Leading Off: Is Free Trade A “High Wage” Plan for New Zealand?

In our second issue of this newsletter, we raised the question whether so-called “free trade” has played a significant role in exacerbating the climate crisis by encouraging hyper-growth, lowering wage standards and reducing national environmental conditions—and whether the current trading regime is compatible with a “high bar” Just Transition.

It’s a topic that bears constant focus because there is still an abiding belief among governments that so-called “free trade” is beneficial to workers–or, at least, that’s the public posture. A note: we will consistently refer to “so-called free trade” because the structure of modern-day trade arrangements has very little to with the classic definition of “free trade”. Indeed, virtually every modern-day trade agreement is a dense document of very carefully structured rules, primarily addressing intellectual property and capital protections.

We’ve circled back to this today after taking a look at a broad Just Transition vision from New Zealand, or Aotearoa, the Māori-language name for New Zealand. There are many components to the efforts underway in the country. Per a general overview sent our way from the Just Transitions Partnerships department of the country’s Economic Development and Transitions Branch:

The Just Transition Partnership team supports regional partners to understand, plan and navigate their transition in a way that is fair and equitable. There are a range of supports available for transition planning in Aotearoa, from broad-based guidance for a community led transition through to intensive, targeted support from Just Transition Partnerships in response to a major economic shock….

We are currently providing targeted support in two regions to undertake a just transition:

• Taranaki, to adapt to the ban on new permits to drill for oil or gas offshore; and

• Southland, to adapt to the planned closure of the New Zealand Aluminium Smelter at Tiwai Point.’

What caught our eye is a main report “Our Economic Plan: Supporting Aotearoa New Zealand to become a high wage low emissions economy that provides economic security in good times and bad”. Much of the report is quite solid.

This passage is worth considering:

We have concluded Free Trade Agreements (FTAs) with the UK and the EU. We continue to negotiate with the Gulf Cooperation Council, to upgrade existing FTAs and to expand the membership of the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) and the Digital Economy Partnership Agreement.

Absent a rewriting of the basic tenets of so-called “free trade” deals, the overriding driver of such agreements is the lowering wages globally.

We’ve asked for the reasoning for this focus from the key people involved and will report back.

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Spotlight: 10 Billion Euros Should Come With A Union Label

Maybe it’s just us. But, throwing out a wild thought here, it’s possible—just possible—that if a nation gives over €10 billion (Euros) to a company that should warrant a modest gesture in return, as a down payment towards a “high bar” Just Transition.

Here’s the story. Volkswagen is casting its eye across the Atlantic at the legitimate Inflation Reduction Act (IRA) subsidies that are being dangled in return for siting manufacturing in the U.S. We’ve noted previously that industrial policy, like the elements contained in the IRA, is a good thing for any country to pursue, if, at the end of the day, it benefits workers and communities by generating solid incomes—not to mention meets the challenge of climate change.

Per the Financial Times [the bolded below is added]:

Volkswagen is putting on hold a planned battery plant in eastern Europe and prioritising a similar facility in North America after estimating it could receive €10bn in US incentives.

The decision is the latest fallout from Joe Biden’s $369bn package of subsidies and tax incentives for green technology that is luring European companies to the US.

Europe’s largest carmaker told EU officials last week that it expected to reap €9bn-€10bn in subsidies and loans from the US president’s Inflation Reduction Act and other US schemes over the lifetime of the factory, according to people at the meeting.

In fact, Volkswagen isn’t waiting:

Volkswagen plans to open two new factories in North America to spearhead its push into the electric vehicle market, which the German carmaker says has become more appealing since US President Joe Biden unveiled more than $400bn in clean energy incentives.

VW said on Friday that it would open an assembly plant in Columbia, South Carolina, to produce electric models for its revived Scout brand. It is also searching for a site for a new battery factory in North America.

