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Unintended effects of deregulation in the European Union: The case of road freight transport
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Sociologie du travail 50S (2008) e19–e29
Unintended effects of deregulation in the European Union: The case of road freight transport Nadia Hilal Institut d’études politiques de Paris, 27, rue Saint-Guillaume, 75007 Paris, France
Abstract Road freight transport (haulage by truck) within the European Union has been totally deregulated and fully open to competition without any quotas or restrictions since July 1, 1998. This has raised problems, namely due to delay in harmonizing the different EU Member States’ tax and labor legislation, roadside check arrangements, and sanctions for companies that violate regulations or the law. Unscrupulous companies have been using this legal vacuum to falsely outsource their activities, intensify the use of subcontracting, and dodge national tax laws and labor and welfare regulations. The result is worsened working conditions in a sector where entry barriers are low. Worker turnover is by definition high in this activity. Truck drivers are semi-skilled and have become interchangeable on the European Union market. They can readily be replaced by drivers from Eastern Europe (Poland, Romania, Bulgaria) who are much less costly in terms of wages and social protection. The spread of these practices has caused concern among labor organizations in Europe. The trucking transport sector is a textbook case for analyzing how the EU is working to counter the unintended effects of deregulation in this sector of the economy. © 2008 Elsevier Masson SAS. All rights reserved. Keywords: Harmonization; Outsourcing; Social dumping; European road transport; EU regulations
Since 1985, the power to determine laws and regulations for road freight transport has gradually been shifted to the European Union level. Transfers of states jurisdiction to this level increased in preparation for the 1993 opening of the single EU market. The transport sector, an essential component in the Europeanization of trade since the 1950s,1 was called upon to play a major role
E-mail address: [email protected]. Despite prescriptions in the 1957 Treaty of Rome, it was not until 1985 and a ruling by the European Court of Justice that Europeanization of this sector took off; see ruling of May 22, 1985 stipulating: “the requirements of freedom to provide services include ... the removal of any discrimination against the person providing services based on his nationality or the fact that he is established in a member state other than that where the services are to be provided.” 1
0038-0296/$ – see front matter © 2008 Elsevier Masson SAS. All rights reserved. doi:10.1016/j.soctra.2008.07.002
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in constructing a borderless internal space wherein free movement of goods, people and services is assured. Road haulage of freight stands today as an example of a totally deregulated economic sector, entirely subject to competition, without any quotas or restrictions since July 1998. But EU deregulation has raised problems, namely due to delay in harmonizing the Member States’ different tax and labor legislation. This shortcoming is being used increasingly by unscrupulous trucking companies. Since 1997, it has been increasingly easy to engage in fraudulent practices, and this has led to keen competition between social protection systems and to overall social and fiscal dumping. These practices are sharply felt in a profession that now constitutes a full-fledged EU labor market: since January 1, 1993, European truckdrivers have been able to circulate without restrictions throughout EU territory. In most activity sectors, European workers’ freedom of movement is weak, but here that term has particular resonance. By definition, labor turnover in road freight transport is high, and EU policy mechanically increases it. Likewise, drivers’ freedom of movement is virtually unhindered by the traditional legal, administrative and language obstacles to workers’ geographic mobility.2 In many EU countries, a driving license is all that is needed to set up as a truckdriver. This sector is thus a textbook case for studying how the EU is working to counter the unintended effects of deregulating an economic sector. EU authorities do not have adequate means for overseeing or monitoring enforcement of Union laws. Dysfunction in the truckdriving profession have raised the issues of instituting an EU-level corps of labor inspectors and improving cooperation among national police forces. Fraudulent practices and the fact that there are no identical rules that all must abide by have fueled protest against head-on competition between employees and debate around the charge that there is no “social Europe.” 1. In economic terms, a totally integrated sector In the late 1980s, the EEC began radically modifying the philosophy behind transport policy. From a heavily state-structured sector, transport became an activity dominated by market and free competition philosophy. Price rates are no longer overseen by the state. European quotas are gradually disappearing.3 Starting July 1, 1998, “cabotage” [transport of goods or passengers between two points in the same country] became a second stage in opening up competition in the EU: any driver from a member state was now free to haul goods within any other EU state without having to perform an operation (loading, unloading) for state of origin.4 EU economic deregulation has not abolished differences in the conditions under which companies compete. This situation has provoked harsh criticism within the profession. Representatives of French hauliers, for example, constantly demanded that tax and labor legislation be harmonized before total liberalization of cabotage; they considered this the only way to ensure equal
2 The European Commission plans to makes better worker mobility a primary goal of the Lisbon program. It declared 2006 “European year of Workers’ mobility,” observing that the percentage of Europeans residing in an EU country other than their country of origin had remained unchanged in the last 30 years at around 1.5%. 3 Qualitative criteria (conditions for entering the profession) have replaced the earlier quantitative ones (a Community quota system). Transport companies now have to be able to prove they are meeting conditions set at the EU level, namely “professional capacities, financial surface and respectability.” Road freight transport prices were deregulated on January 1, 1990; service provision fully liberalized on January 1, 1993. 4 As early as 1996 it was estimated that two-thirds of texts concerning French road freight haulage were EEC texts (Bauchet, 1996: 5).
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opportunity for transport companies.5 Small and mid-sized German companies also expressed reservations about cabotage, pointing out that cost price in Germany was particularly high because of the country’s tax rates.6 But German government efforts to create a “Eurovignette” that would harmonize vehicle and gas taxes have been in vain. In addition to tax differences, there are extremely marked disparities in connection with labor: wages, driver productivity, work hours and how they are counted, and company structures vary widely from one country to another. The legal maximum working time is 48 h a week in Belgium, 56 in Portugal, 60 in Germany, France and Italy, 64 in the Netherlands and 68 in the United Kingdom and Sweden, with a maximum of 70 h in Spain—not to mention all the occasional arrangements authorized by the various labor agreements and more or less frequent recourse to overtime, practices which only increase these disparities. Work hours, overtime, rest stops, yearly paid vacation, pay, and social protection regimes are all still determined at the national level, and this too widens the gaps. 2. The unintended effects of inadequately monitored deregulation 2.1. Spread of subcontracting In the last decade, a great many one-person (zero employees) trucking companies have been registered. In fact, use of small structures makes it very easy to circumvent the constraints imposed by national tax and welfare legislation, which in most cases was designed to apply to large companies. The 1993 Dobias report in France revealed generalized fraud mechanisms due to increased subcontracting and various ways of dodging labor regulations involving the use of undeclared employees (Dobias, 1993). In the context of sharp intra-EU competition, the use of fake “self-employed” workers (or freelancers who were actually being subcontracted by major haulage companies) increased to the point of becoming characteristic of the sector. Fraud, long a feature of this line of work, increased further (Ocqueteau and Thoenig, 1997: 403). Subcontracting in turn kept prices spiraling downward in a sector where entry barriers are low. Road transport is characterized by a high proportion of self-employed workers. Along with the construction industry, this activity shows a particularly high proportion of extremely small companies—63.6% without employees; i.e., hauliers who are their own boss. However, this situation predominates in Southern Europe: in Spain, only 47% of workers are employees, and in Italy there are as many self-employed as registered-employee drivers. 2.2. The “Willi Betz phenomenon” or the “Polish truckdriver” threat In 1997, truckdrivers in the 15 EU states began protesting against increasing—and illegal—use of Eastern European drivers for intra-European itineraries. The German transport workers union ÖTV pointed out that Polish drivers were illegally practicing cabotage in Germany.7 Dutch labor organizations also observed the spread of this practice on their territory. They based their statements on a report by the national labor and trade inspection office on hiring of low-wage drivers 5
“Le cabotage routier inquiète la France,” La vie du rail 2222 (Dec. 7-13, 1989): 19. German carriers do not pay highway tolls for domestic transport but they do pay high vehicle taxes (to finance infrastructure) and one of the highest gas taxes in the Union. This puts German drivers at a competitive disadvantage and conversely gives a competitive edge to drivers from other EU countries circulating on German territory. 7 It also cites the example of Dutch companies purchasing the services of Polish drivers “for $1000, all included.” See Hilal, 2005 et 2007. 6
