Autoworkers of the world, unite! (Ish.)

Hello, and welcome to Trade Secrets. It’s May Day this week, an international celebration of the labour movement (yes, yes, Americans and Canadians, I know your Labor Days are in September, I’ll do something worker-related then as well). So I’m having a look at some intriguing developments in the relationship between labour unions and trade. Today’s Charted waters is on the UK and the forthcoming shambles on checking food imports. Next week, in deference to another public day off (the UK’s pagan-inspired May Bank Holiday), the Trade Secrets newsletter will come out on Tuesday. In the meantime, this particular member of the British National Union of Journalists sends fraternal May Day greetings to all who observe.

Oh Lord, won’t you sign up at Mercedes-Benz?

(It’s from a song.) It’s no huge secret that US labour unions aren’t the biggest fans of international trade, which they blame for undercutting domestic wages and standards, noting that goods and capital are mobile while labour is fixed.

Memories among trade folk were scarred for decades by the disastrous Seattle World Trade Organization ministerial in 1999, ringed by protesters from the fearsome (in several ways) Teamsters union. They needn’t have bothered: President Bill Clinton doomed the summit before it started by calling for labour standards in WTO agreements, infuriating lower-income countries who regarded it as protectionism.

Over the next 20 years the US and EU put labour standards into their own preferential agreements, though without great effect. There’s an interesting sub-phenomenon here: labour unions have a relatively small membership in the US compared with Europe but a much bigger impact on trade policy. EU trade unionism is still overwhelmingly national while its trade policy is set bloc-wide.

Recently things have been, as they say, getting real. Donald Trump’s renegotiation of Nafta into the US-Mexico-Canada trade deal (USMCA), under pressure from a Democratic Congress, wrote in some specific provisions to stiffen the spine of the Mexican labour movement, which is historically weak and co-opted by management and government.

Similarly, one of the many goals President Joe Biden’s Inflation Reduction Act has simultaneously tried to hit is directing spending towards unionised plants. His trade policy, as I may have said one or two thousand times before, is disproportionately driven by the unionised parts of the steel industry, where he wants votes and organising muscle in the presidential election. 

So what’s the latest? There was a big victory for the United Auto Workers union recently in getting recognition at a Volkswagen plant in Tennessee. Organising plants in the generally union-hostile south is hugely symbolic — check out the fascinating history of the RJ Reynolds tobacco factory in North Carolina in the 1940s — and the VW facility was the first unionisation of an auto plant by a vote in the southern states since that decade and the first of a foreign-owned auto factory.

The next UAW target is a Mercedes-Benz plant in Alabama, and the really interesting bit for our purposes is the intriguing way it has found to internationalise campaigning. The union has filed charges against Mercedes under the newish supply chain law in Germany, which makes German companies responsible for environmental, human rights or labour abuses among suppliers. The UAW says the company is victimising union members, though Mercedes denies this and says it will respect the unionisation vote.

The drafters of the supply chain law probably had in mind scrutinising VW’s operations in China’s Xinjiang region rather more than supporting unionising drives in Alabama. Leftist American activists and commentators, especially those who venerate the Seattle moment in 1999, are naturally delighted. The supply chain law might not create a new civil liability for companies’ breaches of standards, but it does provide campaigners with a way of shining light on their activities.

Now, you might think it odd that German car manufacturers with their famous co-operative worker council tradition in Germany chose to set up in non-union US states with lower wages and fewer labour protections, and aren’t actively welcoming unionisation there. (To be fair, VW did want to bring in a German-style works council when it built its plant in Tennessee a decade ago, but it didn’t happen.)

You wouldn’t be alone. European Commission officials say they have quietly been reminding European carmakers about the social partnership model they are supposed to embody. “In addition to complying with local laws, we obviously expect EU companies to uphold European values and standards in their operations abroad,” a commission official told me. “The commission has strong co-operation on labour issues with the US. Our commitment includes ensuring workers are shielded from anti-union discrimination and any interference in unionisation efforts.” By commission standards that’s a measured but unmistakable shot across the bows. It won’t hurt the EU’s sometimes strained relationship with the White House either.

A more perfect union

So is this a new cross-border relationship between unions to match the multinational nature of the corporations in which they seek to organise? Ish.

The German association IG Metall, Europe’s largest industrial union, which represents car (and steel) workers, is in an unusual position. It has backed the UAW’s unionising campaign in the US. But back home, although IG Metall has its own unionisation drive at Tesla’s plant in Germany, it’s much closer to management in companies such as VW and Mercedes, where it represents workers, because of the aforementioned co-operative arrangements.

Bringing the more adversarial US labour tradition into companies it helps to manage might create a bit of tension. Fairly or not, the UAW has consistently been accused of inefficient work practices and making uncompetitive the companies where it represents workers.

Back to trade. In Germany IG Metall generally shares the car companies’ focus on exports and is much less suspicious of international trade. One of the swing votes for trade deals in the European parliament is international trade committee chair Bernd Lange, veteran German SPD activist and IG Metall member. Lange’s role is important because he continually has to balance supporting worker rights and other good progressive causes abroad with mercantilist interests at home. 

In 2022, the IG Metall representative on VW’s board did raise questions about whether it was in the company’s long-term interest to be producing in Xinjiang. But that was a long way away from a clear and principled call to divest. It was German human rights campaigners who first filed complaints about Xinjiang under the supply chain law, not the union.

We remain a very long way from single transatlantic unions. But it’s intriguing that the German supply chain law has managed to affect some powerful companies in ways people didn’t necessarily expect. A German think-tank associated with the SPD is wondering whether it might also be used to boost the labour movement elsewhere, such as sub-Saharan Africa. The EU last week agreed its own version of a supply chain due diligence law, admittedly watered down from its original model.

Commission officials weighing in on unionisation drives in the US is particularly interesting. As I’ve said before, one traditional drollery in Brussels is that EU trade policy is set by Germany, and thus by German manufacturing, and thus by the German car industry, and thus by VW. Right now that joke looks a bit past its sell-by date.

Charted waters

Checks on food imported to the UK from the EU finally start this week, a mere four years after the UK left the EU. Even then a lot of the inspections will be pretty notional. The fact that so much food comes through the congested port of Dover means the inspection station will be 22 miles inland. If you’re wondering how the government makes sure that produce doesn’t simply go missing on that journey, your guess is as good as anyone’s.

Trade links

Katherine Tai’s luck runs out as many in Congress join some of the US’s trading partners in finding her performance as US trade representative unimpressive.

The symbolic issue of trade-distorting cotton subsidies, the subject of one of the first big wins for a middle-income country against a rich one (Brazil vs the US) in the WTO dispute settlement process, has now become a much more complex issue. The big subsidisers affecting African cotton-growers are now middle-income countries including India and China. (H/T to the great Robert Wolfe for spotting this.) That “Global South” solidarity you read about is inexplicably absent.

As the strong dollar causes alarm around the world, Trade Secrets’ favourite and longtime markets guru Karthik Sankaran argues for co-ordinated intervention between the big economies to guide exchange rates.

Meanwhile, Donald Trump’s advisers are supposedly discussing penalties for countries that shift away from using the dollar in reserves and so on, though how they combine that with their other apparent aim of weakening the dollar for competitiveness reasons utterly defeats me.

Industrial profits at Chinese companies have fallen from a two-year high, increasing concerns that their output is running ahead of domestic and export demand.

Trade Secrets is edited by Jonathan Moules

Source: Economy - ft.com