'Social Correctness' Is the New Protectionism

Benn Steil

From Foreign Affairs, January/February 1994

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Summary:  "Worker rights" is the guise under which protectionism is rising in Europe. The EC denies liberalized trade to low-wage countries able to out-compete Western Europe's benefit-laden workers.

Benn Steil is Senior Research Fellow in the International Economics Program at the Royal Institute of International Affairs in London.

While American social trends generally wend their way across the Atlantic, the infamous doctrine of "political correctness" failed miserably in penetrating European common sense barriers. Europeans, however, appear to have found a small but promising market in Washington for a heartier, common sense?resistant Brussels variant: "social correctness."

European politicians and Brussels bureaucrats form the core of an increasingly vocal vanguard of the socially correct. Their principal tenet is that it is no longer acceptable to carry on liberal trade relations with any country failing to provide its workers with "adequate social protection." Such countries are said to be engaged in the practice of "social dumping," as their lower labor costs enable them to undercut countries in economic competition that do provide proper social protection.

While stated as a matter of high principle, this doctrine actually represents little more than an attempt to justify protectionism under the guise of concern for worker rights. Social dumping exists in the eye of the higher?cost beholder: the charge is leveled exclusively at countries that succeed in attracting jobs and investment on the basis of having an advantage in unit labor costs. In order to raise their competitors? production costs, the socially correct seek to impose their system of labor relations, workplace regulations, employment and remuneration laws, and social security provisions, all the while maintaining that they do so in the interest of universal workers? rights.

BEGGAR THY COMPETITOR

The attempt to export social policy to neutralize a competitor advantage is not new. In 1890 Kaiser Wilhelm II, intent on maintaining Germany?s competitive position while addressing domestic demands for working?time restrictions, proposed an international agreement on a maximum eight?hour workday. While Britain had at that time rejected the idea of putting its industrial laws "at the discretion of a foreign power," one hundred years later, its industrial sovereignty sufficiently eroded, it is forced to abide by working?time directives from Brussels.

The French tried the same ruse in the negotiations leading to the signing of the Treaty of Rome. In a memorandum to its partners in May 1956, France cynically insisted that social legislation be harmonized "in conjunction with the reduction of tariff protection" in order to "make more apparent to the workers that link that must exist between the common market?s establishment and higher standards of living." In the end, the only significant piece of social protectionism that the French were able to incorporate was the infamous Common Agricultural Policy, which according to Article 39b must "ensure a fair standard of living for the agricultural community." If the CAP provides any indication of what harmonized social regulation will mean for Europe and its trading partners, there is real cause for concern. The CAP devours up to 80 percent of annual EC budgets, and costs the average European family of four over $1,700 a year.

What finally brought social policy center stage, however, was the launching of the single?market initiative in 1986. While Joseph Stalin may have believed in the possibility of creating "socialism in ...

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