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from Eastern Europe and the former USSR. According to this document, half of the 30 Dutch companies inspected were violating the law. Many European labor unions at the time publicly noted and condemned generalization of “social dumping” in their activity. The European Conference of Ministers of Transport, now the International Transport Forum (ECMT) defined the phenomenon as “the deliberate infringement, circumvention or erosion of applicable social legislation in force—at either the national, Community or international level—in order to procure an advantage, notably a competitive advantage.” (CEMT, 2002: 2). In 1997, it became possible to put a face to the social dumping threat—or rather a color: the deep yellow of the “Willi Betz” trucks running all along EU highways. Europeans drivers began encountering them regularly. This German company based in Bade-Wurtemberg is specialized in international transport. It profited from privatization of Eastern’s Europe’s former state-owned trucking companies. In 1994, it bought out SOMAT, the former Eastern bloc carrier based in Bulgaria. Up until 1997, the Willi Betz company operated primarily on the Russian market, but the economic crisis in Russia worked to shift business to Western Europe. The company’s many subsidiaries and its operating fleet of more than 4500 trucks enabled Willi Betz to make the most of loopholes in EU legislation. The company was banking on spotty roadside checks on EU highways. The operation worked as follows: the head German company and its Austrian satellites had a great number of trucks and therefore of ECMT licenses8 but few drivers of EU origin. They made their surplus vehicles, together with official authorizations, available to their Eastern European subsidiaries, particularly Bulgarian ones—i.e., they employed Bulgarian drivers—thus obscuring the real carrier’s identity. A ECMT report evaluating social dumping in the profession (CEMT, 2002) explains: “A practical example of the type of ‘custom-built’ haulage operation currently being used consists in a tractor registered in Austria with Austrian ECMT licences and operating in France, coupled to a trailer registered in Italy, loaded with Spanish freight, driven by a Bulgarian or Kazakh driver speaking a Slav language and holding identification papers drafted in Cyrillic” (ECMT, 2002: 3). Outside the country the trailer is registered in—here Austria, which has the necessary documents—it is impossible to check whether the driver was in fact hired by the tractor owner. All that the multinational company Willi Betz has to do is make sure the driver does not go through Austria. This arrangement enables the company to employ Eastern European workers for destinations where the company is in direct competition with EU carriers employing EU drivers—that is, to engage in illegal cabotage. The fact is that drivers from Eastern and Central Europe offer a supply of good and above all cheap labor. Their average hourly wage is below 3D hour—half to a third the wage of Greek drivers, the poorest paid in the EU. Workers from some Eastern European countries have virtually no social benefits. Willi Betz’s 4500 trucks give the company an advantage when it comes to competing with large European carriers. Will i Betz drivers, at least two per truck, are willing to leave home for two or three weeks and criss-cross Western Europe. Their wages, low by Community standards, nonetheless figure in the high income bracket in their countries.9 According to the ECMT, “the economic impact in terms of lower wage costs is substantial”10 8
The ECMT is in charge of delivering intra-EU circulation licenses. “Willi Betz, le roi du dumping social,” La vie du rail et des transports (Oct. 27, 1999). 10 “The conclusion to be drawn from this is that the use of an Eastern European driver increases the profit margin on turnover by over 10 per cent! Such an increase considerably increases profitability or the ability to compete in terms of haulage prices, particularly in view of the fact that the profit margin for carriers who do not use such ‘custom-built’ operating systems as Willi Betz amounts to no more than around 1 per cent” (CEMT, 2002: 4). 9
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(CEMT, 2002: 4), and it cites gains of almost 35% for an Eastern European company operating in France.11 Furthermore, the Willi Betz company used the increase in its margins due to the use of borderline-illegal practices to further extend its hold over international road transport. It increased the number of its subsidiaries (in Romania, Azerbaijan and Belarus, for example)12 and modernized its fleet (arranging to track its vehicles by satellite). The ECMT report notes that “Willi Betz” practices are likely to spread in the EU: “The use of Eastern European drivers through such singular manipulation of the regulations may be extremely tempting to many carriers ... In one sense, the practice merits being used on a wide basis. ... drivers from EU Member States ... would lose out in the competition with drivers from Eastern European countries” (CEMT, 2002: 4). In sum, the Willi Betz company rationalized, developed and extended to the continental scale a fraud process that already existed but in much more improvised and therefore less visible form. These practices allowed for naming and illustrating a phenomenon at work since the mid-1990s. 2.3. An extreme case: the Kralowetz company The ECMT prediction about the spread of fraudulent practices in road freight transport has been confirmed: Willi Betz has been widely emulated— by the Austrian company Kralowetz, among others.13 This company can stand as a caricature of all that malfunctions in road transport. It has been in the news since 2001, accused for many years of employing drivers from the former USSR in miserable working conditions (outrageously long working hours, unhygienic working conditions, violated safety regulations, questionable visas, ridiculously low pay, data-recording disks that have been tampered with, and the like). A driver for this company, abandoned with fellow employees in a parking area in Luxembourg, testified: “There are weeks when I’m sure I cover as much as 6000 kilometers. I sleep five hours a day; otherwise, I drive.”14 He detailed his working conditions: drivers were paid by the kilometer rather than the hour, contrary to EU laws specifying that a driver cannot work over 12 h in a 24-h period, with compulsory breaks. To escape this constraint, drivers explain that they count up the kilometers, then turn them into a fictitious number of hours. “It’s very simple” to rig the tachometer: “I throw the disk out every 4 h. If I get caught, the fine is only 50 D .”15 Tracked by the German police, the company’s trucks were immobilized for long weeks in Luxembourg parking areas, leaving the drivers without any means of subsistence.16 Luxembourg labor organizations and their EU counterparts used this instance of social and fiscal dumping as an opportunity to drive home the point that a new stage had been reached in the erosion of working conditions. They expressed indignation at the situation of the first ever “abandoned drivers,” which they described as similar to the one of ship crew members abandoned to their fate by unscrupulous owner-charterers when their ships got blocked in port by national
11
On France, see Gorce, 2000 and Moll, 2000. See “Qui est Willi Betz?” CFDT-Transports no. 1 (May 1999): 7. 13 Kralowetz is one of the largest Austrian international carriers, with more than 100 trucks and subsidiairies in around ten EU countries. 14 See Libération, Feb. 12, 2002, p. 28. 15 Ibid. 16 Kralowetz is headquartered in Luxembourg for taxes reasons. 12
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authorities. The stir caused by the “Kralowetz affair” occurred in a particularly difficult economic context. 2.4. Increased outsourcing for labor and fiscal motives Outsourcing in the road transport sector began accelerating in 1998. It first involved border regions: French companies set up in Spain and Belgium; German ones left for Luxembourg, the Netherlands and Poland. The differences in welfare and tax laws and regulations within Europe created competitiveness differentials that were an incentive to expensive labor-high tax countries to set up in neighboring countries without changing their activities.17 Companies are now free to set up in countries whose social conditions are more flexible and thus to escape application of national rules to their labor force. This can be called the “mailbox” effect, whereby, for example, German employees come under Luxembourg law through what is merely a legal artifice. Outsourcing primarily affected France and Germany, the two largest “transit markets” in Europe and therefore coveted by carriers in neighboring countries. French companies, for example, have complained about the increasing relative weight of foreign flags in domestic transport, particularly in Alsace and the Midi-Pyrénées. They used the charge of cabotage sauvage [unregulated] as grounds for demanding reductions in employer contributions and gas tax for the haulage profession. 3. Labor and social welfare fears 3.1. EU labor organizations’ joint condemnation of social dumping In road freight transport as in many other activity sectors, German and Austrian labor organizations have proved the most sensitive to the social effects of EU enlargement; this was due to their proximity to the candidate countries. The German and Austrian governments have insistently demanded that seven-year transition periods be required before nationals of new member states are allowed access to the EU labor market. In the road transport sector, these transition periods cannot be said to have been applied, as they have been widely circumvented by the spread of “Willi Betz” practices. German and Austrian labor unions experienced dumping as an immediate, large-scale threat to their national welfare legislation. There is a strong tendency for Western European labor organizations to share this understanding and to likewise critique outsourcing and social dumping. German and French organizations have condemned “Willi Betz” practices in nearly the same terms. In a press communiqué, the ÖTV German road transport union pointed out that without minimal harmonizing of labor and welfare rules, a transporter like Willi Betz could employ two Bulgarian drivers for the price of one German, while an article in Confédération Fran¸caise Démocratique du Travail (CFDT)-Transports noted that “CFDT delegates are preoccupied by the increased traffic of the Willi Betz company in France. ... Paying two drivers the wage of one French driver, [the company] appears to be circumventing the limits set by Community rule 38/20 [EU-level specification of maximum working hours for hauliers].18
17 18
For more detailed figures see Grand and Duret, 2000: 99. “Willi Betz et compagnie,” CFDT-Transports no. 106 (Apr. 1999): 11.
