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Under normal circumstances, a state election is not worth a headline in the international media. Yesterday evening, however, the Financial Times and Le Monde even sent out breaking news. The AfD’s victory in the state elections in Thuringia, the first for a radical right-wing party since the end of the Second World War, is being registered with great concern abroad.
Concerns about German democracy are justified. In Saxony and Thuringia, around a third of voters (with a high turnout) voted for AfD leaders who do not even hide their far-right and subversive views. Björn Höcke and Jörg Urban are unlikely to become prime ministers, but governing without them is becoming increasingly difficult.
The CDU feels like a winner, and indeed many voters saw it as the last guarantor of stability. In order to govern, however, it must cooperate with the Sahra Wagenknecht alliance – a leap into the unknown. The negotiations will show whether Sahra Wagenknecht will actually insist on conditions such as a no to the deployment of US medium-range missiles, which are far beyond the power of a state government.
For the SPD, the elections went more smoothly than feared. Chancellor Olaf Scholz is therefore likely to feel vindicated (once again). However, the BSW’s performance is likely to strengthen the voices among the Social Democrats who want to reduce arms deliveries to Ukraine.
It remains to be seen whether the traffic light coalition will survive the state elections in Brandenburg in three weeks. Inside the FDP, the disaster in Saxony and Thuringia is fueling concerns that remaining in the coalition could jeopardize the Liberals’ survival in the federal government. Even if the FDP does not break up the coalition, there is not much holding the SPD, Greens and Free Democrats together. This does not bode well for the ability of the most important EU member state to act.
It’s a bombshell: in September, Óscar Pierre, the boss of Spanish food delivery pioneer Glovo, has to appear in court for alleged violations of labor law. The accusation: Glovo employs bogus self-employed workers despite repeated warnings from the authorities. If found guilty, Pierre faces six months to six years in prison.
This is probably the first time that the head of a platform company has had to answer criminal charges in the EU due to labor law issues. The criminal proceedings are made possible by Article 311, Section 2 of the Spanish Criminal Code. Paragraph 2 criminalizes the repeated employment of bogus self-employed workers. Observers regard it as the “Lex Glovo” – because this paragraph was not introduced until 2022 when it became apparent that Glovo would continue to refuse to hire its food couriers, even though the Spanish government believes that the relevant legal situation now exists.
The company does not want to comment on the ongoing proceedings, “as the start of an investigation says nothing about the outcome of the investigation itself,” a Glovo spokesperson told Table.Briefings. However, the company believes that it is in the right with its changed business model.
The Spanish case is not an isolated one: there are currently legal disputes all over the EU with the major digital platforms over the classification of their workers. Are suppliers, cleaners or chauffeurs really self-employed? After all, they can sometimes determine their working hours or even turn down jobs. Or are they employees after all, because the companies continue to exert coercion and control to which the workers ultimately have to submit?
According to an earlier estimate by the Commission, more than five and a half of the approximately 25 million platform workers across the EU could actually be employees – with the right to sick pay, paid vacation and minimum wage.
For the vast majority of digital platforms, one thing is clear: they work legally with self-employed people – only the legislators do not always understand this. The 2023 annual report of Glovo’s parent company Delivery Hero, for example, states: The legal status of platform workers is controversial at a regulatory level in certain markets, “as the characteristics of this new type of worker often do not match the traditional definitions of workers or self-employed.”
This led to fierce disputes, as can be clearly seen at the EU level, where the Platform Work Act aims to combat bogus self-employment on the new platforms. It was one of the most labor-intensive dossiers of the last legislative period. Behind the scenes, a lobbying battle raged on an unprecedented scale, as parliamentarians repeatedly reported. Until shortly before the deadline, no one knew for sure whether the Council would ultimately allow the law to fall through. In the end an agreement was reached. But the struggle is not over.
