A spate of MUA industrial action threatens to lead Australia back to its uncompetitive past

THERE is much more to the ongoing industrial action taken by the Maritime Union of Australia against shipping companies servicing our offshore oil and gas industry than merely the news that there have been five strikes in just two months.

Escalating industrial action and union militancy in the maritime sector will put at risk Australia’s international reputation as a reliable supplier to the world of energy and resources.

Yet Workplace Relations Minister Julia Gillard is refusing to intervene to stop the strikes under her new workplace relations laws, and dismisses concerns with a blithe warning to employers to “expect a greater union presence in workplaces this year”.

Companies in the mining, resources and energy sectors can decipher the code. Militant unions such as the MUA and the Construction, Forestry, Mining and Energy Union are back with a vengeance and the Rudd government will do little, if anything, to stop them.

Yet not only will outrageous wage claims cause significant harm to the individual companies being targeted by the MUA, but will also cause damage to other sectors of the economy. The MUA is highly unlikely to confine to the North West Shelf or Bass Strait its wage claims of an additional $70,000 to $100,000 a year for unskilled workers.

Australia is witnessing the return of “pattern bargaining”, where unions extract entitlements from one employer and use them as a precedent to demand the same or better entitlements from other employers and across other sectors. There are already reports that other unions intend to seek flow-on claims.

We can’t say we weren’t warned.

In the summer of 2008, the MUA was basking in the afterglow of the election of the Rudd government. It had feared that under the Howard government its glory days were well and truly behind it: those days when it ruled Australia’s waterfronts with a closed shop, restrictive work practices and a go-slow culture that made Australia an international laughing stock.

Yet after the defeat of the Howard government at the 2007 election, new government ministers were falling over themselves to meet officials from the MUA. The union’s national secretary, Paddy Crumlin, was apparently chuffed to be invited by Kevin Rudd to the Lodge on Australia Day, where he was able to extract support for the proposal that the MUA be provided with details of whether workers in the maritime sector were or were not union members.

In a confidential MUA national office report of January 2008, the union spoke of its Australia-wide strategy to implement its policy objectives.

Among those objectives was the introduction of pattern bargaining into the dredging industry. It would work this way. In negotiating an agreement with dredging operators in Sydney or Melbourne, the MUA proposed to demand the same terms and conditions contained in offshore oil and gas agreements that applied to the North West Shelf. Never mind that these agreements included generous remote area allowances. The MUA intended that they be the template for metropolitan sites as well.

When deputy opposition leader Julie Bishop, whose electorate of Curtin is in Western Australia, raised this textbook case of pattern bargaining in March 2008, the MUA defended the proposal.

The Rudd government claimed it couldn’t happen because pattern bargaining was unlawful under the new Fair Work legislation. But it’s not. Labor’s new laws do not outlaw pattern bargaining, only industrial action in pursuit of it. In fact, whether particular conduct constitutes pattern bargaining is a matter for determination by the new Fair Work Australia.

Controversially, five out of six recent appointments to FWA have a union or union-friendly background. The law on the new provisions relating to what constitutes pattern bargaining is open for interpretation by FWA.

Fast forward from the summer of 2008 to the summer of 2009-10 and the MUA’s strategy is being played out to the letter.

If, through ongoing strike action, the MUA is able to bludgeon the oil and gas shipping operators to agree to a huge wage increase on the North West Shelf, it can then present that agreement elsewhere on a take-it-or-leave-it basis.

So, it seems, can other unions. Depending on how far the unions push their demands across the economy, there is a significant risk of a wages breakout and an inflation spiral of the kind that led Australia into the recessions of the 1980s and 90s.

This brings us back to the risk to Australia’s global competitiveness from union strikes.

In the 70s and 80s when the unions had virtually unfettered power over workplaces, more than 1.5 million days each year were lost to industrial action and Australia struggled to present itself as a modern economy.

Strikes in the WA mining region of the Pilbara in particular were endemic. One mine experienced almost 160 strikes in a year, with claims over issues as shallow as the range of ice-cream flavours in the staff canteen. Mine sites in the Pilbara became renowned for inflexible work practices, inflated costs, union turf wars and an aggressive industrial relations culture, which compromised productivity and trading relations.

Australian mining companies were able neither to guarantee a reliable supply of raw materials to world markets, nor to enter into long-term supply contracts with customers that required guaranteed labour supply.

Japan, which had effectively underwritten the huge upfront establishment costs to open up the iron ore industry in the Pilbara in the 60s, was our major resource customer. Notwithstanding the investment and geographic advantages, Japanese steel producers sought alternative suppliers of iron ore because they could not accommodate the delays from the Pilbara caused by the unrelenting wave of strikes.

Japan turned to Brazil and underwrote the expansion of Brazilian miner Vale’s Carajas iron ore mine complex. Iron ore exports from Brazil to Japan began in the mid 80s. The distance between the two countries was more than offset by the steel producers’ requirement for security of supply.

Vale is now the largest miner of iron ore in the world, the Carajas mine is its principal asset, and Brazil is our main competitor in the lucrative Asian markets.

It was the introduction of individual contracts under the Court conservative government in WA in the early 90s that led to a turnaround in industrial relations in the Pilbara. Employers and employees peacefully negotiated individual contracts that were mutually beneficial. Union membership declined from about 60 per cent of the workforce in the 60s to about 15 per cent. Days lost to industrial action plummeted, while workers benefited from increased wages made possible by productivity gains.

With the introduction by the Howard government of flexible industrial relations laws across the country, including Australian Workplace Agreements, introduced in 1996 (almost a decade before the Work Choices legislation was introduced), Australia was well positioned to take advantage of the mining and resource boom. Unemployment reached the lowest levels in decades and real wages increased. Australia was able to withstand the full effect of the global financial downturn.

The reality is the Rudd government is squandering the legacy of flexible deregulated workplaces by turning back the clock on industrial relations. Its full agenda, still to unfold, may prove to be the most extensive legislative re-regulation of workplaces this country has seen.

It is essential for the long-term health of our economy and our global competitiveness, that the Rudd-Gillard government not be permitted to sit by mouthing platitudes while some key unions strive to take us back, by stealth or otherwise, to the days of industrial sabotage and endless strikes.

The Weekend Australian, January 16 – 17, 2010