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Haulier unions in Germany, France,19 the Netherlands, Belgium and Luxembourg stressed the “disastrous effects for employment,” insisting unanimously on the fact that though the accusing finger was for Willi Betz, this was only the tip of the iceberg: other companies were likely to get involved in the same practices. The issue of continually worsening work conditions was a particularly sensitive one in a context of keen intra-European competition. The opening of the single market was accompanied by a major change in working conditions compared to the preceding period, mainly due to the fact that in the 1990s, production companies began using just-in-time methods, drastically reducing their stock to lower warehousing costs. This of course implied intensified freight transport between companies and quicker delivery. Use of trucks began to intensify, and shippers become more demanding about the quality of this service (speed and reliability). Europeanization of the labor market in transport increased distances travelled, number of nights on the road, and the likelihood of working off-schedule hours. International drivers on EU highways thus gradually began transporting freight further and further from “home,” with tighter deadlines and much worse driving conditions. The development of road transport increased traffic on the main European highways and traffic jams on the outskirts of major cities. To avoid late delivery caused by these blockages, which are of course impossible to control, drivers started work at increasingly “early” hours: night work spread. Patrick Hamelin showed that drivers’ weekly work hours, already long, increased continuously between 1983 and 1993, and that night work became much more likely. Around these issues, cross-border union initiatives developed. In a joint communiqué, the ÖTV of Bade-Wurtemberg (extremely active in this fight, since this is where the Willi Betz company was headquartered) and the CFDT-“Route” [highway] division of Alsace-Lorraine observed: “Deregulation has led to a worsening of labor and social welfare conditions. Regulations are not enforced and often violated. Totally opening up cabotage next July will further sharpen what is already merciless competition.”20 The highway division of the CFDT let it be known that it was regularly discussing the issue with its colleagues in other European labor organizations.21 3.2. The appearance of European “bogeymen” In Germany and Austria, the events involving Kralowetz and other such companies got heavy media coverage. German and Austrian unions revealed and condemned the heavy pressure this illegal labor force was exerting on national employees and employment. They claimed these practices allowed for circumventing the usual labor negotiations between managers and unions and were interfering in application of labor accords. Not only did they cause job loss, but also strong pressure on employees, and a perpetual feeling of job and welfare insecurity. In France, the 2005 campaign around the European Constitutional Treaty referendum made extensive use of the “Polish plumber” issue. But what is less well-known is that the road transport profession had been saying for years that the threat to social protection and employment systems was coming from companies using drivers from Eastern European countries. As early as 1998 CFDT-Route explained that European harmonization of working conditions would only make sense if the 19 The French FNTR, an employers’ organization, estimated that a Betz driver cost his employer 11500 FF a month [approximately 1750 D ] as opposed to 25000 FF [approx 3810D ] for a French employee. See “La construction européenne bute sur l’harmonisation sociale,” La Tribune, Mar. 14, 2000. 20 “ÖTV et la CFDT: coopération et actions communes,” CFDT-Transports no. 95 (1995): 11. 21 See n. 12.
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upcoming competition from Eastern European drivers was taken into account; this would be the “most serious problem” the Union would have to resolve.22 The Association pour une taxation des transactions pour l’aide aux citoyens (ATTAC) advocacy group used the labor unrest in French road transport to support its argument against approving the proposed European Constitutional Treaty and its claim that there was no “social Europe.” Together with the construction industry, road transport has characteristically used illegal, nonEU labor with little training, workers forced to accept lower wages than those applied at national levels.23 In 2001 a German construction worker quoted in [the left-leaning daily] Libération suggested that the process was now affecting road freight transport: “The borders are being opened without any monitoring of wages. There are lots of illegals— paid less, no employee contributions, no social protection, no employer contributions. We’re already feeling the pressure on our wage negotiations this year. You’re constantly hearing: ‘Look, I can get a Portuguese driver for a third of your wage.’ They’re pitting us against each other.”24 The influence of European “bogeymen” (Willi Betz, Kralowetz, “the Polish plumber”) went beyond their sector of activity. European labor organizations are sensitive to interprofessional comparisons. The spread of social dumping to the road transport sector began to worry European railway workers. The truckdriver example, preceded by the ship crew and increasing use of “flags of convenience,” was used to condemn liberalization of the railways. The European Transport Workers Federation (ETF), a sector branch of the European Trade Union Confederation (ETUC) has suggested that deregulating railways (including the removal of any obstacles to free movement and the opening of competition among national, public and private companies in a context of inadequate labor and tax harmonization) will have the same negative effect as in the road transport sector. It has argued that the same causes produce the same effects, and that the worsening of truckdrivers’ working conditions today illustrated what railway workers would experience “tomorrow,” just as the situation of the ship crews was a clear foreshadowing of what truckdrivers’ situation would become. Since 1998, the discourse of EU authorities on the effects of Union enlargement has proved powerless to calm the concerns of driver unions. The European Commission argued that the candidate countries would catch up with Western Europe in terms of wages and welfare legislation by being integrated into the Union and having to follow the acquis communautaire and EU regulations. It insisted that social models would converge through enlargement, as happened in the cases of Spain and Portugal. But this talk did not temper the fears expressed by truckdrivers’ unions in Europe. And Spanish and Portuguese unions worked to show that that EU authorities’ theory was wrong. They mobilized heavily to inform colleagues of the threat of the profession becoming “Hispanisized” if social and labor protections were not harmonized throughout the EU. They were referring to the idea that the Spanish transport model, characterized by generalized outsourcing, could spread throughout Europe—implying a leveling down of working conditions. The fear that those conditions would be aligned with the least favorable social model was carefully stoked by unions in these two countries, who painstakingly counted cases of outsourcing for tax or welfare cost motives on the Iberian peninsula so as to inform unions in the other countries concerned. The Spanish unions claimed that the win/win situation set up when they joined the Union in 1986, involving increased social spendingin Southern European countries, only moderately benefited 22 23 24
La Tribune, Sep. 9, 1998. See Nikolaj Lubanski’s analyses of the construction industry (Lubanski, 2000). “Europe protège-moi,” Libération, Dec. 10, 2001.
