EU CONTRIBUTION TO "SOCIAL BENEFITS OF

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