North America offered “huge potential” for the company, VW’s finance chief Arno Antlitz said on Friday. “We are strong in Europe and China and want to keep that strength . . . but it is really important to increase that third pillar in the US.”

The question here is simple: Volkswagen has a very strong unionized workforce in Germany but, it assumes a harsh anti-union posture when doing business in the U.S. similar to all the other so-called “transplant” automakers (including Mercedes-Benz and Nissan).

Why, then, should U.S. workers effectively subsidize Volkswagen’s anti-union posture with tax incentives that, at the end of the day, mean the company is being financed, encouraged and supported to offer up lower wages compared to the wages offered German workers?

This is very much a fundamental issue of Just Transition—though conveniently avoided in the public discourse. So-called “green” jobs (such as the burgeoning components of the electric vehicle industry) will only be a legitimate element of a fair, “high bar” Just Transition if those jobs offer high wages—which almost certainly means they must be unionized jobs. But, to date, the promised future “green” jobs reside almost entirely in non-union companies.

Now, just as were set to publish today’s edition, we did receive this statement from our colleagues at IG Metall, the German union which represents auto workers (the “UAW” refers to the U.S. United Auto Workers):

IG Metall, the UAW and the Volkswagen Group Global Works Council welcome the construction of a new plant in South Carolina to produce electrified vehicles under the traditional US Scout Motors brand. This investment will create thousands of new industrial jobs and will further drive the transformation towards electric mobility.

We also welcome the fact that the Board of Management and Supervisory Board have clearly stated that Volkswagen and Scout will respect employee and trade union rights at the new site. This means that the future employees should of course have the right to decide on union representation without intimidation or influence.

IG Metall, the UAW and the Volkswagen global group works council will accompany the process constructively.

We will watch to see how this develops and hope that a self-professed pro-union Administration in the U.S. does the same.

Ideas: Linking Child Care To Any Just Transition Plan

We’ve raised a couple of recent thoughts about how to ensure that a “high bar” Just Transition is meaningful to workers. For example, making home loans a part of transition so workers don’t loss wealth when they might relocate for a new job. None of the new ideas are economically difficult—it’s all about the will of a government and companies, and the leverage workers can assert primarily through unions to gain the right benefits.

In fact, we see Just Transition as a family affair—every aspect should be tied to making sure the entire family is recognized as an element of the transition.

That would include child care—especially making sure that any retraining packages include child care to allow workers to actually attend retraining when the classes are not taking place during working hours.

Hard? Not really. A wild concept? No.

To wit. If this can be done:

The Biden administration plans to leverage the federal government’s expansive investment in the semiconductor industry to make progress on another goal: affordable child care.

On Tuesday, the Commerce Department will announce that any semiconductor manufacturer seeking a slice of nearly $40 billion in new federal subsidies will need to essentially guarantee affordable, high-quality child care for workers who build or operate a plant.

…Why not make that a demand and an immovable element of every Just Transition proposal, in every part of the globe?

Opinion: The Action We Need Now To Avoid Social and Political Failure On Energy Transition

By Tony Maher

[The following are excerpts from Tony Maher’s February 23rd 2023 address to Australia’s Mining and Energy Union’s National delegates meeting]

Our Union has advocated for a federal Energy Transition Authority for some years. It is not a new concept – but today I’m going to make the case that establishing such a body is a necessary and urgent reform.

Given the speed at which coal fire power stations are now accelerating toward closure; the Federal Government has to establish an Energy Transition Authority this year or it will probably be too late. If Australia doesn’t get an Energy Transition Authority established in time it would be a moral failure, because it’s wrong to expect blue collar workers to bear the brunt of the nation’s climate change action when the costs could easily be shared.

But it would also be an epic social and political failure. Entire regions that have historically relied on coal station employment will face economic devastation if workers are hung out to dry. The community will then have to pay for all the horrible social consequences we know will transpire. And if we allow climate change action in Australia to become a pitiless game of winners and losers, we leave the door wide open to more climate wars.