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road freight transport employees. They worked hard to spread the idea that an unscrupulous social model for transport workers was being generalized throughout Europe. The Spanish experience could be understood to prefigure on a much smaller scale what competition from Central and Eastern European drivers was going to produce. 4. How to enforce Community law? 4.1. The difficulty of monitoring enforcement of Community regulations Strictly speaking, EU authorities do not have their own means for enforcing EU legislation. There is no EU-wide body of labor inspectors, for example. The subsidiarity principle applies in the matter: the job and prerogative of enforcing legislation remains with Member States. The EU is thus dependent on the goodwill of national governments. The fact is that oversight of truck transport activity on Europe’s highways is more rigorous in Germany, the Scandinavian countries and the Netherlands, for example, than in other countries. In France, the probability of a carrier being checked is extremely low; the means allocated for this task are derisory. An EU regulation on driving hours passed in 1985 (the 38/20) stipulates that each member state must control at least 1% of trucks travelling along its highways. That percentage requirement is seldom met—rates are particularly low in France, Italy, Greece and Spain.25 Moreover, some EU states are particularly discreet about companies that outsource for tax or labor reasons. Luxembourg comes immediately to mind as the country that benevolently allows fictitious German, Austrian, Dutch, Belgian and French transport companies to use an address on its territory to acquire licenses. In addition to state unwillingness to cooperate and the difficulties of establishing cooperation among the different EU police forces,26 with the development of subcontracting and fraudulent practices, road freight transport company structures are becoming increasingly complex and responsibilities and accountability within them is being increasingly diluted. Furthermore, it is extremely complicated to oversee a moving employee effectively, since by definition they are usually working outside their country. Up until 2003, the Unions’ main recourse was to file lawsuits in national courts. This has been seen with the Luxembourg unions, who intensified media coverage of the Kralowetz affair when they sued the company: the Willi Betz case went into highly publicized trial in Germany. 4.2. Delegating regulation enforcement to the profession? European truckdriver unions and the ETF have regularly raised the question of making roadside checks and regulation enforcement an EU-level task. During a 1998 European demonstration,27 the symbolic presence of a body of French labor inspectors was noted.28 During the mobilization, drivers carried out road checks themselves. Equipped with data disk scanners, they set out to draw public and EU authority attention to the problem. The demonstration was a means of demanding
25
This point was made repeatedly in European Parliament debates on checking for highway code violations in the Union. On this question see Bigo, 1996. 27 This Europe-wide strike day (“Eurostrike”) led to trucker roadblocks being set up on the Union’s land borders. 28 Inspectors were called on to strike to protest against how little funding they received and show solidarity with the transport driver profession. 26
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the creation of an EU-level corps of inspectors—clearly the question was raised early at the Community level.29 The truckdrivers also demanded harmonization of sanctions for violations of EU legislation. Fines vary by country and they are low in any case. The drivers demanded that instead fining hauliers, trucks be immediately immobilized if there had been a violation of work hour regulations. The demand for a Community work license or attestation for drivers was also aimed at stiffening profession entry conditions at the EU level. The idea was that the standardized license would make national regulations clearer, thereby turning every police officer in Europe into a potential freight transport labor inspector competent to enforce EU texts. These labor demands were inspired by practices at the International Transport Workers Federation (ITF), the organization that had obtained permission for its own body of inspectors to visit docked ships to determine if the personnel had been hired legally. 4.3. The beginning of a solution: facilitating roadside checks In response to these demands, the European Commission in 2004 adopted a “social package for road transport” aimed at improving working conditions in the profession. The first important move was to pass a European Union text stipulating the use of a digital tachograph, more efficient and accurate and less easy to tamper with than the one in use, that would record not only time spent driving and resting but also speed and distance.30 This technological advance is meant to facilitate roadside checks by national police and labor inspectors.31 On March 1, 2002, a European driver attestation was instituted by way of what is known as the “Willi Betz directive.”32 The attestation, standardized for the 15 member states of the time, was supposed to make it possible to check that nationals from third-party countries were employed regularly and were abiding by European regulations. The text also stipulates that Western European companies employing drivers from Eastern Europe must abide by the social legislation in effect in the country the goods are being transported in. This standardized EU-level attestation greatly simplified the problem of reading documents presented to highway police. A German police officer attested to how difficult it was to decode foreign documents before the EU driver attestation was implemented: “In order for us to do our job properly, we would have had to know all the laws in effect in the 15 countries of the Union.”33 The European Union is also considering how to harmonize conditions for a transport driver professional entry examination. A proposition inspired by transport training programs in France and the Netherlands specifies the need for an EU-wide training program (in the 13 other countries, all that is required to practice the truckdriving profession is a driving licence). EU training would consist in giving drivers better knowledge of European regulations and would stress health and safety on the roads. In addition, countries where fraudulent practices are the most widespread (the main transit countries are France, Germany and Austria) have strengthened their cooperation by setting
29 “The question of EU-level labor inspection is in the offing,” noted C.-E. Triumphe in an article in Le Monde entitled “Des inspecteurs sous tension,” Oct. 19, 2004. 30 Passed in August 2002 (regulations 2135/98/CEE and 1360/2002/CEE). 31 Resolve legal suits involving road haulage has traditionally been a complex matter. 32 Regulations 484/2002 of March 1, 2002, OJCE no. L 076 of March 19, 2002. 33 See n. 14.
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up a procedure called Eurocontrôle, wherein France, Germany, Belgium, the Netherlands and Luxembourg develop similar training programs for personnel in charge of roadside checks. These measures are recent and they have not yet been evaluated. Officials I interviewed at the EU Transport commission in Brussels confirmed the intentionon to work with the Social Affairs commission to find viable solutions to labor and social issues in the transport sector. They also acknowledged that the efforts up until now have not been enought: “We went as far as we could go given the European Union treaties.We exhausted all of them. Unfortunately, the Commission cannot propose bills. Member States are very reluctant about labor legislation harmonization in road freight transport. On this question, unfortunately, we are powerless.”34 The European Union is often defined as a “state regulator” (Majone, 1996) that is gradually replacing national regulations with its own rules. But in the road freight sector, this new regulatory authority is having great difficulty developing a legal framework that is sufficiently harmonized and constraining in the areas of taxation and labor. This produces several unintended consequences—spread of subcontracting, social dumping, outsourcing, fraudulent practices—all of which fuel ongoing protest and critique of what has been the EU method: total deregulation before even minimal harmonization of competition conditions. Translated by Amy Jacobs References Bauchet, P., 1996. Les Transports de l’Europe, la Trop Lente Intégration. Economica, Paris. Bigo, D., 1996. Polices en Réseaux: l’Expérience Européenne. Presses de Sciences-Po, Paris. CEMT, 2002. Le Dumping Social dans l’Espace Couvert par la CEMT: Application au Cas du Transport Routier de Marchandises. OCDE, Paris. Dobias, G., 1993. La situation économique et sociale du transport routier de marchandises. Commissariat général du Plan, Paris. Gorce, G., 2000. L’Union européenne face aux risques de dumping social. Assemblée nationale, Paris. Grand, L., Duret, B., 2000. Différentiels de compétitivité et délocalisation des entreprises européennes de transport de marchandises. Transports 400 (mars–avril), 99. Hilal, N., 2005. La naissance d’une coordination syndicale européenne: les mobilisations dans le secteur des transports ferroviaires et routiers. Thèse de sciences politiques, institut d’études politiques de Paris. Hilal, 2007. L’eurosyndicalisme par l’action. Cheminots et routiers en Europe, Paris, l’Harmattan, coll. « Logiques politiques », 2007, 298 p. Lubanski, N., 2000. Moving Closer together – Trade union europeanisation in the construction sector. Transfer 1, 103–109. Majone, G., 1996. La Communauté Européenne : Un État Régulateur. Montchretien, Paris. Moll, M., 2000. Rapport sur le Problème Posé par le Mode de Fonctionnement de la Société. Conseil national des transports. Willi, Betz. Ocqueteau, F., Thoenig, J.C., 1997. Mouvements sociaux et action publique: le transport routier de marchandises. Sociologie du Travail 39 (4), 397–424.
