- Observatory: EMCC
- Published on: 02 March 2008
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This article points out some aspects of the attitudes of the social partners and the government, at central level, but also at decentralised level, on the internationalisation processes that, in the last years, have affected the Italian productive system.
Institutional responses to globalisation
Government action to prevent or reduce the extent of off shoring/relocation
Are there any recent examples in your country (i.e. over the past 3-4 years) of the government intervening to prevent particular activities from being relocated abroad or to reduce the scale of this?
In general, the Italian government, in compliance with the European directives on state aid and competition, has not recently undertaken any direct action to prevent the relocation of productive activities, or parts of them.
Whereas, at central level, but also at decentralised level, the government have undertaken some indirect actions that have had effects on relocation processes, seeking to restrict its excessive diffusion and harmful impact on the Italian productive system. In particular, the state has tried to promote and to implement policies to favour investments in Italy, supporting the use of new technologies, the modernisation of infrastructures, and introducing bureaucratic simplifications and tax concessions for firms. Some of these measures are contained in the recent parliamentary bill Industry 2015, introduced in the last months of 2006 by the Minister for the Economic Development and intended to boost the competitiveness of firms that invest in Italy. The bill’s principal objective is to shift ‘the Italian industrial system to economic activity with higher value added’ by reorganising and simplifying the system of incentives for firms, which to date has been fragmented among numerous laws (the most important being law 488/1992, amended in 1996, and regulating the use of subsidies for firms investing in economic laggard areas; law 46/1982 on the introduction of technological innovation; and law 266/1997 for small and medium-sized firms). From the fiscal point of view, instead, the most significant provision introduced by Industry 2015 is the reduction of the ‘fiscal wedge on labour’, i.e. the difference between the cost of labour sustained by the firm and the net pay of the worker.
In recent years, these structural interventions have been flanked by punctual schemes. On the occasion of industrial action following corporate restructuring plans which foresee the transfer of production (or of a part of it) abroad, the trade unions have increasingly frequently sought to involve the national and local political authorities in order to change corporate decisions on relocation processes. The political authorities have been involved in the settlement of trade union disputes on relocation, for instance, in the case of reorganisation of the steel plants located in Terni and owned by of the multinational ThyssenKrupp (IT0402203F; IT0503103N); and in those related to the reorganisation of the Ilva steel works at Cornigliano (Genoa, IT0511102N) and the petrochemicals plants of Porto Marghera (Venice, IT0512103N).
At decentralised level, the local political authorities have frequently been involved in disputes on relocation: in the majority of the cases, however, the solutions agreed by firm, trade unions and the local political authority have concerned the devising of instruments to dampen the negative effects of relocation on the local productive system and employment, and on the lives of the workers affected. Significant examples mainly concern the North of Italy and firms manufacturing domestic appliances (for instance, IT0501206F; IT0505205F).
Social partner attitudes towards off-shoring/relocation
Have there been cases over the past 3-4 years where the possibility – or threat – of relocation of production has featured as a factor in collective bargaining?
In general, company-level agreements on relocation have been reached following the firm’s presentation of a restructuring plan, of protest actions by the trade unions and, in some cases, after the political authorities have been involved with the purpose of finding ways to minimise the negative effects of such change processes. There are therefore no collective agreements that treat these issues in preventative manner: for instance, by establishing procedures and measures to be implemented in case of relocation.
Partial exceptions are the company-level agreements reached in 2004 and 2005 and respectively concerning the Piedmont plants of the multinational Bitron (IT0505102N) and those of the Siemens Vdo Automotive industrial group situated in Tuscany (IT0502303F).
In the former case, company and trade unions reached agreement on a code of conduct to be applied in all the company’s plants around the world, and laying down transparent rules on competition among those plants. In particular, the code states that workplace health and safety rules must be applied in all Bitron plants; that legislation on workers’ rights and equal opportunities be respected; that trade union freedom and autonomy be guaranteed; that the International Labour Organisation (Ilo) prohibition on the employment of minors be respected; and that the European rules on environmental safety be complied with.
In the latter case, the company and trade unions reached an agreement which changed working time and modified the productive cycle so as to increase the quantity and the quality of production at the Siemens plants in Livorno and Pisa. In substance, the firm must guarantee new investments and the maintenance of employment levels in exchange for greater flexibility and revised shiftworks.
Are there any cases over the past 3-4 years where trade unions have successfully resisted plans to relocate production abroad or have managed to reduce the extent of this?
If so, please indicate the cases concerned and outline their main features Are there any cases where trade unions have accepted the need for the relocation of production – or part of it – abroad as a means of maintaining or improving the viability of companies and so of preserving some jobs and even ultimately expanding them?
In the last three-four years, there have been few cases in which company-level negotiations have changed the initial corporate decision to relocate production or part of it. More numerous are cases in which negotiations have led to the introduction of measures to minimise the negative effects of relocation on the local economic and social context by furnishing economic support and helping the workers affected to find new employment.
