US embassy cable - 04BRUSSELS2437

UNCLAS SECTION 01 OF 04 BRUSSELS 002437 
 
SIPDIS 
 
LABOR FOR ILAB 
STATE FOR IO/T; IO/S; DRL/IL 
STATE please pass USTR 
 
E.O. 12958: N/A 
TAGS: PREL, ETRD, ELAB, ILO, EUN, USEU BRUSSELS 
SUBJECT:  EU CONTRIBUTION TO "SOCIAL BENEFITS OF 
GLOBALIZATION" DEBATE 
 
REF: (A) STATE 35207; (B) GENEVA 983 
 
This is a joint USEU labor/USEU/USTR cable 
 
SUMMARY 
------- 
 
1.  The EU Commission recently tabled a series of 
recommendations presented as its contribution to securing 
the social benefits of globalization.  On the internal (EU) 
front, the Commission advocates full implementation of the 
Lisbon strategy to maintain Europe's competitiveness, 
calling for heavy investment in the skills of the EU labor 
force and for the most effective use of information 
technologies.  On the external front, the Commission calls 
upon the completion of international initiatives, such as 
the conclusion and implementation of the Doha Development 
Agenda (DDA) and delivering on the Millennium Development 
Goals, but also looks toward the promotion of social 
development via unilateral market access schemes, developing 
assistance for trade-related adjustment costs, enhancing 
corporate social responsibility, and improving governance at 
global level.  These recommendations are in response to the 
findings of the ILO's World Commission on the Social 
Dimension of Globalization (WCSDG) published in February and 
in preparation for the follow-up debate at the Geneva ILO 
Conference in June 2004.  END SUMMARY. 
 
2.  In a recent communication to the Council, European 
Parliament and other EU bodies, the Commission reviewed the 
actions undertaken by the EU both within the framework of 
the Union and on the international scene "to ensure that 
economic and social progress go hand in hand" and tabled a 
series of recommendations for "concrete action."  The paper 
was drafted in response to the findings of the ILO's World 
Commission on the Social Dimension of Globalization (WCSDG) 
published last February (REF A), discussed in March (REF B), 
and as a contribution to the follow-up debate to be held at 
this month's Geneva ILO Conference.  Although globalization 
is seen as leading to the creation of higher quality and 
higher earning jobs in parts of the world previously heavily 
dependent on agriculture, the Commission notes that the 
benefits of globalization are "not shared equally across all 
countries and groups and that, without an effective system 
of global governance, the current model of globalization is 
generating unbalanced outcomes and is not likely to lead to 
global sustainable development."  The Commission notes "a 
growing interest, including in the WCSDG report, in the EU 
approach to economic, employment and social issues" and in 
the EU model of sustainable development. 
 
DEALING WITH GLOBALIZATION WITHIN THE EU 
---------------------------------------- 
 
3.  Overall economic gains from globalization are seen as 
"undoubtedly positive" for the EU.  However, for trade 
liberalization to succeed, mechanisms must be provided to 
cope with adjustment costs, in particular those associated 
with restructuring.  The paper places heavy emphasis on the 
integrated "Lisbon strategy" agreed by EU leaders in 2000 
with the aim of turning Europe into the most competitive, 
knowledge-based society in the world by 2010.  The strategy 
is described as the path to "more and better jobs" and 
increased social cohesion, by promoting "mutually 
reinforcing policies" to address the EU requirements in 
areas of competitiveness, employment, social progress and 
environmental sustainability.  Not surprisingly, the paper 
reiterates well-known Commission calls to increase 
investment in the skills of the EU labor force and to make 
the most effective use of information technologies:  "All 
stakeholders are required to anticipate, trigger and absorb 
change." 
 