34
Interview in 2002 with an administrator, EU Social Affairs, Brussels.
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Unintended effects of deregulation in the European Union: The case of road freight transport Nadia Hilal Institut d’études politiques de Paris, 27, rue Saint-Guillaume, 75007 Paris, France
Abstract Road freight transport (haulage by truck) within the European Union has been totally deregulated and fully open to competition without any quotas or restrictions since July 1, 1998. This has raised problems, namely due to delay in harmonizing the different EU Member States’ tax and labor legislation, roadside check arrangements, and sanctions for companies that violate regulations or the law. Unscrupulous companies have been using this legal vacuum to falsely outsource their activities, intensify the use of subcontracting, and dodge national tax laws and labor and welfare regulations. The result is worsened working conditions in a sector where entry barriers are low. Worker turnover is by definition high in this activity. Truck drivers are semi-skilled and have become interchangeable on the European Union market. They can readily be replaced by drivers from Eastern Europe (Poland, Romania, Bulgaria) who are much less costly in terms of wages and social protection. The spread of these practices has caused concern among labor organizations in Europe. The trucking transport sector is a textbook case for analyzing how the EU is working to counter the unintended effects of deregulation in this sector of the economy. © 2008 Elsevier Masson SAS. All rights reserved. Keywords: Harmonization; Outsourcing; Social dumping; European road transport; EU regulations
Since 1985, the power to determine laws and regulations for road freight transport has gradually been shifted to the European Union level. Transfers of states jurisdiction to this level increased in preparation for the 1993 opening of the single EU market. The transport sector, an essential component in the Europeanization of trade since the 1950s,1 was called upon to play a major role
E-mail address: [email protected]. Despite prescriptions in the 1957 Treaty of Rome, it was not until 1985 and a ruling by the European Court of Justice that Europeanization of this sector took off; see ruling of May 22, 1985 stipulating: “the requirements of freedom to provide services include ... the removal of any discrimination against the person providing services based on his nationality or the fact that he is established in a member state other than that where the services are to be provided.” 1
0038-0296/$ – see front matter © 2008 Elsevier Masson SAS. All rights reserved. doi:10.1016/j.soctra.2008.07.002
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in constructing a borderless internal space wherein free movement of goods, people and services is assured. Road haulage of freight stands today as an example of a totally deregulated economic sector, entirely subject to competition, without any quotas or restrictions since July 1998. But EU deregulation has raised problems, namely due to delay in harmonizing the Member States’ different tax and labor legislation. This shortcoming is being used increasingly by unscrupulous trucking companies. Since 1997, it has been increasingly easy to engage in fraudulent practices, and this has led to keen competition between social protection systems and to overall social and fiscal dumping. These practices are sharply felt in a profession that now constitutes a full-fledged EU labor market: since January 1, 1993, European truckdrivers have been able to circulate without restrictions throughout EU territory. In most activity sectors, European workers’ freedom of movement is weak, but here that term has particular resonance. By definition, labor turnover in road freight transport is high, and EU policy mechanically increases it. Likewise, drivers’ freedom of movement is virtually unhindered by the traditional legal, administrative and language obstacles to workers’ geographic mobility.2 In many EU countries, a driving license is all that is needed to set up as a truckdriver. This sector is thus a textbook case for studying how the EU is working to counter the unintended effects of deregulating an economic sector. EU authorities do not have adequate means for overseeing or monitoring enforcement of Union laws. Dysfunction in the truckdriving profession have raised the issues of instituting an EU-level corps of labor inspectors and improving cooperation among national police forces. Fraudulent practices and the fact that there are no identical rules that all must abide by have fueled protest against head-on competition between employees and debate around the charge that there is no “social Europe.” 1. In economic terms, a totally integrated sector In the late 1980s, the EEC began radically modifying the philosophy behind transport policy. From a heavily state-structured sector, transport became an activity dominated by market and free competition philosophy. Price rates are no longer overseen by the state. European quotas are gradually disappearing.3 Starting July 1, 1998, “cabotage” [transport of goods or passengers between two points in the same country] became a second stage in opening up competition in the EU: any driver from a member state was now free to haul goods within any other EU state without having to perform an operation (loading, unloading) for state of origin.4 EU economic deregulation has not abolished differences in the conditions under which companies compete. This situation has provoked harsh criticism within the profession. Representatives of French hauliers, for example, constantly demanded that tax and labor legislation be harmonized before total liberalization of cabotage; they considered this the only way to ensure equal
2 The European Commission plans to makes better worker mobility a primary goal of the Lisbon program. It declared 2006 “European year of Workers’ mobility,” observing that the percentage of Europeans residing in an EU country other than their country of origin had remained unchanged in the last 30 years at around 1.5%. 3 Qualitative criteria (conditions for entering the profession) have replaced the earlier quantitative ones (a Community quota system). Transport companies now have to be able to prove they are meeting conditions set at the EU level, namely “professional capacities, financial surface and respectability.” Road freight transport prices were deregulated on January 1, 1990; service provision fully liberalized on January 1, 1993. 4 As early as 1996 it was estimated that two-thirds of texts concerning French road freight haulage were EEC texts (Bauchet, 1996: 5).
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opportunity for transport companies.5 Small and mid-sized German companies also expressed reservations about cabotage, pointing out that cost price in Germany was particularly high because of the country’s tax rates.6 But German government efforts to create a “Eurovignette” that would harmonize vehicle and gas taxes have been in vain. In addition to tax differences, there are extremely marked disparities in connection with labor: wages, driver productivity, work hours and how they are counted, and company structures vary widely from one country to another. The legal maximum working time is 48 h a week in Belgium, 56 in Portugal, 60 in Germany, France and Italy, 64 in the Netherlands and 68 in the United Kingdom and Sweden, with a maximum of 70 h in Spain—not to mention all the occasional arrangements authorized by the various labor agreements and more or less frequent recourse to overtime, practices which only increase these disparities. Work hours, overtime, rest stops, yearly paid vacation, pay, and social protection regimes are all still determined at the national level, and this too widens the gaps. 2. The unintended effects of inadequately monitored deregulation 2.1. Spread of subcontracting In the last decade, a great many one-person (zero employees) trucking companies have been registered. In fact, use of small structures makes it very easy to circumvent the constraints imposed by national tax and welfare legislation, which in most cases was designed to apply to large companies. The 1993 Dobias report in France revealed generalized fraud mechanisms due to increased subcontracting and various ways of dodging labor regulations involving the use of undeclared employees (Dobias, 1993). In the context of sharp intra-EU competition, the use of fake “self-employed” workers (or freelancers who were actually being subcontracted by major haulage companies) increased to the point of becoming characteristic of the sector. Fraud, long a feature of this line of work, increased further (Ocqueteau and Thoenig, 1997: 403). Subcontracting in turn kept prices spiraling downward in a sector where entry barriers are low. Road transport is characterized by a high proportion of self-employed workers. Along with the construction industry, this activity shows a particularly high proportion of extremely small companies—63.6% without employees; i.e., hauliers who are their own boss. However, this situation predominates in Southern Europe: in Spain, only 47% of workers are employees, and in Italy there are as many self-employed as registered-employee drivers. 2.2. The “Willi Betz phenomenon” or the “Polish truckdriver” threat In 1997, truckdrivers in the 15 EU states began protesting against increasing—and illegal—use of Eastern European drivers for intra-European itineraries. The German transport workers union ÖTV pointed out that Polish drivers were illegally practicing cabotage in Germany.7 Dutch labor organizations also observed the spread of this practice on their territory. They based their statements on a report by the national labor and trade inspection office on hiring of low-wage drivers 5
“Le cabotage routier inquiète la France,” La vie du rail 2222 (Dec. 7-13, 1989): 19. German carriers do not pay highway tolls for domestic transport but they do pay high vehicle taxes (to finance infrastructure) and one of the highest gas taxes in the Union. This puts German drivers at a competitive disadvantage and conversely gives a competitive edge to drivers from other EU countries circulating on German territory. 7 It also cites the example of Dutch companies purchasing the services of Polish drivers “for $1000, all included.” See Hilal, 2005 et 2007. 6