Among the cases in which the initial intention to relocate has been modified by dialogue among company, trade unions and political authority, to be mentioned in particular is the agreement reached in 2005 between Electrolux and the trade unions in regard to the plants at Porcia (in the province of Pordenone) and Scandicci (near Florence; IT0601304F). In the former plant, the agreement between firm and trade unions was intended to relaunch the production of washing machines, clothes driers and dishwashers (initially set to be relocated in Germany) through new investments. In the latter case, the agreement instead envisaged a reduction in the number of redundancies initially decided by the company and plans for the training and outplacement of employees forced to leave the company.
In the case, finally, of the restructuring plan for ThyssenKrupp steel works in Terni, although the company-level agreement did not prevent the transfer of the production of magnetic steel, it guaranteed new investments by the company in the production of stainless steel and the maintenance of employment levels following the transfer of part of more specialised production (magnetic steel plate). To be stressed is that, in this case, the reaching of agreement between employer and the workers’ representatives was also made possible by the intervention of the national and local political authorities, which pledged their commitment to creating new infrastructures to reinforce the local industrial system.
Government policy on foreign-owned firms controlling significant sections of the economy
Does the Government in your country have an explicit policy on restricting the acquisition of domestic companies in certain sectors by foreign-owned firms?
The state has not recently promoted any protectionist policy aimed at maintaining Italian ownership and control on firms that operate on the country’s territory. Conversely, at normative level, since the 1990s, the state has passed various measures designed to lower the barriers to entry by foreign investors in the Italian industrial system and to increase competition, especially in the services sector. The implementation of privatisation and liberalisation processes, undertaken especially in sectors where state-owned enterprises monopolised the production of goods or services, has not to date produced the effects expected in terms of increased competition.
Although Italian legislation on competition has been gradually aligned with the standards imposed by European directives, the Italian state has recently taken indirect action to influence economic processes in productive sectors deemed vital for the country’s interests, such as defence, telecommunications, transport and energy. There has been ‘meddling’ by the Italian state in the proposed merger between Autostrade, the main Italian concessionary constructor and manager of toll motorways and services and the Spanish company Abertis, the largest in Europe for the construction and management of motorways and services. The Italian state has also brought pressure to bear on the recent sale to Telefonica, world leader in the telecommunications sector, of the majority share in the private company controlling Telecom Italia, the main Italian supplier of telecommunications.
On the one hand, therefore, recent years have seen liberalisation in various sectors, while on the other, the state seeks to influence in some specific sectors, albeit indirectly, the result of economic processes.
Are there any restrictions on foreign-owned companies setting up branches or subsidiaries in your country either generally or in specific sectors?
In recent years, the Italian state has not adopted policies to raise barriers against the entry of foreign capital into Italy; on the contrary, it has provided incentives for investment by foreign companies. To date, however, the results have been not significant: in 2005, the stock of direct investments in Italy represented 12.4% of gross GDP, and the annual (2005) inflow was 5.9% of total fixed investments in the country. These figures place Italy in the lowest band of the European countries as regards the presence of foreign companies in the country (United Nations Conference on Trade and Development, World Investment Report 2006). The main reasons for Italy’s scant attractiveness to direct foreign investments are the generally poor quality of infrastructures, low spending on research and development, high taxation, a bloated bureaucracy and, especially in the South of the country, widespread organised crime.
Moreover, as said in the previous answer, although liberalisation and the entry of foreign capital have been promoted in recent years, the state continues to interfere indirectly in sectors deemed crucial, such as national defence, health, raw materials, essential public services, telecommunications and transport.
Are there any sectors of the economy in which the acquisition of a domestic company has not been allowed over the past 3-4 years?
Recent examples of direct action by the Italian state to prevent the acquisition of an Italian-owned company, or of part of it, are rare. But there has been, as already mentioned because of the large size of the company and the strategic nature of the sector concerned, the state’s interference in the mooted merger between the Spanish multinational Abertis and Autostrade, a joint-stock company sold by the Italian state in 1997 and which operates motorways in Italy. The present Italian government has slowed down the merger because it wants to change the rules on motorway concessions before the transfer of ownership between the two companies.
Social partner responses to the take-over of domestic firms by foreign-owned ones
Have there been any recent cases (i.e. over the past 3-4 years) where trade unions have resisted foreign acquisition of domestic companies explicitly because of the nationality of the company concerned?
In the past three-four years, the trade unions have not actively opposed the acquisition of Italian-owned companies by foreign investors. However, one notes that trade unions are generally diffident towards foreign takeovers of Italian companies. This attitude is mainly due to the fact that the Italian trade unions consider foreign companies to be less interested than Italian ones in investing to develop their activities in Italy, and less concerned about the quality of industrial relations and personnel training.
However, the Italian trade unions have recently concentrated in practice on finding ways to counter the effects of relocation, to encourage investments in Italian manufacturing, and to assist workers made redundant by relocation processes.
