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					      Behind the Great Wall of China
            U.S. Corporations Opposing New Rights for Chinese Workers
              Opposition may harm workers in the US and other countries

              Contents                 Executive Summary
Executive Summary                 1
                                       US-based corporations are opposing legislation to
                                       give Chinese workers new labor rights.
I. Introduction                   2
                                       US-based global corporations like Wal-Mart,
II. Corporations oppose           3    Google, UPS, Microsoft, Nike, AT&T, and Intel,
Chinese labor law reforms              acting through US business organizations like the
                                       American Chamber of Commerce in Shanghai and
   1. The campaign against        3    the US-China Business Council, are actively
   protections for Chinese             lobbying against the new legislation. They are also
   workers                             threatening that foreign corporations will
                                       withdraw from China if it is passed.
   2. Why Chinese labor law 4
    e d “g i a t h n e”
           i f c
   n e s s ni n c a g s
                                         hn ’ rfL b r o tat a
                                              s
                                       C ia D at a o C nrc L w would provide
                                       minimal standards that are commonplace in many
   3. Protections corporations    5
   are fighting against                other countries, such as enforceable labor
                                       contracts, severance pay regulations, and
III. Why foreign corporations     7    negotiations over workplace policies and
oppose Chinese labor law               procedures. The Chinese government is
reform                                 supporting these reforms in part as a response to
                                       rising labor discontent.
   1. Corporations benefit by     7
   exploiting Chinese workers
                                       Corporate opposition to the law is designed to
                                       maintain the status quo in Chinese labor
   2. Corporations benefit from   8
   po tgte“ c t te
    rmoi h r e o h
          n        a
                                       relations. This includes low wages, extreme
   b t m”
    ot o                               poverty, denial of basic rights and minimum
                                       standards, lack of health and safety protections,
   3. Corporations fear more      9    and an absence of any legal contract for many
   rights for Chinese workers          employees.

IV. Policy recommendations        10   Low wages and poor working conditions in China
                                        r d w h s i h rs o te ol n rc
                                          v
                                       die o ntoe nte et fh w r i a“ae         d
About Global Labor Strategies     12    o h b t ” h o p s in f op rt s o
                                                  o              t
                                       t te otm.T e p oio o croain t              o
                                       minimum standards for Chinese workers should
GLS Staff                         13   be of concern to workers and their political and
                                       trade union representatives throughout the world.




                                  GLOBAL LABOR STRATEGIES
I. Introduction
A major debate is underway in China on a proposed Draft Labor Contract Law that
would grant new rights to Chinese workers. The debate has not been widely
reported outside of China; it has been almost entirely ignored by media in the US.
But when the Chinese government opened a 30 day public comment period this
spring, nearly 200,000 comments were received. A majority of these were from
ordinary workers. But some of the comments were from big US and European based
global corporations and their lobbying groups that came out squarely against the
new law.

       r’ ee t geme t o eo nz u in i hn a ma e e di s
         s
Wal-Mat rcn a re n t rcg ie no s nC iah s d h a l e                      n
worldwide. But Wal-Mart and other corporations, including Google, UPS, Microsoft,
Nike, AT&T, and Intel, acting through the American Chamber of Commerce in
Shanghai (AmCham) and other industry associations, are trying to block legislation
that would significantly increase the power and protection of workers.

This corporate campaign contradicts the justifications that have been given for
public policies that encourage corporations to invest in China. US based
corporations have repeatedly argued that they are raising human and labor rights
standards abroad. For example, the American Chamber of Commerce in Hong Kong
                   “nv ra pi i e” h t A r a u i s pa s n
                                 np
asserts among its u iesl r c ls ta “ mei nb s es ly a  c      n
important role as a catalyst for positive social change by promoting human welfare
and guaranteeing to uphold the dignity of the worker and set positive examples for
                                                     1
                                   at n aey”
                                       h
their remuneration, treatment, he l a dsft. But US based corporations are
trying to block legislation designed to improve the remuneration, treatment, health
and safety, and other standards of Chinese workers.

At a time when China exerts a growing impact on the global economy, efforts to
improve the conditions of Chinese workers are profoundly important for workers
everywhere. As U.S. wages stagnate, many Americans worry that low wages and
labor standards in China are driving down those in America. Improving labor
conditions in China can help workers in the rest of the world resist a race to the
bottom that threatens to bring wages and conditions worldwide down to the level of
the least protected.

