<DOC>
[108th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:88096.wais]
CODES OF CONDUCT: U.S. CORPORATE
COMPLIANCE PROGRAMS AND WORKING
CONDITIONS IN CHINESE FACTORIES
=======================================================================
ROUNDTABLE
before the
CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
__________
APRIL 28, 2003
__________
Printed for the use of the Congressional-Executive Commission on China
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CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA
LEGISLATIVE BRANCH COMMISSIONERS
House Senate
JIM LEACH, Iowa, Chairman CHUCK HAGEL, Nebraska, Co-Chairman
DOUG BEREUTER, Nebraska CRAIG THOMAS, Wyoming
DAVID DREIER, California SAM BROWNBACK, Kansas
FRANK WOLF, Virginia PAT ROBERTS, Kansas
JOE PITTS, Pennsylvania GORDON SMITH, Oregon
SANDER LEVIN, Michigan MAX BAUCUS, Montana
MARCY KAPTUR, Ohio CARL LEVIN, Michigan
DIANNE FEINSTEIN, California
BYRON DORGAN, North Dakota
EXECUTIVE BRANCH COMMISSIONERS
PAULA DOBRIANSKY, Department of State*
GRANT ALDONAS, Department of Commerce*
D. CAMERON FINDLAY, Department of Labor*
LORNE CRANER, Department of State*
JAMES KELLY, Department of State*
John Foarde, Staff Director
David Dorman, Deputy Staff Director
* Appointed in the 107th Congress; not yet formally appointed in
the 108th Congress.
(ii)
C O N T E N T S
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Page
STATEMENTS
Cahn, Doug, vice president, human rights program, Reebok
International, Ltd., Canton, MA................................ 2
Niepold, Mil, director of policy, Verite, Inc., Jersey City, NJ.. 5
van Heerden, Auret, director of monitoring, Fair Labor
Association, Washington, DC.................................... 9
Rosenbaum, Ruth, executive director, Center for Reflection,
Education, and Action, Hartford, CT............................ 12
APPENDIX
Prepared Statements
Cahn, Doug....................................................... 32
Niepold, Mil..................................................... 35
van Heerden, Auret............................................... 38
Rosenbaum, Ruth.................................................. 44
CODES OF CONDUCT: U.S. CORPORATE
COMPLIANCE PROGRAMS AND WORKING CONDITIONS IN CHINESE FACTORIES
----------
MONDAY, APRIL 28, 2003
Congressional-Executive
Commission on China,
Washington, DC.
The roundtable was convened, pursuant to notice, at 2:30
p.m., in room 2200, Rayburn House Office Building, John Foarde
[staff director] presiding.
Also present: Mike Castellano, office of Representative
Sander Levin; Karin Finkler, office of Representative Joe
Pitts; Andrea Yaffe, office of Senator Carl Levin; Bob Shepard,
office of Deputy Secretary of Labor D. Cameron Findlay; Susan
O'Sullivan, office of Assistant Secretary of State Lorne
Craner; Erin Mewhirter, office of Under Secretary of Commerce
Grant Aldonas; Susan Roosevelt Weld, general counsel; Selene
Ko, chief counsel for trade and commercial law; Lary Brown,
specialist on labor issues; and William Farris, senior
specialist on Internet and commercial rule of law;
Mr. Foarde. Good afternoon and welcome to this issues
roundtable of the Congressional-Executive Commission on China.
My name is John Foarde. I am staff director. On behalf of
Chairman Jim Leach and Co-Chairman Chuck Hagel, we welcome all
of you this afternoon and appreciate not only your coming to
hear and listen, but particularly to our panelists for coming
to share their
expertise with us this afternoon.
As anyone who has read our first annual report, which was
published last October, can attest, our bosses care about the
topic of corporate social responsibility. They asked us to look
into it this year in a very intensive way. One of the first
things we discovered, of course, is that not everyone agrees as
to what ``corporate social responsibility'' means.
Certainly one of the responses of the business community
has been to adopt codes of conduct to guide their own behavior
as they invest and trade abroad. There are a number of codes,
and not all of them say the same thing. So we thought, as a
point of departure, that it would be useful to have several
experts come in to talk about corporate compliance with codes
of conduct. Do they make any sense? Do they work? We have
succeeded beyond our wildest dreams by having four first-class
panelists.
I will introduce all of them at greater length, but they
are Doug Cahn, vice president, Human Rights Programs, Reebok
International, Ltd.; Mil Niepold, director of policy, Verite,
Inc.; Auret van Heerden, director of monitoring, the Fair Labor
Association [FLA]; and Dr. Ruth Rosenbaum, executive director,
Center for Reflection, Education, and Action [CREA].
We are going to adopt our usual practice of going wall to
window and begin over on this side with Doug Cahn. As vice
president of Human Rights Programs, Doug oversees Reebok's
corporate commitment to international human rights, both
through the company's business practices and through its
philanthropic endeavors. He joined Reebok in October 1991.
Doug leads the team that develops and implements Reebok's
workplace code of conduct for factories making Reebok products.
Under his direction, Reebok has been an early leader in
innovative ways to apply codes of conduct to factories owned
and operated by third parties, including the development of a
child-labor-free soccer ball factory in Pakistan, human rights
training programs, worker communication system, and assessment
tools.
Doug Cahn directs the human rights grant-making effort at
the Reebok Human Rights Foundation as well.
Doug, welcome and thank you for coming.
Let me review the ground rules here. We will let each
panelist speak for 10 minutes. After 8 minutes, I will remind
you that you have 2 minutes remaining. Any point that you can't
get to in your presentation, we will try to pick up in the
question and answer session, after all four panelists have
presented. Each staff member here will get a chance to ask
questions.
Doug, please.
STATEMENT OF DOUG CAHN, VICE PRESIDENT, HUMAN RIGHTS PROGRAMS,
REEBOK INTERNATIONAL, LTD., CANTON, MA
Mr. Cahn. Thank you very much, and thank you for giving me
and Reebok the opportunity to be with you here this afternoon.
For over a decade, Reebok International, Ltd., has
implemented its code of conduct, the Reebok Human Rights
Production Standards, in the independently-owned and -operated
factories that make its products. We do this to ensure that
workplace conditions meet internationally recognized standards
and local law, to honor our corporation's commitment to human
rights, to protect our brand reputation, and to benefit, most
importantly, the lives of 150,000 workers--nearly half of whom
live in China.
In recent years, an increasing focus of Reebok's monitoring
work has been to encourage factory workers to participate in
workplace decisions. This focus is born out of Reebok's
experience that code of conduct compliance is enhanced when
workers are involved in identifying workplace problems and
resolving them in dialog with management.
The current movement of global brands to monitor factories
has its limits. Professional monitors can do much good, but
they cannot be present in every factory, all the time. This
realization has caused us to recognize that a worker
representation model--one in which workers participate in
decisions that affect their lives--can speed our efforts to
ensure that quality workplace conditions are sustained. Among
our standards is the provision that Reebok will respect the
rights of workers to freedom of association. With worker
representation projects, we facilitate the development of this
right, even when host country laws do not fully accept the
covenants of the International Labor Organization [ILO]
relating to freedom of association and collective bargaining.
In China, as an example, we hope our worker representation
projects will give greater meaning to this provision of our
code of conduct.
In China, our worker participation programs have resulted
in elections of worker representatives in two large footwear
factories. While elections are not the only way of developing
problem-solving mechanisms that include worker participation,
they are permissible under the law in China and, as the level
of participation in the two elections demonstrate, workers view
these elections as acceptable methods to choose representatives
who can defend their interests.
Our experiment began with the facilitation of the
democratic election of worker representatives in the Kong Tai
shoe factory [KTS] located in Longgang, China in July 2001.
This athletic shoe factory is publicly listed on the Hong Kong
Stock Exchange and employs just under 6,000 workers.
In the spring of 2001, we examined the existing union
charter and Chinese labor law. Working with management and the
then-appointed union, an affiliate of the All China Federation
of Trade Unions [ACFTU], all parties agreed to a process that
would be followed and on the underlying charter that would be
its guide.
The previous union membership consisted of 19 committee
members, of whom 18 were office workers or guards. We sought to
avoid the preponderance of non-production line workers serving
as union leaders by insisting on proportional representation.
We wanted to ensure that a new union would truly represent all
workers. Communication and outreach was the next important
step. Workers needed to understand the process in order to be
able to participate fully in it.
There were a variety of materials prepared in order to post
on the walls and explain to workers what this process was
about. Open forums were critically important at that point in
order to provide the opportunity for workers to hear the
purpose and the process for the union election.
Under the rules, candidates were to be self-nominated. And
we were delighted that 62 candidates put their names forward.
The voting was conducted in secret. On July 28, 2001, each
worker received one colored ballot denoting their election
zone, and the voting took place.
On the day of the election, there were 4,658 workers in the
factory; 1,130 were on leave; 3,409 ballots were issued; 119
chose not to vote. There were 102 spoiled ballots, and 17
ballots were not
returned.
During the election, 26 workers--16 women and 10 men--were
elected to the committee out of 62 worker candidates. Of the 26
workers 15 were line workers, 7 were line leaders or
supervisors, and 4 were office staff. Of the six former
executive committee members who ran, four were re-elected.
Training was and continues to be an essential post election
activity, so that the elected representatives can have a better
understanding of what is possible under the law in China, and
to help them in the process of organizing themselves to become
an effective voice for workers.
A second election was held in a Taiwan-invested factory in
October 2002. The 12,000 workers at the Fu Luh Sports Shoe
factory in Fuzhou, China voted for 192 candidates in 7 election
zones. Although the Fu Luh factory had a union previously,
there was no charter--nothing written down about the purpose or
the structure of the union. So they had to start from scratch.
We began by bringing Fu Luh leadership to the first
factory, the Kong Tai factory, the one I just mentioned, to
view first hand the process and the outcome of the election
that had been held there a year earlier. Representatives were
then introduced to the Kong Tai charter during that visit and
subsequently relied heavily on it for the development of their
own charter document.
Workers were given the opportunity to self-nominate at the
second factory, the same as the were in the first. Open forums
preceded the nomination process and were meant to inform
workers about the elections, explaining how this was different
from the past; explaining the purpose, for instance, of the
trade union; and encouraging workers' involvement.
Fu Luh has only one small dorm that houses a few of the
factory's workforce. Most of the workers live offsite. So to
ensure that workers would attend the open forums where the
process of the elections was discussed, workers were required
to attend and were compensated for their time. Open worker
forums on this lasted for about an hour and a half.
The voting, again, was by secret ballot and took place in a
fully transparent manner. A week following the election for the
committee members, the chair and vice chair were elected from
among the committee members, and the whole process with
speechmaking and such was repeated.
Training is now the focus at the second factory, the Fu Luh
factory, so that the worker representatives can have the
benefit of the knowledge that comes with understanding how to
organize information and how to conduct a meeting and such, the
basic prerequisites that are necessary for workers to be able
to adequately represent the larger workforce. Two training
sessions have already occurred, and we expect an additional one
in the future.
The elections at Kong Tai and Fu Luh are initial efforts to
enhance the voice of workers in China in a way that will aid
code compliance and lead, we hope, to a more sustainable model
for improving workplace conditions.
These elections were fully consistent with Chinese law and
were supported by the local ACFTU officials. We were pleased
will the overall level of support we observed and we commend
all parties, including ACFTU officials, for their forbearance
and, in many cases, active support.
The guiding principles in the election process were self-
nomination; transparency; proportional representation; and one
person, one vote. Self nomination to stand as a candidate;
transparency in the process, so that all would understand it
with the same voice; proportional representation to make sure
that each part of the factory was represented in the union
committee; and one person, one vote by secret ballot.
In conclusion let me say this, to label the experiments as
``successes'' or ``failures'' is to try to put them in boxes
where they don't necessarily fit. We view them as more steps in
the right direction toward compliance that is more sustainable
and that involves workers in the process.
We are pleased that all parties have cooperated to permit
these elections to take place in a credible, transparent manner
in which they were conducted. At Kong Tai, the union is still
growing and developing. They have spent much of their time
during the last year learning how to work together and how to
be a voice for workers. They have routinely assisted workers to
get approvals to take leave. They have fought for proper
medical compensation for sick workers.
We hope these elections will demonstrate that an increase
in worker participation can be achieved in an environment where
fully independent unions do not exist. Our experience is that
there is room for movement and progress within the confines of
what unions are permitted to do today in China. It is our hope
that through this example, other multinational brands and other
factories will experiment with these and other ways to
establish
sustainable methods for achieving code compliance. In the end,
we better implement our standards when we are willing to
challenge ourselves, our factory partners and workers to find
new, more sustainable ways to achieve internationally
recognized workplace norms.
Thank you.
[The prepared statement of Mr. Cahn appears in the
appendix.]
Mr. Foarde. Doug, you are obviously an expert at this. You
have come in exactly on time, and your discipline is
commendable and appreciated.
We would like to come back to the many issues that you have
raised in your statement in the Q and A. It is really very
interesting.
Our next panelist is Mil Niepold, director of policy at
Verite, Inc., and head of the Verite New York regional office.
Verite is a nonprofit auditor of factory working conditions
around the world, and has performed over 900 individual factory
evaluations in 64 countries since 1995, including over 200 in
China.
In 1999, Mil negotiated the selection of Verite as the
monitoring body in the settlement of the Saipan lawsuit against
18 U.S. retailers. Before joining Verite, her work spanned both
the private sector, Fortune 500 companies such as American
Express, and the public sector, the United Nations, the
European Union, as well as various NGOs and nonprofits.
Mil, welcome and thanks very much for coming. Please.
STATEMENT OF MIL NIEPOLD, DIRECTOR OF POLICY, VERITE, INC.,
JERSEY CITY, NJ
Ms. Niepold. Thank you. I wanted to first thank the
Commission for inviting Verite's testimony here today. In 1973,
Zhou Enlai, Chinese Premier, said ``China is an attractive
piece of meat coveted by all . . . but very tough, and for
years no one has been able to bite into it.'' The population is
not the only part of this estimation that has changed 30 years
later. Multinational corporations [MNCs], global trading
organizations like the World Trade Organization [WTO] and even
a few inter-governmental organizations [IGOs] and non-
governmental organizations [NGOs] have clearly ``taken a
bite.'' It is Verite's core belief, and one shared by many
advocates, that respect for labor and human rights--the very
same ones that are covered by this Commission's mandate and
that China has quite often signed and ratified itself--comes
only when workers themselves are an integral part of the
process. Later, when I address examples of initiatives that
have worked or might potentially work, the direct involvement
of workers will be the common thread in each case.
So who is Verite? Over the past 8 years Verite has
interviewed approximately 18,000 factory workers for the
purpose of identifying the issues workers face in a newly
globalized economy. Verite's mission is to ensure that people
worldwide work under fair, safe, and legal conditions. Our
pioneering approach brings together multinational corporations,
trade unions, governments, non-governmental organizations, and
workers, primarily, in over 65 countries for the purpose of
identifying solutions to some of the most intractable labor
rights violations.
Verite performs social audits--as you have said, to date,
over 1,000 factory evaluations have been conducted--to analyze
workplace compliance with local and international labor,
health, safety, and environmental laws and standards. Unique as
a nonprofit in the sector dominated by private sector firms, we
go beyond monitoring to provide factories with specific
recommendations on how to remedy the problems that we uncover.
We also provide training for factory management and
manufacturers. To address the needs of workers, Verite conducts
education programs to teach workers their legal rights and
entitlements in the workplace as well as ``life skills.''
In China, this program has been our greatest success.
Verite has operated in China--our first and largest area of
operation--extensively since 1995. We have conducted nearly 200
factory audits in China over the last 8 years. In the past 2
years alone, we have done 112.
Our findings, and those of others, are very disturbing.
There are egregious health and safety violations. China's own
Work Safety Administration reported 140,000 deaths in 2002.
That is an increase of approximately 30 percent over the year
before.
Chinese media sources reported 250,000 injuries in the
first quarter of this year, 30,000 of them resulting death.
This is all sectors combined.
The ILO ranks China as the world ``leader'' in industrial
accidents. China estimates 25 million workers are exposed to
toxins annually, with tens of thousands of them injured and
incapacitated annually.