… When it comes to energy transition, it’s raining money and there’s more programs and acronyms than you can poke a stick at.

The glaring gap in the institutional response to climate change is a federal body to coordinate the future employment of displaced workers and the economic diversification of the communities that host power stations and associated coal mines.

There are a range of impressive measures at the state and employer level to address concerns about Just Transition for workers – and our officials and delegates have done a terrific job negotiating agreements that provide for redundancy, retraining and
consultation.

But while all the existing models and initiatives to support energy workers have something to offer, they also all have limitations.

• Queensland’s Energy Workers Charter provides a jobs guarantee for state–owned power station workers, but doesn’t extend to the private sector or captured coal mines;

• Western Australia’s scheme offers good retraining provisions but faces the challenge of attracting new well–paying industries to Collie;

• Our Union agreements provide fair redundancy entitlements but can’t get workers into new jobs.

I have been convinced of the need for a federal authority to support energy workers since Hazelwood power station in Victoria’s Latrobe Valley closed with just four months’ notice in 2017 – with the private owners proposing nothing for its long–term loyal workforce and community except their existing obligations like redundancy pay.

The state government, to its credit, stepped in with a quarter–billion dollar package to revitalize the region through various investments and employment assistance programs.

…In my view, establishing a federal authority to support energy workers and provide employment is every bit as important as investing in shoring up the grid, developing new technologies and assisting businesses and industries to adapt.

From a public policy perspective, an Energy Transition Authority is our opportunity to prevent multi–generational unemployment and regional economic devastation in coal–dependent areas, along with all the adverse social consequences that go with it.

From a political perspective, it would give meaning to the oft–quoted phrase of leaving no one behind. We have seen at home and abroad the damage caused when acting on climate change becomes politicised and when our communities become divided between perceived ‘winners’ and ‘losers’. Avoiding this divide requires careful work to make sure the costs and benefits arising from government policy are managed and shared fairly and transparently.

The model for an Energy Transition Authority that I advocate for is based on research into best and worst practice internationally.

Germany’s transition away from its economically unviable black coal mining industry over several decades is often cited as an example of how to successfully support workers and transition their communities through major economic restructuring. Forward planning, investment in industry diversification, staggered scheduling of mine closures, comprehensive support for workers, and strong engagement with unions and communities, combined to enable the profound reshaping of a region without a single forced redundancy.

The consequences of failing to act are stark. We see it in the devastation that has met the Appalachian region of the United States, where short–term, reactive, and fragmented responses to the decline of coal mining have entrenched long–term unemployment and social disadvantage.

…A federal Energy Transition Authority in Australia should bring government, industry and unions together to:

1. plan the orderly retirement of coal–fired power stations

2. fund and co–ordinate economic diversification in coal power regions; and

3. support affected workers in power stations and associated coal mines through industry–wide redeployment schemes, education and training, relocation packages where necessary and early retirement where appropriate.

It should work co–operatively with the network of state and regional transition authorities to develop appropriate local plans. And in creating a realistic vision for the future, it must avoid buying into the fairy–tale that coal workers will magically transition into ‘green jobs.’ Once a successful model to support worker transition in coal power is established, the Authority may extend to other industries unable to transition to the future low–carbon economy – like our much larger export thermal coal sector.

Australia has a chance to establish a suitably ambitious model that will serve us well for decades to come. It’s an opportunity that we simply can’t afford to miss. The stakes are just too high, and the workers and communities now facing a profound upheaval deserve no less.

After a decade of policy stagnation and inaction, it’s beyond time that we stopped leaving the future of your communities up to chance or, even worse, to the profit–driven proclivities of the private sector. A hands–off approach simply will not work. As we witness closure dates coming closer and closer into view, the need for a national Authority is more pressing than ever. The clock is ticking – the time to act is now.

Maher is the National President of the MEU.

Links

National Union of Mineworkers (South Africa): The National Union of Mineworkers was founded in 1982.