Have there been any recent cases (i.e. over the past 3-4 years) where domestic companies have resisted acquisition by a foreign-owned firm on the grounds of its nationality?
There have been no recent cases in which Italian companies have resisted takeover by foreign companies for reasons other than strictly economic.
Attitudes to globalisation
Have employers’ associations in your country adopted a stated position as regards the main aspects of globalisation – i.e. outsourcing or the relocation of production abroad and the acquisition of domestic companies by foreign-owned ones?
Confindustria, the largest Italian employers’ association, has repeatedly stressed in recent years that the competitiveness of Italian companies depends to a large extent on their internationalisation. Here ‘internationalisation’ denotes expansion into new markets through increased exports, but also through the transfer of part of production abroad. To encourage the internationalisation of Italian companies, Confindustria has created services to assist companies in this process, while also urging the state to promote ‘made in Italy’ products abroad more incisively with several actions such as:
- to strengthen the foreign activities of the National Institute for Foreign Trade (Istituto Nazionale per il Commercio Estero, Ice) with particular regard to SMES, their consortia and groups;
- to foster synergies among companies, regions and the central state so as to make efficacious use of the funds available to promote internationalisation, avoiding duplications of action;
- and to draw up a three-year plan for the internationalisation of Italian companies.
Confindustria has also indicated actions necessary to increase the foreign direct investments in Italy: among them, the streamlining of bureaucratic procedures; the improvement of infrastructures; the reduction of labour costs; and the reduction of energy costs.
Recent surveys on the internationalisation of Italian firms have highlighted a tendency towards quantitative growth, but also an increase in complexity. Whereas until recently the curbing of production costs was cited as the main reason for relocation, in the past two-three years it has been flanked by the endeavour to acquire shares of emerging markets. For instance, a survey conducted in 2006 by the Fondazione Nord-Est and sponsored by Il Sole 24 Ore newspaper reported that 47% of a sample of 1,641 firms with more than 10 employees stated that they did business abroad (L’Italia delle imprese. Rapporto 2007). Time series analysis showed that this percentage was close to the record of 2002, which marked the beginning of the change recently affecting large part of Italian firms. The survey also showed that the 49.5% of the companies interviewed had established business relations abroad in order to enter new strategic markets, while only 25.4% of them stated that they had relocated only to reduce production costs. The survey also highlighted the greater ability of Italian SMEs to acquire shares of international markets, although this was the firm size class which had previously evinced the greatest difficulties in adjusting to economic internationalisation.
Have trade unions in your country adopted a stated position as regards the main aspects of globalisation – i.e. outsourcing or the relocation of production abroad and the acquisition of domestic companies by foreign-owned ones?
The Italian trade unions are generally opposed to relocations that involve solely the transfer of resources and production abroad. They express dissent not so much in regard to relocation in itself as to the lack of industrial plans that foresee, in parallel, new investments in Italy to foster, for instance, the production of higher-quality goods and services.
As said above, the trade unions have not been entirely intransigent towards foreign acquisitions of Italian companies (or parts of them). The trade unions’ main concerns in these cases have centred on the new ownership’s intentions in regard to employment levels and its interest in investing to induce the growth of productive activities in Italy.
Have there been any surveys of public opinion in your country over the past 3-4 years on attitudes towards globalisation or on the various dimensions of this (as listed above)?Have these surveys made a distinction between the different dimensions of globalisation (as listed above) or have separate surveys been carried out on these dimensions?Have these surveys made an explicit distinction between globalisation and the process of European integration, by, for example, distinguishing between relocation of production to other EU Member States and relocation to countries outside the EU or between the take-over of domestic companies by EU-owned firms and take-over by a non-EU companies?
There have been no recent national-level surveys on public perceptions of changes due economic globalisation, and, particularly, on the internationalisation of goods and services production and its social and economic effects in Italy.
In general, issues concerning relocation have been mainly investigated at local level, and more specifically in the communities affected by it (for instance, the areas of North-East, characterised by a productive system made up of SMEs), or as part of surveys on more general topics, such as competition and processes of liberalisation and privatisation.
In February 2006, for instance, the Demos&Pi research centre and the Confindustria Research Centre carried out a survey on the attitudes of Italians towards the market by interviewing a sample of 1,500 subjects representative of the Italian population aged over 15, by gender, age and zone of residence. As regards international economic competition, the survey found that more than half of the interviewees believed that the country should defend itself against international competition; 80% saw relocation as a threat to employment, or as only being to the advantage for employers. Moreover, the majority of the interviewees perceived China ‘as a threat to be countered by erecting national, or better European, customs barriers’.
Although these results may indicate a widespread attitude among Italians towards the internationalisation of the economy, they should not be considered conclusive because they are the findings of the sole survey conducted on these topics in a specific period.
Diego Coletto, Fondazione Regionale Pietro Seveso