Social Policy And European Integration

Few substantial advances have been obtained by the EU in the social fields since the signing of the Treaty of Rome. The status quo demonstrates that national social policy is still in a state of decentralization, and the EU can only play roles of support, coordination and supplementation in the social fields. Internal Market and Monetary Union are significant achievements of European integration. Internal Market has the advantage of economies of scale, while the Single Currency can reduce transaction costs and risks. For the Internal Market mechanism to bring its full potential into play, there must be free movement of workers, stable Single Currency, equitable distribution and fair competition between member states, to which decentralized national social policy is the main barrier. The conclusion of this thesis is that harmonized social policy should be drawn and implemented along with the completion of Internal Market and Monetary Union.Following the requirement of intergovernmentalism, harmonization should possess a functional imperative, or, it can reduce negative externalities resulting from socioeconomic interdependence among member states. Whether one sees harmonization is necessary or not depends on how to evaluate European integration conditions and on how to treat the relationship between harmonization and integration. Two imperatives can be identified:firstly it can accommodate the intrinsic needs of Internal Market and Monetary Union, and secondly it can mitigate the negative impacts of economic integration under circumstances of lack of harmonized social policy.Decentralized social policy is the main obstacle to the establishment of free movement of workers and integrated labour market, which is an indispensable part of Internal Market project. The reproduction process of Internal Market relies on stable labour input and product demand. Flexible labour market policy is propitious for resolving the problem of unemployment that member states commonly faces, and free movement of workers is an effective mechanism for the adjustment of aggregate supply and demand. Without necessary monetary policy, free movement of workers can act as an alternative to reduce negative impacts of the changes of aggregate demand to reproduction process.Functioning of Internal Market is based on efficiency and equality. Location of production factors and distribution of economic resources are both realized through market mechanism, which together with comparative advantages determines gains and losses. If there is no redistribution, gains from Internal Market will be different because of diverse comparative advantages. Less absolute and relative gains may frustrate positive attitudes of member states in the process of market building. Monetary Union is based on efficiency and stability. The Stability and Growth Pact emphasizes only nominal criteria and the short of real convergence measures may raise short-term and long-term macroeconomic adjustment costs and thus undermine the Single Currency. Integration needs the support and participation of all member states. Economic integration can not coordinate efficiency, equality and stability. EU should intervene with effective transfers and real convergence instruments to encourage the development of integration.Competition is the key element of Internal Market policy. Decentralized social policy may impede competition. Competitive advantages depend in a large degree on labour costs which are determined by levels and standards of social protection. With free movement of production factors and without social policy harmonization, different levels and standards of social protection can lead to social dumping, capital competition, and race to the bottom. Although differences in productivity levels may offset the differences in labour costs, the increase of intra-trade between member states and the harmonization of tax bases and rates may leave competitive pressures in the social fields untouched. What policy can be introduced depends not only on external pressures, but also on policy alternatives. After the establishment of the Single Currency, social policy becomes almost the only choice for the coordination of socioeconomic development. In order to relieve themselves from competitive pressures, cutting down levels and standards of social protection may be exercised by member states to solve socioeconomic problems.The concept of European social model implies that national social policies are compatible in terms of principles and values. Harmonization must take into account of policy differentiation in forms and substances which embody principles and values. A European social policy expressing the principles and values of most member states is more acceptable than others. But if principles and values are the same, convergence of forms and substances become more important to harmonization. Although divergence does not deny the possibility of harmonization, it may be an additional burden to EU legislation and decision-making.Variations of national social policy, which are identified as different models, are one of the determinants of the development of EU social dimension. Convergence is favourable for harmonization. Same trends of demographic and structural changes, as well as negative and positive integration, bring about more similarities in the social fields among old member states, but differences between old and new member states still can be easily distinguished. EU institutional capabilities, which most importantly involves distributional capability and decision-making capability, is another critical determinant of the prospects of EU social policy. Harmonization presumes that EU budget should bear the responsibility of redistribution between member states. Unfortunately, its financial resources are extremely limited, and expenditures unduly concentrated. Conflicts between member states on budgetary issues make it impossible to expand financial bases and adjust expenditure structures, at least in the foreseeable future.The most effective way, through which the EU can acquire sufficient competences, is to set harmonization as integration project. EU competences are authorized by member states in accordance with commonly decided projects. Only in those policy areas that member states should take common actions can the EU have exclusive competences. Integration projects have general impacts in the sense that they qualify which policy areas and solutions are concerned, what competences should be conferred on the EU, and what decision-making procedures and rules should be adopted. Because harmonization has always been excluded from integration projects, EU competences and capabilities in the social fields are limited. There are two kinds of competences:transfer and control. Integration projects can only define the transfer, not the control, of competences. The outcome of the implementation of EU legislation hinges ultimately on the control of competences. Harmonization intends to promote free movement of workers, to which social protection, arguably the most important part of national social policy, is closely associated. There are so many perplexities for the EU to resolve that it may take long time to materialize the transfer and control of competences in the social fields.Another way for the EU to acquire sufficient competences is progressive empowerment through flexible decision-making procedures and rules, the outcome of which relies on positions and influences of EU decision-making institutions and member states. The Commission has always been active in the integration process. Positive initiatives are necessary prerequisites to enhance member states cooperation. Constructive initiatives can not be adopted when the Council dominates decision-making procedures under unanimity rule. Balance can be partly shifted with the EU treaty conferring more competences on the Parliament. But the principle of subsidiarity poses severe strains on the role played by the Commission. If there are less positive proposals initiated by the Commission, extension of majority rule is of no help in transforming the unfavorable conditions. EU legislations do not necessarily reflect the stances of all member states, disagreement may result in passive implementation. Harmonization is the most effective approach for the realization of free movement of workers, stability of Monetary Union, equal distribution and fair competition. But it may be unrealistic because of complex and dynamic nature of national social policy and socioeconomic and labour market conditions. The more pragmatic way is to limit differences in levels and standards of national social policy within a commonly acceptable scope, which can only be facilitated on the basis of consensus among member states. Convergence is not an end in itself. EU social policy should start with the concern of labour protection. Rational EU transfers through structural funds may be the only viable way to narrow the gap between levels and standards of national social protection.The original motive for European integration is to establish an effectively restrictive mechanism for national sovereignty, which if without restriction may obstruct stability and prosperity. The principle of subsidiarity means that competences in the social fields can not be transferred to the EU completely. It is impossible that member states shall let a new absolute sovereignty to come true at the same time as they check each other. The competences of decision-making and implementation can not belong to the same authority. Even if decision-making in the social fields becomes exclusive EU competence, its implementation still needs to be carried out by member states. The importance of member states, regional authority, and social partners can not be denied, multi-level governance may be useful for explaining more exactly the future development of EU social policy.