The left-wing Spanish government is determined to regulate platform work. More precisely: to declare food couriers employees. In 2021, Spain became the first country in the EU to pass a “Ley Rider.” The law aims to protect the rights of platform workers.
Like the EU Platform Work Act, the Rider Law contains a presumption of employment and a chapter on algorithmic management. Unlike the EU law, however, it only applies to food couriers (riders) and not all platform workers. Tailwind for the Spanish law came from the highest level. In 2020, the Supreme Court ruled that a Glovo courier was in fact an employee.
According to Spain’s largest trade union, CCOO, more than 70,000 bogus self-employed workers on digital platforms have since been reclassified by the labor inspectorate in 2022 and 2023. In an interview with Table.Briefings, the union praised the law as an “important step towards protecting the rights of workers in the platform economy.” The Spanish government is currently considering extending the rules to domestic helpers.
Politically, there is a lot of ambition to take on the billion-dollar platforms, says Alessio Bertolini from the Fairwork Foundation. “Spain has declared itself a pioneer when it comes to shaping the digital economy fairly.” The Fairwork Project examines and evaluates working conditions in the platform industry. With the new laws, the situation of platform workers in Spain has improved, he says – at least for the companies that have started to employ their food couriers.
Since the Ley Rider, penalties and back payments for bogus self-employment have been raining down, especially on Glovo. According to the CCOO trade union, Glovo now has to pay around €200 million in back social security contributions. In addition, there are around €50 million in penalties, reports El País.
That Spain is a European pioneer in this field is also due to the fact that various players are taking the issue very seriously. “In Spain, we see the peculiarity that various players cooperate very efficiently in this area,” says Christina Hiessl, who teaches labor law at the KU Leuven. An individual rider has little power to enforce their rights in court. In Spain, on the other hand, there is close cooperation between trade unions, the labor inspectorate and social security. “This has made it possible to bring large numbers of cases to court.”
And the courts also take the issue very seriously, says Hiessl: “There are more judgments in the area of platform work than in almost any other EU country. The field is extremely well standardized through case law. There is no longer any debate in the courts about how couriers should be classified: couriers are employees.”
The courts have transferred the concept of an employee to the digital world, explains the expert on labor relations in the platform economy. “Working via platforms does suggest a certain degree of freedom, which is characteristic of genuine self-employment. For example, when orders can be rejected or shifts can be chosen by the employee.” Ultimately, however, the courts ruled that the power still lies with the companies. After all, they are the ones who ultimately make the agreements with the customers and control the drivers’ work via the apps. The German Federal Labor Court ruled similarly in a precedent-setting case in 2020.
In Spain, the tenor had already emerged several months before the Supreme Court’s ruling, says Hiessl. This was preceded by around 50 rulings from lower courts, mostly on Glovo. “Of these, fewer than ten came to the conclusion that platform workers are genuinely self-employed.” And yet: the impact of the law is limited. Glovo continues to work with self-employed people in Spain. Uber Eats has also started to recruit self-employed workers again.
The company Glovo refers to changes in the business model after the rider law came into force. “We are confident that our operating model in Spain, which has been in force since August 2021, meets all the legal requirements of Spanish legislation,” a Glovo spokesperson told Table.Briefings. There are no recent high court rulings on this yet. Uber Eats did not respond to a request for comment.
Competitors who now employ their riders in Spain complain about competitive disadvantages. For example, the company Just Eat Takeaway: “The low level of enforcement of regulations in Spain means that working with illegal self-employed models still pays off,” a company spokesperson told Table.Briefings.
Bertolini from Fairwork also says: “Companies that work with self-employed people save a lot of money.” The companies themselves sometimes admit this. In the 2023 annual report of Glovo’s parent company Delivery Hero, the hiring of drivers is described as a strategic risk for the “entire delivery industry.” It also states the following about recruitment efforts: “Such developments could result in higher operating costs.”