The Hong Kong Christian Industrial Committee recently
reported that after 10 years of research on the toy industry--
China manufactures 70 percent of the world's toys--a full 55 to
75 percent of toy factories are still classified as poor,
meaning 80 to 100 hour workweeks are common. The majority of
factories use triple or even quadruple books in order to mask
the under payment or non-payment of legally mandated overtime
premiums, which range from 1\1/2\ to 3 times the base wage
depending on the day.
In some instances it has taken even our most experienced
teams days of research, and interviews, and analysis to really
uncover the true extent of the problem.
Labor laws that are on balance quite robust--for example
those requiring overtime premiums, or automatic machine shut-
off devices--are in fact not enforced. Harassment and lengthy
imprisonment are also common for those who report violations,
peacefully demonstrate, or who try to associate freely.
Since 1998, Verite has organized an annual China Suppliers
Conference that brings together factory owners and managers
with government officials and non-governmental organization
specialists with the purpose of exploring issues and solving
problems.
Now to the topic for today, codes versus laws in China.
While not unique to China by any means, there is a growing
debate regarding the value of voluntary initiatives, such as
codes of conduct, versus direct legal obligations within both
national and international legal frameworks. For the purposes
of this discussion, I will not cover this debate in any detail.
However, as we are discussing codes of conduct and examples of
best practices--with the aim of achieving improved labor rights
compliance in China--I would be remiss if I did not at least
touch upon the subject.
Direct obligations, i.e., those that are placed upon
companies under international law, are certainly weaker than
those that are indirect, those placed upon them by governments.
Weaker though they may be, there is nonetheless a clear upward
trend in their being extended to multinational corporate
actors. Movements such as the International Right to Know
Campaign, and the increasing use of U.S. courts to seek redress
for perceived MNC complicity in overseas human and labor rights
violations, for example Unocal and Saipan, to name a few, using
the Alien Tort Claims Act, are examples of this trend.
So, for our purposes today, you may wonder why these
distinctions between voluntary initiatives and direct
obligations under international law are relevant? It is simply
because, to quote the excellent report by the International
Council on Human Rights Policy, we must go ``beyond
voluntarism.'' Codes are squarely in the camp of voluntarism
and while they are a useful starting point for improving labor
rights compliance, they are simply not enough to right the
``imbalance of power'' that exists today between multinationals
and most governments.
Governments do not have the resources that multinationals
do--resources that are in many places, including China, greatly
eroded by endemic corruption. Limited resources greatly hinder
labor rights enforcement, but they are not the sole issue. I am
by no means suggesting that more laws and/or more enforcement
are the only answer, but I am saying that rooting both
voluntary codes and national laws in a strong international
framework creates a ripple effect that will help enforcement in
ways that merely increasing the number of labor inspectors
cannot.
Violations of human and labor rights thrive in cultures of
impunity. Take the example of slavery. While now outlawed in
virtually every country of the world, this heinous practice
continues, particularly in countries where the rule of law is
eroded. Just as corruption of government officials and police
officers allows slavery to flourish, so too do labor rights
violations.
Strengthening the rule of law in any given country is not a
task merely for MNCs and their voluntary initiatives. This is a
task for governments. Grounding all efforts in the
international legal framework helps to achieve a few important
things. It creates a climate that favors compliance by
strengthening the effectiveness of voluntary initiatives and it
strengthens the work of NGOs and workers' advocates and
improves judicial efforts, both domestic and international.
Thus, it is incumbent upon those of us concerned with
improving labor rights on the ground in China, as elsewhere, to
use multi-layered approaches that draw on past successes. Each
approach should also be aligned with a particular ``sphere of
influence'' of the respective stakeholder. Historically, the
greatest successes have come from governments working on the
most macro-level legislative improvements, government-to-
government consultations, technical assistance programs, and
the like.
MNCs in turn have had success when they assert their
considerable leverage primarily at the supplier/factory level
but they should by all means continue to exert pressure on
governments. One of the best examples of an MNC working on
creative solutions would be the example that Doug Cahn has just
spoken about, with the Kong Tai election, but there are others.
The Institute of Contemporary Observation launched an
initiative recently, posting posters in factories and also
setting up a worker hotline to report violations. There is also
another coalition, the China Working Group, that nine
corporations have joined.
It is very common to discuss the ``sticks'' when discussing
human and labor rights. But, I find the ``carrots'' to be of
greater interest. The examples cited above share a few things,
most notably the inclusion of the workers in the process.
I wanted to close with a quote from Mao Zedong. Speaking of
the population of China, he said, ``On a blank sheet of paper
free from any mark, the freshest and most beautiful pictures
can be painted.''
The picture for labor rights in China would have to include
the following: harmonization of the multiple codes of conduct;
a greater degree of responsibility on the part of
multinationals for the havoc they wreak with their ``just in
time'' delivery and price pressures; passage, or modification,
of implementing legislation required under China's ratification
of the International Covenant on Economic, Social, and Cultural
Rights [ICESCR]; and finally, a direct contact mission from the
ILO.
This would be a very beautiful picture indeed. Thank you.
[The prepared statement of Ms. Niepold appears in the
appendix.]
Mr. Foarde. Thank you very much. Also lots of food for
thought and for a subsequent discussion in the Q and A.
I would like to continue now with Auret van Heerden. Auret
represents the Fair Labor Association. The FLA is a unique
collaborative effort to improve working conditions in factories
around the world by working cooperatively with forward-looking
companies, NGOs, and universities. The FLA has developed a
workplace code of conduct based on ILO standards, and has
created a practical remediation and verification process to
achieve these standards.
Auret van Heerden has a long history of labor activism in
South Africa and is also an official of the International Labor
Organization on loan--if I understand correctly--to FLA. It is
a great pleasure to have you today, and thanks for coming.
STATEMENT OF AURET VAN HEERDEN, DIRECTOR OF MONITORING, FAIR
LABOR ASSOCIATION, WASHINGTON, DC
Mr. van Heerden. Thank you. I would like to just start off
just setting up what codes of conduct are not.
Codes of conduct are in no way, shape, or form a
replacement or a substitute for national labor laws and their
enforcement. Codes of conduct can never replace workers'
organizations and collective bargaining.
The challenge we face is that, in many countries where FLA
participating companies source, you do not have adequate
enforcement of labor law. You do not have adequate penetration
of trading and organization. You do not have collective
bargaining agreements to regulate terms and conditions in the
workplace.
The reasons for that are varying and many, and we do not
have time to go into them now, but suffice it to say that we
are working in a global marketplace which is increasingly
unregulated. Right now, I see that trend still going in the
wrong direction. This is despite the very noble efforts of the
ILO to reinforce national labor administration to build up
employer and worker organizations around the world. This is
despite the fact that the global marketplace is subject to
evermore public scrutiny by the media. Consumers are better
informed than ever before.
Yet national level labor administration systems and labor
relations systems continue to decline. There are a few rays of
hope out there. Indonesia, for example, has undertaken major
labor law reforms in recent years. But, those efforts are
really only in their infancy, and in some cases, are throwing
up new problems that we have to deal with. In Indonesia, for
example, we have a massive proliferation of trade unions,
creating chaos and confusion.
In China, we have a central government which is very aware
of these challenges. In my previous work with the ILO, the
Chinese Government explicitly asked the ILO to come in and help
it reform its labor relations system in its special economic
and export processing zones. They are also cognizant of the
fact that they don't control the provinces and the cities.
These are tremendous barriers in the application of these labor
laws, and in many cases, non-application.
Mil has already made reference to the factor of corruption
which undermines the consistent application of labor law in
China.
The second challenge that the FLA participating companies
face is that of global competition, because what you have in
the global market place right now is a consistent demand by
consumers for a cheaper product. Weave tailors shave the
margin. Those pressures go all the way down supply chain.
Everybody wants to reduce the price being paid for the article,
but also to have shorter and shorter lead times, and quicker
and quicker delivery.
Those price pressures accumulate on the suppliers at the
bottom of the chain. Since many of them don't have the
management capacity or the management tools to deal with them,
they end up working harder rather than smarter. So, again,
global competition in some ways is pushing factories into non-
compliance.
FLA participating companies, together with the other
stakeholders in the FLA, have come together and have tried to
address this through codes of conduct and internal and external
monitoring. I want to stress that it is not the monitoring
itself which is designed to achieve the compliance. Independent
monitoring or even the internal monitoring is simply a
measurement of the progress that the brands have made in their
internal development work in those factories.
Brand name companies are going back to those factories
weekly, monthly, many times a year to not just identify the
compliance issues in those factories, but to actively work with
them on remediation programs. The monitoring conducted by the
FLA is an assessment of the efficacy of those programs.
Doug Cahn spelled out the pioneering initiative they have
in China to elect worker representatives. That is one example
of how brand name companies can respond to a designated
problem, namely freedom of association in China. Their
monitoring is not to repeat that there is a problem with
freedom of association, rather it is to help a company like
Reebok assess where it has come in its remediation program and
to help it improve, refine, or focus those remediation
programs.
This is where I think that the FLA program becomes
interesting, in two senses. One is that the brands are inside
China. Unlike many other commentators and critics who are by
definition outside, the brands are present inside China. They
have access like you wouldn't believe to thousands of factories
in China.
The second point is that they are remediating. They are
concretely, practically, in a nuts-and-bolts fashion bringing
about changes.
However, these efforts, as concerted as they, are face the
same limitation that every labor administration system in the
world faces--even here in the United States--you never have
enough labor inspectors, or enough labor officials to go to
enough factories on a frequent enough basis to bring about
compliance. Compliance has to be something generated
internally, organically within those workplaces. So, we need to
somehow use this effort to kick-start, to catalyze processes in
those factories that will allow them to regulate the terms and
conditions.
The ILO in its 90 years of existence has always promoted
worker organization, consultation, negotiation, and dispute
resolution as a most effective way of doing that. I think that
it is, to date, still the best option that we have. Again, the
KTS example is an excellent one of how that can be
progressively introduced in a context like China.
There are a number of other initiatives which we can work
in parallel with, or in concert with in China--young labor
lawyers are taking up cases of industrial accidents, seeking
compensation under Chinese labor law--a very comprehensive
law--seeking compensation for workers who are injured; young
labor activists doing workers' education so that they can elect
their own representatives; groups working with young women
workers, and many of the problems of discrimination and abuse
that they face, particularly young migrants who come from far
away.
There are initiatives within the group of Chinese employers
who are trying to grapple with these international standards
that they are now being held up to, and who are trying to
develop their own policies, and their own management tools to
be able to meet these standards. It is quite a shock to go to a
Chinese footwear factory, and one of the first offices you come
to has a sign on the door saying ``Human Rights Officer.'' Now,
that is clearly under pressure from brand name companies and
codes of conduct, but it is a
response. And it is a response which can be encouraged, can be
guided, and which through capacity-building activities can
start to contribute to that indigenous, organic process that we
need to catalyze positive action within these factories.
The ILO clearly has a vital role to play in this as well,
both at the central level, in helping the Chinese Government
continue its labor law reform program, but also more
importantly in the capacity building sphere. If you take a
problem like hours of work, which Mil referred to, we went in
initially and insisted on the maximum of a 60-hour work week.
Factories simply could not cope with that. Competitive
pressures required a lot more than that. Workers wanted to work
a lot more than that in order to maximize their earnings.
So, as with any enforcement system, if you place the bar
too high, people are obliged to evade it. So, they show us
false books. If you then try to deal with that problem
structurally, you realize that, in effect, you need to re-
engineer those factories for them to have any hope of observing
the 60-hour work week. That is still a long way short of
Chinese labor law.
At the moment, there are very few organizations and
institutions that can go in and do that kind of work in China.
Brand name companies can certainly do it factory by factory,
but it would add a lot of horsepower to that effort if the ILO
could mount a far larger program with its partners in China.
Teach factories how to schedule or how to re-engineer their
production process. Teach them how to organize shifts, which a
lot of them are not doing properly at the moment.
We can then monitor that process to ensure that it is
making progress, and to ensure that those abuses are gradually
being reduced. That combination of initiatives, the ILO working
together with its partners, the Chinese Government, employers,
trade unions, brand name companies, and monitoring
organizations like the FLA, all of that requires resources
which are very scarce at the moment. American brand name
companies are going to China and investing in companies that
are unknown. It is a unique situation. Brand name companies are
helping workers form worker organizations. It is a unique
situation, but then China is a unique environment in which to
be working. So, I think for the time being it is justified, and
is the most appropriate response we have at the moment. Thank
you.
[The prepared statement of Mr. van Heerden appears in the
appendix.]
Mr. Foarde. Thank you very much, Auret. Again, lots of meat
for subsequent conversation.
Let us go on. Let me recognize Dr. Ruth Rosenbaum, founder
and executive director for the Center for Reflection,
Education, and Action [CREA]. The center is located in
Hartford, CT. CREA is a social, economic, research, and
education organization, unique in that it starts its analyses
of social and economic systems from the perspective of their
affect on the lives of the persons made poor or kept poor.
In addition to educational programs, CREA offers a multi-
faceted service for individuals, organizational investors, and
investment managers who are committed to socially responsible
investment. Ruth is associate professor for research at the
Labor
Education Center at the University of Connecticut. She is also
the coordinator of the New England Coalition for Responsible
Investment, and has served as co-chair of the Global Corporate
Accountability Issue Group at the Inter-Faith Center on
Corporate Responsibility since its creation.
Ruth is the creator of the Purchasing Power Index [PPI], a
trans-cultural measurement of the purchasing power of wages,
used to determine what constitutes a sustainable living wage.
Ruth, thanks very much for coming. I appreciate you sharing
your expertise with us.
STATEMENT OF RUTH ROSENBAUM, EXECUTIVE DIRECTOR, CENTER FOR
REFLECTION, EDUCATION, AND ACTION, HARTFORD, CT
Ms. Rosenbaum. Thank you. I asked either to be first or
last because the way we look at things at CREA really has to do
with looking at things on a much more systemic basis. That is
the way I would like to pose my comments this afternoon.
When we look at codes of conduct in China, we see their
functioning as parallel to what has happened in every other
country in which we have been involved. My comments are going
to be based on that cumulative knowledge, and then we can
specifically apply it to China.
The first thing I would say is there is a major question
that needs to be asked, and that is why a company is in China
in the first place? If the work situations are so bad, if the
labor situations are so bad, if they violate, from the
beginning, codes of conduct that corporations have, why are the
companies there?
We need to be honest and acknowledge that underneath all
the other issues affecting the decision of companies to be in
China, there is the essential issue of cost of production.
Companies are in China because the cost of production is
cheaper.
When we examine the effect of this low cost of production,
we see several related issues: First, the factory seeks to pay
the lowest wages possible.
Second, the brands placing the orders seek an ever
shortening turn around time, that is, the time between placing
the orders and receiving the orders.
Third, in order to fill orders in the shortened turn around
time, extended overtime becomes the norm within factories. And
workers, seeking higher income, are often willing to work the
extended overtime simply because they need more income than
their basic wages can provide.
To this gets added the ``just in time'' production system
in which companies keep inventory to the lowest limit possible
and then place orders when they need an item, again demanding
the shortest turn around time possible.
There is this global reach for what we have said is a race
toward the bottom in terms of wages. It is almost impossible to
talk about raising wages above minimum wage. The corporations
will say to us, ``Well, we do what is legal.'' And we reply,
``Well, we would expect that you would do what is legal.'' But
that legal requirement is a floor, and not a ceiling.
We have asked workers in many, many countries, if you were
paid more, would you want all of the overtime, and they say no
because they have lives. They have lives with their friends.
They have lives with their families. They have lives with
something outside of work.
And so, again, the question to the corporations is, why are
they in China in the first place?
The second issue is where does the power exist to bring
about change? It should exist in the governments. If you read
the paper that I presented for the meeting today, we talk about
government extensively. Somehow, we have created a system where
brand names have produced codes of conduct, and from that we
are asking them to come up with systems of compliance.
The purpose of the code of conduct should not be just
keeping the brand name out of trouble. For many corporations
having a code of conduct and doing some kind of minimal
compliance is simply to get the news media off of their back,
and to get shareholders off of their back.