The proposed legislation will not eliminate Chinese labor problems. It will not
provide Chinese workers with the right to independent trade unions with leaders of
their own choosing and the right to strike. But foreign corporations are attacking
the legislation not because it provides workers too little protection, but because it
provides them too much. Indeed, the proposed law may well encourage workers to
organize to demand the enforcement of the rights it offers.

1
   U i r l ui sPi i e ” h A e cn hm e o C m e en og ogA aal t
       vs        n     nps              i
 “ n e aB s es r c l ,T e m r a C a br f o m r iH n K n. vib ac l e :
http://www.amcham.org.hk/pr/background/universal-business-
principles.pdf#search=%22universal%20business%20principles%22


                               Global Labor Strategies                              2
 hn ’ e ae n h n w e i ai s l d n e w y
       s                          l o        e
C ia d b t o te e lgs t ni ara yu d r a .Citizens, workers, and
public officials in the U.S. and throughout the world should ask: Has public policy
encouraged corporate investment in China so that global corporations can lobby
against greater rights for Chinese workers?

II.    Corporations oppose Chinese labor law reforms
1.     The campaign against protections for Chinese workers

  h P o l’ e u l f hn
            s        c
T e epe R p bi o C iain April released a Draft Labor Contract Law whose
                                         r t a d neet.A
                                           g
proclaimed purpose is to protect workers’ihs n itrss GLS analysis of
the response by US and other foreign corporations indicates that they are engaged
in a concerted campaign to prevent improvement of the notoriously low wages and
conditions of Chinese workers by blocking the proposed reforms.

This campaign is being conducted directly by large corporations like General
Electric and Procter & Gamble, which have directly addressed Chinese lawmakers.2

This campaign is promoted publicly by three major organizations representing
foreign corporations operating in China:

           o The American Chamber of Commerce in Shanghai represents over
             1,300 corporations, including 150 Fortune 500 companies.

           o The US-China Business Council represents 250 US companies doing
             business across all sectors in China.

           o The European Union Chamber of Commerce in China represents more
             than 860 members.

All three have sent the Chinese government extensive attacks on the proposed law.
The statement of AmCham in Shanghai runs to 42 pages.3

These organizations have also issued barely veiled threats that foreign companies
will leave China if the new legislation is passed. As AmCham comments on the
                              a     y rd c e ly n o p ru i e fr R
draft legislation put it, the lw ma “e u e mpo me t p otnt s o P C   i
 ok r” n n g t l mp c te R s o eiv n s a d p e l s
                       v
w r es a d“e aieyi at h P C cmp t ie es n a p a a a t
d siainfr oeg iv sme t 4
      n o
 et t o frin n et n.                ”

Dr. Keyong Wu, an expert for the British Chambers of Commerce, stated,


2
    i aaoe“i sy e a u l s s p ak a ”
     l             m               b     w     e          d
  BlSvdv,Fr sa nwl ora ia t bcw r,China Morning Post, 3/21/06.
3
   C m et n S get n o R v i o ao C n at a ,A e cn hm e o C m e en hnhi
              s          i
  “ o m n ad ugsos n eio t L br ot cL w” m r a C a br f o m r iS aga
                                       sn            r               i                    c        ,
April 19, 2006. Available at: http://www.amcham-shanghai.org/NR/rdonlyres/A18F268D-6EE8-4221-B075-
4F00282E8623/1427/AmChamShanghailaborcontractlawcommentstoNPCApr2006.pdf
4
  Ibid, p. 21


                                    Global Labor Strategies                                       3
        Business is attracted to China not only because of its labour costs but also because of its
        efficiency. If regulation starts to affect that and flexibility, then companies could turn to
        India, Pakistan and South-East Asia.5

The affection of American corporations for the status quo in China is revealed by
the emphasis in the AmCham document on the desirability of maintaining present
                              s l me o a e s icnl rmoe
                                 a                 g i
Chinese labor law. That law i c i dt h v “inf a t po td      y
standardized operation of enterprises and establishment of modern enterprise
        6
 ytm.
sse ” AmCham criticizes the proposed changes in the law for making it harder
 o i w r es n o “i d rsr t s n b s s a mii ai f
    r                    g         co
t f e ok r a dfr r i” eti in o “u ies d nsrt no   n            t o
 nepi s t o c e,w d u t h te ii n csay o
        s ”          u
e trr e. I cn ld s“ e o b w eh r ts eesr t carry out such
 i icn c a g s 7
  g i
s nf a t h n e.    ”