In Spain, it is now all or nothing for the Group: the 2023 annual report explicitly warns that if the exorbitant additional payments were to be made, Glovo itself would not be able to meet them. This would go so far as to mean that the Spanish subsidiary could cease operations. Although the risk is classified as unlikely, the company has never gone so far in its forecast for any other country.
Lawyer Hiessl believes that Glovo’s tactics have little chance of success in the long term: “I strongly believe that Glovo will lose in the end.” The company has made some changes, for example by making prices negotiable or allowing courier tracking to be issued. In her opinion, however, this may not be enough. “There are already rulings from the first instances that say these changes have not helped either.”
However, observers believe that the platform industry in Spain may ultimately not be aiming for a legal victory. They suspect that the industry is trying to play for time and, as in other countries, create facts that legislators will eventually accept. Or that a differently colored government has less interest in the battle with the digital platforms.
It is only the appendix to an annual report, but it packs a punch. From page 101 in Appendix VII of the latest China report, the International Monetary Fund (IMF) makes it clear that there is something fishy about the current account surplus officially reported by Beijing. The IMF wonders about the growing difference between China’s balance of payments and customs data. To be more precise, China’s trade surplus appears to be significantly lower in the light of the balance of payments than the customs data would suggest.
What may sound like a trivial statistic is of great relevance. The trade surplus, which documents the imbalance between an economy’s imports and exports, provides information on the extent to which the People’s Republic unloads its excess manufactured industrial products abroad. The greater the surplus, the greater the quantity of goods that could be shipped abroad. Particularly in view of the international competitive pressure on European industry, the figures are important when assessing possible countermeasures.
According to US economist Brad Setser from the Council on Foreign Relations (CFR), the IMF report raises the question of whether China is manipulating the volume of its exported goods. Setser says that China is “basically running a trade deficit with itself.” To understand what he means by this, it helps to take a look at the creative method of Chinese calculation.
The trick works as follows: If a foreign company in China has its goods produced by a Chinese company and pays the producer for the order, the balance of payments registers this transfer as an export. However, the goods have never left the People’s Republic. This maneuver is called factory-less production.
This would all be understandable if foreign companies sold these goods outside of China, thereby effectively generating exports. In reality, however, these goods are sold within the country and then registered as imports by the Chinese authorities, even though they were produced domestically.
Because the products are sold to end customers in China at a significantly higher price (imports) than the Chinese producer collects from the foreign company for their manufacture (exports), these supposed imports generate a deficit in the balance of payments. This artificially reduces the volume of China’s trade surplus.
According to Setser, “a detailed examination of the data” shows that the Chinese balance of payments deviates from the customs data on both sides. This means that, on the one hand, the volume of exports according to the balance of payments is far below the volume of customs exports. On the other hand, imports according to the balance of payments are higher than imports according to customs, although they should be lower due to the adjustment of insurance and freight costs.
“The goods surplus in the balance of payments is now about $300 billion less than it should be in the balance of payments data. At no point is there a corresponding correction in the trade balance,” says Setser. According to official data, the trade surplus in China in the first six months amounted to US$434.9 billion. This would have meant an increase of around 8.6 percent compared to the previous year.
However, the questionable reliability of the data leads to the conclusion that Chinese overcapacity is instead flooding the global markets to a much greater extent than the official data would suggest. “And I firmly believe that the customs data – which captures actual trade – tells the story correctly, not the current account data fitted with a model (and an internal survey),” says Setser.
The economist also wonders how the decline in real estate investment by six percentage points of economic output can be reconciled with a decline in China’s current account surplus. Because, he argues, “the current account surplus is savings minus investment, and savings have not fallen by seven percentage points of GDP.”
The reason why no one has noticed this so far is probably due to the switch to an opaque methodology, which China now uses to collect financial data directly from large companies. Accordingly, more than 13,000 large companies report data on trade in goods, which accounts for around 70 percent of total trade in goods, directly to the authorities. For the rest of the companies, the compilers use cross-border receipts and payments in goods trade, which come from the International Transactions Reporting System.