The purpose of the code of conduct realistically should be
bringing about change for workers. However, that purpose is so
low on the ladder of priorities for many corporations, that it
doesn't even seem to exist. We have seen codes take the place
of laws, and we believe that is absolutely critical that we
take a look at this.
Somehow the production system in most industries has
concluded that corporations bear the ultimate responsibility
for the conditions under which their products are manufactured
or assembled. We then expect them to become the creators of the
standards for the factories and the enforcers of those
standards. In other words, we have handed over to corporations
the role of society and the role of government: making and
enforcing standards of laws to the corporations we are holding
accountable. It is a shift in power. It is a shift in
responsibility. It is a shift in accountability. We believe
that that is really dangerous for society as a whole.
If you go into most factories, you will see a multiplicity
of codes. Some managers will say to us, which code are we
supposed to be obeying? The highest? The lowest? Depending upon
who is going to be inspecting us this week, or this month? Are
standards supposed to change from day to day, or week to week?
Who decides? It is an absolutely bizarre system.
Out of this we have created all kinds of systems of
certification of factories, monitoring, inspecting, etc. The
problem with all of that, even though some people are doing
heroic work in trying to improve the conditions in the
factories, is that the power comes from outside the factory and
outside the country. The money comes from outside the country,
and outside the factory. When it is all over, the power and the
money leave the factory, and leave the country.
So, we are not transferring power to the local community.
We are not transferring power to the factory to really bring
about the change that is expected.
For us at CREA, there are three central issues that we use
to evaluate whether or not a code of conduct and whatever
enforcing systems are in place, whether that factory or code is
succeeding. The first measurement for us is absolutely basic,
what has changed for the workers? Although it is a simple
question, this should be the reason why we are looking at
codes. It is the situation in the factory that we are trying to
address. And we believe that it is absolutely critical that we
see these codes and the situations they are trying to address
not as an abstract thing, unchanged over time, but rather as
the day-to-day reality that workers have to work within every
single day of their lives around the world.
The second measurement that we use is how is the power of
enforcement transferred back to civil society and other
components of society in China and in other countries? If all
the inspecting, certifying, all the monitoring, and all of the
enforcing continues to come from outside the country, it will
continue to be a system of putting out fires, and of presuming
that if a small percentage of factories are OK, then they all
are. There are simply not enough monitors and certifiers in the
world to take care of all the factories that have to be
monitored and certified.
And then the third measurement we have is: where does the
money and the power attached to the money accumulate as a
result of all the inspecting, and certifying, and monitoring?
How do we have a transfer to the local communities so that they
can govern themselves? We do that through education of workers.
We do that through the education and the sharing of power with
civil society. We also have to do it with the money that is
being spent on all of this.
If you talk to monitoring groups or groups that are trying
to do worker education around the world, one of the biggest
problems they have is where do they get the funding to survive?
I would suggest to you that the majority of that funding is
being absorbed by organizations in the United States. We need
to be honest about that. We need to learn to share this out.
Looking at the specifics of China today, we would like to
suggest the following: First, that there is a need to start
with recognition of the inherent dignity of each human being,
so that workers are seen not only in terms of what they are
able to produce.
Second, the need to look at ways of strengthening civil
society in China. CREA presently is collaborating with the
Institute for Contemporary Observation [ICO], and transferring
our knowledge and our ability in terms of measuring a
sustainable living wage to them so that they will be able to do
that in their community.
Third, we believe that the CECC, corporations, any group
working on the issue, again, needs take a look at why companies
are moving to China. What is it that they gain because of the
labor situation there as compared to other countries?
Fourth, there needs to be a greater analysis of Chinese law
related to labor, including occupational health and safety,
wages, overtime, freedom of association and right the to
organize, and systematic ways of addressing these. Again,
coupled with the ILO standards that we have heard spoken about.
Fifth, we need to figure out a way to make it beneficial
for factory managers to adhere to the standards. We have got to
move from it being a punitive system to being a reward system.
Sixth, how do we provide support for collaborative efforts
between corporations to enhance their power to bring about
change as well as to create an equal standard? Now we see that
happening in the apparel industry, and somewhat in the footwear
industry. But we have the automotive industry, the electronics
industry--there is not an industry out there to which this is
not applicable. Somehow, they are not even on the radar screen
in terms of the work that we are all doing.
On the last level, how do we get investors, the investment
community including Wall Street and the other markets around
the world to recognize that raising working conditions is a
beneficial thing even if the costs of production are higher?
How do we communicate that the continual drive to lowest cost
of production
contributes to the violation of the standards of performance
and behavior that we are trying to raise in these codes?
I don't want anybody to think that we believe that any of
this is simple. If there is anything that I have learned in
doing this work, and it is over a decade that I have been
involved in it, it takes at least 10 times longer to do almost
anything than the time that--see everybody is smiling up here--
at least 10 times, maybe 20 times longer. But I really believe
that unless we continue at it, we are on a downward spiral from
which there will be no return.
I think we have to salute and support the efforts of those
who seek to promote, enforce, and report on codes of conduct
and compliance. Even as we say there needs to be a better
system for bringing about change. None of these efforts should
be taken lightly. It is hard work. It is important work, and
hopefully, we will be able to learn from the experiences of all
of us who have worked and continue to work on these issues that
these codes of conduct seek to address, and then to devise the
methods for systemic change that remain before us. Thank you.
[The prepared statement of Ms. Rosenbaum appears in the
appendix.]
Mr. Foarde. Ruth, thank you very much.
And thanks to all four of our panelists. Let's take a very
brief breather and let me announce that our next staff-led
issues roundtable will be here in this room, that is 2255
Rayburn, on Monday, May 12 at 2:30 p.m. Our topic will be
public health in China. We will be looking at SARS, the
transparency issues, and other issues that are quite current.
So, I hope you will join us.
If you have not signed up yet for our roundtable and
hearings announcement list on our Web site, we would like you
to do that. Please visit us at www.cecc.gov.
I would like to go now to our question and answer session,
and normally it is the prerogative of he who is chairing to ask
the first questions. But I think today I am going to defer to
my friend and colleague Bob Shepard from the Department of
Labor to get us started, and then we will go around, and I will
get a chance a bit later. Bob, please go ahead and ask a
question or two. We are going to give you 5 minutes to ask a
question and hear the answer, and then we are going to give
everybody a chance to do as many rounds as we can before our
time is up.
Mr. Shepard. Thank you, John. I would like to thank the
members of the panel for very informative, very useful papers
and presentations.
In describing the work that is going on, there is a sense
that we are seeing what might generally be called the
demonstration projects, and that we are hoping these projects
will in some way spur the Government of China into some sort of
action. I would like to ask if you could discuss or describe
what the attitude to date of the Chinese Government has been
with regard to these projects, for example, have there been
barriers to entry to your groups' coming in? Have they required
you to register? Has there been oversight of the activities of
the monitors? Has there been feedback? Has there been pressure
against you, or encouragement of your activities?
For example, I was curious. Mr. Cahn noted that you are
pushing the principle of freedom of association within the
workplace, whereas this is obviously not a principle that has
received high regard nationally in China, and Ms. Niepold
discussed how they had to dig very hard to get a lot of the
data. This suggests some type of a conflict, and perhaps you
could describe the relationship you have had with the Chinese
Government or the authorities? We may have different answers
from the provincial and the national levels.
Mr. Cahn. We have received cooperation and to a certain
extent, collaboration from local and provincial authorities as
we engaged in the two election experiments that have occurred
to date. All parties at the local and provincial level were
aware of what we were doing. These are large footwear factories
where Reebok buys 100 percent of the capacity of those
factories. We undertook these experiments in these two
factories because we felt we had strong relationships with both
management and workers in these facilities and it would be the
ripest environment in which for us to attempt this experiment.
As I say, we were fully open with the local authorities. We
consulted through the process.
In the case of the first factory election, at the Kong Tai
factory, the local ACFTU officials were aware and not
integrally involved in the process. By contrast, the ACFTU
officials at the second factory were much more involved in
every aspect of the election process. So, slightly different
levels of interaction, but one where there was a general sense
of cooperation. People had different points of view from time
to time, and there were lots of meetings, and more meetings,
and more meetings, but at the end, there was a consensus on how
the process should go forward.
We were very complimentary of that, and hoped that as a
result that we would have the ability to experiment with this
in other factories. We certainly are aware of the fact that
others in government circles are knowledgeable about these
experiments.
Ms. Niepold. I would say also that Verite's experience in
China, as I said was our first country--China was actually our
first country because our executive director and founder was
actually working in China as a sourcing agent when she had the
wonderful idea to found Verite based on her experience in
factories.
I should say that in the beginning, it is clear that--when
we say ``government,'' similar to what Doug has said, it means
much more regional, municipal, and local level officials. I am
not referring to national officials when I say ``government,''
and by and large we were clearly not on their radar screen, but
3 years later when we had our first China supplier's
conference, we were. You said collaboration; we were actually
being spied on, and by the second year, we actually were
somewhat more welcomed and had government officials present as
panelists. So, that was quite a shift.
You asked the question of registration, and we are all
clear that trade unions are not really a factor in China, but
we should also be clear that NGOs really aren't either. You
said it quite well. We have not been required to register. It
is something, obviously, that has crossed our mind, but for the
purposes of right now, we are not a registered NGO in China,
because we simply cannot be one. But we have not been hindered,
I should say, at all in our work. Our work has been very
respectful. It is conducted only by Chinese in China. There are
no Americans in China running these programs, and as such, I
think it has been culturally and locally relevant and
appropriate and has been quite successful.
The one last thing I would say is the government officials
have run the gambit from very clear that they were bribed, to
hiding the fact that they were bribed, to equally clear that
they were unaware of what the laws were that they were supposed
to enforce, to very clear that they were doing a very good job
and that they were enforcing the laws. That level of frankness
allowed us to actually have a great deal of success. And some
of them have actually said that we were helping them do their
jobs by informing them of what was really going on in
factories. Thanks.
Mr. Foarde. Even though we have run out of Bob's time
allotment, I think this is such an important part of the
question that if either of you or both of you had a comment on
that question, please go ahead.
Ms. Rosenbaum. Just one quick thing. I know that most of
the time that we have been in the factory, it has really been
because a corporation has facilitated entrance into the
factory. I do know that there is a project that we are working
on that involves several corporations, and it will be a
collaborative project between the corporations. They are
seriously concerned about whether the Chinese Government will
permit it. So, since they are the ones who are doing the actual
dialog with them, that just says to me there is some concern
both on the local level and on higher levels.
Mr. van Heerden. I would just add that we have maintained
contact with the Chinese Government at the central level and
also in the provinces, and with the ACFTU and the China
Employers Confederation [CEC]. All three have expressed
tremendous interest in this work because they are well aware of
the problem and they would like to participate. They do want to
have a plan for improving working conditions in China.
I'll just repeat one quote from a Chinese Government
official who said to me that he was really worried that the
poor conditions prevailing in factories and the labor relations
problems arising from them could eclipse China's labor cost
advantages.
Mr. Foarde. Very interesting. Let's go on, and I should
have said when I recognized Bob Shepard that he represents
Deputy Secretary of Labor D. Cameron Findlay, one of our
commissioners.
And now I recognize Erin Mewhirter from the Department of
Commerce, who represents Under Secretary of Commerce Grant
Aldonas, another one of the members of our Commission.
Ms. Mewhirter. Thank you. Code of conduct monitoring is not
new. Has there been any quantifiable improvement in overall
working conditions in China during the 10 years that auditing
and corrective measures have been ongoing? And how should
progress be measured?
Mr. Foarde. Anybody that wants to step up to it, or all of
you if you would like to.
Ms. Mewhirter. I apologize. Yes, anyone.
Mr. Cahn. I suppose to give a full answer to that question
would take the next day and a half.
Ms. Mewhirter. OK.
Mr. Cahn. I know in our own work that there have been
considerable improvement in factory workplace conditions over
the last decade that are demonstrable and they are meaningful
in terms of workers. Factories today--in particular, I am
thinking of the large athletic footwear factories that make a
great many Reebok shoes--these factories are healthier and
safer. There are fewer volatile organic chemicals in the air.
There are better communication systems between workers and
management. There are fewer instances of harassment and abuse.
Nonetheless, there are as there are in factories anywhere, many
things that can be improved, and this is a continuous
improvement model.
So, we have dozens of programs at play in Chinese factories
today to continue the model of improvement that we have been
able to put in place in the past decade. As to how to measure?
It is an extraordinarily difficult question, because we are
talking about a continuous improvement model, not an absolute
model. Some things are easier to measure than others, and on
those things were measurement is possible, it is possible to
look at international norms, there are many standards that
exist in the world. When we measure organic solvents and what
is too much of a particular chemical, for instance, there are
many internationally-recognized models. Both here in this
country and in Europe, for instance, when it gets to the issue
of discrimination, it becomes much more difficult, and what we
are looking for are systems in a factory that can find the
problems and solve them quickly so that these problems don't
become larger problems or systemic problems that never seem to
go away. So, there are certainly ways to do it, and they are
difficult.
Ms. Niepold. I would say that--I will take the second half
of your question first. Verite does measure and track the
degree of improvement very closely, but to answer your
question, we--as Doug has said--there are some things that are
very hard to measure. So, our working benchmark is actually not
at all scientific. It is the degree to which workers tell us
that we have improved their lives.
Now, that is obviously not scientific, and it also is very
messy when you get into things like voluntary overtime. When a
worker tells you--the point was made earlier by the way the
workers will say they have friends, they have lives, and the
sad truth is if they are a foreign contract worker, our
experience has been that they will say they do want excessive
voluntary overtime. So to your point, that is the measurement
that we use.
But to the other point, which is have things improved? Our
experience is that things do improve in, unfortunately what we
would call, the easier places. In other words, we have seen
improvements in health and safety. We have seen improvements in
posting codes of conduct. We have seen improvements in posting
laws. We have seen improvements in toilets and bathrooms, and
breaks. But guess what that means? We have seen aggravation in
the most serious issues.
In the case of China, the top three issues--and I should
also point out the State of California recently hired Verite to
do a major undertaking to measure just this, and what we have
found in the case of China, which came in last place of 27
emerging markets, was that the top three issues remain the top
three issues, and we have seen very little improvement; those
top three issues being freedom of association; health and
safety; and wages and hours.
Mr. van Heerden. Our monitoring program has only been going
for 1 year, in fact, the Fair Labor Association program. So, it
is very early. We are obviously building on the work of a
number of our participating companies who have been at this for
a lot longer, but it is too early to talk about trends.
What I would support is what the previous speakers have
said, and that is that under occupational health and safety and
conditions of work areas, it is a lot easier to identify the
problems and to remediate them. When we look at areas like
freedom of association, discrimination, and harassment and
abuse, it is both harder to detect the problems, to measure
them, and to remediate them. And it is a process of continual
improvement.
The other point I would just make, is the need for a
critical mass. The FLA has 13 brand name companies out there
doing this. There are some very big buyers who are not at any
of the tables right now. With the best will in the world, they
end up undermining our efforts, because there is no
coordination.
So, if you just take volatile organic compounds that was
just mentioned, if the three or four of the biggest importers
of footwear from China could get together and come to an
agreement on that basic standard and on how to remediate it, we
could make a huge impact. So, there really is a need for
coordination here.
Ms. Rosenbaum. Just to add to that quickly, there is a big
difference between the right to organize, and the right that is
supposed to go with it, the right to engage in collective
bargaining. We have the beginnings of the right to organize. We
are waiting to see the ability of workers to engage in
collective bargaining.
The second piece is that it depends on the industry. The
really short answer is that it depends on the industry. The
more brand names that you have in the factory, the harder it is
to bring about change. In the footwear industry, because many
times you have one single brand name in the factory, they have
tremendous amount of leverage. In other industries, toys,
apparel, etc., where you can have 5, 10, 15, 20 different brand
names there in the course of the year, all with different
standards, it is very hard to bring about the change.
Mr. Foarde. Really useful. Thank you. I would like to
recognize our friend and colleague, Andrea Yaffe, who
represents Senator Carl Levin.
Ms. Yaffe. I have a question. I think this was somewhat
touched upon, especially by Ms. Niepold. My question is how has
the social climate changed since the passage of permanent
normal trade relations [PNTR] and China's accession to the WTO?