4.  The Commission also suggests that: 
 
--   EU resources from the Structural Funds be better 
     targeted to address the challenges of globalization, 
     such as promoting the adaptability and employability of 
     people and enterprises and spreading out innovation and 
     research "more evenly throughout Europe"; 
 
--   The European Social Fund (ESF) be used "as a catalyst 
     for national and regional investments to contribute to 
     employment and life long learning, increased quality 
     and productivity at work and to social inclusion"; 
 
--   EU countries should tackle all forms of discrimination 
     and inequalities within the labor market and pursue 
     education and training programs that contribute to the 
     Lisbon strategy goals; 
5.  The Commission further notes that EU legislation sets 
minimum requirements for all Member States and companies 
when contemplating large-scale jobs losses or preparing 
other decisions likely to affect workers.  Most recent texts 
in this regard promote upstream worker involvement, notably 
on strategic issues and on the foreseeable evolution of 
employment opportunities within companies.  EU legislation 
also ensures minimum standards for occupational health and 
safety and for working conditions.  Freedom of association 
and collective bargaining are enshrined in the EU Charter of 
Fundamental Rights, soon to be included in the EU 
Constitutional Treaty. 
 
EU ACTION ON THE EXTERNAL FRONT 
------------------------------- 
 
6.  The Commission recalls that EU external policies have 
always had an important social dimension, e.g. in supporting 
universal access to basic social services in the LDCs.  For 
some time now, the EU has also been promoting the 
effectiveness and coherence of global governance, including 
economic governance, through international institutions, to 
ensure that trade policy and bilateral relations with 
regions and individual countries are fully supportive of 
social development and to ensure that development and 
external cooperation contributes to maximize positive and 
minimize negative social consequences of globalization.  Six 
primary objectives are put forth by the Commission in terms 
of external action: 
 
--   Conclusion and implementation of the Doha Development 
     Agenda (DDA); 
 
--   Delivering on the Millennium Development Goals; 
 
--   P 
romoting social development via unilateral market access 
     schemes; 
 
--   Developing assistance for trade-related adjustment 
     costs; 
 
--   E 
nhancing corporate social responsibility; 
 
--   Improving governance at the global level. 
 
7.  Although regional integration can foster growth, the 
Commission emphasizes in its report that regional 
integration is only a "second best solution" compared to 
multilateral efforts.  Specifically the Commission refers to 
the international efforts of the Doha Development Agenda and 
the Millennium Development goals.  Reference is made to the 
World Bank, which has estimated that the gains from 
implementing the DDA could be between USD 270-520 billion in 
2015.  In order to achieve the pro-development goals of the 
WTO talks, the Commission calls not only for an improvement 
of the WTO negotiation process (i.e. increasing active 
participation of developing countries in the decision-making 
procedures), but also for increased market access, and 
specifically market access to reduce trade distortions for 
sectors and products of "special interest to developing 
countries."  In this respect, the Commission points out that 
since some of the highest trade barriers exist between 
developing countries, the creation of new markets via "south- 
south" trade will be important and may ease concerns among 
LDCs about the impact of preference erosion. 
 
8.  The Commission report recognizes that agriculture is a 
particularly sensitive sector.  According to the Commission, 
there is high dependence of these countries on a few key 
agricultural commodities, and the solution is wider market 
access.  Two recent Commission communications suggesting 
integrated approaches to achieve sustainable practices along 
the commodity supply chain are mentioned as starting points 
for further action.  The communications are the "proposal 
for an EU action plan on agricultural commodity chains, 
dependence and poverty" and the "proposal for an EU-Africa 
Partnership in support of cotton development," both released 
this past February. Further, the Commission refers to the 
benefits of liberalization in the services sector, and the 
importance of assisting developing countries in regulatory 
reform and the rule-making component of the DDA, as legal 
certainty will help create more optimal conditions for trade 
and investment. Regarding the Millennium Development goals, 
the Commission expresses agreement with the WCSDG report 
that these goals are part of the first steps towards 
establishing a global socio-economic base.  The "EC will 
focus on delivering on its international commitments with 
clear targets on poverty, education, health, gender and 
environment.  The specific objectives and actions agreed in 
Monterrey and Johannesburg will set the pace and direction 
of this work." 
 
