29 June 2006

France 1, NZ 0

According to a World Bank-sponsored survey
of business regulation, New Zealand has among the least restrictive labour laws in the world (despite what employers say). France, by contrast, has relatively rigid labour-market regulations. You may recall recent protests there when the French Government tried to introduce a law that would permit young employees, in the first 2 years into a job, to be dismissed without cause or explanation. This kind of relaxation of regulations is thought to help reduce unemployment (specifically for youth, in this case) by making employment more flexible and cost-effective. The downside is that employment security is reduced.

Current policy dogma is that labour-market deregulation is a good thing. However, it is worth looking at some of the effects of deregulation in the context of international trade. The following example is from a recent article by Alain Supiot. (If you want, you can go to the complete article in NLR 39. Or I can email you the full text in pdf.)

“Contrary to the dogma of the labour-market deregulators, unemployment levels in any given country depend far more on the organization of international trade and on company law than on local labour legislation. The notion that a reform of the labour law will create jobs is an illusion: the complete abrogation of all regulatory norms applicable to wage labour would have scant impact on unemployment. Witness the situation of the self-employed, excluded from wage-labour regulations, but subject to those of international trade. A typical instance of self-employment is the food and agriculture sector, which switched almost overnight from the ‘archaic’ pattern of peasant smallholdings to an ultramodern model, integrated within international production and distribution networks. A part of this sector lives off the Common Agricultural Policy (another neglected aspect of employment law), but other farm businesses receive no subsidy at all. This is the case, for example, with the battery-farming of poultry, which has been intensively developed since the early 1980s. The method is industrial (25 birds per square metre, massive reliance on antibiotics, etc), the product is tasteless, and the pollution is huge (ground-water poisoned by nitrates), but the—apparent—costs are low. The system is organized into networks on the basis of bilateral contracts signed between the food giants that dominate the world market and the breeders whom they control, from one end of the production chain to the other. This is the sort of ‘social paradise’ of which the advocates of labour deregulation dream: no minimum wage, no limit to the working day, no right to strike, no collective agreements.

“The evolution of such a sector offers a concrete example of the impact on employment were labour regulations to be completely abolished. The battery-chicken industry initially underwent a period of vertiginous growth, exporting within Europe and beyond; the number of poultry farmers rose accordingly. Before long, the food corporations moved into developing countries where costs were lower (Brazil, Thailand, China) and began to re-import products from there into Europe, thus exerting pressures for increased productivity and lower margins on the European breeders. In terms of jobs, however, the most destructive effects of the free circulation of frozen chickens were felt in Africa. Here, poultry markets had been shielded from excessive competition by the 1975 Lomé Accords, signed between the eu and the acp countries (Africa, the Caribbean and the Pacific). Thus protected, a small cottage industry of quality poultry, sold live, had begun to flourish.

“These protections were removed in 2000 under the Cotonou Accords, in compliance with WTO rules, opening the floodgates to the mass importation of frozen chicken pieces of the kind scorned by northern consumers (necks, wings, parson’s nose). Sold for next to nothing and in poor sanitary conditions thanks to the rupturing of the ‘cold chain’, these imports were mere surplus profit for the multinationals, whose trade in ‘choice cuts’ for the north yielded huge returns; but their effect was to wipe out the local industry. Ruined poultry farmers swelled the stream of African workers compelled to emigrate by the breakdown of local economies. In Europe, the avalanche of ‘choice cuts’ of frozen chicken from Thailand or Brazil threw Breton poultry farming into crisis, as profit margins shrank and more jobs were lost. Predicated on the excessively low cost of transport—itself a function of the deregulation of maritime labour—the globalization of the poultry circuit also increased the chance of a major health disaster, by ‘globalizing’ the risk of avian flu.”


At 11:23 AM, Blogger alberto said...

Thanks for the reading. It was very interesting. However it seems a lot an european bias view. When will Europe give same competitive oportunities to the developing world? Outsourcing at least give some work oportunities to poor countries. Even though these oportunities are not the best, it is definitely better than unemployment.
Brazil is not profiting from that. Brazilian legislation is confusing and difficult. I agree that we have now a competition for legislation and that is negative. But what can developing countries do? Expect that European governments will give a fair competition in the world market?

Alberto Rocha

At 8:55 AM, Anonymous Grant said...

Alberto, I agree with your point, and in fact a lot of NZ farmers would like also to see fair competition in the EU and US. The article - like a lot of Eurocentric pieces - treats outsourcing to poorer nations as if we should automatically disapprove of it. It would be interesting to know how many Euros in subsidies went to each of those Breton chickens!


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