Has there been more pressure to change and to open up the
transparency of their economy--compared to the standards of the
rest of the world? I mean in the last 3 years, has there been
any improvements?
Mr. Cahn. You know, it is our experience that there has
been improvement, but I would say that the driver for that
improvement has been the ongoing relationships that we have
with those independently owned and operated factories in which
we place orders, as opposed to the passage of PNTR or some
other external development. Perhaps that helps define for you
where that nexus of leverage or power is and our ability to
educate a group of people about a different way of thinking
about managing people. People, in this case, who make shoes or
apparel. But that is certainly where we have had our almost
sole focus and where we see the difference, it is based on
those sets of relationships and where we are able to get people
in a room and began to establish a common shared set of values
and expectations over what workplace conditions should be.
Ms. Niepold. I was actually going to echo what Doug said. I
wouldn't--it almost feels a little too soon to say what PNTR
might have done with regard to such a vast and complex country
as China. I think all of the various and myriad facets of free
trade, however, would definitely begin to start, I think,
changing things a little bit over time, when you look at all
the various issues around trade agreements in general,
accession to the WTO, things like that, I think all of those
are drivers toward a greater degree of transparency and
openness.
But, truthfully, I think--it is just an educated guess--I
am actually thinking that the greatest degree of change in
China has occurred by the enlightened self-interest of managers
who have seen the truth is a tired worker doesn't make a good
product. They don't make it at a good price. They don't make it
on time. They don't make it in a good quality way. Where we
have seen sane and rational--as a client of mine calls them--
overtime policies, we have seen improvements in all of those
bottom line benefits. So, I think that those areas are where we
are seeing the most change.
Mr. van Heerden. I would emphasize two different ways of
looking at that. From the center, Chinese Government officials
told me things like ``We are joining the WTO, the global
market, now we have to play by the global rules.'' They are
turning to organizations like the WTO and saying teach us what
those rules are. Trade unionists are saying the same thing to
us. They are saying ``We are dealing with the market economy
now, we need to learn a new way of operating that is
appropriate to the conflict of interest that you have in a
market economy.''
From the ground upward, looking upward, I see workers
striking in greater, and greater numbers than ever before over
issues like late and non-payment of wages. Or the restructuring
of state-owned enterprises and control over their severance pay
and benefits.
I see crime emerging for the first time, that I never
concerned myself with in China before. I unemployed workers who
have been laid off from state-owned enterprises and who can't
find jobs elsewhere, manifesting many forms of social
dysfunction: drugs, alcohol abuse. I see violence in the
streets. I see domestic violence. Signs that society is
undergoing a painful transition with a lot more bubbling under
the surface and with breakthrough erupting periodically. The
Chinese Government is extremely aware of this.
Some Chinese Government officials have said to me that they
will not make the mistake that Gorbachev made in the Soviet
Union--China will not fall apart like the Soviet Union. That
has implications as to the social climate.
Ms. Rosenbaum. Just one quick thing to add to that. In the
past workers migrated, worked in the factories for a number of
years, and then went home. There is a major transition that is
taking place, or that has taken place, and it is finally being
recognized. That is that, they are not going back. They are
staying. So, the whole social service dimension that needs to
be created as we have larger populations in the areas where the
factories are, and a decrease in the number of jobs to handle
both the workers that want to stay, and the workers that are
going to migrate, this is yet to be dealt with.
Mr. Foarde. Thank you very much. I now go on and recognize
our colleague, Susan O'Sullivan, who represents Assistant
Secretary of State Lorne Craner. Do you have a question for the
panel?
Ms. O'Sullivan. One. I think two of you, Ms. Niepold and
Dr. Rosenbaum, talked about the efficacy of a carrot or reward
system, at least, ensuring or encouraging compliance with codes
and laws. I am wondering what you had in mind, and what you've
used that you have found to be effective?
Ms. Rosenbaum. Well, I am not sure what exactly I have in
mind. I do know that in country after country, and certainly in
China as much as any place else, fear of punishment doesn't
bring about long-term change. It only brings about immediate
change. The many levels of hiding of records--I don't even know
how we can really know what is happening. There are so many
levels of hiding.
So, what that says to me is even though we might be
bringing about some small change in these heroic efforts in a
few factories, we are not changing the system. It seems to me
that the change needs to take place in a number of ways.
First, there has to be a reward system, probably a
financial reward because it seems to be the only thing that
works. But the other is that there is a whole component in the
production system that we don't pay attention to very much.
That is the companies that own the factories. They are just
almost invisible in this whole system. Those of us who work in
this system know about them, but they don't get publicity.
Nobody says to them, ``What are you doing.'' Or demands that
they can bring all the factories that they own, or where they
place orders, up to standards.
We have to find a way to really involve them--the managers,
the owners, the vendors--and also to reward them, and it is
probably going to have to be financial. No, the question is,
``Who ends up paying for it? '' And I think that one of the
things we need to make sure of is that it is not the workers on
the bottom. In other words, that there is not further squeezing
both of the factory managers and of the workers. That somehow
bearing the cost of that is really throughout the system. That
is going to involve Wall Street, and probably the factory
owners. Maybe even before the factory owners. They are the
hardest ones to bring to the table.
Ms. Niepold. I think also the example I had in mind was
possibly more organic, what I alluded to earlier, which were
the gains in productivity and the presentation of all of these
myriad labor rights compliance issues in a more positive
framework. And it is odd how psychology works. But even when
the brands are coming less at the punitive level and more that
``We understand that we are partly to blame for this. By the
way, how can we work together. Who can we bring in? ''
The increasing influence of multi-stakeholder approaches,
as Ruth made the point earlier, certainly complement
initiatives that are done at the ground level involving
community activists in their own communities, CSOs, NGOs, and
the like. All of these rewards are not only the nuts and bolts,
but there are also some psychological rewards that have gone
along way toward shifting this
problem.
But the specific things that I was really thinking of were
increasing emphasis on the bottom line benefits of doing this.
There are--here and there--somebody's presentation here today
mentioned it. I think it was yours, Auret--the World Bank study
about the gains from freedom of association. There was a very
interesting study done last year by Princeton that looked at
the Bridgestone/Firestone situation, and noticed that the
shoddy tires were made during a period of labor strife.
There are my favorites. I have these five anecdotes that I
trot around in my head, but the degree to which we all can
begin to really, really crack this nut and say better factories
make better products. Can we approach it from that angle and
less beating them over the head with a stick kind of approach?
Mr. Foarde. I would recognize our friend and colleague,
Mike Castellano, who works for the other Levin on our
Commission, Congressman Sander Levin. Mike.
Mr. Castellano. Thank you, John. I thank you all for being
here. I apologize for being late. I was at another engagement.
Actually, I just want to make a quick comment, following up
on something that was just said, which is that we have seen,
that is, the Ways and Means Democratic trade staff has seen
personally, the impact that good labor relations can have on
factories. We
visited Cambodia about a year and a half ago, where there is an
innovative agreement in the textile sector. And one thing that
even factory managers would concede is that the increasing
rights and a better organized labor force actually resulted in
less friction with workers and less down time. So, I definitely
agree that that is borne out in practice, at least in my
experience.
I want to ask a question, though. And I apologize that I
wasn't here when the first several questions were asked, so if
I am repeating something, answer whatever you feel that you
haven't said that you want to say. But, if I am not repeating
something, please answer the question, which is, I think my
boss is of the view that out of all the core labor standards,
the right of association is probably the most important one,
because it is the one through which the other standards can be
realized. If the workers can organize, they can make sure there
is no child labor, forced labor, and ensure minimum wages and
healthy working conditions, et cetera. I just wonder. The
Commission's responsibility is to make recommendations later in
the year to the Congress, basically, on what Congress can help
do. Assuming that right of association is the most important
right, or the key right, what would be the single best way for
the U.S. Government, perhaps working through the codes of
conduct or your organization to help promote that right in
China?
Mr. van Heerden. If I could kick off on that one. This is
what--I started an ILO project to do this in China in the
special economic zones to improve labor relations. What we
realized was that there were many structures provided for in
Chinese labor law which were dormant or ineffectual. For
example, every factory has to have a dispute resolution
committee. That offered a tremendous vehicle for education,
capacity building and point proving, consultation, negotiation,
and dispute resolution in the factory.
Many, many factories have ACFTU branches. Now, whatever we
think about the ACFTU, like any big organization it is not
monolithic. I came across in many factories excellent ACFTU
representatives who were really grappling with the problems
that they were facing, downsizing for example. Nothing in their
Chinese trade union education had prepared them for that. They
were desperate for examples from Western countries.
So, I think there are vehicles. There are institutions with
which we can work to promote capacity building, new skills, new
perspective, new approaches to the labor relations issues that
they are
facing. The lower down the chain you go, the greater those
opportunities become. If you reached out to the Guangdong ACFTU
provincial branch now, you would find a group of people who are
looking the market economy square in the face and saying, ``How
in the world do we deal with this? '' And who are desperate for
input.
So I am a great believer in engagement through capacity
building and training. Clearly, there are tradeoffs in that. A
question of legitimizing certain institutions. There are
questions of compromises which need to be made. But, I think
that working under the umbrella of the ILO, we can deal with
most of those tradeoffs.
Mr. Foarde. Anybody else on the panel? Doug, please.
Mr. Cahn. I certainly think that capacity building, as
Auret articulates, is absolutely essential if we are to be
successful on a broader scale. Companies like Reebok will have
the opportunity and take advantage of that opportunity to
exercise their leverage with their business partners, the
independently owned and operated factories that make our
products. But we need those voices within China that can
support the application of the laws to the extent that laws are
not being adequately enforced, and that is the case in many
instances. And there are many other companies that need to come
to the table so that all of us in the business community are
operating with a level playing field.
Mr. Foarde. I would next recognize Susan Roosevelt Weld,
who is the general counsel of the Commission. Susan.
Ms. Weld. As a lawyer I am interested in the ways in which
the rule of law can help the position of workers in China. In
general, help from top down can be useful. Reforming government
organizations can be useful at the provincial and local levels,
but the greatest help will come from empowering the workers to
use the laws that exist, the codes that exist to demand better
conditions for themselves.
So, you look at that problem, and you think, ``Well, what
do they need for that? '' They need a practicing bar that is
friendly and feels free. I am wondering in what ways can
foreign corporations help that development? There might be a
series of hotlines and so on. Can you give me your ideas?
Perhaps we could put those in recommendations and see if U.S.
corporations can be encouraged to furnish that kind of aid to
the people at the bottom who want to assert their own rights?
Mr. Cahn. Well, I think there are many things that can be
done. I know that there are an increasing number of cases being
tried in the Chinese judicial system related to industrial
accidents and getting judgments that weren't the case some 5 or
6 years ago. That is a trend that I think will--if it
continues--allow the rule of law to be represented in the
industrial South, for sure, where many of these cases are
occurring. That is one way.
I think in general, you have a system in need of
accountability. There must be--there will be many ways to be
able to do that, starting with labor rights education and
training for workers and for those who relate to the legal
system. In other words, the creation of legal aid mechanisms so
that workers and others have access to rule of law and to the
institutions in China which need to be better accessible to
those who are most in need of it. Those are simply lacking
unless we or others, today, make certain that they are
exercised. But it isn't automatic today.
And there are many efforts in south China--I am sure there
are others on the panel who will be able to speak to some of
them to create greater awareness of the legal mechanisms that
are already available, and those will certainly lead to others.
Ms. Niepold. A perfect segue. I was going to mention as a
specific example, Verite has a program that has been around now
for 2 years, which is a mobile van. I like to call it the
``upward mobility project.'' We have reached 20,000 workers in
the past 2 years. It is a van that is primarily operating in
factories where we are invited by factory management, and
obviously, at the behest of a lot of the major brands that have
leverage there. But, it has also had the wonderful spillover
effect of allowing us to reach workers who work in factories
where we are not welcome, whom we happen to find at a mutually
convenient location.
Entering the second year, we now have begun a ``train the
trainers'' process with the workers. So that has an exponential
benefit. I noted that in your 2002 report, the Commission had
the recommendation for further development of legal aid
programs. I certainly think that that was an excellent
recommendation. It is one that probably needs to be repeated
until it is heard.
I know that in Verite's case, the curriculum of our van is
done on a needs assessment basis. So, workers tell us they want
to learn English. They want to learn sewing. They want to learn
whatever, but the first and primary focus is workers rights
education. I think that all the programs that draw on that,
even if it then means referring them to legal aid societies or
others, are very successful programs.
Mr. Foarde. Do either of our other panelists have a comment
on that? No. One of the things that we have done all along in
these issues roundtables is to encourage the person who did all
of the heavy lifting and organizing to sit up here at the panel
table and be able to ask a few questions. And so, I would
recognize my friend and colleague Lary Brown, with thanks for
doing all of this today and getting these great folks here to
share their knowledge with us. Lary.
Mr. Brown. Thank you. In the 3 minutes remaining to us, I
think the one thing that I would like to ask you is this: As
companies that are going into China are setting up their supply
chains, using factories, if they have good solid economic
reasons for being there, and much of the code of conduct
compliance has not brought about overall changes, what should
they be doing that they are not doing now? How should a
compliance program look? Anyone can comment?
Mr. Cahn. How should a compliance program look? Well, you
come in with a strong code. That is the start, and something
that a vast majority of companies do. They come in with--and
there is considerable expertise now--human resources and a set
of compliance benchmarks that would allow that company that
wished to place orders to be able to communicate what standards
were to be in place in that factory. There is a number of
places to go to do this now if that capacity doesn't exist
within that company placing the orders.
There has been, in the last 7 or 10 years, the growth of,
in a sense, a cottage industry of people who are experts who
understand how to do this, are knowledgeable about this and who
can do this in Hong Kong; in the United States to a lesser
extent, but still growing; and in China itself as is the case
with Verite. I would make sure those conditions were in place
before the first order is placed, which is at the greatest
point of leverage. I would put in place systems within the
factory for reporting back to the buyer of products on the
progress so, that you require the factory to inculcate into its
management systems a culture of compliance, rather than have to
impose it from top down so to speak.
Then I think you are into a reasonably good start.
Ms. Rosenbaum. I know of at least one corporation that
demands certification of the factories before any orders are
placed. It seems to me, just picking up on what Doug said, that
that is one of the most important things that can be done.
Brands need to say to factories ``before we come, before we put
our orders here, you have to raise the standards.'' It is much,
much harder to do it once you are in the factories. If we can
get more corporations to do that--if that could become the
norm, rather than the remedial afterthought, when you don't
want to pull the orders because it is going to effect the
workers, I think we would have a better chance of making this
work on a broader basis.
Mr. van Heerden. I would just add to that that I think
transparency would aid this process tremendously. I think that
the monitoring programs should be transparent so that you can
have this dialog with your stakeholders and constituents as to
whether what you are doing is the right thing.
Ms. Niepold. Just finally, I also agree greatly in the
proactive approach, as opposed to a reactive one. Some of the
work we have been doing recently, and we certainly encourage
companies anywhere to do this would be sort of a risk mapping
exercise within their supply chains. When Verite was founded in
1995, most of the people we ever spoke to in the corporate
sector did not know who their suppliers were. And they continue
not knowing to this day. In fact, we are quite often sent to
factories only to find a factory manager who says, ``Oh gee, we
would love to get their business.'' They are not even a
supplier.
So, the risk mapping has to be in tandem with knowing who
your suppliers are, but more importantly--I don't know who said
it earlier, but who owns the factories. These is where I see
truly is more cutting edge. Knowing who your suppliers are and
disclosing them is one thing, but trying to aggregate leverage
within your own supply chain by looking at the ownership
structures is another.
Because we find very often that going into each of the
respective factories is nothing compared to if you had sat us
down from the beginning and let us tell you that 25 of them are
owned by one guy in Turkey. We could have done a great deal by
going to him and funneling those resources into remediation.
My pet peeve right now is spending all of one's money on
monitoring, such that there is nothing left for remediation. I
encourage brands increasingly to work together. I think the
best example was the footwear industry, when they pulled
together to find a water-based solvent--glue. Excuse me. I am
not an expert, but you know what I mean. The point being that I
thought it was an excellent example. I think brands should do
more than that.