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from Eastern Europe and the former USSR. According to this document, half of the 30 Dutch companies inspected were violating the law. Many European labor unions at the time publicly noted and condemned generalization of “social dumping” in their activity. The European Conference of Ministers of Transport, now the International Transport Forum (ECMT) defined the phenomenon as “the deliberate infringement, circumvention or erosion of applicable social legislation in force—at either the national, Community or international level—in order to procure an advantage, notably a competitive advantage.” (CEMT, 2002: 2). In 1997, it became possible to put a face to the social dumping threat—or rather a color: the deep yellow of the “Willi Betz” trucks running all along EU highways. Europeans drivers began encountering them regularly. This German company based in Bade-Wurtemberg is specialized in international transport. It profited from privatization of Eastern’s Europe’s former state-owned trucking companies. In 1994, it bought out SOMAT, the former Eastern bloc carrier based in Bulgaria. Up until 1997, the Willi Betz company operated primarily on the Russian market, but the economic crisis in Russia worked to shift business to Western Europe. The company’s many subsidiaries and its operating fleet of more than 4500 trucks enabled Willi Betz to make the most of loopholes in EU legislation. The company was banking on spotty roadside checks on EU highways. The operation worked as follows: the head German company and its Austrian satellites had a great number of trucks and therefore of ECMT licenses8 but few drivers of EU origin. They made their surplus vehicles, together with official authorizations, available to their Eastern European subsidiaries, particularly Bulgarian ones—i.e., they employed Bulgarian drivers—thus obscuring the real carrier’s identity. A ECMT report evaluating social dumping in the profession (CEMT, 2002) explains: “A practical example of the type of ‘custom-built’ haulage operation currently being used consists in a tractor registered in Austria with Austrian ECMT licences and operating in France, coupled to a trailer registered in Italy, loaded with Spanish freight, driven by a Bulgarian or Kazakh driver speaking a Slav language and holding identification papers drafted in Cyrillic” (ECMT, 2002: 3). Outside the country the trailer is registered in—here Austria, which has the necessary documents—it is impossible to check whether the driver was in fact hired by the tractor owner. All that the multinational company Willi Betz has to do is make sure the driver does not go through Austria. This arrangement enables the company to employ Eastern European workers for destinations where the company is in direct competition with EU carriers employing EU drivers—that is, to engage in illegal cabotage. The fact is that drivers from Eastern and Central Europe offer a supply of good and above all cheap labor. Their average hourly wage is below 3D hour—half to a third the wage of Greek drivers, the poorest paid in the EU. Workers from some Eastern European countries have virtually no social benefits. Willi Betz’s 4500 trucks give the company an advantage when it comes to competing with large European carriers. Will i Betz drivers, at least two per truck, are willing to leave home for two or three weeks and criss-cross Western Europe. Their wages, low by Community standards, nonetheless figure in the high income bracket in their countries.9 According to the ECMT, “the economic impact in terms of lower wage costs is substantial”10 8
The ECMT is in charge of delivering intra-EU circulation licenses. “Willi Betz, le roi du dumping social,” La vie du rail et des transports (Oct. 27, 1999). 10 “The conclusion to be drawn from this is that the use of an Eastern European driver increases the profit margin on turnover by over 10 per cent! Such an increase considerably increases profitability or the ability to compete in terms of haulage prices, particularly in view of the fact that the profit margin for carriers who do not use such ‘custom-built’ operating systems as Willi Betz amounts to no more than around 1 per cent” (CEMT, 2002: 4). 9
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(CEMT, 2002: 4), and it cites gains of almost 35% for an Eastern European company operating in France.11 Furthermore, the Willi Betz company used the increase in its margins due to the use of borderline-illegal practices to further extend its hold over international road transport. It increased the number of its subsidiaries (in Romania, Azerbaijan and Belarus, for example)12 and modernized its fleet (arranging to track its vehicles by satellite). The ECMT report notes that “Willi Betz” practices are likely to spread in the EU: “The use of Eastern European drivers through such singular manipulation of the regulations may be extremely tempting to many carriers ... In one sense, the practice merits being used on a wide basis. ... drivers from EU Member States ... would lose out in the competition with drivers from Eastern European countries” (CEMT, 2002: 4). In sum, the Willi Betz company rationalized, developed and extended to the continental scale a fraud process that already existed but in much more improvised and therefore less visible form. These practices allowed for naming and illustrating a phenomenon at work since the mid-1990s. 2.3. An extreme case: the Kralowetz company The ECMT prediction about the spread of fraudulent practices in road freight transport has been confirmed: Willi Betz has been widely emulated— by the Austrian company Kralowetz, among others.13 This company can stand as a caricature of all that malfunctions in road transport. It has been in the news since 2001, accused for many years of employing drivers from the former USSR in miserable working conditions (outrageously long working hours, unhygienic working conditions, violated safety regulations, questionable visas, ridiculously low pay, data-recording disks that have been tampered with, and the like). A driver for this company, abandoned with fellow employees in a parking area in Luxembourg, testified: “There are weeks when I’m sure I cover as much as 6000 kilometers. I sleep five hours a day; otherwise, I drive.”14 He detailed his working conditions: drivers were paid by the kilometer rather than the hour, contrary to EU laws specifying that a driver cannot work over 12 h in a 24-h period, with compulsory breaks. To escape this constraint, drivers explain that they count up the kilometers, then turn them into a fictitious number of hours. “It’s very simple” to rig the tachometer: “I throw the disk out every 4 h. If I get caught, the fine is only 50 D .”15 Tracked by the German police, the company’s trucks were immobilized for long weeks in Luxembourg parking areas, leaving the drivers without any means of subsistence.16 Luxembourg labor organizations and their EU counterparts used this instance of social and fiscal dumping as an opportunity to drive home the point that a new stage had been reached in the erosion of working conditions. They expressed indignation at the situation of the first ever “abandoned drivers,” which they described as similar to the one of ship crew members abandoned to their fate by unscrupulous owner-charterers when their ships got blocked in port by national
11
On France, see Gorce, 2000 and Moll, 2000. See “Qui est Willi Betz?” CFDT-Transports no. 1 (May 1999): 7. 13 Kralowetz is one of the largest Austrian international carriers, with more than 100 trucks and subsidiairies in around ten EU countries. 14 See Libération, Feb. 12, 2002, p. 28. 15 Ibid. 16 Kralowetz is headquartered in Luxembourg for taxes reasons. 12
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authorities. The stir caused by the “Kralowetz affair” occurred in a particularly difficult economic context. 2.4. Increased outsourcing for labor and fiscal motives Outsourcing in the road transport sector began accelerating in 1998. It first involved border regions: French companies set up in Spain and Belgium; German ones left for Luxembourg, the Netherlands and Poland. The differences in welfare and tax laws and regulations within Europe created competitiveness differentials that were an incentive to expensive labor-high tax countries to set up in neighboring countries without changing their activities.17 Companies are now free to set up in countries whose social conditions are more flexible and thus to escape application of national rules to their labor force. This can be called the “mailbox” effect, whereby, for example, German employees come under Luxembourg law through what is merely a legal artifice. Outsourcing primarily affected France and Germany, the two largest “transit markets” in Europe and therefore coveted by carriers in neighboring countries. French companies, for example, have complained about the increasing relative weight of foreign flags in domestic transport, particularly in Alsace and the Midi-Pyrénées. They used the charge of cabotage sauvage [unregulated] as grounds for demanding reductions in employer contributions and gas tax for the haulage profession. 3. Labor and social welfare fears 3.1. EU labor organizations’ joint condemnation of social dumping In road freight transport as in many other activity sectors, German and Austrian labor organizations have proved the most sensitive to the social effects of EU enlargement; this was due to their proximity to the candidate countries. The German and Austrian governments have insistently demanded that seven-year transition periods be required before nationals of new member states are allowed access to the EU labor market. In the road transport sector, these transition periods cannot be said to have been applied, as they have been widely circumvented by the spread of “Willi Betz” practices. German and Austrian labor unions experienced dumping as an immediate, large-scale threat to their national welfare legislation. There is a strong tendency for Western European labor organizations to share this understanding and to likewise critique outsourcing and social dumping. German and French organizations have condemned “Willi Betz” practices in nearly the same terms. In a press communiqué, the ÖTV German road transport union pointed out that without minimal harmonizing of labor and welfare rules, a transporter like Willi Betz could employ two Bulgarian drivers for the price of one German, while an article in Confédération Fran¸caise Démocratique du Travail (CFDT)-Transports noted that “CFDT delegates are preoccupied by the increased traffic of the Willi Betz company in France. ... Paying two drivers the wage of one French driver, [the company] appears to be circumventing the limits set by Community rule 38/20 [EU-level specification of maximum working hours for hauliers].18
17 18
For more detailed figures see Grand and Duret, 2000: 99. “Willi Betz et compagnie,” CFDT-Transports no. 106 (Apr. 1999): 11.
