There’s a new threat to British workers that goes under the innocuous-sounding title of Mode 4. It is set to allow cheap labour to be brought from developing countries to work in Britain. It’s being negotiated by the European Union in talks set up by Peter Mandelson when he was EU Trade Commissioner. And it’s all being done in secrecy…

What Mandelson won’t tell the British public about cheap labour and EU trade talks

WORKERS, OCTOBER 2009 ISSUE

Trade agreements do not only affect developing countries: they also affect developed ones. Yet the British public has almost no idea of what the European Commission is offering, on its behalf, in international trade negotiations. One aspect of European Union trade offers that has been kept from public attention but is set to have a significant effects here is the EU offer to open European labour markets to workers from outside the EU. This will inevitably be, for the most part, cheap labour.

This aspect of the “trade-in-services” agenda, known innocuously as Mode 4, is being included in all of the trade agreements that the EU Trade Commissioner’s office is negotiating – all initiated by Peter Mandelson when he was EU Trade Commissioner. The information is being effectively kept from the workers who will be directly and negatively affected in EU member states such as Britain. The texts of these agreements, including the Mode 4 element, is confidential until after negotiations are concluded, so they are kept secret from those who will be affected and on whose behalf they are being made.

It appears that not only is Mode 4 information being kept from those who will be affected, but also it is not shared with the rest of the Commission. The Head of EU Employment Strategy, with responsibility for employment for the half billion EU population, recently admitted that he knew nothing of Mode 4. And in a January 2009 briefing on the EU/India bilateral agreement to the European Parliament’s International Trade Committee, mention of Mode 4 was avoided even though it was stated in the text of the report that the agreement will not proceed without it.

Need for awareness

With this effective secrecy at all levels, workers need to raise awareness of the irreversible commitments that the EU Trade Commission is making, particularly in relation to movement of labour. These commitments must not be included in trade agreements, and most certainly not behind the backs of those who will be negatively affected.

Mandelson hard at work when he was EU Trade Commissioner and negotiating on movement of labour with India. Photo: Confederation of Finnish Industries

Trade-in-services is huge. It takes in broad commercialised areas such as financial services and tele-communications, both of which facilitate all other trade. But it goes further, covering all other service investment opportunities, including privatised public services, that transnational corporations have accessed or aim to access through the mechanism of trade agreements.

While trade-in-goods is mostly about action at borders, “free trade” in services means more freedom for transnational corporate service investors to operate without restriction, with a corresponding restriction of governments’ rights to regu-late them. This amounts to a lessening of democratic power in favour of a strengthening of private, corporate power.

Cross-border trade in services has been divided into four “modes” in the international trade agenda. Mode 1 is services bought from abroad, for instance via the Internet. It is Mode 2 when buyers move across borders, for instance students going overseas to buy study programmes. When corporations set up in another country, this is Mode 3. Mode 4 is the temporary movement of skilled service workers to another country.

This increased freedom for transnational corporations includes the freedom to move cheaper labour, as “intracorporate transferees”, into countries where higher labour standards and wages have been established, undermining those standards, and producing a race to the bottom, with big profit potential for corporations positioned to exploit this differential.

Workers in the host country are undercut and displaced in the process, sometimes via a two-step process of outsourcing to a transnational company. Job losses follow in the parent company, after which the outsourcing company can bring in cheaper “intracorporate transfer-ees”. The ability to bring in cheap labour teams thus encourages outsourcing.

Bringing workers into a host country avoids many of the disadvantages associated with offshoring work, though may be in addition to rather than replacing offshoring. Profit potential is greatly increased when a transnational corporation can utilise both, in concert. For a transnational company, having the same kind of workforce in both the home and in the client country overcomes the cultural differences involved in interfacing across big geographical distances.

But workers in the host countries, such as Britain, are the losers.

Worse in Britain

The effect on the labour market in Britain could be more severe than elsewhere in Europe, since EU Mode 4 offers are based on member states’ existing labour migration policies – and British labour migration regulations are very liberal, without numerical limits. The concept of “skilled” has already been shown to be very elastic. Note, too, that labour market tests whereby jobs have to be offered to UK (or European) workers for four weeks before being offered outside the EU do not apply to intracorporate transferees. And the length of stay for temporary labour migrants can be extended, leading to permanent residence.