Mr. Foarde. Good. Thank you. We are getting very close to
the witching hour, but I would like to recognize, first Bob
Shepard, and then Mike Castellano for our final questions. Bob.
Mr. Shepard. I think the general image I think a lot of
people have in the United States is of China being a very
difficult country that does not have a particularly good record
on human rights, labor rights, but that things have been
improving slowly. Mr. van Heerden has submitted a paper which
certainly gives the impression that actually this may not be
the case. That globally and perhaps within China, despite all
the very good efforts on the part of monitors, we could be
losing the race, too.
And certainly within China, there is some reason to believe
that there are a lot of downward pressures. There is
competition within provinces, between the companies. I was
struck by--the last time I was in eastern China, there was
concern about companies moving west because of high incomes,
and because of monitoring and things like that. I was just
wondering if maybe some of you could discuss the balance
between our efforts and their efforts, even of the Chinese
Government to improve things, while at the same time facing
some of these downward pressures, how serious they might be?
Mr. van Heerden. I would draw a--you could take as an
illustration of that dilemma two factors. The one is the
Olympics in 2008. There is no way China intends to be
embarrassed by inviting the world to visit China in 2008. That
is a tremendous incentive to make positive change.
At the same time the Multi-Fiber Arrangement is due to
expire on January 1, 2005, and a lot of additional apparel
business is going to move to China and be sourced from China.
So we are going to see factories expanding their operations
very, very rapidly. We are going to see a lot of new investors
opening up in China. A lot who are not used to doing things
according to international standards.
So I think some of the, sort of, ``wild west'' nature in
China is going to expand, and with the move westward, that is
only going to be exacerbated. So we are going to see
contradictory pressures.
Ms. Rosenbaum. I think what Auret just said illustrates
what I said before, on the question, why do companies go to
China in the first place? If things were improving as much as
we would like to see them improve based upon all the efforts
that everybody is making there, than the move to China that
almost all of us expect at the end of the Multi-Fiber
Arrangement would not take place. It is just there. I think it
says to us the depth of the work that we have ahead of us.
Mr. Foarde. You want to make a comment? Doug, please.
Mr. Cahn. Yes. Just briefly to say that the vast majority--
if I am not mistaken--will be factories that are foreign
invested, and in those factories, there really does seem to be
a trend toward compliance, as difficult and slow and sometimes
zigzag as that trajectory is. I think there may be a
distinction worth investigating as to whether there is a
difference between the progress, as rough as it is, with
foreign-invested companies and those that are not.
Ms. Niepold. Just one last thing, we actually have tracked
some of that within our limited framework, and we have found
improvements are accelerating in the foreign-invested
factories, but the vast ``wild west,'' as you referred to it,
truly are the domestic industries that are producing for
domestic consumption. And I think that a greater spotlight
needs to be shown there. And workers will frequently tell us
that as bad as the conditions are in the foreign-owned
factories, they do not compare to those that are domestically
owned.
Mr. Foarde. Mike.
Mr. Castellano. Thank you. We are focusing on codes of
conduct and I think there is an assumption that is fairly
widely shared--it seems to me that because there are pressures,
you know, on capitalism, that a code of conduct effort is best
able to be successful when there is a cost to consumer
preferences for not having one. There may be a role for the
U.S. Government to help increase that cost, require a
transparency component, et cetera. Do you have any ideas for
how the U.S. Government could help increase the cost and
benefits of having a code of conduct program?
Ms. Rosenbaum. Well, the question is who is supposed to
benefit? It seems to me that it is corporations who have the
code. I think that what the government can do, probably in a
way that nobody else can, is put pressure on the Chinese
Government to want compliance throughout the whole system.
As I said in my paper, it is unrealistic to ask
corporations, essentially private actors in all of this, to
bear the role and the responsibility that is the role of
government and society. Now many corporations have stepped up
to the plate and are doing that. But, I think one of the
reasons why we see so little sustainable compliance is because
it is a societal system that we are trying to change.
I don't think any corporation that comes from the outside
has the ability to do that. I think they are trying to do the
things that they are able to do, but we need a construct coming
from a different approach. If China wants companies to do
business in China, then it is their responsibility, to make
sure that factories in their country are in compliance.
Everything else is just trying to do something because that is
not happening.
Mr. van Heerden. I would urge the U.S. Government to devote
more resources to education and training in China. The
education component of it--that is just understanding these
rights, the ILO definition, in the sense of the ILO
jurisprudence. More importantly, the ability to use those
rights, and that involves skill sets which workers are just not
getting at the moment. The ACFTU organizers are not getting it.
So, even if we are able to promote freedom of association and
collective bargaining, the ability to bargain cannot be taken
for granted.
A Western market-based labor relations system is going to
take a lot of getting used to in China.
Ms. Niepold. I also--sort of in line with what Ruth was
saying, if you look at the 10 core areas that are in every code
of conduct and all the ILO conventions--it is sort of a silly
habit of looking at what is the root of each of them. And truly
what is the root of each of them is wages. Child labor boils
down to wages. Are the parents being paid enough to live.
Contract labor, which is the area that Verite works the hardest
on with foreign, overseas workers boils down to wages as well.
So, if you ask a multinational corporation to go in and
work on wages, that is impossible. So, when I look at the most
egregious violations that are out there, and they boil down to
wages, I am very clear that it really is at the feet of
government to work from the top and then to have other efforts,
which are sort of a category, pushing rocks up a hill to do
something at the lower level. But, nonetheless, in the trenches
initiatives are critical, because until there comes some
enlightened day where governments do make a difference, in the
mean time you are left with workers who really are dying,
possibly on a daily basis, and you need to do whatever you can
in the interim to work for them.
Mr. Cahn. Companies increasingly do take responsibility for
workplace conditions in China and elsewhere around the world
where products are made. They have the capacity to accept that
responsibility and do much. But, as many of the panelists here
have articulated, there are limits to that influence, and our
efforts to implement that code of conduct will be infinitely
enhanced by a Government which implements its laws, by a civil
society that is there to support it, and by other companies who
are at the table too exercising their influence as well.
Ms. Rosenbaum. Could I just add one thing?
Mr. Foarde. Please, go ahead.
Ms. Rosenbaum. Only because this has just been sitting in
my head the whole time that we were here. And that is, if we
want China to do these things, we need to walk the walk
ourselves in this country. I couldn't let this go by. We need
to take a look at how we are de-constructing the right to
organize and engage in collective bargaining in this country.
We need to take a look at who is entitled to overtime pay and
who is not. We need to take a look at the extension of the work
week in this country. We really need to take a look at these
things in our own country because that, then will give us the
credibility when we are talking to China and other countries.
Thank you.
Mr. Foarde. And with that word, let me thank each of our
four panelists, Doug Cahn, Mil Niepold, Auret van Heerden, and
Ruth Rosenbaum. On behalf of Chairman Jim Leach, and Co-
chairman Chuck Hagel and all the members of the Congressional-
Executive Commission on China.
We will convene again in 2 weeks, on May 12, a 2:30 p.m. to
talk about public health in China. Thank you all for coming. I
will see you on May 12. Good afternoon.
A P P E N D I X
=======================================================================
Prepared Statements
----------
Prepared Statement of Doug Cahn
APRIL 28, 2003
INTRODUCTION AND BACKGROUND
For over a decade, Reebok International Ltd. has implemented its
code of conduct--the Reebok Human Rights Production Standards--in the
independently owned and operated factories that make its products. We
do this to:
<bullet> ensure that workplace conditions meet internationally
recognized standards and local law;
<bullet> honor our corporation's commitment to human rights;
<bullet> protect our brand reputation; and
<bullet> benefit, most importantly, the lives of the 150,000 workers
who make our products.
In recent years, an increasing focus of Reebok's monitoring work
has been to encourage factory workers to participate in workplace
decisions. This focus is borne out of Reebok's experience that code of
conduct compliance is enhanced when workers are actively involved in
identifying workplace problems and resolving them in dialog with
management. In fact, the first and primary finding of Reebok's Peduli
Hak (Indonesian for ``Caring for Rights'') external monitoring
experiment, released in 1999, was that ``greater worker communication
and understanding is at the heart of many solutions to the workplace
problems identified.''
The current movement of global brands to monitor factories has its
limits. Professional monitors can do much good, but they cannot be
present in every factory, all the time. This realization has caused us
to recognize that a worker representation model--one in which workers
participate in decisions that affect their lives--can speed our efforts
to ensure that quality workplace conditions are sustained. Among our
standards is the provision that Reebok will respect the right of
workers to freedom of expression. With worker representation projects,
we facilitate the development of this right, even when country laws do
not fully accept covenants of the International Labor Organization
related to Freedom of Association and Collective Bargaining. In China,
as an example, we hope our worker representation projects will give
greater meaning to this provision of our code of conduct.
WORKER PARTICIPATION MODEL
It is clear to us that sustainable code compliance is enhanced when
strong internal problem-solving mechanisms are in place. Worker
participation in problem-solving is a prescription for success.
Monitoring as simple ``policing'' is increasingly not a way forward.
Sustainable monitoring, that is, monitoring that emphasizes education
and training and worker participation, is a model that holds promise
for the future.
With worker participation:
<bullet> Workers feel more ownership of and commitment to the factory.
Communications are improved. Problems are prevented.
<bullet> Management faces less unrest, although it must spend more time
on communicating and negotiating with its workforce.
<bullet> Reebok sees more efficient production, less monitoring, and
higher levels of code compliance that is more sustainably achieved.
In China, our worker participation programs have resulted in
elections of worker representatives in two large footwear factories.
While elections are not the only way of developing problem-solving
mechanisms that include worker participation, they are permissible
under the law in China and, as the level of participation in the two
elections demonstrate, workers view these elections as acceptable
methods to choose representatives that can defend their interests.
THE KONG TAI EXPERIMENT
Our experiment began with the facilitation of the democratic
election of worker representatives in the Kong Tai Shoe factory located
in Longgang, China in July 2001. This athletic shoe factory is publicly
listed on the Hong Kong stock exchange and employs just under 6,000
workers.
KONG TAI: PRE-ELECTION
In the spring of 2001, we examined the existing union charter and
Chinese labor law. Working with management and the then- appointed
union,\1\ an affiliate of the All China Federation of Trade Unions
(ACFTU), all parties agreed that the process would be made more
credible with a charter amendment to expand the union committee from 19
to 26 members, which allowed for the expansion of the mediation/
arbitration committee. In fact, the previous mediation/arbitration
committee existed in name only; its members were not active. The Kong
Tai experiment did not benefit from the more concise and relevant PRC
trade union law that became effective in October, 2001. The old law was
of little guidance to potential practitioners of a more democratic,
dynamic worker representative system within the factory.
---------------------------------------------------------------------------
\1\ The term ``union'' is used in China to describe factory level
affiliates of the All China Federation of Trade Unions, a Chinese
government institution. It is not possible at present for unions
independent of the ACFTU to operate legally in China.
---------------------------------------------------------------------------
The previous union membership consisted of 19 committee members of
whom 18 were office workers or guards (not production line workers). We
sought to avoid the preponderance of non-production line workers
serving as union leaders by insisting on proportional representation.
We wanted to ensure that a new union would truly represent all workers,
especially production line workers. Some union members at that time
were understandably upset that they would have to compete for future
committee seats on a more level playing field.
Communication and outreach was the next important step. The newly
amended charter was posted in production areas and common areas, where
all workers would have access to them. A list of ``frequently asked
questions'' was circulated as well. Questions we posed, like: ``What
are the purposes of a trade union?'' ``Who can be members of the labor
union?'' and ``What are the duties and responsibilities of each of the
committees or teams?'' These and other questions were answered in
detail.
Still, since a majority of workers could not be expected to study
these documents on their own, open forums were critically important.
Factory management and Reebok explained how newly elected
representatives could be different from the previous union where
workers were not free to select committee members or determine their
working agenda. The forums started to convince workers that the factory
management was serious about its intentions to permit a democratic
election. Workers asked good questions. As a result of the open forums,
all parties agreed to scrap the ``one-year of employment requirement''
for candidates. Newer workers wanted to join in.
Under the rules, candidates were to be self-nominated. We were
pleasantly surprised when we learned that there would be 62 candidates.
We thought it was possible that we would have an election that no one
was interested in. Happily, we were wrong.
In every factory department, information about the department's
candidates was posted, including a photo and general background like
the workers' village of origin, length of service at the factory and
age, and a short statement explaining why they wanted to be on the
union committee. Information about all candidates was posted in one
central location in the factory as well.
Campaign speeches were held on one night per election zone or
factory department. Workers became more and more interested as the
nights progressed.
KONG TAI: THE VOTING PROCESS
Voting was conducted in secret. A sample ballot and voting
instructions were posted.
On election day, July 28, 2001, each worker received one colored
ballot denoting their election zone (some election zones consisted of
more than one production area--office workers, guards and maintenance
staff, for instance, were all lumped together). Stitching, the largest
production area was large enough that it was split into two zones. Each
color represented a different voting zone.
On the day of the election, there were 4,658 workers in the
factory; 1,130 were on leave (15 days off with base pay due to low
orders); 3,409 ballots were issued; 119 chose not to vote. There were
102 spoiled ballots and 17 ballots were not returned.
During the election, 26 workers--16 women and 10 men--were elected
to the committee out of 62 worker candidates. Fifteen were line
workers, 7 were line leaders or supervisors, 4 were office staff. Of
the 6 former executive committee members who ran, 4 were re-elected.
KONG TAI: POST ELECTION EDUCATION AND TRAINING
Training was and continues to be an essential post election
priority for committee members. The local ACFTU told us that they did
not have the resources to provide training. We then contacted two Hong
Kong-based non-governmental organizations who agreed to conduct
training. Training began with 6 half-day sessions in October and
November 2001.
Original curriculum of the training included discussions on what is
a Trade Union, the functions of Trade Union committee, strategies for
reaching consensus, internal communication and organizing, how to
manage complaints, event organizing and Trade Union administration.
This initial training was followed by several visits from outside
groups, such as a delegation from the Swedish Trade Union
Confederation. These contacts helped the workers at Kong Tai understand
the larger context of their work.
The next training phase was an offsite retreat of the elected
representatives over a long weekend in January, 2002 that focused on
team building, communication amongst committee members, and self-
evaluation. The offsite training was again conducted by the Hong Kong
CIC and the LESN.
Today, the trainers are trying to work with the workforce at large
to increase the understanding about what they can expect of their
elected representatives.
THE FU LUH EXPERIMENT
A second election was held in a Taiwanese-invested factory in
October 2002. The 12,000 workers at the Fu Luh Sports Shoes factory in
Fuzhou, China voted for 192 candidates in seven election zones.
Although the Fu Luh Sports Shoe factory had a union previously, there
was no charter--nothing written down about the purpose or the structure
of the union. They had to start from scratch.
FU LUH: PRE-ELECTION
We began by bringing Fu Luh leadership to the Kong Tai factory to
view first hand the process and the outcome of the election that had
been held there a year earlier. Representatives were introduced to the
Kong Tai charter during their visit and subsequently relied heavily on
it for the development of their own charter document.
In addition, in between the date of the Kong Tai election and the
start of plans for an election at Fu Luh, the Chinese government
ratified a new trade union law (in October 2001) eliminating the
confusing and often irrelevant language for today's modern business
environment. The law clearly defined the roles and responsibilities of
unions. We found it helpful in our work at Fu Luh.
At the Kong Tai factory, local ACFTU officials were aware of the
election and supportive of it but did not get involved in the details
of the process. At the Fu Luh factory, local union officials were
actively involved from the first conversations and remained involved
throughout. They had different ideas from us on some issues such as the
value of proportional representation and campaign speeches. They also
pushed for the creation of a broader Congress in addition to the
smaller union Committee to increase the number of workers who could be
directly involved in the union's activities.
The union charter that was adopted for the Fu Luh factory was
similar to the charter at Kong Tai. It allows for the recall of union
members in the event, for instance, of mismanagement and the filling of
posts of committee members who leave the factory. Workers were given
the opportunity to self-nominate as was the case at Kong Tai. The
principle of proportional representation was followed.
Open forums preceded the nomination process and were meant to
inform workers about the elections, explain how this was different from
the past, explain the purpose of the trade union and encourage workers'
involvement.