The figures therefore suggest that the gap is significantly smaller and that concerns about growing Chinese overcapacity are therefore unjustified. After all, overcapacity is poison for other economies, which are suffering from a flood of Chinese goods at ridiculously low prices. “China ‘s overcapacity will become a global problem above all if it leads to a further increase in the trade surplus in industrial goods. According to the customs data, this was obviously the case,” says Jürgen Matthes from the Cologne Institute for Economic Research (IW).
Matthes considers it “highly problematic when China dubiously minimizes its trade surplus reported in the balance of payments because this indicator is often looked at even more frequently by analysts than the customs data.” It is therefore very important that we now have a better understanding of what exactly leads to the glaring and increasing differences.
An embellished Chinese balance sheet may also reduce the willingness elsewhere to take political countermeasures that are not in China’s interests. Take the EU, for example: Brussels has imposed countervailing duties to protect its own manufacturers from cheap competition from China. This makes exports – and therefore the reduction of overcapacity – much more difficult for Chinese manufacturers because demand is falling.
“If the development of the trade surplus in goods trade based on the customs data continues like this, China should not be surprised if more and more countries protect their markets against a flood of Chinese goods, which are also often directly and indirectly subsidized,” warns Matthes.
Retail, care, logistics – 60 percent of all employees in the European labor market work in the private service sector. They generate 60 percent of the continent’s GDP. Hardly anyone knows the state of the sector as well as Oliver Roethig. Since May 2011, the German has been Regional Secretary of UNI Europa, the European federation of service sector trade unions across the continent.
Roethig studied political science in Bonn, Scotland and England. Prior to his position as Regional Secretary at UNI Europa, he worked for the association for eight years at a global level, specifically for the financial sector. Due to his family background, Roethig knew early on that his path would lead him into trade union work. He also focused his studies on the work of trade unions.
Nowadays, trade unions are no longer as influential as they were in the past. Roethig says that visibility must increase across Europe, particularly in the service sector, in order to highlight the social and political relevance of employees. The coronavirus pandemic has strengthened the position of some professions, such as supermarket employees. Nevertheless, they are “still largely in the shadows” compared to employees in the industry. This is currently reflected in poorer working conditions such as lower wages or unfriendly overtime regulations.
In trade union work, it also remains difficult to “dramatize the concerns of the service sector organizationally and politically.” One of the reasons for this is the regional spread of the individual businesses. “When a factory with 2,000 employees closes, there is often a huge outcry. When the same thing happens in supermarkets, it often fails to materialize.”
One of the major levers through which the EU could improve the situation of employees in the service sector is collective bargaining coverage. In the last legislative period, the member states agreed on a collective bargaining coverage of 80 percent within the Minimum Wage Directive. Countries like Germany that have not yet reached this target will have to draw up national action plans in 2025. Roethig demands that these plans should not be “just a paper tiger.”
Oliver Roethig names the expansion of public procurement as one initiative for concrete implementation. “In future, this should mean that only employers who respect collective bargaining will be considered for public contracts,” says Roethig. To date, 14 percent of European GDP has been awarded through public contracts. As hoped, Commission President Ursula von der Leyen promised to revise European public procurement law in the first 100 days of her second term of office. At the Commission level, support for Roethig’s project seems to be a given.
Oliver Roethig expects nation-states to perceive labor disputes as an achievement whose value goes beyond companies. “Collective bargaining is the school of democracy on a small scale,” he says. Compromises could give the people involved a practical understanding of democracy.
For this reason alone, the European states should see the trade unions as partners. However, if the impression of many employees that their concerns do not play a role in national and European institutions becomes entrenched, there is a risk of losing more people to the AfD and other populist parties. This is despite the fact that a party like the AfD “consistently opposes workers’ rights at the European level.” Jasper Bennink
Under normal circumstances, a state election is not worth a headline in the international media. Yesterday evening, however, the Financial Times and Le Monde even sent out breaking news. The AfD’s victory in the state elections in Thuringia, the first for a radical right-wing party since the end of the Second World War, is being registered with great concern abroad.