2.        y hn s a o lw e d sg ic n c a g s
                                i
        Wh C ie elb ra n e s“ inf a t h n e ”

Despite extraordinary economic growth most Chinese workers live on the edge of
poverty. They earn little and often work under abysmal conditions. Most lack basic
rights or access to those rights. About 150 million Chinese urban and rural workers
are unemployed—more than the entire workforce of the US.8

                           ali n i b w ” rde
                               r   c
China abandoned its so-cl“ o r e o lca l-to-grave social security system in
the 1980s when it ended traditional central planning and embarked on its wide-
open, laissez-faire, development model. During the 1990s state enterprises were
closed, private enterprises mushroomed, foreign investment skyrocketed and
workers were left to fend for themselves.

In 1994 China adopted a labor law that mandated individual contracts between
workers and companies. Soon after it also adopted a law allowing collective
contracts negotiated by trade unions in some industries.

Labor contracts are supposed to stipulate wages, basic terms of employment, and
the duration of employment. The reality is that many workers lack contracts and
basic protections. Seventy per cent of all rural workers and about 15% of urban
workers do not have a contract which means they can not access even minimal
 i t o b n f sI hn ’ omig o sr ci n u ty 0 f lw res a e
  g             t            s                    o
r hs r e ei .nC ia b o n cn tu t nid sr 4 % o al ok r h v
no contract. Even those with contracts lack real security: country-wide 60% of all
the contracts are for 3 years or less.9

3.      Protections corporations are fighting against


5
    hii B cl ,F r g i s rm y u f h ai t s p a u l ”
       sn        e
  C rt e uk y“oe n net s a qiiC i t h n u l ora ,TimesonLine, 6/29/06.
                         i v o                t     n ge               b      w
6
   C m et n S get n o R v i o ao C n at a ,A e cn hm e o C m e en hnhi
               s         i
  “ o m n ad ugsos n eio t L br ot cL w” m r a C a br f o m r iS aga
                                    sn                 r                 i                          c             ,
April 19, 2006, p.20.
7
  Ibid, p. 21.
8
  Dorothy Guerrero, Yale Global On-Line 2/6/2006. Available at: http://yaleglobal.yale.edu/display.article?id=6929
9
    cnm ssn lgne n , u a R suc Sco 7 L bu l s t nO e e A gs2,06
             t ei            t                e     i
  E oo i’Itl ec U i H m n eor s et n : aoreiao: vri , uut 120,         g li           vw
http://www.tmcnet.com/usubmit/2006/08/21/1820817.htm


                                          Global Labor Strategies                                               4
While the proposed labor contract law addresses many of these problems, the
protections it offers are modest. Most important, it does not provide for
independent unions with leaders chosen by their members and the right to strike.
                      a ig ate o B a e asl & ry o ’B in fc,a s
Robert Kwauk, man gn p rn r f lk C ses G a d ns ej gof e sy           i   i
 I el g
  ’     i         l ns o t p nc ea s te e ue ae tl ey e sn be
                   i
“m tln myc e t n t o a i b cu e h n w r ls r si v r rao a l      l
compared to the labor laws to which many of them are exposed otherwise in their
                              p rt s 10
domestic and international o eain .o ”

               L ’a ayi n i e ta foreign corporations are fighting against
                             s
Nonetheless, G Ss n ls idcts h t    a
                                                          o o C ia s s
the very aspects of the legislation that might ameliorate sme f hn ’mot
blatant labor problems:

     Contract protections for all workers
Foreign corporations want to maintain the current system which creates a large
underclass of highly precarious workers with no rights. Access to labor rights and
benefits—however limited—depends on the existence of a written labor contract
signed individually or collectively by workers and companies. But millions of
workers currently work without one. The new law would create an implied contract
for any worker who receives a wage, giving millions of workers rights and benefits
now denied them. It stipulates that any ambiguities in the interpretation of a
contract will be made in the employees’  favor. AmCham opposes these provisions on
 h go n s h t“ h s po i o s r n t o s tn w t h rcut t ytm
                                 i                s
te ru d ta,T ee rvs n ae o cn i e t i te er i n sse      h             me
                        11
 f d r nepi s      s ”
o mo ene trr e. Instead, companies want to set pay and terms of work for
all workers without signed contracts unilaterally. Management alone would
 eemie A l rbe …such as pay confirmation, the way of handling the social
d tr n “ lpo lms
                                                                       12
insurance, the method of dismissal and the standard of compensation.  ”

     Collective bargaining with employees
The new law provides for negotiations over workplace policies and procedures, lay-
 f , e l n aey a d i n s i
  s         h                   r       h no r n e ly e e rsnai .
of h at a dsft, n f ig w t au ino a “mpo e rpee tt e                           v”
Foreign corporations demand unilateral authority, not negotiation. The US-China
 u i s C u c r e,I s o fai e o tt ta a mpo e’ e uai s
    n             l t        t            b
B s es o n iw i s“ i n te s l t sae h t ne ly r rg lt n               s         o
and policies shall be void if they are not adopted through negotiation with the trade
union. . . . Requiring the consent of the trade union before such changes can be
made is overly burdensome and may prevent important company policies from




10
    u u Me ie P w r h tC i ’ oe et r r t m k s ep g hne t i a ra ,
      i      nz ,           f
   Jl s l t r“o e S i: h a gvrm npea so ae w ei cagso tl o l s Inside
                                    ns       n         pe                   n             sb w”
Counsel, August 2006. Available at: http://www.insidecounsel.com/issues/insidecounsel/15_211/global_views/577-
1.html
11
    C m et n S get n o R v i t L bu C n at a ”A e cn hmber of Commerce in
             s          i             sn
   “ o m n ad ugsos n eioso aor ot cL w , m r a C a      r                i
Shanghai p.25
12
   Ibid p.36


                                        Global Labor Strategies                                             5
being implemented in a timely manner. . . Final authority and responsibility for
 o a y oi e s o l etn h h n s fh e ly r 13
            c
cmp n p l is h udrs i te a d o te mpo e.                  ”

     Freedom to change jobs
Non-compete agreements are a regressive feature of US and other western systems
that have crept into the Chinese economy. They prevent workers from changing jobs
easily if they have access to proprietary knowledge as determined by an employer.
For a developing economy like China, knowledge transfer is essential. The new law
caps damages employers can seek for workers who change jobs, makes it more
difficult to claim confidentiality has been breached, and allows for geographic
exemptions to foster the spread of skills throughout the country. The opposition to
 hs rvs n o s i
            i             h h e t I ar  f
ti po i o cme w t atra:“ crido t acrigt te o        ”
                                              e u, codn o h cmme t o         ns n
                                      “ i ei s f t h idvd a tc n lg
                                        t l o y e
the bill submitted by the AmCham,iw lsr u l afc te n iiu leh oo y
innovation of the Chinese enterprises and thus multi-national corporations would
not introduce their advanced technology, let alone allow the Chinese staff members
                                                      14
 x oe s )o n
           i            se ( c te oe eh oo y”
                              i
e p s ( c t a dmatr s )h cr tc n lg .
     Limited probationary periods
Currently corporations can set probationary periods unilaterally, often for an entire
year, keeping people in a highly precarious employment status. The new law sets
standard probationary periods of from one to six months depending on the type of
                                                                        …
job. Management justifies the status quo because one to six months is “ not long
                                                                       15
 n u h o rvd s fc t i o e trr e t e a n n w tf”
                      i e me
e o g t po ie uf in t fr nepi s o x mie e safs                        .