Fu Luh has only one small dorm that houses a few of the factory's
workforce. Most workers live offsite in rented rooms. To ensure that
workers would attend the open forums, workers were required to attend
and were compensated for their time. The forums lasted approximately an
hour and a half.
The speeches were quite fun--workers laughed and enjoyed themselves
(but also mercilessly ribbed people who were nervous or who lost their
place in their speeches).
Workers only attended the speeches of candidates for their
particular production room or election zone.
FU LUH: THE VOTING PROCESS
The voting was by secret ballot and the vote counting was conducted
in a fully transparent manner.
A week following the election for the Committee members, the Chair
and Vice Chair were elected from among them. Speeches were again given
by all the candidates.
FU LUH: POST ELECTION EDUCATION AND TRAINING
The local ACFTU will provide an initial 2-day training program to
elected representatives in mid-November, 2002. After this training,
Reebok staff will meet with the new union members to assess their needs
and look for additional ways to help meet them. Reebok remains open to
new and innovative ways to assist in the education and training process
of newly elected worker representatives.
DISCUSSION AND CONCLUSION
The elections at Kong Tai and Fu Luh shoe factories are initial
efforts to enhance the voice of workers in China in a way that will aid
code compliance and lead, we hope, to a more sustainable model for
improving workplace conditions.
These elections were fully consistent with Chinese law and were
supported by local ACFTU officials. We were pleased will the overall
level of support we observed and we commend all parties, including
ACFTU officials, for their forbearance and, in many cases, active
support.
The guiding principles in the election process were transparency,
proportional representation and ``one person, one vote:''
<bullet> self nomination to stand as a candidate;
<bullet> transparency in the process (holding open forums so all
workers would understand it, posting Frequently Asked Questions in
the factory to answer concerns, and transparency in the vote-
counting) to instill confidence;
<bullet> proportional representation to make sure that each part of the
factory was represented on the union committee;
<bullet> one person, one vote by secret ballot. (In neither factory had
all workers voted before, or voted in a secret manner.)
To label the experiments as ``successes'' or ``failures'' is to try
to put them in boxes where they don't necessarily fit. We view them as
steps in the right direction: toward compliance that is more
sustainable and that involves workers in the process.
We are pleased that all parties have cooperated to permit these
elections to take place in the credible, transparent manner in which
they were conducted. At Kong Tai, the union is still growing and
developing. They have spent much of their time during the last year
learning how to work together and how to be a union. They have
routinely assisted workers to get approvals to take leave, they have
fought for proper medical compensation for sick workers.
We hope these elections will demonstrate that an increase in worker
participation can be achieved in an environment where fully independent
unions do not exist. Our experience is that there is room for movement
and progress within the confines of what unions are permitted to do
today in China. It is our hope that through this example, other
multinational brands and other factories will experiment with these or
other ways to establish sustainable methods of achieving code
compliance. In the end, we better implement our standards when we are
willing to challenge ourselves, our factory partners and workers to
find new, more sustainable ways to achieve internationally recognized
workplace norms.
______
Prepared Statement of Mil Niepold
APRIL 28, 2003
I would first like to thank the Congressional Executive Commission
on China for inviting Verite's testimony today.
VERITE'S PERSPECTIVE
``China is an attractive piece of meat coveted by all . . . but
very tough, and for years no one has been able to bite into it.''
Chinese Premier Zhou Enlai, 1973
Thirty years later, the population is not the only part that has
changed--multi-national corporations, global trading organizations like
the WTO and even a few IGOs and NGOs have clearly ``taken a bite.'' It
is Verite's core belief, and one shared by many advocates, that respect
for labor and human rights--the very same ones that are covered by this
Commission's mandate and that China has quite often signed and/or
ratified--comes only when workers themselves are an integral part of
the process of enforcing these rights. Later, when I address examples
of initiatives that have worked or might potentially work, the direct
involvement of workers will be the common thread in each case.
WHO IS VERITE?
Over the past 8 years Verite has interviewed approximately 18,000
factory workers for the purpose of identifying the issues workers face
in a newly globalized economy. Verite's mission is to ensure that
people worldwide work under fair, safe and legal conditions. Our
pioneering approach brings together multi-national corporations, trade
unions, governments, non-governmental organizations (NGOs) and
workers--in over 65 countries--for the purpose of identifying solutions
to some of the most intractable labor rights violations.
Verite performs social audits (to date, over 1,000 factory
evaluations conducted) to analyze workplace compliance with local and
international labor, health, safety and environmental laws and
standards. Unique as a non-profit independent monitoring and research
organization, Verite, unlike private sector companies, goes
beyond monitoring to provide factories with specific recommendations to
remedy problems and training for factory management and manufacturers.
To address the needs of workers, Verite conducts education programs to
teach workers their legal rights and entitlements in the workplace as
well as ``life skills'' (literacy, health education, math, English, and
computer skills).
VERITE IN CHINA
Verite has operated in China--our first and largest area of
operation--extensively since 1995. We have conducted nearly 200 factory
audits in China over the past 8 years, including 112 in the past 2
years.
Our findings, and those of others, are disturbing:
1. Egregious health and safety violations
a. China's own Work Safety administration reported 140,000
deaths in 2002 (an increase of approximately 30 percent over
2001)
b. Chinese media sources reported 250,000 injuries and more
than 30,000 deaths in industrial accidents in the first quarter
of this year alone
c. The ILO ranks China as the world ``leader'' in industrial
accidents
d. China estimates 25 million workers are exposed to toxins
annually (with tens of thousands incapacitated annually)
e. The Hong Kong Christian Industrial Committee (HKCIC)
reported recently that, after 10 years of research on the toy
industry (China produces 70 percent of the world's toys) that a
full 55--75 percent are still classified as poor (80-100 hour
work weeks, poor health and safety, not paying minimum wages)
2. Majority of factories use triple or even quadruple books to mask
under payment or non-payment of legally mandated overtime premiums
(which range from 1.5 to 3 times the base wage depending on the day of
the week and whether or not it is a holiday). In some instances it has
taken even our most experienced teams days of research, interviews and
analysis to uncover the true extent of the problem.
3. Limited enforcement of labor laws that are on balance quite
robust (for example those requiring overtime premiums, automatic
machine shut-off safety devices, compensation for injury.
4. Harassment and lengthy imprisonment for those who report
violations, peacefully demonstrate and or who try to associate freely.
Since 1998 Verite has organized an annual China Suppliers
Conference that brings together factory owners and managers with
governmental officials and non-governmental organization specialists to
explore issues and solve problems related to labor compliance in China.
(Last year's conference in Xiamen focused on three aspects of labor
compliance: the changing role of unions in Chinese factories; health
and safety compliance; and the comprehensive work-hour calculation
system and its impact on overtime. Presenters included local government
and union officials. This year's conference will provide Verite the
opportunity to release a research report on the prevalence of excessive
overtime and its impact on worker health and safety).
Verite's Worker Education Program, sponsored by Timberland, Eileen
Fisher and New Balance, among others, operates in a mobile van which
visits southern Chinese factories to provide information on workers'
rights, labor law and health information (recently including updates on
HIV, Hepatitis, and SARS); the Program has reached 18,980 workers since
its founding in 2001.
Verite has facilitated direct communication between factory
managers and local labor officials in 40 factories since 2001 by
inviting labor officials to accompany auditors to the factories for
joint training with factory managers on proper wage-calculation,
recordkeeping, and employment-contract procedures.
CODES VS. LAWS
While not unique to China by any means, there is a growing debate
regarding the value of voluntary initiatives (such as Codes of Conduct)
versus direct legal obligations within both national and international
legal frameworks. For the purposes of this discussion, I will not cover
this debate in any detail. However, as we are discussing Codes of
Conduct and examples of best practices--with the aim of achieving
improved labor rights compliance in China--I would be remiss if I did
not at least touch on this important subject.
Direct obligations--i.e. those placed upon companies through
international law--are weaker than those that are indirect (those
placed upon them by governments who themselves are fulfilling their
obligations under international conventions, etc.). Weaker though they
may be, there is nonetheless a clear upward trend in their being
extended to corporate (MNC) actors. Movements such as the International
Right to Know (IRTK) campaign (whose recent report includes various
case studies, including one on McDonald's and toys made in China) and
the increasing use of U.S. Courtrooms to seek redress for perceived MNC
complicity in overseas human and labor rights abuses (for example
Unocal, Saipan, and Shell, lawsuits, among others) using the Alien Tort
Claims Act (ATCA) are examples of this trend.
So, for our purposes today, you may wonder why these distinctions
between voluntary initiatives and direct obligations under
international law are relevant? It is simply because, to quote the
excellent report by the International Council on Human Rights Policy,
we must go ``beyond voluntarism.'' Codes are squarely in the camp of
voluntarism and while they are a useful starting point for improving
labor rights compliance, they alone are simply not enough to right the
``imbalance of power'' that exists today between major MNCs and most
governments. Governments do not have the resources that MNCs do--
resources that are in many places including China--greatly eroded by
endemic corruption. Limited resources greatly hinder labor rights
enforcement, but they are not the sole issue. I am by no means
suggesting that more laws and/or more enforcement are the only answer,
but I am saying that rooting both voluntary codes and national laws in
a strong international legal framework creates a ripple effect that
will help enforcement in ways that merely increasing the number of
labor inspectors cannot.
Violations of human and labor rights thrive in cultures of
impunity. Take the example of slavery. While now outlawed in virtually
every country of the world, this heinous practice continues
particularly in countries where the rule of law is eroded. Just as
corruption of government officials and police officers allows slavery
to flourish--so to do labor rights violations. Strengthening the rule
of law in any given country is not a task merely for MNCs and their
voluntary initiatives. This is a task for governments. Grounding all
efforts in the international legal framework helps to achieve a few
important things. It creates a climate that favors compliance by
strengthening the effectiveness of voluntary initiatives and national
legislation, it strengthens the work of NGO and workers' advocates and
it improves judicial efforts, both domestic and international.
Thus, it is incumbent upon those concerned with improving labor
rights on the ground in China, as elsewhere, to use multi-layered
approaches that draw on past successes. Each approach should also be
aligned with the particular ``sphere of influence'' of the respective
stakeholder--thus historically, the greatest successes have come from
governments working on the most macro level legislative improvements,
government to government consultations, technical assistance programs
and the like. MNCs in turn have had success when they assert their
considerable leverage primarily at the supplier/factory level but they
should continue by all means to exert pressure on governments as well
to ensure that the rule of law is both upheld and strengthened. One of
the best examples of an MNC working on creative solutions to the most
challenging issue in China is the example that you have just heard
about from Doug Cahn--the Kong Tai (or KTS) factory election of worker
representatives. This initiative is exemplary and there are others:
<bullet> The Institute of Contemporary Observation recently launched an
initiative that provides posters in factories that outline workers'
rights under Chinese law and they provide a hotline for workers to
call if they are the victims of violations
<bullet> A coalition of over 20 NGOs and SRIs (Socially Responsible
Investors), including the International Labor Rights Fund, Global
Exchange and Amnesty International USA started the U.S. Business
Principles for the Human Rights of Workers in China. To date nine
MNCs are participating in this China Working Group (3Com, Cisco,
Intel, KLA-Tencor, Nike, Palm Computing, Reebok and Target) working
to implement the Principles or similar Codes of Conduct.
It is very common to discuss the ``sticks'' when discussing human
and labor rights. But, I find the ``carrots'' to be of greater
interest. The examples cited above share a few things--most notably the
inclusion of the workers in the process--but most of all they are
implicitly or explicitly capitalizing on the fact that there is
competitive advantage to be gained from transparency, disclosure and
good working conditions. If the industrial revolutions in the U.S. and
the U.K. have shown us anything they have shown us that good factories
make better products and over the longer term, that are more cost-
effective.
CONCLUSION
``Apart from their other characteristics, the outstanding thing
about China's 600 million people is that they are ``poor and blank.''
This may seem a bad thing, but in reality it is a good thing. Poverty
gives rise to the desire for change, the desire for action and the
desire for revolution. On a blank sheet of paper free from any mark,
the freshest and most beautiful pictures can be painted.'' Mao Zedong
1967
The picture for labor rights in China would have to include the
following:
<bullet> Harmonization of the multiple codes of conduct (factory owners
rightly complain that the profusion of codes is a confusing time-
sink and with at times 40 audits a month by inexperienced CPAs,
auditing as it is conducted by private sector firms is harmful to
workers and disruptive to production cycles)
<bullet> A greater degree of responsibility on the part of MNCs who
wreak havoc on factories through pressures to lower prices paid to
factories and ``just in time'' delivery demands that inevitably
lead to excessive, often forced, overtime
<bullet> Passage, or modification, of embodying legislation required
under China's ratification (2001) of the ICESCR (International
Covenant on Economic, Social and Cultural Rights and their
membership in the ILO (specifically with regard to freedom of
association and collective bargaining) and withdrawal of their
reservations
<bullet> A direct contact mission from the ILO
This would be a beautiful picture indeed. Thank you.
______
Prepared Statement of Auret van Heerden
APRIL 28, 2003
Labor Rights in China: The Role of Private Labor Rights Initiatives
By Auret van Heerden and John Salem Shubash, II
In the contemporary global marketplace, competition to produce
goods quickly and inexpensively often leads to morally unacceptable
conditions of work, where labor relations systems and labor rights have
been sacrificed in the name of economic efficiency. A number of
scholars have made similar observations. Sabel, et al argue, ``It is a
brute fact of contemporary globalization--unmistakable as activists and
journalists catalog scandal after scandal--that the very
transformations making possible higher quality, cheaper products often
lead to unacceptable conditions of work'' (Sabel, et al, 2000). In
light of such troubling observations, the role of private labor rights
initiatives, such as the Fair Labor Association (FLA), become crucial.
This paper is divided into six sections. First, we briefly outline
why labor relations systems are breaking down, and why this is morally
and economically troubling. Second, we discuss a number of theoretical
strategies for coping with the current regulatory vacuum. Next, we
argue that the FLA, along with other private initiatives, plays an
important role in improving international labor rights and we briefly
outline how the FLA complements public regulatory regimes. We then
offer a brief discussion of labor rights in China, and argue that the
relocation of global supply chains to China has out paced the
government's ability to enforce labor rights, making industry self-
regulation vital. Finally, we present a case study that demonstrates
the effectiveness and potential of private initiatives in improving
labor rights and in strengthening labor relations systems in China. We
conclude that the FLA has gained a high level of access to factories
and workers in China, and is uniquely placed to affect human and labor
rights there.
THE BREAKDOWN OF LABOR RELATIONS SYSTEMS
The global economy has witnessed the development of global supply
chains that have outstripped existing labor market regulations and
enforcement mechanisms. Katherine V. Stone, a professor of industrial
relations at Cornell University argues, ``existing regulatory
approaches are inadequate to ensure that the global marketplace will
offer adequate labor standards to its global workforce'' (Stone, 1999).
Additionally, competition to reduce costs and the possibility of
capital relocation has resulted in the breakdown of traditional labor
relations systems, where labor and business leaders negotiate
collective agreements. The International Confederation of Free Trade
Unions further articulated this finding, arguing, ``Governments, made
increasingly desperate to increase their countries' exports and attract
foreign investment after the Asian crisis, are finding themselves in a
buyers' market dominated by companies who can name their price. And
that price all too often includes cheap labour, low standards and no
trade unions'' (ICFTU, 1999). This process has weakened the enforcement
of labor laws and has allowed labor relations systems to breakdown.
This has resulted in more persistent labor rights violations and more
acute labor conflicts around the globe.
The fact that labor relations systems are breaking down and labor
rights violations continue is troubling for both moral and economic
reasons. Morally unacceptable working conditions, such as child labor,
forced labor, discrimination, overly
excessive working hours and the payment of starvation wages are far too
common in global supply chains. The excessive exploitation of
vulnerable members of society, such as children, women and the poor,
for financial gain must be corrected for a morally acceptable global
economy to be created.
