US economy

Europeans have double standards on transatlantic trade

The battle between Airbus and America says a lot about the hypocrisies in our system of global trade.

US President Donald Trump got the go ahead to slap tariffs on the pan-European aircraft manufacturer a couple of weeks ago when the World Trade Organization ruled that Airbus had received billions in illegal subsidies from European governments. Fair enough. But Airbus’s major US operation in Mobile, Alabama will be exempt from any tariff pain.

Airbus employs 4,000 people in the US in a state with labour and social welfare outcomes that would make many Europeans blanch. To locate there, it was promised $158m in subsidies from state and local officials in Alabama.

Talk about double standards. Europe loves to bash America for its lack of a social safety-net and Darwinian labour market, which comes with relatively few worker protections and plenty of doublespeak. In the US, a “right to work” state is one in which it’s easier to fire you, and harder to unionise. The fact that Europe has stronger labour standards is one reason that inequality in many European countries is lower.

But European companies love to play the labour standards arbitrage game — and they are just as good at it as their American peers.

In the past 25 years, multinational firms based in Europe have made 36 investment deals with state governments throughout the US — deals worth $8.5bn in subsidies and tax benefits. Of those, 18 were based in just six “right to work” states in the Deep South, according to a new study from the AFL-CIO, America’s largest labour union. Alabama was the most profligate, doling out nearly $1.7bn to companies including Airbus, Daimler and Thyssenkrupp. As the chairman of Airbus operations in the Americas, Allan McArtor, put it in 2012, the year the Mobile plant was announced: “I don’t think there is any question that right to work states have an advantage on recruiting out of country employers.”

Airbus, like many other European companies, touts its high-minded principles. “Airbus has the same high standards for processes, quality and employee wellbeing regardless of our manufacturing location,” says company spokeswoman MaryAnne Greczyn. “We selected Mobile for our US assembly line because it had an existing aviation infrastructure in the underutilised Brookley Aeroplex, as well as an adjacent deep water port and an existing Airbus presence . . . The Airbus workforce in Alabama is a team of highly skilled aerospace professionals who are proud to be part of the global Airbus team.”

I have no doubt that’s true. But it’s also true that Alabama, and the American South as a whole, is arguably one of the worst places in the rich world to be a worker — or by some metrics, a person. Southern states aren’t just hostile to worker rights, they also have some of the lowest health, education, workforce development and living standard metrics in the US.

Why is that? One reason is the “New South” method of economic bootstrapping, which involves cities and states selling themselves to big corporations on the basis of subsidies and an unfriendliness to labour organisation. While the approach has created jobs (though often low-income ones) and overall economic growth figures that are higher in the Sun Belt than the Rust Belt, it also means that states have less to spend on things like healthcare and K-12 education, because they are giving hefty tax breaks to big companies.

Whether or not those pay off in the long run is unclear — studies show that subsidies tend to offer politicians great headlines but end up being a net loss for growth in the long term because they degrade the quality of human capital. As we shift from an economy based on making widgets (or aeroplane wings) to one based on intellectual property and data, that will come to matter more than subsidies in the corporate calculation, not to mention any given region’s growth prospects.

I can understand why European companies in countries such as France, where operations can suddenly be ground to a halt by strikes, are eager to outsource to places where they can control labour more easily. But I’ll come clean and say that I have no personal sympathy for that view because I feel strongly that the balance of power between corporations and labour today is wildly off.

Neither do many European corporate elites understand that the US president’s politics of American exceptionalism that they loathe — “We’re different, we’re great, you’re not” — was born and bred in the southern states where many locate their US operations.

Indeed, some historians would draw a line from Jim Crow racism to anti-union sentiment to gerrymandering to Mr Trump’s own brand of xenophobic nationalism in the American south, all of them part and parcel of the country’s original sin of slavery.

This matters — really matters — at a time when the US government would love the EU to accept weaker regulatory and labour standards in any new transatlantic trade deal that might be struck. Europeans can talk a good game about corporate responsibility and social welfare, but in the end, they have little legitimate complaint if their companies won’t walk the walk.

Like it or not, you can’t have your cake and your subsidies, too.


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