     Payment for training
Under current practice employees sign a separate contract that allows companies to
recover any training costs if a worker terminates his/her employment. Under
                                                     s r “ iig—including
                                                      d
current law almost anything that management con ies tann ”   r
many of the kinds of on-the-job training that are standard for any new job—can be
subject to re-payment, leaving a departing worker either in debt or, if unable to
repay the training expenses, bonded to his/her current employer. The new law
 i s ot e ly r cn eo e b ,o isa c, ei n t iig a isr ci
 mi                                                      n
l t css mpo es a rcv r y fr n tn e d f ig“ ann ” s n tu t n     r                   o
 h t a e pae of
ta tk s lc “f            o ” n ul
                           b
                    -the-j ,o afl      -time basis, and lasting for at least 6 months.
                                           t e ly r o l o b e t ld o
                                           h
Companies oppose the new law because “ e mpo e w udn t e nie t             t




13
    C m et n h r t ao C n at a fh ep ’R pb c f h a D a o Ma h 020) S
                s e f                r            e
   “ o m n o t D a L br ot cL wo t Pol s eul o C i ( r t f r 2,06,U -
                                                          e      i       n      f      c   ”
China Business Council, April 19, 2006 p.2. Available at:
http://www.uschina.org/public/documents/2006/04/uscbc-comments-labor-law.pdf#search=%22US-
China%20Business%20Council%20Comments%20of%20the%20Draft%20Labor%22
14
    C m et n S get n o R v i to
                s        i            sn                         ,
   “ o m n ad ugsos n eios Labour Contract Law” American Chamber of Commerce in
Shanghai, p. 35.
15
   Ibid. p. 39.


                                  Global Labor Strategies                                  6
claim compensation from the departing employee for [on-the-job and other types] of
 riig x ei cs 16
             e
tann e p r n e.     ”

       Severance payments
There is theoretically no at-will employment in China; all workers are supposed to
have labor contracts—although in practice many do not. Most contracts are for a
 f e em,at w i n mpo e cn i s ok r i u p n l n
  i             e       h                    mi
“ x dtr ” f r hc a e ly r a ds s aw re w to t e at a da        h          y
worker can leave without penalty. This system encourages highly unstable
employment relationships. The new proposal encourages stable employment by
requiring employers to provide severance pay to workers whose contracts end, but
not to those whose contracts are renewed. Management opposes this provision as
 mot n e sn be 17
“ s u rao a l.       ”
       A pathway from temporary to permanent work
Chinese companies employ a large number of temporary workers hired through
temp agencies. Temporary work encourages management to avoid the protections
and commitment that come with standard employment. Under the new law, temp
agency workers would become permanent employees after one year of employment
at a client firm, thus reducing the number of insecure, contingent jobs. According to
 h cmp ne,T i si lt mp d sp    o
te o a is“ hs t uaini e e the right of the employer to find the best
p ro fr h jba dw lrd c te lxblyo h ma rsu c alct n”
 esn o te o n i e u e h f iit f u n eo re l ai .
                           l           e     i                         o o 18

       A fair system for lay-offs
In practice corporations frequently lay-off workers at their own discretion. Under
the new proposals, corporations would have to lay people off on the basis of
seniority. Management opposes seniority based lay-offs in part on a novel
             I s i i ai p l y g is te e tfto
             t        c mi v          c
argument: “ i adsr n t e oi a an t h n w saf fire them while they
                                                19
work for the [same] enterprise as the old staff.”

III.      Why foreign corporations oppose Chinese labor law reform

       1. Corporations benefit by exploiting Chinese workers
While the extraordinarily rapid growth of the Chinese economy has often been
noted, it is less often realized how much of that growth actually reflects the role of
 oeg op rt s codn o ra tne ’ he eo o s
                   o
frincroain .A crigt Mog nSa ly c if cn mi Stephen    s                t
Roach, 65% of the tripling of Chinese exports –from $121 billion in 1994 to $365
                         s t ca l t o to ri y hn s subsidiaries of
                            r
billion in mid 2003 –i “ ae be o usu c gb C iee n
16
   C m et n h r t ao C n at a fh ep ’R pb c f h a D a o Ma h 020) S
             s    e f                r       e
   “ o m n o t D a L br ot cL wo t Pol s eul o C i ( r t f r 2,06,U -
                                               e i      n     f        c          ”
China Business Council, April 19, 2006, p.2.
17
   C m et n S get n o R v i to
             s           i            sn         A e cn hm e o C m e en
                                                     i
   “ o m n ad ugsos n eios Labour Contract Law” m r a C a br f o m r i     c
Shanghai, p.37
18
   C m et n h r t ao C n at a fh ep ’R pb c f h a D a o Ma h 020) S
             s    e f                r       e
   “ o m n o t D a L br ot cL wo t Pol s eul o C i ( r t f r 2,06,U -
                                               e i      n     f        c          ”
China Business Council, April 19, 2006, p.2.
19
    C m et n S get n o R v i to
              s          i            sn
   “ o m n ad ugsos n eios Labour Contract Law,”  American Chamber of Commerce in
Shanghai, p. 39


                                    Global Labor Strategies                              7
mut ain l op rt n a djit e trs 20 The export surge blamed on
    i o                o
   ln t a croai s n on v nu e.                 ”
China is primarily an export surge of global corporations utilizing Chinese workers.