Intracorporate transferees are already a major component of current labour migration into Britain. But when they become included in international trade agreements, the movement of workers becomes effectively an irreversible international legal commitment.

So how are British ministers reacting? Responses to questions asked in the UK Parliament this year about Mode 4 have established that the government is fully supportive of pushing ahead with trade in services agreements that include movement of labour, and that there are no numerical limits in EU Mode 4 offers, and that labour market tests have been eliminated.

To make matters worse, the Mode 4 specialist within the European Commission has confirmed that there is no definition of a Mode 4 temporary worker, despite the assertions of the UK Minister for Immigration to the UK parliament that there is, and that lengths of stay are not specified in the EU offer in the current round of talks within the multilateral World Trade Organization’s General Agreement on Trade in Services (GATS).

On top of the GATS talks, part of the Doha Round, the EU is negotiating significant bilateral agreements that include Mode 4 provision with a range of countries and regions (for example, with India, South Korea, and the Association of Southeast Asian Nations. It is also negotiating Economic Partnership Agreements (EPAs) between the EU and poorer regions of the world, such as the Caribbean, Africa and the Pacific (which involves Papua New Guinea and Fiji).

Under the World Trade Organization’s Most Favoured Nation rule, any commitments including Mode 4 made to one country, such as India, are made to all 150 WTO member states. The EU tabled its offer on the WTO’s ongoing GATS negotiations, including Mode 4, on 2 June 2005, at the same time as the French and Dutch referenda on the EU Constitution, but without any publicity.

At the last Ministerial meeting on the Doha Round, in Geneva in July 2008, despite the global media presence, the focus was kept on agriculture and manufactured goods, and away from services. The GATS meeting was held on a Saturday afternoon, with little publicity, and the report of that apparently positive meeting was only issued after the press had packed up and left.

The other set of agreements under negotiation, the EPAs, are also largely about investment into the partner countries, with Mode 4 access for workers included as the trade-off.

Although the trade-off aspect of trade negotiations appears to be country to country, or in our case, to the EU, transnational capital is lobbying hard on EU services trade policy via its Brussels-based European Services Forum (www.esf.be), both for investment access into other states’ services, including financial services, and for the entry of cheap labour into the EU.

The lobbying is led by Lord Vallance of Tummel, the Liberal Democrat spokesman on trade and ex-BT chief executive, who has admitted interests in an Indian company bringing cheap Indian labour into Britain.

Don’t mention the services

The secrecy continues. In Britain, Peter Mandelson, EU Trade Commissioner when all of these trade agreements were initiated, is still not telling the public what the European Commission is negotiating away on its behalf, despite his current central role in the government.

WTO Doha Round negotiations, in which the GATS talks are included, will be revived in the next, ministerial meeting, to be held from 30 November to 2 December. To deter media attention WTO Director-General Pascal Lamy has already advised states not to mention “services” and to present the meeting as a bureaucratic event. The EU/India bilateral agreement is due for finalisation in 2010, and other bilateral agreements are also progressing, as are the EPAs.

There is a lot at stake. Mode 4 trade agreements, offers and commitments, also national labour migration policy, exist alongside the free movement of labour within the EU, reinforced in the European Court of Justice by the Viking and Laval decisions on corporate rights in regard to moving workers.

Thus EU directives forcing open labour markets, with negative effects on wages and labour standards, are on a continuum with irreversible labour commitments in international trade agreements. The reserve army of labour that these structures facilitate is intended to ensure that the balance of power between workers and capital is weighted progressively on the side of capital.

The loss of democratic power through governments’ reduced right to regulate, conceded in services trade commitments, exacerbates the situation. After all, trade commitments hold even when governments change.

The aim of services trade agreements, initially conceived by transnational financial services corporations such as Citicorp and American Express, is to provide what they call “investor security”. And what guarantees investor security? The loss of workers’ power and of citizens’ power, that’s what.

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