Concerns about German democracy are justified. In Saxony and Thuringia, around a third of voters (with a high turnout) voted for AfD leaders who do not even hide their far-right and subversive views. Björn Höcke and Jörg Urban are unlikely to become prime ministers, but governing without them is becoming increasingly difficult.
The CDU feels like a winner, and indeed many voters saw it as the last guarantor of stability. In order to govern, however, it must cooperate with the Sahra Wagenknecht alliance – a leap into the unknown. The negotiations will show whether Sahra Wagenknecht will actually insist on conditions such as a no to the deployment of US medium-range missiles, which are far beyond the power of a state government.
For the SPD, the elections went more smoothly than feared. Chancellor Olaf Scholz is therefore likely to feel vindicated (once again). However, the BSW’s performance is likely to strengthen the voices among the Social Democrats who want to reduce arms deliveries to Ukraine.
It remains to be seen whether the traffic light coalition will survive the state elections in Brandenburg in three weeks. Inside the FDP, the disaster in Saxony and Thuringia is fueling concerns that remaining in the coalition could jeopardize the Liberals’ survival in the federal government. Even if the FDP does not break up the coalition, there is not much holding the SPD, Greens and Free Democrats together. This does not bode well for the ability of the most important EU member state to act.
It’s a bombshell: in September, Óscar Pierre, the boss of Spanish food delivery pioneer Glovo, has to appear in court for alleged violations of labor law. The accusation: Glovo employs bogus self-employed workers despite repeated warnings from the authorities. If found guilty, Pierre faces six months to six years in prison.
This is probably the first time that the head of a platform company has had to answer criminal charges in the EU due to labor law issues. The criminal proceedings are made possible by Article 311, Section 2 of the Spanish Criminal Code. Paragraph 2 criminalizes the repeated employment of bogus self-employed workers. Observers regard it as the “Lex Glovo” – because this paragraph was not introduced until 2022 when it became apparent that Glovo would continue to refuse to hire its food couriers, even though the Spanish government believes that the relevant legal situation now exists.
The company does not want to comment on the ongoing proceedings, “as the start of an investigation says nothing about the outcome of the investigation itself,” a Glovo spokesperson told Table.Briefings. However, the company believes that it is in the right with its changed business model.
The Spanish case is not an isolated one: there are currently legal disputes all over the EU with the major digital platforms over the classification of their workers. Are suppliers, cleaners or chauffeurs really self-employed? After all, they can sometimes determine their working hours or even turn down jobs. Or are they employees after all, because the companies continue to exert coercion and control to which the workers ultimately have to submit?
According to an earlier estimate by the Commission, more than five and a half of the approximately 25 million platform workers across the EU could actually be employees – with the right to sick pay, paid vacation and minimum wage.
For the vast majority of digital platforms, one thing is clear: they work legally with self-employed people – only the legislators do not always understand this. The 2023 annual report of Glovo’s parent company Delivery Hero, for example, states: The legal status of platform workers is controversial at a regulatory level in certain markets, “as the characteristics of this new type of worker often do not match the traditional definitions of workers or self-employed.”
This led to fierce disputes, as can be clearly seen at the EU level, where the Platform Work Act aims to combat bogus self-employment on the new platforms. It was one of the most labor-intensive dossiers of the last legislative period. Behind the scenes, a lobbying battle raged on an unprecedented scale, as parliamentarians repeatedly reported. Until shortly before the deadline, no one knew for sure whether the Council would ultimately allow the law to fall through. In the end an agreement was reached. But the struggle is not over.
