Free Movement of Labour in the EU - Coursework Example

Running Head: EUROPEAN UNION AND FREE MOVEMENT OF LABOUR European Union and Free Movement of Labour of the of the European Union and Free Movement of Labour Introduction In applying for EU membership, the ten CEE candidate states are aspiring to become members of an enlarged, pan-European area for free movement of labour. From an economic point of view, free movement of labour has been part of the project of achieving equality of opportunity within the EU by dismantling obstacles to the mobility of factors of production. Freedom of movement of labour is seen as a benefit of integration, and takes the form of a legal provision which gives an opportunity for individuals to look for employment in the EU. Whether or not they are employed depends on the labour market situation in the EU and the decision of individual employers. However, in wider political terms, the tolerance of the principle of free labour movement `is an important signal of a willingness to treat the citizens of one EU member state as welcome within any other (Wallace 2004: 3). In the last couple of decades, EU labour migration policies have been largely aimed at preventing labour migration from outside while encouraging labour mobility inside. The eastern enlargement of the EU presents a case whereby, according to the logic of enlargement, nationals coming from the accession states would be treated more like members and would be allowed access to the EU labour market. Labour migration trends in late 1990s and start of 21st century An increasing migration trend since the 1990s has been the search for temporary--as opposed to permanent--migration, especially from the CEE countries. This kind of migration does not involve residential settlement and does not pose a burden on the welfare states in Western Europe--short-term, income-seeking migrants will usually not draw any public welfare provisions they are entitled to receive (such as medical insurance, social security and unemployment benefits) from the home country. The great majority of Poles, Czechs and Hungarians who contemplate possibilities for migration think of it as a supplement to (not replacement of) their home-country earnings (Morawska 2000). The trend towards temporary migration is demonstrated in a May 2001 survey on labour movement from the Czech Republic, Hungary, Poland, Romania and Bulgaria after accession. Twelve per cent of them intended to work for longer than two years and 13 per cent to settle permanently (CEORG 2001). These forms of migration target the country of origin in the end, because the transfers of money and skills emanating from these movements are, in turn, leading to further economic growth within the sending countries (Langewiesche 2000: 15). An increasing tendency in Eastern Europe is `incomplete migration (Okolski 2001). This is a form of mass mobility of very short duration, often documented as tourism, which involves petty trade in cross-border regions. Although the expansion of the EU towards the east will create immigration to the EU member states, it will not lead to significant numbers of immigrants from the new states. A study conducted by the European Integration Consortium at the request of the Employment and Social Affairs Directorate General of the European Commission on the impact of eastern enlargement on employment and wages in the EU concludes that one should not fear massive immigration. According to the study, the number of foreign residents from the CEE countries in the EU would increase annually by around 335,000 immediately after the introduction of free movement of persons. The issue of free movement of labour became prominent during the negotiations for accession between the EU and Greece, Portugal and Spain in the 1980s. It resulted in transition periods for the mobility of labour. Greece joined the European Community in 1981 and only in 1986 was its labour force allowed to move freely in the EU. Spain and Portugal entered the EU in 1986 with restrictions on labour movement until 1992. The experience of the Southern enlargement shows that the long transitional arrangements for the Spanish and Portuguese labour testify to the fears in the EU member states of influxes of migrant workers from these countries rather than to a real threat of migration. Finally, even if fears of large migration flows persist, enlargement itself could become the best anti-immigration policy (Straubhaar 2001). EU membership can become a crucial factor in creating prospects for CEE countries nationals to find jobs in their home countries, and thus function as a migration deterrent. There will be a considerable return migration to Eastern Europe, stimulated by improving economic conditions in the immigrants home country. How much return migration occurs will depend to a large extent on EU policies, both in terms of encouraging development in the countries which `send migrants and in the development of a common policy on migration. Closing the borders of the EU could well also discourage return migration because those who otherwise wish to return for limited periods will be discouraged as they will fear that they will not have the possibility to re-enter the EU (Morawska 2000). The benefits of migration Theoretically, labour migration can have a significant beneficial effect on the economies and labour markets of both home and host countries. For host countries on the other hand, immigrant labour (temporary or permanent) can alleviate bottlenecks in the labour market, contribute to lower wage inflation and often lead to the development of new entrepreneurial cultures. In the case of Germany, Zimmermann (2004) argues that, as economic migrants are usually highly motivated and mobile, their entry into the German labour market may help to moderate the excessive growth of labour costs and thus maintain international competitiveness. Immigration may also boost the demand for goods and help to moderate excess demand for labour in specific sectors or regions. Both in Eastern and Western Europe the overall trend is of a slowing of population growth and a marked ageing of populations. In the longer run the EU will experience a reduction of its labour force as the population ages, even if the age of retirement is raised. This trend has important economic consequences. Reaping the benefits of economic integration will require some degree of labour mobility that will emanate from comparative advantage, increased specialisation and a more complete division of labour with respect to `wanted migration. Changes