Yesterday, the EU proposed to limit the days in which foreign drivers can drive across Europe on lower wages. Richer EU countries like France and Germany have complained competitors from Eastern Europe are undercutting them by sending over a driver on lower wages.
Foreign drivers will be given the title “Posted Worker” meaning they would potentially receive at least the minimum wage of the country they are working in. Drivers would be categorised as a “posted worker” if they spend 3 or more days per month working away from home.
Eastern European countries hit back by calling these restrictions on their drivers as protectionist.
In previous weeks, we have seen France try to take action by charging €40 per foreign driver and the introduction of the macron law, where every foreign worker has to be paid the French minimum wage throughout their time in France.
The impact of higher wages will lead to higher haulier costs which will be passed onto the customer. However, the proposition would make it fairer for the hauliers which are from the richer countries.
The French government has taken the decision to charge a €40 fee for every foreign worker operating in France on a temporary basis, for foreign companies. This charge looks to come into place on the 1 January 2018. The Charge will affect the UK’s ability of UK’s logistical operators which operate in Europe.
The Freight Transport Association (FTA) has criticised the French government’s decision to charge a €40 fee. The fee has been described as “excessive” and “protectionist”. The FTA Head of European Policy calls for the “European Commission to react strongly and speed up its ongoing legal case against France, to ensure that trade can continue to flow across borders in a seamless manner and to protect the integrity of the single market.”
This sort of controversy is nothing new from the French government. Just last year the French tried to impose, that anyone driving international road vehicles received payment whilst in the country equal to, or exceeding that, of French minimum wages.
Just Less than two weeks the EU community was congratulating France on the election of Emmanual Macron, now they are asking him to reverse this “protectionist” policy. What shall he do?
The growth of globalisation over the past 50 years is something the world has never seen before. Globalisation has sourced from the developments of our technology, to be more specific our way of communication. Today, the internet and our mobile phones allow us to contact people on the other side of the world. Despite globalisation providing benefits to people, it has led to growth in popularity for protectionist policies. The Brexit vote would be the clearest example.
When looking at all the countries in the world it’s easy to notice a pattern where the more developed countries have lower trade tariffs but, this isn’t the same for undeveloped countries, they tend to have higher trade tariffs on imports.
The World Economic Forum released the Global Competitiveness Report on the state of the world’s economies. The report used international trade tariffs as one factor in their report.
So what are the top 10 international trade tariffs?
10 – Barbados: 14.2% – Barbados is a full member of the Caribbean Community (CARICOM), and as such, has implemented CARICOM’s Common External Tariff for goods, with import duties ranging from 0 – 20%.
9 – Gambia: 14.3% – Gambia is a member of the Economic Community of West African States (ECOWAS). Gambia has four tariff bands, and they are as follows: 0 percent for basic social goods, 5 percent for raw materials, capital goods, and specific inputs; 10 percent for intermediate goods; and 20 percent for final consumer goods. There are a 1.55 percent processing fee and an ECOWAS levy of 0.5 percent on all imports.
8 – Chad: 14.3% – Like other CEMAC countries, i.e. Gambia, they have the same international trade tariffs.
7 – Cameroon: 14.6% – Cameroon has an import tariff range of 10-30% of most goods.
6 – Zimbabwe: 14.6% – You must obtain an export licence to export any controlled goods from the UK to Zimbabwe. These are issued by the Export Control Organisation.
5 – Pakistan: 16.6% – Import tariffs in Pakistan range from 0 to 35% for most goods.
4 – Nepal: 16.8% – One fifth of Nepal’s tax income comes from its custom duty.
3 – Sri Lanka: 17.6% – Most of the imports are charged a 15% levy when entering Sri Lanka. However, some imports have been hit a 100% on their customs duty.
2 – Bhutan: 22.7% – Sometimes Bhutan levies the tax on foreign goods up to 100%.
1 – Iran: 28% – Iran’s biggest export is oil, now that the US has started to lift sanctions. However, their import tariff rates range from 10% to 100%.
What is the Macron Law?
The law obliges all international transport companies who transit or have their drivers working in France to pay their drivers the French minimum wage of €9.76 an hour. France introduced this law on the 1st of July 2016. However, it was unclear whether the French would be able to enforce this. The EU started an infringement process in June 2016 against France. The outcome is still unclear as to whether they will be able to overrule this law.
What will the impact be?
European express market will be the most affected. With loads to/from Italy, France, Spain or Portugal, our vans have to travel through France. For example, if a driver spends 9 hours in France this could add an extra €35 to the cost of the shipment as European van drivers do not receive €9.76 an hour. As of 1st January this year, the French police have the right to stop any international driver and request documentation that proves that they are paid the French minimum wage. Hauliers have had to register their drivers online with the French Ministry of Labour and appoint a French fiscal representative.
This could also has an effect on full load rates as many Eastern European hauliers do not pay their drivers 9.76 euros per hour. If they transit France in the future, they will be obliged to pay them this hourly rate for the time spent in France.
Some European Transport Ministers met in Paris in late January to discuss the “unlevel” playing field they believe exists in Europe. They say that Eastern European hauliers have an enormous competitive advantage over most Western European countries who have minimum wage restraints in place.
We will keep you all updated on any changes.
Theresa May Prime Minister of the United Kingdom
On Tuesday, Theresa May’s much anticipated speech provided a tiny bit of clarity on the UK’s plans to leave the EU and its single market. However, it fails to provide the details on how the government is going to go about achieving these plans. At the moment May has only told us what the UK is looking to get of Brexit, this doesn’t really help businesses since we don’t yet know if the EU will allow any of these things.
As a Freight Forwarding company we were saddened to hear that the UK would be looking to leave the ‘single’ market. Leaving the ‘single’ market means importing and exporting to and from Europe will become more complicated. Custom procedures will be introduced which increases the chance of delays. Many supply chains that rely heavily on Just in time delivery will have to rethink this strategy if their stock is coming from outside the EU. However, hearing that the UK would look to pursue a Free Trade Agreement with Europe softened the blow. The EU negotiators will not give the UK better access to the single market then a member of the EU otherwise other EU countries will follow.
The road freight industry relies heavily on foreign drivers especially those from the EU. Currently in the UK most drivers are from EU countries and with the freedom of movement expected to go we may see a scary shortage of drivers which will inevitably shoot up haulage costs. In order for the shortage to be avoided May will need to consider this problem when putting together the UK’s immigration policy. Her speech did not clarify on what type of immigration policy the UK would be pursing. One proposed by the leave campaign was a ‘points’ based system.
May talked about looking past the EU single market to countries like China, America and India the big economies of the world. Setting up trade deals with these powerhouses would work wonders for our economy. However we have to be careful that the trade deal benefits both parties otherwise more damage than good can be acquired. With Britain in a vulnerable position once we leave the EU, the PM has to be careful not to jump into any agreements. Again these trade agreements are just what Britain would like to happen, when putting this into reality the trade negotiations could easily breakdown.
Brexit was not something that Espace would have liked. However, it’s too late to go back now. Although, the PM’s speech did not give much detail on how the UK’s ‘wish list’ would be achieved, May’s plans for ‘tariff free and frictionless’ trade is one welcomed in the freight industry.