Industry and unions both will have to adapt old mindsets to survive in changing international competitive environment, writes Marc Coleman, Economics Editor

The Central Statistics Office recently told us that 6,000 jobs were lost in manufacturing in the year to May of this year. Many were relocated in parts of the world where wages are far lower than those offered to its workforce by Irish Ferries. While their loss was lamented, there were no cries of outrage, nor calls for government intervention.

Irish Ferries is different. Employment in the ferry industry links workers from Latvia, where a house can be purchased for less than €100,000, with workers from Ireland, where you'd spend that money on a coal shed.

Like textiles, the ferry industry chooses those workers from countries where Ireland's minimum wage amounts to a reasonable, if modest, income. But whereas the textile industry migrates to China and is forgotten, Irish Ferries stays Irish and docks in port every day to remind us of what happened. Thus it becomes a political problem

By dint of what it does, the ferry industry is an internationally open industry. Some important facts about it need analysis, however, boring this is for the polemicists.

Firstly, the day of passenger ferry traffic is not quite over, but its heyday is. A revolution in the aviation sector has made air fares much cheaper relative to ferry fares. Car rental is also cheaper and more convenient, thanks to the internet.

Most of us stopped taking ferries to the UK in the 1980s. If seafaring has a future, it is in freight and cruise liners. We might ask in passing what, in addition to decrying Irish Ferries, the Government is doing something to promote those industries.

Secondly, the boon of duty free shopping - once a major pull for the Irish ferry industry - is no longer with us.

Thirdly, local authorities in Brittany subsidise French Ferries on the grounds that it encourages tourism. This has given Irish Ferries' competitors an unfair advantage on its Normandy route.

Fourthly, the rising cost of holidays in rural Ireland has scared off the kind of tourist who wants to drive a car - the kind that uses ferries. As figures from the Central Statistics Office show, tourists are now far more likely to be visiting urban areas, and therefore come without cars.

Fifthly, and most importantly, globalisation and EU enlargement mean that wage rates needed to live decently are far higher in western European countries than Latvia or Lithuania. I still remember working as a student in Germany for a wage that a German would have sniffed at. Twenty years later it is Germans who are coming here to work. That is how our market forces redistribute wealth, if allowed to do so.

For this last reason many of Irish Ferries' competitors have been forced to outsource their workforces, including the Seacat ferry from Northern Ireland to Scotland, P&O Ferries and the Isle of Man steam packet.

Irish Ferries has been forced to respond. A question that must be asked is whether it has responded reasonably. Perhaps it has taken the line of least resistance by cutting wages. This has been done by too many managers as a substitute for real business leadership.

Neutral sources close to the ferry industry say that the management of Irish Ferries as a company is reasonably good, by Irish standards at least, and has sought rationalisation and restructuring before to reduce labour costs.

And a consultant's report on the company - produced by Farrell Grant Sparks - shows that it will be in trouble soon. While still profitable now, the company's return on capital will be only 2 per cent by 2007.

Foreseeing this out-turn, the company last year offered workers on its French route a package, which 90 per cent of them took. In a reaction to this, Siptu balloted its members on the Irish route for strike action. It got a majority for strike action, but the union represents only about 40 per cent of the route's staff.

Now, Irish Ferries is proposing a redundancy package to workers on the Irish routes. Workers can accept lower rates of pay, or can opt for redundancy with eight weeks of pay for each year worked.

Admittedly there is some pressure to accept. Those who delay or strike will get only six weeks of pay per year of service. But a majority of workers - as represented by the Seaman's Union of Ireland - seem content with the deal.

However, Siptu, which represents 40 per cent of the workers on the route (mostly officers), has served notice of industrial action. It has not, to my knowledge, held a ballot.

Those are the facts. What judgments and solutions can we taken from them?

Irish Ferries has managed its company reasonably well and the pressure for it to reduce its cost base is understandable. But the salary awarded to the chief executive Eamonn Rothwell, in excess of €600,000, is an issue. Japan has maintained good industrial relations between workers and management because of a system whereby managers of troubled companies impose cuts on their own pay before asking workers to do so.

In Ireland, we should develop partnership structures along these lines, so that workers and management share both good times and bad. Apart from improving worker-manager solidarity, such an approach is good for the bottom line.

Having said this, the survival of old mindsets in Irish Ferries is only partly a failure of Irish management culture. Trade unions, which for too long have adhered to prehistoric notions of labour practice, are also to blame. Irish Ferries' heavy-handedness with its workers derives partly from a perception that some trade unionists involved in the dispute are not interested in constructive solutions. Events in ESB this week give credence to such a view.

But the key issue in this dispute relates to the downward pressure on wages from globalisation. One of the saner contributions on this issue has recently come from Labour MEP Prionsias de Rossa. He recently asked whether the EU Commission would take action to safeguard the international rights of seafarers.

Yesterday he got the following answer: the EU Commission will support the development of the first ever code of maritime labour standards, due to be finalised by the International Labour Organisation convention on maritime labour standards. This means that common standards of employment will apply worldwide.

This approach is intervention in the market. But if implemented globally, ferry companies will face a level playing field for wages.

But as one playing field is levelled, so must another be levelled. The situation in Irish Ferries comes in part from subsidies paid to French ferry companies by French local authorities. This is unacceptable in a single market.

If it is serious about protecting Irish jobs from unscrupulous competition, the Irish Government must denounce this in language equally as strong as that deployed against Irish Ferries.