A number of recent studies have outlined the positive correlation
between high labor standards, and specifically coordinated labor
markets, and macroeconomic
performance. A recent World Bank report entitled ``Unions and
Collective Bargaining: Economic Effects in a Global Environment'' found
that countries with highly coordinated collective bargaining tended to
be associated with lower levels of unemployment, lower earnings
inequality, fewer strikes and generally better levels of macroeconomic
performance (Aidt and Tzannotos, 2003:12). Similarly, a recent OECD
study attempted to analyze the effects of labor standards on
macroeconomic performance by comparing the economic indicators of
countries that undertook major labor market reforms before and after
the reform. The report, which studied the effects of labor market
reforms on macroeconomic performance in 17 countries, found that on
average, GDP grew at 3.8 percent per year before the improvement in
labor standards and grew 4.3 percent afterwards. The OECD further
argues, ``Countries which strengthen their core labor standards can
increase economic growth and efficiency by creating an environment
which encourages innovation and higher productivity'' (OECD, 2000).
Maryke Dessing summarized the economic argument for labor standards,
stating, ``Labour standards in general can become the source of
competitiveness and economic dynamism as they transform the production
process. Labour standards aim at correcting market failures,
internalizing social externalities associated with firms' activities,
and thus improve factor allocation consistent with the general good''
(2001:3). Given the moral and economic arguments in favor of labor
standards, many actors stand to benefit from their implementation.
STRATEGIES TO IMPROVE LABOR STANDARDS
A number of strategies for improving labor standards
internationally have been proposed. The strategies outlined in this
paper are divided into two categories: (1) regulatory approaches; and
(2) cosmopolitan approaches, which employ both public and private
initiatives to improve labor rights.
Regulatory approaches attempt to find methods to improve the
enforcement of core labor standards internationally. One such approach
involves linking labor rights to trade negotiations. Proponents of this
approach argue that the US-Jordan Free Trade Agreement, which has labor
and environmental rights clauses and enforcement via a dispute
settlement mechanism, should be a model for future trade negotiations
(Ruebner, 2001). Similarly, others argue that labor rights should be
included in the World Trade Organization (WTO). They argue that the
WTO's Trade-Related Aspects of Intellectual Property Rights (TRIPS)
sets a precedent for including legal frameworks for protecting rights
in the WTO, and thus could easily be applied to labor rights (Wells,
2001). They argue that the dispute settlement mechanism of the WTO, and
the possibility of applying trade sanctions on noncompliant countries,
would be a distinct advantage of using the WTO framework.
Others argue that an enhanced international regulatory regime using
the International Labor Organization (ILO) is the best method for
improving labor standards. They say that the ILO system of ``sunshine''
(openness and transparency), ``carrots'' (assistance and rewards for
labor rights compliance), and ``sticks'' (penalties for labor rights
violations) forms the basis of an effective labor rights regulatory
regime (Wells, 2001). The proponents of this view argue that the
actions taken by member states to punish Burma for the use of forced
labor shows the potential effectiveness of the ILO. Many critics,
however, argue that the ILO is incapable of enforcing labor standards
internationally, and that their ``punishment'' is often limited to bad
publicity. They argue that much more needs to be done to ensure labor
standards are upheld. As outlined previously, the inability of
regulatory regimes to keep pace with global economic change suggests
that some other approach must be employed to complement the role of the
ILO and other regulatory regimes.
Many intellectuals make the opposite argument, stating that labor
standards in trade agreements are advocated by protectionist groups and
by misguided NGOs, and that labor standards harm developing country
workers (Bhagwati, et al, 1999). However, if a truly global approach is
taken that improves labor rights across the globe, the negative
competition that fuels labor rights violations can be altered, and more
positive competition can be initiated to attract investment. Examples
of positive competition for attracting foreign direct investment would
include developing a skilled workforce, a strong infrastructure and
more effective government institutions. Positive competition quickly
breaks down with the absence of a globally
coordinated strategy, however.
In an attempt to create such a global strategy, some argue that
``cosmopolitan'' approaches must be taken to address labor rights
violations internationally. A ``cosmopolitan'' approach involves
coordinating global responses to international problems and executing
them locally, in coordination with local bodies. David Held
articulates this strategy by arguing that two interrelated sets of
transformations must take place to improve labor rights
internationally. First, companies must adopt socially responsible
rules, while public institutions at local, national, regional and
global levels must enhance their regulatory regimes (Held, 2002). A
similar sentiment is echoed by Amartya Sen, a Nobel laureate in
economics and a leading development philosopher, who argues, ``In
dealing with conditions of working lives, as well as the interests and
rights of workers in general, there is a similar necessity to go beyond
the narrow limits of international relations: not just beyond the
national boundaries but even beyond international relations into global
connections'' (Sen, 1999). This promising approach, which depends on
building ``global connections'' and worldwide coalitions, reinforces
the need for ``private'' labor rights initiatives to articulate and
advocate the rights of workers on an international scale.
THE ROLE OF PRIVATE LABOR RIGHTS INITIATIVES AND THE FLA
Non-regulatory, or ``private'' approaches promote corporate social
responsibility by allowing companies to adopt a code of conduct and
promote adherence to that code. Critics argue that voluntary approaches
are simply public-relations activities for the corporations, which do
not change their behavior as a result of voluntary codes of conduct.
All voluntary approaches are not the same, however.
Some voluntary approaches, such as the U.N. Global Compact, have
been referred to as ``learning networks,'' where companies can exchange
ideas about corporate social responsibility and exchange ideas and
``best practices.'' Although these networks have no inspection regimes
and do not require the remediation of labor rights violations among
their members, the open exchange of ideas has a number of potential
benefits (Ruggie, 2002). Other voluntary mechanisms, and specifically
the FLA, are much more demanding and effectively complement public
labor rights regimes such as the ILO and national labor ministries.
The FLA has a workplace code of conduct, based on ILO principles,
which brand-name multinational enterprises sign and agree to implement
throughout their supply chains.\1\ The Participating Companies (PCs),
as they are known, agree (inter alia) to:
---------------------------------------------------------------------------
\1\ Where there are discrepancies between the code and national
law, the higher standard applies.
<bullet> inform factory managers and workers of the code,
<bullet> train their compliance staff in the code standards,
<bullet> internally monitor their production facilities to assess
compliance and
<bullet> monitor progress, and remediate any non-compliance.
The FLA then conducts independent external monitoring of a random
sample of those facilities to ensure that the PC is implementing its
compliance program. It is important to note that the FLA independent
external monitoring is unannounced and that the results are published.
The process of internal and external monitoring involves consulting
knowledgeable local sources, worker and management interviews, a review
of wage and hour records and an inspection of the factory. In addition
to the brand name PCs, there are 175 universities affiliated with the
FLA. They require that their licensees join the FLA and implement
compliance programs. There are presently some 4000 facilities in over
80 countries covered by the FLA program.
By consulting and working closely with local groups around the
world, the FLA has participated in the formation of a global network
dedicated to improving labor rights. By working globally and without
national allegiances, the FLA takes steps to ensure that all workers in
the PC supply chains, regardless of their country, experience the
benefits of improved labor rights. This global approach helps prevent a
``race to the bottom,'' and helps creates positive competitive
pressures for suppliers engaged in business relationships with FLA PCs.
HOW THE FLA COMPLEMENTS REGULATORY REGIMES
Given the breakdown of labor relations and regulatory regimes and
the national and international levels, ``private'' initiatives like the
FLA attempt to fill this regulatory vacuum and create the ``global
networks'' necessary to advocate improved labor rights. The FLA
complements regulatory regimes in three principle ways: (1) because the
PCs commit to a stringent monitoring and remediation process, and
because the results of the process are published, they have strong
incentives to correct labor rights violations in their supply chains;
(2) because the FLA works in coordination with PCs and local NGOs, it
has a large physical presence in China, where other efforts to address
the human and labor rights situation have been limited; and (3) because
of the economic leverage of PCs with their suppliers, remediation is
negotiated from a position of relative power.\2\ This process is
particularly relevant in China, since the relocation of multinational
enterprises to the country has taken place so quickly that the Chinese
authorities cannot effectively enforce labor laws throughout the
country.
---------------------------------------------------------------------------
\2\ There are a number of reasons why companies sign on to the FLA
or other private initiatives, such as improved brand reputation,
improved and more efficient labor relations systems, and a lower
likelihood of crisis following the discovery of a major labor rights
violation.
---------------------------------------------------------------------------
The FLA is a framework for collaboration among different actors to
improve respect for labor rights. By involving the participation of
global brands, the FLA is able to bring attention to violations
wherever they occur, and promote the accountability of brand-name
companies for the protection of labor rights in their supply chains.
The FLA also engages local groups in the monitoring and remediation
process. By coordinating with PCs and local NGOs and targeting
compliance efforts at specific factories, the FLA is well placed to
respond to the speed of change in global sourcing. This is particularly
advantageous in China, where the pace of global investment and sourcing
has overwhelmed the regulatory regime.
In 2001, the FLA PCs had 497 factories in China. Of these 497
factories, the FLA conducted independent external monitoring visits at
53 factories, or 10.66 percent of the total. Although concern about
human rights in China is high in the international community, an
alarmingly few number of organizations have been able to conduct
concrete, hands-on human and labor rights work there. Given the rare
experience of the FLA in practicing human and labor rights work in
China, the organization's various ``people on the ground,'' and our
unique access to factories and workers, the FLA is well placed to
affect human and labor rights in China in a very practical and tangible
way.
Given the economic leverage that FLA PCs have over their
contractors, the FLA can negotiate with labor rights violators from a
position of relative strength. While the FLA encourages PCs to
``remediate rather than terminate,'' the possibility of losing an
important business relationship is a powerful incentive for factories
to work with PCs in order to address labor rights violations.
Regulatory regimes, while possessing a great deal of moral authority,
are seldom able to mobilize the financial resources of the FLA PCs.
Ensuring respect for international labor standards is a lengthy and
complex process, highlighting the need for systematic efforts to
monitor, remediate and verify compliance. The FLA participates in this
process in an era when regulatory regimes, and particularly the Chinese
authorities, cannot do it alone. While the FLA does not substitute for
labor law enforcement and collective bargaining, the FLA serves as a
complement to the efforts of regulatory regimes.
LABOR RIGHTS IN CHINA
According to the World Bank, China has a population of 1.272
billion people, a workforce of 706 million people, and is categorized
as a lower-middle-income economy based on Gross National Income (GNI)
per capita.\3\ Given the size of the Chinese workforce and the
relatively low costs of labor, companies have been relocating to China
at an amazing pace; FDI has been flowing into China at an average of
over $40bn for more than a decade, and in 2002, China became the
world's largest recipient of foreign direct investment (FDI)
(Economist, Feb. 13, 2003). This has fuelled a 116.2 percent growth in
GDP since 1991, an average growth of 9.7 percent annually, making China
the fasting growing large economy in the world (World Bank, Sept. 14,
2002).
---------------------------------------------------------------------------
\3\ The World Bank classifications are: low income, $745 or less;
lower middle income, $746-2975; upper middle income, $2976-9205; high
income, $9206 or more. This calculations is based on GNI per capita.
The entire list can be seen at http://www.worldbank.org/data/
countryclass/classgroups.htm.
---------------------------------------------------------------------------
Labor rights in China are defined in a very particular way, and
critics argue that they have not kept pace with the growth in FDI and
GDP. The Chinese Constitution guarantees Freedom of Association, but
this right is subject to the interests of the State and the Communist
Party. Only one trade union, the ACFTU, is recognized. It has
traditionally seen its role as protecting the interests of the Party,
the government, the employer and the worker. The shift from state-
controlled to private enterprise is bringing about a reevaluation of
that role, and many local union officials are adopting Western trade
union techniques and adapting them to their circumstances. According to
the ACFTU, there were 103 million trade union members in China in 2000,
and 67,000 unions in foreign-invested enterprises, with a membership of
6 million workers. However, unofficial estimates of ACFTU presence in
foreign-invested enterprises suggest that less than 10 percent are
organized. It has been government policy to promote collective
bargaining since 1995, and by the end of 2000, some 240,000 agreements
had been registered with the Ministry of Labor and Social Security.
Most of these agreements, however, are products of an administrative
process rather than collective bargaining.
Although the right to strike was removed from the Constitution in
1982, more than 100,000 strikes take place each year, particularly over
late or non-payment of wages, severance payments in cases of bankruptcy
and lay-offs resulting from the downsizing of enterprises. In Freedom
of Association Case #2031, the Committee on FOA noted that while the
government of China believes that its laws guarantee the rights of
workers to form and join organizations of their own choosing, the
Committee concluded that many provisions of the Trade Union Act were
contrary to the fundamental principles of FOA. The Committee also
recalled that it had concluded in two previous cases (1652 and 1930)
that the Trade Union Act prevented the establishment of trade union
organizations independent of the Government and the Party.
Additionally, the China Daily reported a number of highly
publicized industrial accidents recently. The latest statistics show
that in the first 2 months of 2003 there were 1,639 deaths from 1,417
workplace accidents in industrial and mining enterprises, prompting the
government to announce the formation of a new State Administration of
Work Safety to promote safety at work. According to the paper the
problem stemmed from the ``prevailing ignorance among employers of
working conditions resulting from irrational pursuit of profits'' but
the ``main reason is that many local officials have tolerated some
employers' malpractice in a bid to pursue economic development at the
cost of work safety.''
Given the rapid relocation of multinational corporations to China,
the inability of the Chinese authorities to enforce existing labor
laws, and the continued restrictions on freedom of association in
China, industry self-regulation becomes vital. In the following
section, two case studies that detail the positive impact of private
labor rights initiatives and codes of conduct in China are presented.
CASE STUDIES
As mentioned before, China presents a unique set of remediation
challenges for FLA PCs. In an attempt to address persistent health and
safety and freedom of association violations that were reported by FLA
independent external monitors, three FLA PCs, three Taiwan-based
footwear manufacturers, and four Hong Kong-based labor rights non-
governmental organizations (NGOs) developed a joint project to build
the occupational health and safety (OHS) capacity of local groups in
southern China. According to one of the companies,
``Engaging workers in problem solving with management
significantly reduced the amount of time spent on myriad small,
recurring problems (e.g. mistakes made by factory
administrative staff, miscommunications between management and
workers). In a few cases where worker representatives acted in
a sophisticated and professional manner, serious problems have
also been attended to and resolved without Reebok's
involvement. This emphasis represents the next
generation of strategies to honor code commitments that respect
the rights of workers to freedom of association.''
Acting on the principle that an organized workforce can create a
more sustainable system of labor relations and can improve a number of
labor rights problems, the stakeholders established plant-wide health
and safety committees, drawn from workers and management, to develop
action plans to help correct workplace health and safety hazards. By
organizing the workers into such groups, the stakeholders have found a
way to sustain improved labor relations and adherence to the FLA Code
in China.
The international training team consisted of industrial hygienist
Garrett Brown (from Maquiladora Health and Safety Support Network),
health educators Pam Tau Lee and Betty Szudy (from the Labor
Occupational Health Program at the University of California at
Berkeley), as well as professor Dara O'Rourke (Massachusetts Institute
of Technology). The project team worked with China Working Women's
Network (CWWN), Asia Monitor Resource Center (AMRC), the Hong Kong
Christian Industrial Committee (HKCIC), and the Association for the
Rights of Industrial Accident Victims to develop the project.
CWWN and the project staff conducted group discussions with
participating organizations prior to the training to assess the needs
of the workers. They also held discussions with the labor practices
managers of Adidas and Reebok in Hong Kong, and visited a 60,000-worker
shoe complex in Dongguan City.
Using interactive, participatory techniques, the trainings covered
topics such as identifying safety hazards, industrial hygiene controls,
chemicals effects on the body, ergonomics, noise, machine guarding, and
fire evacuation. The trainings also addressed workers' legal rights,
and workplace inspection techniques. All training materials were
translated into Chinese; English-speaking instructors had simultaneous
translation for their presentation and activities. After the training,
each factory's participants reunited to create a proposal for setting
up the health and safety committee in their respective factories.
This pioneering effort involving cooperative efforts among brands,
NGOs and factories has had a positive impact:
<bullet> Factory management have since come together to share their
experiences in setting up the Health and Safety committees;
<bullet> NGOs have become more knowledgeable about health and safety
issues;
<bullet> The worker-management committees are young, but they are
functioning; and
<bullet> A democratically elected union now supports one committee.
