French fury over 'divide and rule'

FRANCE yesterday renewed its attack on 'social dumping', complaining that the European Community's lax social policy enabled foreign investors to divide and rule. 'An integrated social policy has never been more necessary now that foreign investors are trying to play rival member states off against each other and can exploit the gaps created by a policy of social harmonisation that is far too limited,' Roland Dumas told fellow EC foreign ministers at a meeting in Brussels.

Hoover's decision to close its factory in Dijon with a loss of 700 jobs and consolidate its production in Scotland has incensed the Socialist French government, which is fighting to retain power in next month's elections against a background of rising unemployment. 'The Hoover transfer poses a very serious problem as far as we are concerned,' Mr Dumas said yesterday.

He took advantage of the first televised session of Community proceedings to make a hard- hitting speech demanding that the EC make good existing social legislation 'in order to avoid commercial distortion and social dumping'.

France has been vociferous in arguing that the economic success of the single market in goods and services depends on the reciprocal harmonisation of working practices, so that no one country can claim the competitive advantage of cheap labour.

The argument has particular resonance now that the strains in the Community's monetary system (EMS) have created such disparities in exchange rates that countries forced to devalue see an immediate benefit in the boost to export trade.

'Employment cannot be preserved by financial inducement or unfair competition,' complained Mr Dumas, saying he expected the European Commission to look into specific French complaints.

Recession and unemployment have moved to the forefront of the Community's agenda. But EC solidarity has been badly strained by the weekend's EMS crisis as member states blame each other for failing to put European unity above national interest.

The EC's growth package designed to create jobs is by its own admission modest, while the signs from the Clinton administration have dampened initial hopes that growth in the United Sates could be the engine to pull Europe out of recession.

After announcing punitive tariffs on EC steel products last week, the US yesterday served notice that it was preparing to exercise what it believes to be its legal right to favour US-made products over EC goods, particularly in the sphere of telecommunications. The potential loss for European companies runs into millions of dollars.

With the Gatt trade round still unresolved, the prospect of an all- out US-EC trade war grows ever more likely, limiting still further the Community's room for manoeuvre.

The solution, suggested some member states yesterday in a wide-ranging discussion on the Community's work programme, is to integrate not only social but industrial policy too.

The debate as to whether Europe should pick and promote 'winners' through formal investment programmes was fiercely opposed by the Community's free- market wing when it was first raised last year, but is now gaining new currency.

Respite for ERM, page 20

Paying the price, page 21