The obvious motive for such foreign corporations to oppose the law protecting
Chinese workers is their fear that it may eliminate the cheap labor costs they now
enjoy.

According to the New York Times,

       hn ’ rw h ei o h a a o. h frin
            s            e
      C ia go t rl s nc e plb r T e oeg -invested factories here, including
      production centers for most multinational companies, depend on a flexible work force that
      actually grows cheaper by the year.
      Guangdong [province] has grown by more than ten percent annually for the past decade. But
      its factory workers, mostly migrants from the interior, earn no more than they did in 1993…
      workers are losing ground even as China enjoys one of the longest and most robust
      expansions in modern history.
      This is partly a paradox of globalization. China has attracted more foreign investment by far
                  te d v lpn o nr…
      than any oh r e eo igcu ty But it continues to draw capital essentially because it is
      willing to rent workers for falling returns.21

2.                                        h race to the botm”
      Corporations benefit from promoting te“             to

Foreign corporations have another, less obvious, motive for opposing protections for
Chinese workers. The ability to hire cheap labor in China has put downward
 rsu e n a e a d ok r’o dt n ao n h go e
                                      i
pes r o w g s n w rescn i o s ru dte lb .

China plays a key role in setting global wage norms. It is the lynch pin of what
                                                                                   22
Morgan Stanley chief economist Stephen Roach has called “    global labor arbitrage”
— in which corporations move from one labor market to another to take advantage
 f h a e lb rT e euts lb lrc t te ot i hc ok r a d
o c e p r a o. h rs li ago a “ae o h b t m”nw i w r es no           h
their communities are put into competition with each other to see who can provide
the lowest-cost labor and the most corporate-friendly conditions. According to
  o c ,h go a lb r ri g i as o ci s a o ef sr cu a
                             r         o          n
R ah te lb la o abta e s l n w at ga “ p w r l tu trl             u
depressant on traditional sources of job creation in high-wage countries such as the
   i e tts 23
UntdSae.       ”

  h d w w r rsu e u o h w r s a e b hn s n r u .
                                        d
T e o n adpes r p t nte ol’w g s yC iai e omo sHarvard
economist Richard Freeman estimates that the entry of India, Russia, and China
into the world economy in the past few decades has doubled the workforce employed
in the global economy. China, alone, accounts for 50% of this increase. And because

20
    t e R ah“ o l l ao A b r Wi hp t
       p                    b
   Sehn oc,H wGoaL br riae lS aeh Wol E oo y Global Agenda, 2005 Edition,
                                         tg      l               d
                                                          e r cnm ,          ”
Available at: http://www.globalagendamagazine.com/2004/stephenroach.asp
21
    oeh an“ h a edr ng Ca C nlt a fl ,
                      ns        s          s       i     e l”
   Jsp K h,C i ’L ae Maae l s ofcC r u y New York Times, January 25, 2004.
22
    t e R ah“ l l h a n Go l ao A b r ,
       p               b: n            b             tg ”
   Sehn oc,Goa C i ad l aL br riae Global Economic Forum, April 7, 2006. Available
at: http://www.morganstanley.com/GEFdata/digests/20060407-fri.html#anchor0 .
23
    t e R ah“a e eoe ”
       p               s         y
   Sehn oc,Fl R cvr,Global Economic Forum, Morgan Stanley, January 1, 2004. Available at:
http://www.morganstanley.com/GEFdata/digests/20040112-mon.html