9.  The Commission also promotes unilateral market access 
schemes as mechanisms to secure social development. The 
Everything But Arms proposal is cited as an example, 
although the Commission report focuses on the EU's 
Generalized System of Preferences (GSP).  The GSP contains 
an incentive system in which compliance with rules to combat 
drug production and trafficking and core labor, 
environmental, and social standards, qualifies the 
beneficiary country with additional trade preferences.  The 
Commission refers to the upcoming reform of the present EU 
GSP scheme, which will focus on "maximizing benefits for 
recipients and promoting the full application of core labor 
standards in beneficiary countries." 
 
10.  Trade-related assistance is highlighted in the 
Commission report as a priority in order to help countries 
manage economic and social adjustment due to trade 
liberalization and policy changes.  Trade reforms (such as 
adjustment of quotas, tariffs for example) often involve 
transitory costs for certain groups of the population.  The 
Commission calls upon the international community to address 
the issue of adjustment costs more systematically in order 
to minimize negative social impacts.  The IMF's trade 
integration mechanism to support countries under-going 
balance of payment difficulties is cited as an example.  The 
Commission states that it aims to progressively develop 
support for trade-related adjustment as part of its 
development strategy.  The support would address three 
levels: 
 
--   Domestic, institutional capacity building to support 
     policy reforms; 
 
--   Programs to ensure a more equitable spread of gains and 
     smooth transfer of resources from protected sectors; 
 
--   Programs for productive capacity development to ensure 
     that opportunities of increased market access can be 
     utilized to the full potential. 
 
Responsibility of countries themselves is not undermined. 
Although it commits itself to further develop support for 
trade-related adjustment mechanisms, the Commission also 
argues (just like the WCSDG report) that much of the 
responsibility for social development rests with the 
individual countries.  It is the responsibility of each 
country to ensure that domestic policies respect the rule of 
law, human rights and transparent and accountable 
governance. 
 
11.  According to the Commission, corporate social 
responsibility (CSR) is an approach "which can help trade 
and investment work for sustainable development." 
Companies are increasingly aware that responsible business 
conduct can strengthen their competitiveness. In this 
respect, the private sector can be a powerful and 
complementary partner with governments to attain social 
goals. In order to have CSR policies be seen more than a 
simple "PR exercise," the Commission calls for the policies 
to be developed transparently and in "full consultation with 
the social partners and other relevant stakeholders." Best 
practices are to be further identified and the Commission 
actively supports the application of the Organization for 
Economic Co-operation and Development (OECD) Guidelines for 
Multinational Enterprises, which it will try to incorporate 
more into future bilateral agreements. 
 
12.  Lastly, on the external front, the Commission calls for 
a more "coherent and holistic approach" to questions 
relating to the social dimension of globalization - whether 
they be in the WTO, the International Financial 
Institutions, the International Labor Organization, or the 
United Nations.  According to the Commission, all these 
organizations must work together to towards the strategic 
goal of sustainable development.  The Commission report 
focuses specifically on the U.N., calling for the EU to 
speak more consistently with "one voice in the whole range 
of UN fora addressing social and economic issues." 
 
COMMENT 
------- 
 
13.  This paper reflects the preoccupation of several 
Commissioners and other senior Commission officials 
regarding the volatile public debate -- internally within 
the EU, and internationally -- about the costs and benefits 
of globalization.  The document clearly sets out to portray 
existing EU polices and programs (e.g. Everything But Arms) 
as standards to be emulated by other developed economies, 
but also points to areas where the Commission would like to 
extend EU activity, including with respect to corporate 
social responsibility and trade-related technical 
assistance.  The references by the Commission to "the EU's 
economic and social model" raise questions about the 
existence of such a unified "model," particularly in a newly 
expanded union of 25 member states.  USEU will continue to 
track Council reactions to the Commission's strategy paper 
and eventual efforts to translate certain concepts into 
policies or new programs.  One area of particular interest 
may be the concepts related to the design, implementation 
and evaluation of policies intended to balance economic and 
social objectives related to globalization. 
 
13. For further details, see 
http://europa.eu.int/comm./trade/issues/globa l/index_en.htm 
 
SCHNABEL