour party has not told the UK public about this EU/India agreement and the centrality of the Mode 4 concessions even though Peter Mandelson initiated all the current agreements. Neither has the Conservative/Liberal coalition, even when David Cameron and Vince Cable led a specific 'trade' delegation to India in 2010. Greens MP Caroline Lucas spent years as an MEP and a member of the European parliament's International Trade Committee (INTA) but has declined to warn UK workers what they are being signed up to, and similarly Ukip, which has two members on the INTA but actually supports the concept of temporary labour from outside the EU being brought in by transnational corporations.
by Mark Sheppard in International issues | 2 comments
This is a MUST READ, written evidence given in the UK Parliament. Written evidence from Linda Kaucher
http://www.publications.parliament.uk/pa/cm201012/cmselect/cmbis/writev/735/kaucher.htm
A must read, explains Mode 1,2, and 3.
Mode 4 Again by Linda Kaucher
http://trade.ec.europa.eu/doclib/docs/2010/february/tradoc_145756.pdf
Only four pages
African Trade Policy Centre. The Effect of Mode 4
Liberalization on Illegal Immigration 30 pages many equations.
http://www.uneca.org/atpc/Work%20in%20progress/55.pdf
Rebalancing the Economy: Trade and Investment
http://www.publications.parliament.uk/pa/cm201012/cmselect/cmbis/735/735i.pdf
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House of COMMONS, Oral EVIDENCE TAKEN BEFORE the BUSINESS, INNOVATION AND SKILLS Committee REBALANCING THE ECONOMY: TRADE AND INVESTMENT THURSDAY 10 March 2011.
Q471 Rebecca Harris: We talked on Tuesday about the implications of trade policy being an EU competence. Our witnesses said they considered that we had been punching below our weight under previous Administrations. How do you think you can do more to increase our power in the EU realistically, in particular to influence some EU members and members of the International Trade Committee who were characterised as globalisation sceptics?
Edward Davey: I am really pleased that you have raised the issue because it is absolutely critical, not least because some of the potentially easier low-hanging fruit for boosting trade is within the EU, particularly now that the Single Market Act programme is going forward. In terms of the general approach, again there is a whole Government approach to this, so all Departments are making an effort at pushing trade globally but also within the EU. Ministers such as myself, Lord Green and others are paying particular attention. For my own part, I have met Commissioner De Gucht; I speak regularly to Trade Ministers, and just this morning I talked to Dr Pfaffenbach from Germany; there are regular meetings at the Council; and I speak to members of the INTA Committee, so it is a key part of the work that I do.
You are right to stress the fact that not only does the EU have competence for trade policy but, post-Lisbon, for investment policy; there is also the increased role for INTA. I would encourage this Committee to do a little more work on EU trade policy post-Lisbon and the role of the INTA Committee in that. I do not necessarily agree with you that they are all globalisation sceptics.
http://www.publications.parliament.uk/pa/cm201011/cmselect/cmbis/uc735-vii/uc73501.htm
http://www.publications.parliament.uk/pa/cm201012/cmselect/cmbis/735/73502.htm#evidence
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