                                   Global Labor Strategies                                        8
these countries did not add significant capital to the global economy, more workers
are competing to be employed by essentially the same amount of capital, increasing
the bargaining power of capital and decreasing that of labor.24 This contributes
substantially to wage stagnation or decline in countries around the world.
Chairman Ben Bernanke of the Federal Reserve Bank recently stated, there are “    no
                        for
historical antecedents” the rapid integration of China, India, and the former
C mmu i bo it te ol’eo o i t space of a just a couple of decades.25
  o         t                 d
        ns lc no h w r s cn my n he

Andrew Ross of New York University, who recently spent a year in China studying
how workers are coping with the rapid changes of the last decade, notes that foreign
corporations can use the wages and working conditions in their Chinese operations
to drive down labor conditions for workers at all levels worldwide:

        No industrializing country has been able to compete for the top-end slot at the same time as
        it absorbs jobs lower down the production chain. . . To command this spread—from the lowest
        assembly platform work to the upper reaches of industry and services—is to be in a position
        to set the global norm for employee standards as never before. Given the chronic disregard
         o jb eu i n ok lc r t i hn ’ oeg -invested private sector, such a norm
                      t
        fro sc r ya dw r pae ihs nC ia frin g              s
        is a clear threat to the stability of livelihoods everywhere.26

3.      Corporations fear more rights for Chinese workers

Under current Chinese law, workers do not have the basic human rights to
organize, bargain collectively, and strike. A high proportion of Chinese workers are
represented by unions, but these unions operate under the All-China Federation of
Trade Unions (ACFTU), which is an arm of the government. The ACFTU is non-
 o f tt a:t v w d u p s i t ce t “amo iu rlt s i
     o     o      s
cnrnain li a o e p roe s o rae h r no s eain ”na                    o
workplace. Managers often serve as trade union officials. Strikes are illegal. The
ACFTU is widely considered inside and outside of China to be ineffective.

Current Chinese labor law and the conditions it promotes have led to a huge
upsurge in demonstrations, strikes, and other kinds of protests that have swept
China in the past few years. Last year alone the government reported 300,000
labor disputes, nearly double the number reported in 2001.27 The g v r me t
                                                                    o en n’    s
decision to institute the limited reforms embodied in the proposed new labor law is
a reaction to such action by Chinese workers, which government officials believe
threatens the stability of their rule.

The new law proposes increased government inspection of wages, overtime, and
working conditions, but foreign corporations know that the Chinese government is

24
   “                                                       ”
    China and the world economy: From T-shirts to T-bonds,Economist.com, July 28 2005
http://www.economist.com/displaystory.cfm?story_id=4221685
25
    rha ua“ e nk C l fr a e Go lao,
      s                n        l        r      bi i ”
   K i n G h,B ra e aso Fi r l azt n Financial Times, August 25, 2006.
26
    nr os A at oto h a
         w      ,                   n”
   A de R s “ FsB at C i ,delivered at the Cornell Global Labor Conference on February 10, 2006.
Ross is author of the book A Fast Boat to China : Corporate Flight and the Consequences of Free Trade; Lessons
from Shanghai. (Pantheon, 2006).
27
    n ae el a“ h a r l Wi ao D a n,
       o a        o        n      pe       h           g
   A t ntB z v,C i G ap s tL br r o”Asia Times, April 4, 2006.


                                         Global Labor Strategies                                                 9
unlikely to enforce this law in a way that will seriously threaten their interests.
Indeed, they may well have doubts that the government will effectively enforce it at
 l s mC a cn w e g se e u rn C iee a o lw “r n tul
  .
al A A h m ak o ld e, v nc re t hn s lb r a s ae o fl                           y
o sre a de fre ” n “ n e trr e voae ter rvs n .
 bev d n nocd a d ma y nepi s ilt” h i po i o s
                                            s                        i 28

Corporations have no guarantee, however, that the empowerment of Chinese
workers will end with the current legislation. Historical experience in the U.S. and
around the world has shown that when workers realize that they are entitled by law
to certain rights, they may well create the institutions needed to access and enforce
those rights.

Experience in many countries indicates that labor laws are often unenforced unless
workers exercise the right to organize, bargain collectively, and strike. For that
reason, corporations have reason to fear that even a limited guarantee of rights to
Chinese workers will encourage their further efforts to form independent unions,
elect their own leaders, and utilize their potential bargaining power. They fear, in
short, that the proposed labor bill may be but one step in a new long march for
Chinese workers as they fight for the legal rights due them and the institutional
supports to enforce those rights.