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Haulier unions in Germany, France,19 the Netherlands, Belgium and Luxembourg stressed the “disastrous effects for employment,” insisting unanimously on the fact that though the accusing finger was for Willi Betz, this was only the tip of the iceberg: other companies were likely to get involved in the same practices. The issue of continually worsening work conditions was a particularly sensitive one in a context of keen intra-European competition. The opening of the single market was accompanied by a major change in working conditions compared to the preceding period, mainly due to the fact that in the 1990s, production companies began using just-in-time methods, drastically reducing their stock to lower warehousing costs. This of course implied intensified freight transport between companies and quicker delivery. Use of trucks began to intensify, and shippers become more demanding about the quality of this service (speed and reliability). Europeanization of the labor market in transport increased distances travelled, number of nights on the road, and the likelihood of working off-schedule hours. International drivers on EU highways thus gradually began transporting freight further and further from “home,” with tighter deadlines and much worse driving conditions. The development of road transport increased traffic on the main European highways and traffic jams on the outskirts of major cities. To avoid late delivery caused by these blockages, which are of course impossible to control, drivers started work at increasingly “early” hours: night work spread. Patrick Hamelin showed that drivers’ weekly work hours, already long, increased continuously between 1983 and 1993, and that night work became much more likely. Around these issues, cross-border union initiatives developed. In a joint communiqué, the ÖTV of Bade-Wurtemberg (extremely active in this fight, since this is where the Willi Betz company was headquartered) and the CFDT-“Route” [highway] division of Alsace-Lorraine observed: “Deregulation has led to a worsening of labor and social welfare conditions. Regulations are not enforced and often violated. Totally opening up cabotage next July will further sharpen what is already merciless competition.”20 The highway division of the CFDT let it be known that it was regularly discussing the issue with its colleagues in other European labor organizations.21 3.2. The appearance of European “bogeymen” In Germany and Austria, the events involving Kralowetz and other such companies got heavy media coverage. German and Austrian unions revealed and condemned the heavy pressure this illegal labor force was exerting on national employees and employment. They claimed these practices allowed for circumventing the usual labor negotiations between managers and unions and were interfering in application of labor accords. Not only did they cause job loss, but also strong pressure on employees, and a perpetual feeling of job and welfare insecurity. In France, the 2005 campaign around the European Constitutional Treaty referendum made extensive use of the “Polish plumber” issue. But what is less well-known is that the road transport profession had been saying for years that the threat to social protection and employment systems was coming from companies using drivers from Eastern European countries. As early as 1998 CFDT-Route explained that European harmonization of working conditions would only make sense if the 19 The French FNTR, an employers’ organization, estimated that a Betz driver cost his employer 11500 FF a month [approximately 1750 D ] as opposed to 25000 FF [approx 3810D ] for a French employee. See “La construction européenne bute sur l’harmonisation sociale,” La Tribune, Mar. 14, 2000. 20 “ÖTV et la CFDT: coopération et actions communes,” CFDT-Transports no. 95 (1995): 11. 21 See n. 12.
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upcoming competition from Eastern European drivers was taken into account; this would be the “most serious problem” the Union would have to resolve.22 The Association pour une taxation des transactions pour l’aide aux citoyens (ATTAC) advocacy group used the labor unrest in French road transport to support its argument against approving the proposed European Constitutional Treaty and its claim that there was no “social Europe.” Together with the construction industry, road transport has characteristically used illegal, nonEU labor with little training, workers forced to accept lower wages than those applied at national levels.23 In 2001 a German construction worker quoted in [the left-leaning daily] Libération suggested that the process was now affecting road freight transport: “The borders are being opened without any monitoring of wages. There are lots of illegals— paid less, no employee contributions, no social protection, no employer contributions. We’re already feeling the pressure on our wage negotiations this year. You’re constantly hearing: ‘Look, I can get a Portuguese driver for a third of your wage.’ They’re pitting us against each other.”24 The influence of European “bogeymen” (Willi Betz, Kralowetz, “the Polish plumber”) went beyond their sector of activity. European labor organizations are sensitive to interprofessional comparisons. The spread of social dumping to the road transport sector began to worry European railway workers. The truckdriver example, preceded by the ship crew and increasing use of “flags of convenience,” was used to condemn liberalization of the railways. The European Transport Workers Federation (ETF), a sector branch of the European Trade Union Confederation (ETUC) has suggested that deregulating railways (including the removal of any obstacles to free movement and the opening of competition among national, public and private companies in a context of inadequate labor and tax harmonization) will have the same negative effect as in the road transport sector. It has argued that the same causes produce the same effects, and that the worsening of truckdrivers’ working conditions today illustrated what railway workers would experience “tomorrow,” just as the situation of the ship crews was a clear foreshadowing of what truckdrivers’ situation would become. Since 1998, the discourse of EU authorities on the effects of Union enlargement has proved powerless to calm the concerns of driver unions. The European Commission argued that the candidate countries would catch up with Western Europe in terms of wages and welfare legislation by being integrated into the Union and having to follow the acquis communautaire and EU regulations. It insisted that social models would converge through enlargement, as happened in the cases of Spain and Portugal. But this talk did not temper the fears expressed by truckdrivers’ unions in Europe. And Spanish and Portuguese unions worked to show that that EU authorities’ theory was wrong. They mobilized heavily to inform colleagues of the threat of the profession becoming “Hispanisized” if social and labor protections were not harmonized throughout the EU. They were referring to the idea that the Spanish transport model, characterized by generalized outsourcing, could spread throughout Europe—implying a leveling down of working conditions. The fear that those conditions would be aligned with the least favorable social model was carefully stoked by unions in these two countries, who painstakingly counted cases of outsourcing for tax or welfare cost motives on the Iberian peninsula so as to inform unions in the other countries concerned. The Spanish unions claimed that the win/win situation set up when they joined the Union in 1986, involving increased social spendingin Southern European countries, only moderately benefited 22 23 24
La Tribune, Sep. 9, 1998. See Nikolaj Lubanski’s analyses of the construction industry (Lubanski, 2000). “Europe protège-moi,” Libération, Dec. 10, 2001.