The left-wing Spanish government is determined to regulate platform work. More precisely: to declare food couriers employees. In 2021, Spain became the first country in the EU to pass a “Ley Rider.” The law aims to protect the rights of platform workers.
Like the EU Platform Work Act, the Rider Law contains a presumption of employment and a chapter on algorithmic management. Unlike the EU law, however, it only applies to food couriers (riders) and not all platform workers. Tailwind for the Spanish law came from the highest level. In 2020, the Supreme Court ruled that a Glovo courier was in fact an employee.
According to Spain’s largest trade union, CCOO, more than 70,000 bogus self-employed workers on digital platforms have since been reclassified by the labor inspectorate in 2022 and 2023. In an interview with Table.Briefings, the union praised the law as an “important step towards protecting the rights of workers in the platform economy.” The Spanish government is currently considering extending the rules to domestic helpers.
Politically, there is a lot of ambition to take on the billion-dollar platforms, says Alessio Bertolini from the Fairwork Foundation. “Spain has declared itself a pioneer when it comes to shaping the digital economy fairly.” The Fairwork Project examines and evaluates working conditions in the platform industry. With the new laws, the situation of platform workers in Spain has improved, he says – at least for the companies that have started to employ their food couriers.
Since the Ley Rider, penalties and back payments for bogus self-employment have been raining down, especially on Glovo. According to the CCOO trade union, Glovo now has to pay around €200 million in back social security contributions. In addition, there are around €50 million in penalties, reports El País.
That Spain is a European pioneer in this field is also due to the fact that various players are taking the issue very seriously. “In Spain, we see the peculiarity that various players cooperate very efficiently in this area,” says Christina Hiessl, who teaches labor law at the KU Leuven. An individual rider has little power to enforce their rights in court. In Spain, on the other hand, there is close cooperation between trade unions, the labor inspectorate and social security. “This has made it possible to bring large numbers of cases to court.”
And the courts also take the issue very seriously, says Hiessl: “There are more judgments in the area of platform work than in almost any other EU country. The field is extremely well standardized through case law. There is no longer any debate in the courts about how couriers should be classified: couriers are employees.”
The courts have transferred the concept of an employee to the digital world, explains the expert on labor relations in the platform economy. “Working via platforms does suggest a certain degree of freedom, which is characteristic of genuine self-employment. For example, when orders can be rejected or shifts can be chosen by the employee.” Ultimately, however, the courts ruled that the power still lies with the companies. After all, they are the ones who ultimately make the agreements with the customers and control the drivers’ work via the apps. The German Federal Labor Court ruled similarly in a precedent-setting case in 2020.
In Spain, the tenor had already emerged several months before the Supreme Court’s ruling, says Hiessl. This was preceded by around 50 rulings from lower courts, mostly on Glovo. “Of these, fewer than ten came to the conclusion that platform workers are genuinely self-employed.” And yet: the impact of the law is limited. Glovo continues to work with self-employed people in Spain. Uber Eats has also started to recruit self-employed workers again.
The company Glovo refers to changes in the business model after the rider law came into force. “We are confident that our operating model in Spain, which has been in force since August 2021, meets all the legal requirements of Spanish legislation,” a Glovo spokesperson told Table.Briefings. There are no recent high court rulings on this yet. Uber Eats did not respond to a request for comment.
Competitors who now employ their riders in Spain complain about competitive disadvantages. For example, the company Just Eat Takeaway: “The low level of enforcement of regulations in Spain means that working with illegal self-employed models still pays off,” a company spokesperson told Table.Briefings.
Bertolini from Fairwork also says: “Companies that work with self-employed people save a lot of money.” The companies themselves sometimes admit this. In the 2023 annual report of Glovo’s parent company Delivery Hero, the hiring of drivers is described as a strategic risk for the “entire delivery industry.” It also states the following about recruitment efforts: “Such developments could result in higher operating costs.”
