They also serve who only stand and sweat

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The Independent Online
IS BRITAIN condemned to become a low-wage country? The last few days have brought a surprising alliance between people who feel dismayed that we seem to be becoming one.

From the right corner, Edward Heath was furious that the Department of Trade and Industry should be advertising in Germany that the UK had low wages: 'I see nothing to be proud of in having sweated labour . . . The aim should be high wages, high productivity and low prices,' he told the BBC. From the left came Arthur Scargill, who has intervened in the troubled Timex dispute in Dundee with the proposition that British workers are being denied the job security that would be available in other EC countries.

And, of course, it is not just the Heaths and the Scargills. Both are articulating, perhaps for rather partisan reasons, a concern that most of us feel. It is surely a little shaming if one of the main competitive advantages we have in the modern world is that we offer cheap labour. It is not the way we would like to feel about the country, particularly if it happens to be true.

True? Up to a point. You cannot just look at take-home pay, for any comparison is skewed by shifts in exchange rates, the number of hours worked and the extent to which people are supported by the social services they pay for in taxation. But allow for that and most fair-minded comparisons would put real UK wages in the bottom half of the industrial world league - not so far below the US or Japan, but a long way below Germany, the country with which we tend to compare ourselves - and to which those DTI adverts were addressed.

But international comparisons make an implicit assumption: that the levels being compared are sustainable. German industrial workers have the highest wages per hour of any in the world. While this might in the short-run seem a cause for pride, on any longer- term view it is a terribly vulnerable position.

It raises the fundamental question: what can German workers do that, say, Taiwanese workers cannot at a much cheaper rate? And if one were sitting in Taiwan, the question would be: what can our people do that justifies our wages being 10 times those paid on mainland China?

Surely what Messrs Heath and Scargill should be worrying about is not so much the narrow issue of the level of legal protection over working conditions that the British have compared with their counterparts on the Continent. Rather, it should be the comparative advantage of Europe as an economic region when set against North America, with its economies of scale and vast natural resources, or against the countries of the Far East, the fastest-growing region in the world, with their educated and motivated

people.

This question - how can Europe continue to justify its rather comfortable standard of living? - is the dominant one facing this continent, an issue vastly more important than the kerfuffle over whether we adopt the Maastricht social chapter. Put yet more brutally: what can we do that other parts of the world cannot?

There is no single, simple answer, partly because the answer will be different for different parts of Europe, and partly because it is unreasonable to expect to guess the winning industries or services even a decade ahead. There are, however, certain skills in Europe that would be very hard for North America or the Far East to replicate.

A sketch of these might include 'craft manufacturing' - producing small runs of equipment with a high craft input. The products vary from country to country. In Britain they would be things such as racing cars, top-end hi-fi kit, malt whisky. In Italy it would be the range of clothing and fashion goods from that great band of economic triumph that runs across the northern industrial belt. In Germany it would not be up-market cars, which the Japanese can do just as well, but things such as anti-pollution equipment for cleaning up factories.

A second band of products are not products at all, but services. There are obvious examples such as London's financial business (how many noticed that the City's lead in foreign exchange has increased in the last year, or that London has won back from Tokyo the number-one slot in international banking transactions?). Other obvious areas where Britain is a leader include cultural exports such as popular music, while other European nations would have equally important, but different, strengths.

The joy of these cultural exports is that it is very difficult for the newly industrialised countries to imitate them. It is easy for mainland China to reverse engineer a PC or a VCR, but it cannot reverse engineer a Phantom of the Opera, still less early Stones.

There is a third area where Europe need not fear foreign competition: things that by their very nature are not internationally traded. This newspaper is a good example. While the entrepreneurs of Shanghai could doubtless undercut most British manufactured products, they cannot produce a British (or French, Dutch, German, Italian) newspaper and get it to the newsagent every day. They cannot deliver better health services or cheaper universities. An efficient non-traded sector increases the national standard of living, so it is worth putting energy into improving the sector. But even a country that neglects it (as Japan does to some extent) is not punished by a flood of imports.

The encouraging news for Europe is that as manufacturing technology moves ever more quickly across national boundaries, the whole focus of competition will move away from trade in mass-market goods to trade in services and ideas. The money will be in the software, not the hardware. Goods will be made wherever it is cheap and convenient; the added value will come in the services attached to them. It costs very little to make a CD (whatever the record companies would have us believe). What costs the money is Anne-Sofie von

Otter singing on it.

Strength in crafts and culture does not guarantee Europe's economic success. It will not employ all our people. The skills of a top mezzo-

soprano, racing-car designer or fund manager are, by their very nature, exclusive. People without those skills are still required for the routine jobs any society needs. Some of these are interesting and well paid; others are less highly ranked but are still honourable and worthwhile occupations. All countries must have unpleasant jobs; the better we are at producing things uniquely ours, the more resources we will have to improve the pay and conditions of people doing menial work. And we must respect them for it.

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