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road freight transport employees. They worked hard to spread the idea that an unscrupulous social model for transport workers was being generalized throughout Europe. The Spanish experience could be understood to prefigure on a much smaller scale what competition from Central and Eastern European drivers was going to produce. 4. How to enforce Community law? 4.1. The difficulty of monitoring enforcement of Community regulations Strictly speaking, EU authorities do not have their own means for enforcing EU legislation. There is no EU-wide body of labor inspectors, for example. The subsidiarity principle applies in the matter: the job and prerogative of enforcing legislation remains with Member States. The EU is thus dependent on the goodwill of national governments. The fact is that oversight of truck transport activity on Europe’s highways is more rigorous in Germany, the Scandinavian countries and the Netherlands, for example, than in other countries. In France, the probability of a carrier being checked is extremely low; the means allocated for this task are derisory. An EU regulation on driving hours passed in 1985 (the 38/20) stipulates that each member state must control at least 1% of trucks travelling along its highways. That percentage requirement is seldom met—rates are particularly low in France, Italy, Greece and Spain.25 Moreover, some EU states are particularly discreet about companies that outsource for tax or labor reasons. Luxembourg comes immediately to mind as the country that benevolently allows fictitious German, Austrian, Dutch, Belgian and French transport companies to use an address on its territory to acquire licenses. In addition to state unwillingness to cooperate and the difficulties of establishing cooperation among the different EU police forces,26 with the development of subcontracting and fraudulent practices, road freight transport company structures are becoming increasingly complex and responsibilities and accountability within them is being increasingly diluted. Furthermore, it is extremely complicated to oversee a moving employee effectively, since by definition they are usually working outside their country. Up until 2003, the Unions’ main recourse was to file lawsuits in national courts. This has been seen with the Luxembourg unions, who intensified media coverage of the Kralowetz affair when they sued the company: the Willi Betz case went into highly publicized trial in Germany. 4.2. Delegating regulation enforcement to the profession? European truckdriver unions and the ETF have regularly raised the question of making roadside checks and regulation enforcement an EU-level task. During a 1998 European demonstration,27 the symbolic presence of a body of French labor inspectors was noted.28 During the mobilization, drivers carried out road checks themselves. Equipped with data disk scanners, they set out to draw public and EU authority attention to the problem. The demonstration was a means of demanding
25
This point was made repeatedly in European Parliament debates on checking for highway code violations in the Union. On this question see Bigo, 1996. 27 This Europe-wide strike day (“Eurostrike”) led to trucker roadblocks being set up on the Union’s land borders. 28 Inspectors were called on to strike to protest against how little funding they received and show solidarity with the transport driver profession. 26
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the creation of an EU-level corps of inspectors—clearly the question was raised early at the Community level.29 The truckdrivers also demanded harmonization of sanctions for violations of EU legislation. Fines vary by country and they are low in any case. The drivers demanded that instead fining hauliers, trucks be immediately immobilized if there had been a violation of work hour regulations. The demand for a Community work license or attestation for drivers was also aimed at stiffening profession entry conditions at the EU level. The idea was that the standardized license would make national regulations clearer, thereby turning every police officer in Europe into a potential freight transport labor inspector competent to enforce EU texts. These labor demands were inspired by practices at the International Transport Workers Federation (ITF), the organization that had obtained permission for its own body of inspectors to visit docked ships to determine if the personnel had been hired legally. 4.3. The beginning of a solution: facilitating roadside checks In response to these demands, the European Commission in 2004 adopted a “social package for road transport” aimed at improving working conditions in the profession. The first important move was to pass a European Union text stipulating the use of a digital tachograph, more efficient and accurate and less easy to tamper with than the one in use, that would record not only time spent driving and resting but also speed and distance.30 This technological advance is meant to facilitate roadside checks by national police and labor inspectors.31 On March 1, 2002, a European driver attestation was instituted by way of what is known as the “Willi Betz directive.”32 The attestation, standardized for the 15 member states of the time, was supposed to make it possible to check that nationals from third-party countries were employed regularly and were abiding by European regulations. The text also stipulates that Western European companies employing drivers from Eastern Europe must abide by the social legislation in effect in the country the goods are being transported in. This standardized EU-level attestation greatly simplified the problem of reading documents presented to highway police. A German police officer attested to how difficult it was to decode foreign documents before the EU driver attestation was implemented: “In order for us to do our job properly, we would have had to know all the laws in effect in the 15 countries of the Union.”33 The European Union is also considering how to harmonize conditions for a transport driver professional entry examination. A proposition inspired by transport training programs in France and the Netherlands specifies the need for an EU-wide training program (in the 13 other countries, all that is required to practice the truckdriving profession is a driving licence). EU training would consist in giving drivers better knowledge of European regulations and would stress health and safety on the roads. In addition, countries where fraudulent practices are the most widespread (the main transit countries are France, Germany and Austria) have strengthened their cooperation by setting
29 “The question of EU-level labor inspection is in the offing,” noted C.-E. Triumphe in an article in Le Monde entitled “Des inspecteurs sous tension,” Oct. 19, 2004. 30 Passed in August 2002 (regulations 2135/98/CEE and 1360/2002/CEE). 31 Resolve legal suits involving road haulage has traditionally been a complex matter. 32 Regulations 484/2002 of March 1, 2002, OJCE no. L 076 of March 19, 2002. 33 See n. 14.
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up a procedure called Eurocontrôle, wherein France, Germany, Belgium, the Netherlands and Luxembourg develop similar training programs for personnel in charge of roadside checks. These measures are recent and they have not yet been evaluated. Officials I interviewed at the EU Transport commission in Brussels confirmed the intentionon to work with the Social Affairs commission to find viable solutions to labor and social issues in the transport sector. They also acknowledged that the efforts up until now have not been enought: “We went as far as we could go given the European Union treaties.We exhausted all of them. Unfortunately, the Commission cannot propose bills. Member States are very reluctant about labor legislation harmonization in road freight transport. On this question, unfortunately, we are powerless.”34 The European Union is often defined as a “state regulator” (Majone, 1996) that is gradually replacing national regulations with its own rules. But in the road freight sector, this new regulatory authority is having great difficulty developing a legal framework that is sufficiently harmonized and constraining in the areas of taxation and labor. This produces several unintended consequences—spread of subcontracting, social dumping, outsourcing, fraudulent practices—all of which fuel ongoing protest and critique of what has been the EU method: total deregulation before even minimal harmonization of competition conditions. Translated by Amy Jacobs References Bauchet, P., 1996. Les Transports de l’Europe, la Trop Lente Intégration. Economica, Paris. Bigo, D., 1996. Polices en Réseaux: l’Expérience Européenne. Presses de Sciences-Po, Paris. CEMT, 2002. Le Dumping Social dans l’Espace Couvert par la CEMT: Application au Cas du Transport Routier de Marchandises. OCDE, Paris. Dobias, G., 1993. La situation économique et sociale du transport routier de marchandises. Commissariat général du Plan, Paris. Gorce, G., 2000. L’Union européenne face aux risques de dumping social. Assemblée nationale, Paris. Grand, L., Duret, B., 2000. Différentiels de compétitivité et délocalisation des entreprises européennes de transport de marchandises. Transports 400 (mars–avril), 99. Hilal, N., 2005. La naissance d’une coordination syndicale européenne: les mobilisations dans le secteur des transports ferroviaires et routiers. Thèse de sciences politiques, institut d’études politiques de Paris. Hilal, 2007. L’eurosyndicalisme par l’action. Cheminots et routiers en Europe, Paris, l’Harmattan, coll. « Logiques politiques », 2007, 298 p. Lubanski, N., 2000. Moving Closer together – Trade union europeanisation in the construction sector. Transfer 1, 103–109. Majone, G., 1996. La Communauté Européenne : Un État Régulateur. Montchretien, Paris. Moll, M., 2000. Rapport sur le Problème Posé par le Mode de Fonctionnement de la Société. Conseil national des transports. Willi, Betz. Ocqueteau, F., Thoenig, J.C., 1997. Mouvements sociaux et action publique: le transport routier de marchandises. Sociologie du Travail 39 (4), 397–424.
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Interview in 2002 with an administrator, EU Social Affairs, Brussels.