In Spain, it is now all or nothing for the Group: the 2023 annual report explicitly warns that if the exorbitant additional payments were to be made, Glovo itself would not be able to meet them. This would go so far as to mean that the Spanish subsidiary could cease operations. Although the risk is classified as unlikely, the company has never gone so far in its forecast for any other country.
Lawyer Hiessl believes that Glovo’s tactics have little chance of success in the long term: “I strongly believe that Glovo will lose in the end.” The company has made some changes, for example by making prices negotiable or allowing courier tracking to be issued. In her opinion, however, this may not be enough. “There are already rulings from the first instances that say these changes have not helped either.”
However, observers believe that the platform industry in Spain may ultimately not be aiming for a legal victory. They suspect that the industry is trying to play for time and, as in other countries, create facts that legislators will eventually accept. Or that a differently colored government has less interest in the battle with the digital platforms.
It is only the appendix to an annual report, but it packs a punch. From page 101 in Appendix VII of the latest China report, the International Monetary Fund (IMF) makes it clear that there is something fishy about the current account surplus officially reported by Beijing. The IMF wonders about the growing difference between China’s balance of payments and customs data. To be more precise, China’s trade surplus appears to be significantly lower in the light of the balance of payments than the customs data would suggest.
What may sound like a trivial statistic is of great relevance. The trade surplus, which documents the imbalance between an economy’s imports and exports, provides information on the extent to which the People’s Republic unloads its excess manufactured industrial products abroad. The greater the surplus, the greater the quantity of goods that could be shipped abroad. Particularly in view of the international competitive pressure on European industry, the figures are important when assessing possible countermeasures.
According to US economist Brad Setser from the Council on Foreign Relations (CFR), the IMF report raises the question of whether China is manipulating the volume of its exported goods. Setser says that China is “basically running a trade deficit with itself.” To understand what he means by this, it helps to take a look at the creative method of Chinese calculation.
The trick works as follows: If a foreign company in China has its goods produced by a Chinese company and pays the producer for the order, the balance of payments registers this transfer as an export. However, the goods have never left the People’s Republic. This maneuver is called factory-less production.
This would all be understandable if foreign companies sold these goods outside of China, thereby effectively generating exports. In reality, however, these goods are sold within the country and then registered as imports by the Chinese authorities, even though they were produced domestically.
Because the products are sold to end customers in China at a significantly higher price (imports) than the Chinese producer collects from the foreign company for their manufacture (exports), these supposed imports generate a deficit in the balance of payments. This artificially reduces the volume of China’s trade surplus.
According to Setser, “a detailed examination of the data” shows that the Chinese balance of payments deviates from the customs data on both sides. This means that, on the one hand, the volume of exports according to the balance of payments is far below the volume of customs exports. On the other hand, imports according to the balance of payments are higher than imports according to customs, although they should be lower due to the adjustment of insurance and freight costs.
“The goods surplus in the balance of payments is now about $300 billion less than it should be in the balance of payments data. At no point is there a corresponding correction in the trade balance,” says Setser. According to official data, the trade surplus in China in the first six months amounted to US$434.9 billion. This would have meant an increase of around 8.6 percent compared to the previous year.
However, the questionable reliability of the data leads to the conclusion that Chinese overcapacity is instead flooding the global markets to a much greater extent than the official data would suggest. “And I firmly believe that the customs data – which captures actual trade – tells the story correctly, not the current account data fitted with a model (and an internal survey),” says Setser.
The economist also wonders how the decline in real estate investment by six percentage points of economic output can be reconciled with a decline in China’s current account surplus. Because, he argues, “the current account surplus is savings minus investment, and savings have not fallen by seven percentage points of GDP.”
The reason why no one has noticed this so far is probably due to the switch to an opaque methodology, which China now uses to collect financial data directly from large companies. Accordingly, more than 13,000 large companies report data on trade in goods, which accounts for around 70 percent of total trade in goods, directly to the authorities. For the rest of the companies, the compilers use cross-border receipts and payments in goods trade, which come from the International Transactions Reporting System.