in the demographic situation in the EU and the development of new technologies have increased the demand for migration. The German government has opened the labour market to highly skilled specialists through a Green Card programme, which grants five-year work visas to non-EU computer specialists. BITKOM, the computer association whose plea for foreign labour led to the Green Card programme, said there were 75,000 unfilled IT jobs in February 2000. Chancellor Gerhard Schroeder called the Green Card programme a great success, citing estimates that each holder creates or sustains three to five German jobs, and said that he favoured expanding the programme to other industries (Migration News, April 2001). Furthermore, the functioning of economic and monetary union will require new channels for adjustment to region-specific shocks, once exchange rate adjustments and independent monetary policies are no longer an option. Decressin and Fatas (1995) have found that, in comparison with the US, labour flows among EU regions are about half as responsive to labour demand shocks, thus suggesting a potential scope for reduction of the policy barriers to migration. Restricting labour mobility from the CEE countries The EU position on the issue of extending the principle of free movement of labour to CEE citizens can be traced back to the provisions of the Europe Association Agreements (EAs). In the EAs, the EU safeguarded itself against labour movement from the CEE countries. Whilst free movement of workers is enjoyed by nationals of the EU, the EAs remain cautious in their approach to this issue. The Association Agreements make no reference to the Treaty of Romes provisions on free movement of persons and do not recognise the automatic right to access the labour market or freedom to reside in the EU. During the ten-year transition period, CEE countries nationals in an EU member state are subject to the countrys legislation as regards entry and stay. The Agreements, despite their openness on trade issues and their incremental liberalisation of capital and service movements, in practice allow no real movement of CEE countries workers other than on the basis of inter-governmental bilateral agreements (Langewiesche and Lubyova 2000). The agreements do contain an article encouraging member states to improve the existing facilities of access to employment accorded under bilateral agreement. The EU/CEE Association Councils, taking into consideration the economic situation in the CEE countries and the unemployment in the EU, give an opportunity for further examination of the ways to improve the free movement of workers. Under Article 52 of the Agreements, CEE countries enterprises that freely establish themselves in a Community member state are entitled to employ by one of their subsidiaries both EU nationals and nationals of their state, provided that these employees are key personnel and are employed exclusively in companies that enjoy the right of free establishment. This measure grants an indirect right of movement to CEE countries workers and constitutes an exception to the chapters of the EAs on workers. However, the work permit is thus restricted to high-skilled labour from Eastern Europe (Baldwin 1992; Guild 1999). The EAs reflect the EUs interest in developing closer trade and investment links with CEE while avoiding large inflows of low-skilled workers from the latter. The EUs position in the accession negotiations Almost a decade after the signing of the EAs, the EUs position towards the issue of free movement of labour from the CEE countries had to be expressed formally as a common negotiating position of the EU-15 member states in light of the opening of the negotiations for membership with the ten applicant CEE countries. All the CEE countries have requested respect for the provision for free movement of workers from day one of accession. Depending on their geographical proximity to the CEE countries and the likelihood of CEE countries nationals to look for employment in the neighbouring labour markets, the EU member states vary in their positions on free movement of labour. When the EU member states were negotiating their common position in 2000, Germany and Austria expressed worries that they would be the main destination for East European workers immediately after enlargement. The EU finally agreed to a common position stating that `the EU underlines the political and practical importance of this area and notes that there are sensitivities over the issue of mobility of workers in the labour markets which will have to be taken into account at a later stage of the negotiations (EU-Hungary Newsletter, 39, May 2000). In response, several applicants called on the EU member states to state exactly why they considered the free movement of workers a `sensitive issue for which derogations should be considered (Agence Europe, 26 May 2000). According to German Chancellor Schroeder, unrestricted freedom of movement from the first day of membership--i.e. the right of people from the new member states to work in any EU country--could not be accommodated by the German labour market from one day to the next, noting that this applied in particular to border areas. In December 2000, Schroeder proposed a plan for the enlargement negotiations calling for a transitional period of seven years in which freedom of movement on labour markets would be restricted. The plan envisaged a possible shortening of this period to five years or less for individual candidate countries based on their respective situations, as well as an option for the old member states unilaterally to provide controlled access to their labour markets prior to the expiry of the transitional period (e.g. in the case of labour shortages). However, while allowing for a shortening of the transitional periods for free movement of workers, the plan specified a restriction on freedom of movement for services in some areas, particularly in the building and manual trades sectors. In order to prevent negative consequences on the Austrian labour market, he proposed that the EU should do a review every fifth year by taking into consideration changes in wages and the unemployment situation in Austria and the candidate countries. Under German and Austrian insistence, and despite the conclusions of its own study on labour migration trends cited above, in April 2001 the European Commission proposed general five-year transition periods before full rights to free movement are granted to workers from the CEE countries. The Commission proposed that the current member states