In an interview with the AP, Garrett Brown argued, ``Clearly the
workers, supervisors and managers who participated learned a great deal
and are now able to put that into real life practice in the plants.''
This case demonstrates the ability to improve labor rights in China,
even when regulatory regimes are incapable of doing so.
CONCLUSION
Because of the inability of the Chinese authorities to monitor and
remediate labor rights violations in the rapidly expanding industrial
zones, labor rights in China are suffering. Consequently, private labor
rights initiatives, such as the FLA, have attempted to fill the
resulting regulatory vacuum. Although the FLA is no substitute for
local, national, regional and global regulations, it does complement
the regulatory process by using the economic force of PCs, which have
committed to the rigorous FLA monitoring and remediation process in
order to improve labor rights worldwide. Given the unique access of the
FLA to factories and workers in China, the organization is capable of
taking concrete steps to improve the human and labor rights situation
in the country.
BIBLIOGRAPHY
Aidt, Toke and Zafiris Tzannotos (2003) Unions and Collective
Bargaining: Economic Effects in a Global Environment (Washington,
DC: World Bank).
Bhagwati, Jagdish (1999) Third World Intellectuals and NGOs-Statement
Against Linkage (http://www.columbia.edu/?jb38/TWIN--SAL.pdf)
Dessing, Maryke (2001) ``The Social Clause and Sustainable
Development'' ICTSD Resource Paper No. 1 (Verdun: International
Centre for Trade and Sustainable Development)
Economist (April 6, 2000) ``Discrimination against rural migrants is
China's apartheid'' (http://www.economist.com/
displayStory.cfm?Story--ID=299640)
Economist (Feb. 13, 2003) ``China's Economic Success'' (http://
www.economist.com/displayStory.cfm?story--id=1576786).
Held, David (2002) ``Globalization, Corporate Practice and Cosmopolitan
Social Standards'' Contemporary Political Theory vol.1, pp.59-78.
ICFTU (1999) Building Workers' Human Rights into the Global Trading
System (Brussels: ICFTU).
ICFTU (Nov. 29, 2002) ``ICFTU CHINA POLICY'' (http://www.icftu.org/
displaydocument.asp?Index=991217172&Language=EN).
OECD (Oct., 2000) International Trade and Core Labor Standards (Paris:
OECD).
Ruggie, John (2002) ``The Theory and Practice of Learning Networks:
Corporate Social Responsibility and the Global Compact'' Journal of
Corporate Citizenship issue 5, pp.27-36.
Sabel, Charles, Dara O'Rourke and Archon Fung (2000) ``Ratcheting Labor
Standards: Regulation for Continuous Improvement in the Global
Workplace'' Faculty Research Working Paper Number:RWP00-010
(Cambridge: Harvard).
Sen, Amartya (June, 1999) ``Globalized Ethics in a Globalized Economy''
Keynote Speakers at the 87th International Labor Conference,
Geneva, Switzerland.
Stone, Katherine V. (1999) ``To the Yukon and Beyond: Local Laborers in
a Global Labor Market'' Journal of Small and Emerging Business Law
vol. 3, no. 1, p. 93.
Wells, Gary (2001) Trade Agreements: A Pro/Con Analysis of Including
Core Labor Standards (http://fpc.state.gov/6119.htm).
World Bank (Sept. 14, 2003) ``China at a Glance'' (http://
www.worldbank.org/cgi-bin/
sendoff.cgi?page=%2Fdata%2Fcountrydata%2Faag%2Fchn--aag.pdf)
World Bank (2001) ``China Data Profile'' (http://devdata.worldbank.org/
external/CP
Profile.asp?SelectedCountry=CHN&CCODE=CHN&CNAME=China&PTYPE=CP)
______
Prepared Statement of Ruth Rosenbaum
APRIL 28, 2003
The function of codes of conduct in China needs to be placed within
the larger context of codes of conduct and enforcement systems
throughout the globalized world. We will see that what is happening in
China is parallel to what has happened and is continuing to happen
within the contract supplier system worldwide.
In countries with strong legal codes that recognize the rights of
workers, including standards related to occupational health and safety,
working hours, right to organize and engage in collective bargaining,
etc., it is society as a whole that has established those standards.
The standards themselves are expressed through the society's legal
codes and enforcement systems. These give evidence that the societies
hold themselves individually and collectively accountable for upholding
the standards that they have devised. The standards include, of course,
those standards to which corporations are held.
As production and assembly has moved from countries where such
standards, legal codes and strong enforcement exist, to other
countries, differences are readily apparent.
1. The standards to which factories are held by the society and its
government vary from country to country. In fact, these standards are
often much lower than those in the ``home'' countries of the
corporations placing the orders in the factories.
2. The legal systems for the enforcement of standards range from
non-existent to minimal at best.
3. The legal channels for addressing poor standards or violation of
standards either do not exist--or the workers are in danger if they
express concerns or raise issues.
For at least the past decade, if not longer, a steady stream of
media reports have exposed the harsh realities within factories to
consumers, investors, as well as to labor rights and human rights
organizations. Different countries and the problems within factories in
those countries rise to public consciousness as a result of media focus
and then as the months pass, other countries have taken their place.
One of the mistakes within the varied responses to these exposes
and reports has been to see the problems as isolated, the exception to
the norm, etc. The responses have focused on a particular factory, a
particular situation. Heroic work has been done by coalitions of
organizations to bring about change in a particular factory--while the
other factories in the same trade zone or province or country continue
with similar patterns of behavior.
The underlying question within all of this is the following:
Where does the power exist to bring about change within the
factories as individual factories and within the supply chain
components within any country, including China?
We need to keep in mind that for many industries, the factories of
production or assembly are usually not owned by the corporations or the
brand names with which we are all so familiar. They are contractors or
vendors for the corporations. This lack of corporation ownership makes
the power issue even more important.
Yet, the focus of the media has been on the corporations placing
orders within the factory. In response, corporation after corporation
have produced a standard for the work place, the factory; hence the
Codes of Conduct as we know them today. Although called by many names,
these codes were set forth as the standard for the factory or, another
way to say it would be, the ``laws'' for performance in the factory.
We need to pay attention to what has taken place with this
development. We have concluded that the corporations bear ultimate
responsibility for the conditions under which their products are
manufactured or assembled. We then expect them to become the creators
of the standards for the factories and the enforcers of those
standards.
In other words, we have handed over the role of the society and its
governance--making and enforcing standards and laws--to the
corporations we are attempting to hold accountable. It is a shift in
power, a shift in responsibility and a shift in accountability.
When this plays out within the production system, we have the
common phenomenon of almost any factory which accepts orders from
numerous corporations, having a display wall with the various codes of
conduct for these corporations framed and available for anyone who
wants to take the time to read them. In theory, at least, these are the
standards within which products are produced within the factory.
Careful examination of the various codes quickly exposes one of the
major flaws of the role of codes of conduct in a production factory.
The codes from the various corporations are not the same. So what is
the standard to which the factory must adhere? Is it the common
denominator or the higher standard or a combination thereof? Is it one
standard one day and another standard another day depending on the
product being produced and/or the corporation for which the product is
being produced and/or the particular inspection, monitoring,
certification team that is coming? How is the management of the factory
to know, much less the workers?
Whose standard is it really? It does not matter which code of
conduct we are using, it is still not the rule of law and governance of
the community or country in which production is taking place. In fact,
in many instances, the codes of conduct are higher that the legal
standards within the country of production. This is certainly true in
China--and so many other countries that could be named.
When codes are conduct are seen as something imposed from the
outside rather than a standard of behavior that is adopted from within
the society, for the benefit of all involved, it depends on an external
enforcement system for adherence. Hence we have the various systems of
monitoring, inspection, certification, etc. that have developed as
means and method of enforcing the codes.
Again with most of the monitoring, inspection and certification,
the power of enforcement comes from the outside: outside the community
and often, outside the country of production.
For us at CREA, there are three central issues that we use to
evaluate whether or not the code of conduct and whatever enforcement
systems are in place for that factory/code are succeeding:
1. What changes for the workers? Although a simple question, this
should be the reason why we are looking at codes. It is the situations
in the factory that we are trying to address. It is critical that we
see that we see these codes and the situations they are trying to
address not as an abstract exercise but rather as the day-to-day
reality for workers in China, most especially, but in any country where
the assembly plant system works worldwide.
2. How is power of enforcement transferred back to civil society
and other components of society within China--and within other
countries? If all the inspecting, certifying, monitoring, enforcing
continues to have to come outside the community, it will continue to be
a system of putting out fires, of presuming that if a small percentage
of factories are OK, that they all are.
3. Where do the money and the power attached to the money
accumulate as a result of all the inspecting, certifying, monitoring,
etc.? If we are looking at a system that can be sustained over time,
there needs to be the transfer of sufficient funding and the associated
power to the communities where the factories are located. The funding
needs to remain within the community to support a sustainable economic
system where appropriate governance can develop and function.
While all of this is applicable anywhere in the world, the
specifics of China are our focus today. CREA suggests the following:
1. The need to start with recognition of the inherent dignity of
each human being, so that workers are not seen only in terms of what
they are able to produce.
2. The need to look at ways of strengthening civil society within
China. Organizations such as the Institute for Contemporary Observation
(ICO), with which CREA is collaborating on a project, need to be seen
as equal partners. We need to find ways to have work such as theirs
seen as the ordinary, the way it should be done, rather than the
exception or the extra-ordinary means of functioning.
3. The CECC, corporations, any group working on the issue, needs
take a look at why companies move to China. What is it that they gain
because of the labor situation there as compared to other countries?
For companies moving production to China because of the lower costs and
standards there, there needs to be the means of holding these
corporations accountable.
For example, how does the issue of ``Just in time'' production and
the on-going shortening of turn around time in relationship to orders
being placed and demands placed on factories, resulting in abusive
situations for workers?
4. There needs to be a greater analysis of Chinese law related to
labor, including OHS, wages, overtime, freedom of association and right
to organize, and systematic ways of addressing these. This needs to be
coupled to an examination of the ILO standards relating to occupation
health and safety, work hours, etc., followed by the examination of
each of these codes of conduct and their enforcement systems. Again,
the underlying issue is how to bring these together in order to improve
standards for workers.
5. How do we make it beneficial for factory managers to adhere to
the standards? At the present time we use a system of rewards and
punishments based on the placing and withdrawal of orders to ensure
compliance with the code of conduct. How do we move this reason for
compliance to a standard that is beneficial for all factory managers to
adhere to? How do we make adherence to codes the norm rather than the
exception?
Within the Chinese governmental system, how do we make it possible
for a factory to be singled out positively if its standards go beyond
the legal?
6. How do we provide support for collaborative efforts between
corporations to enhance their power to bring about change as well as to
create an equal standard? How would the development of a collaborative
code of conduct be constructed that would not be the lowest common
denominator? And then, how do we provide a neutral space for a trial of
this to take place and evaluated, without the spotlight or glare of
publicity so that change for the workers could really take place.
7. On another level, how do we get investors, the investment
community including Wall Street and the other markets around the world
to recognize that raising working condition standards is a beneficial
thing even if the costs of production are higher? How do we communicate
that the continual drive to lower costs of production contribute to the
violation of the standards of performance and behavior that we are
trying to raise in these codes of conduct?
These systemic questions, and many others that could also be
raised, focus the issue of codes of conduct on the global production
system as it functions within society, most specifically in China. For
more than a decade, members of CREA's staff have worked with numerous
corporations on issues of code of conduct development, reporting
mechanisms, monitoring and inspections; in fact, we continue to do so
even as I speak here today about the need to look at the issues on a
systemic basis. Without looking at the systemic issues, CREA is
convinced that real change, sustained change, change that affects the
lives of workers, and their communities cannot and will not take place.
In the meantime, we salute and support the efforts of those who seek to
promote, enforce and report on codes of conduct and compliance with
them. These efforts should not be taken lightly. This is hard work. It
is important work. Hopefully, we will be able to learn from the
experiences of all of us who have worked and continue to work on the
issues that these codes of conduct seek to address and devise the
methods for system change that remain before us.
Thank you for your time and attention.
Submissions for the Record
----------
Prepared Statement of the Wei Jingsheng Foundation
april 28, 2003
Statement on U.S. Corporations' Codes of Conduct in China
One of the major fields this Foundation works on regards workers'
rights, as well as the codes of conduct and working conditions of the
companies and factories that employ them, including those of foreign
companies and joint ventures. Of course, the U.S. companies have a lot
of investment and are doing a lot of business with China.
For these companies, naturally, their primary concern is profit.
Most of them do not want to ``interfere with the internal affairs'' of
China, nor do they want to care about Chinese human rights. On the
surface, it seems very reasonable. In reality, it has helped the
Chinese Communists to restrict and even suppress Chinese human rights,
including the flow of information and free expression. Nevertheless,
while these companies only focus on revenues and care about self-
protection with their concern of offending the Chinese government, they
have really done damage not just to Chinese human rights, but also
their own interests.
What these companies have done has effectively reduced the pressure
the international community has on the Chinese government. It is now
time for these companies to review their moral and ethical codes. They
should try to apply what they have in their own country to the
factories and companies overseas, especially in China. Among them,
these companies should build a moral standard of not protecting the
interests of the suppressive Chinese government. They should not speak
in favor of the Chinese government. They should not work on behalf of
what the Chinese government wants yet is unable to accomplish itself,
either in China, or in the United States, or elsewhere in the world.
Although we know these calls of conscience have their limited
appeal, we want to point out that how these companies conduct
themselves in China has not just helped the Chinese government to
further damage human rights by allowing a poor standard of conduct in
China, but also damaged their own interests and that of their
employees. Their conduct has resulted in themselves and their employees
being afraid to speak freely, not just inside China, but even overseas.
(We have examples but are not submitting these cases and names until
necessary, which involve top brand-name companies.) It also brings them
the hazard of health, which could be life threatening.
Take the recent spread of SARS as an example. Due to the fact that
the Chinese government restricted the truth, instead of spreading the
necessary information, their obstacles have helped to spread the virus.
The result is not just damaging the health and lost lives of our fellow
Chinese inside China, but also the same threat to the rest of the
world, including the health and lives of these companies.
Not long ago, a poor woman with diagnosed SARS was refused health
care in the south and had to return to her home in the north. It was
that fateful journey that made more people in the north get infected
with the disease, before the poor woman died. Not any excuse should let
the innocent citizens' lives be victimized, and expose the whole world
to risk. It is time for us to realize that pressure must be brought to
the Chinese government as much as we can. That is the responsibility of
the whole world, for the welfare of all humanity. The U.S. companies
must strengthen and enhance their own codes of conduct not just in the
United States, but also in the rest of the world, including China.
These companies have a choice between aligning themselves with the
Chinese workers for their welfare, or aligning themselves with the
Chinese government to exploit and suppress workers' rights and benefits
altogether.
As a matter of fact, the poor workers' benefit protection has a
long history. For more than a decade, there have been more than one
hundred twenty million ``peasant workers'' from the countryside
supporting almost all of the construction and service industry,
especially the processing industry for export. In reality, they are
``second class citizens'' with no official ``city registration.'' They
live in terrible temporary shelters. Due to the lack of official ``city
registration,'' they do not have the social and economical benefits the
city dwellers may have, and especially they lack health and life
insurance. Under the health system that is guided by rules that refuse
patients who do not have money, a sick ``peasant worker'' basically has
nothing for protection even when he/she is very ill, like the woman who
died of SARS that was mentioned in the last paragraph. The so-called
``workers union'' which is paid by and works for the Chinese
government, has done nothing beneficial for these miserable workers.
The owners and enterprisers simply keep an attitude of ``one eye open
with one eye closed'' in dealing with these problems, unless a dispute
gets out of control.
One has to ask, for a government that does not care for the welfare
of its own people and lied to protect itself, how could others
including these companies trust this kind of government? How could you
give assistance to this type of government in any form, or align your
moral codes and ethical conduct with the allowance of this type of
government?
It is time for the U.S. companies to act and raise their moral
conduct in China, to what we expect of them in the United States. It is
time for the U.S. government and Congress to act, on behalf of the
freedom loving people instead of the profit seeking companies, to
ensure the moral and ethical expectation of these companies.
Thank you very much for your attention.
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