The figures therefore suggest that the gap is significantly smaller and that concerns about growing Chinese overcapacity are therefore unjustified. After all, overcapacity is poison for other economies, which are suffering from a flood of Chinese goods at ridiculously low prices. “China ‘s overcapacity will become a global problem above all if it leads to a further increase in the trade surplus in industrial goods. According to the customs data, this was obviously the case,” says Jürgen Matthes from the Cologne Institute for Economic Research (IW).
Matthes considers it “highly problematic when China dubiously minimizes its trade surplus reported in the balance of payments because this indicator is often looked at even more frequently by analysts than the customs data.” It is therefore very important that we now have a better understanding of what exactly leads to the glaring and increasing differences.
An embellished Chinese balance sheet may also reduce the willingness elsewhere to take political countermeasures that are not in China’s interests. Take the EU, for example: Brussels has imposed countervailing duties to protect its own manufacturers from cheap competition from China. This makes exports – and therefore the reduction of overcapacity – much more difficult for Chinese manufacturers because demand is falling.
“If the development of the trade surplus in goods trade based on the customs data continues like this, China should not be surprised if more and more countries protect their markets against a flood of Chinese goods, which are also often directly and indirectly subsidized,” warns Matthes.
Retail, care, logistics – 60 percent of all employees in the European labor market work in the private service sector. They generate 60 percent of the continent’s GDP. Hardly anyone knows the state of the sector as well as Oliver Roethig. Since May 2011, the German has been Regional Secretary of UNI Europa, the European federation of service sector trade unions across the continent.
Roethig studied political science in Bonn, Scotland and England. Prior to his position as Regional Secretary at UNI Europa, he worked for the association for eight years at a global level, specifically for the financial sector. Due to his family background, Roethig knew early on that his path would lead him into trade union work. He also focused his studies on the work of trade unions.
Nowadays, trade unions are no longer as influential as they were in the past. Roethig says that visibility must increase across Europe, particularly in the service sector, in order to highlight the social and political relevance of employees. The coronavirus pandemic has strengthened the position of some professions, such as supermarket employees. Nevertheless, they are “still largely in the shadows” compared to employees in the industry. This is currently reflected in poorer working conditions such as lower wages or unfriendly overtime regulations.
In trade union work, it also remains difficult to “dramatize the concerns of the service sector organizationally and politically.” One of the reasons for this is the regional spread of the individual businesses. “When a factory with 2,000 employees closes, there is often a huge outcry. When the same thing happens in supermarkets, it often fails to materialize.”
One of the major levers through which the EU could improve the situation of employees in the service sector is collective bargaining coverage. In the last legislative period, the member states agreed on a collective bargaining coverage of 80 percent within the Minimum Wage Directive. Countries like Germany that have not yet reached this target will have to draw up national action plans in 2025. Roethig demands that these plans should not be “just a paper tiger.”
Oliver Roethig names the expansion of public procurement as one initiative for concrete implementation. “In future, this should mean that only employers who respect collective bargaining will be considered for public contracts,” says Roethig. To date, 14 percent of European GDP has been awarded through public contracts. As hoped, Commission President Ursula von der Leyen promised to revise European public procurement law in the first 100 days of her second term of office. At the Commission level, support for Roethig’s project seems to be a given.
Oliver Roethig expects nation-states to perceive labor disputes as an achievement whose value goes beyond companies. “Collective bargaining is the school of democracy on a small scale,” he says. Compromises could give the people involved a practical understanding of democracy.
For this reason alone, the European states should see the trade unions as partners. However, if the impression of many employees that their concerns do not play a role in national and European institutions becomes entrenched, there is a risk of losing more people to the AfD and other populist parties. This is despite the fact that a party like the AfD “consistently opposes workers’ rights at the European level.” Jasper Bennink