should be able to extend these periods by another two years in the event of serious disruption in their labour markets. The Commission insisted on patience on the part of the applicant states, whose governments adopted the position that free movement of labour should apply immediately after accession, without transition periods. Political leaders from the CEE countries have stressed that, for their citizens, access to the EU labour market would be an immediate benefit from EU membership, and have voiced their concerns about the exclusive effect of the EUs position. If millions of people who live within the EU were denied free movement across the continent, the EU would end with two populations, one of first-class and one of second-class citizens. Ultimately, in their drive to make overall progress with the enlargement negotiations, the CEE accession states accepted the EU terms for the following transitional periods: * A two-year period during which national measures will be applied by current member states to new member states. Depending on how liberal these national measures are, they may result in full labour market access. * Following this period, reviews will be held, one automatic review before the end of the second year and a further review at the request of the new member state. The procedure includes a report by the Commission, but essentially leaves the decision on whether to apply the acquis up to the member states. * The transition period should come to an end after five years, but it may be prolonged for a further two years in those member states where there are serious disturbances of the labour market or a threat of such disruption. * Safeguards may be applied by member states up to the end of the seventh year. Austria and Germany have the right to apply flanking national measures to address serious disturbances in specific sensitive service sectors on their labour markets, which could arise in certain regions from cross-border provision of services. Although the CEEs nationals will not be allowed access to the largest EU labour market (Germany) and the nearest one (Austria), Sweden, Denmark, Ireland and the Netherlands have indicated their labour markets will be open to the newcomers from day one after accession. Britain, France and Spain announced that their curbs would last only two years. The Czechs closed their EU chapter on the free movement of labour in October 2001, after securing concessions from Brussels to protect the Czech labour market. Poland accepted the same conditions as the other candidates in December 2001. However, Polish negotiator Jan Truszczynski stressed that the Polish decision had not been an easy one and that `indeed, while accepting the transitional mechanism as it now stands, we still underline our view that there is no sufficient economic basis, nor demographic basis, for having an arrangement of that nature (quoted in RFE/RL, 21 December 2001). The EUs position on labour mobility from the CEE countries is in contrast to its approach to intra-EU mobility. In 1997, in an Action Plan for Free Movement of Workers, the Commission proposed specific measures to promote mobility across the EU, regarding it not only as economically desirable, but as part of the wider EU goal of achieving prosperity and stability: The right to free movement of workers, enshrined in the Treaty of Rome, gives every European citizen the right to enter the territory of any Member State in order to work or look for work. The purpose is to open European labour markets to all EU workers, thereby contributing to the overall goal of peace and prosperity and complementing the development of the Single Market for goods, services and capital. Historically, cross-border labour mobility in the EU has been low. Around 5 million European citizens reside in another member state. Less than 2 per cent of the working-age population in the EU consists of people from one member state working in another, although there are considerable variations between member states. Movement of people measured on a yearly basis amounts only to 0.2 per cent of the population. In 2000, the Commission launched a special project, the European Mobility Forum, which examines barriers to mobility in the EU. It is funded by the European Social Fund, and its aim is to develop a unique employee mobility information service for companies across the EU. It builds on existing research on European labour markets, and undertakes new research looking at the barriers to developing a culture of mobility, vital for competitiveness in the Single Market. In February 2002, the Commission adopted an action plan to remove obstacles to EU workers mobility between jobs and between countries by 2005. It called upon government, business and workers themselves to do more to equip workers for occupational mobility and to accelerate efforts to ensure geographical mobility and a high-performance labour market. Conclusion The analysis of the two areas of the EUs eastern enlargement negotiations has shown that the uneven transfer of common EU policies to the CEE countries has, effectively, amounted to extending to them the obligations of EU membership, even prior to accession, while at the same time withholding the benefits of being part of the EU, even after enlargement. Regarding the EU visa acquis, the technical obligation for harmonisation with the EU visa regime has had some undesirable political, economic and societal consequences for the relations between the accession states and their neighbours further east by impeding cross-border movement of people. It has led to the emergence of dividing lines and tensions between EU accession states and non-candidate states that, ultimately, undermine the EU-encouraged good neighbourly relations and cross-border co-operation. Regarding the issue of free movement of labour, the EUs decision to introduce transitional periods has been based on fear of immigration from the CEE countries; regardless of whether it is temporary or cross-border, this immigration is narrowly perceived as one-directional, permanent and irreversible. The EU has adopted a policy in which the CEE countries nationals are regarded as third-country nationals, whose migration potential is perceived as a threat, regardless of the CEE countries prospective membership and the prominence of temporary and return migration as global trends in late 1990s and start of 21st century. By contrast, the EU strongly encourages its citizens mobility in the EU labour market. References Ardittis, S. 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