IV.   Policy recommendations
While public and media discussion often focuses on the role of the Chinese
government in suppressing workers struggles and in not enforcing existing labor
law, millions of these workers are exploited by global corporations or their
                             n ed n al w ti o te n rae n C iee
                                          y         d
subsidiaries and suppliers. Id e , e r t o hrs fh ice s i “ hn s”
exports actually represents non-Chinese corporations and their subsidiaries and
suppliers.

Public policy in the US and other countries has allowed these corporations to realize
immense benefits from the low pay and poor conditions under which their Chinese
workers work. These policies have been justified largely on the grounds that foreign
corporations operating in China would elevate labor and human rights standards.

By opposing a labor contract reform law that would elevate labor and human rights
standards, American and other foreign corporations are aggravating the very
conditions they claimed they would ameliorate. Their campaign against the law
blocks protections for Chinese workers, but continues protections for corporations
that would exploit them. By doing so they hurt not only Chinese workers, but
workers around the world who are put into competition with them.




28
  C m et n S get n o R v i o ao C n at a ,A e
             s         i sn        r         ican
 “ o m n ad ugsos n eio t L br ot cL w” m r Chamber of Commerce in Shanghai,
April 19, 2006, p. 21.


                               Global Labor Strategies                            10
The new labor bill is expected to have its third reading this fall; if passed, it will
come into full effect in March 2007.29 U.S., European, and other global corporations
have already weighed in on the bill—they want it gutted. Now is the time for other
voices to be heard.

Corporations and business organizations in China, and their political allies, should
be asked to immediately reverse their opposition to the draft labor code. And they
should be asked to publicly support further legislation to ensure the basic human
right of Chinese workers to organize, choose their own leaders, bargain collectively,
and strike.

This is an opportunity for those who represent American workers in union halls and
                                        op rt s r u d r nn ok r’i t
                                               o
the halls of Congress to ask how UScroain ae n emiigw resr hs                  g
in China for their own profit. It is an opportunity for those who represent workers
around the world to draw a line against the race to the bottom.

There is no need to travel to Beijing: The headquarters of the corporations that are
opposing reforms for Chinese workers are in New York and Brussels, Los Angeles
and London, and other cities and towns around the world.



           hn ’ s
Copies of C ia Draft Labor Contract Law and a membership list of the American
Chamber of Commerce in Shanghai are available on request at:
info@laborstrategies.org .




29
    hi i,C m t eo t n
       s l           e       uo ”
  C r Gl “ o eh R vl i ,The Guardian, 06/24/06. Available at:
http://www.guardian.co.uk/china/story/0,,1804659,00.html


                                  Global Labor Strategies                           11
ABOUT GLOBAL LABOR STRATEGIES
Global Labor Strategies is a newly formed non-profit 501(c)-3 resource center
providing research and analysis on globalization, trade, and labor issues. GLS staff
has assisted numerous unions, government officials, and NGOs develop the
strategies and research needed to function effectively in the global economy. These
organizations range trade unions to civil society organizations in North America,
Asia, Europe, and Latin America.

GLS staff have published many previous reports on a wide array of issues, including
Outsource This! American Workers, the Jobs Deficit, and the Fair Globalization
Solution, Contingent Workers Fight For Fairness, and Fight Where You Stand!:
Why Globalization Matters in Your Community and Workplace. They have also
written and produced the Emmy-nominated PBS documentary Global Village or
Global Pillage?

GLS also runs the Global Labor Blog –promoted by organizations such as the AFL-
 I n       rad rd Uno rga
                 s
C O a dHav r’T a e inP o rm –which is regularly read by journalists,
academics and union officials around the world. GLS has offices in New York,
Boston, and Montevideo, Uruguay.

 h p p r a w i e y L ’Not mei n tf
             t              c
T e a e w s r tnb G Ss rhA r a Saf.

For more on GLS visit: www.laborstrategies.blogs.com

To contact GLS email: info@laborstrategies.org




                               Global Labor Strategies                            12
GLS STAFF
Tim Costello has over 40 years of work and union experience. He helped organize
and served (until July 2005) as Coordinator of the North American Alliance for Fair
Employment a network of 65 unions and community based organizations in the US
and Canada. Costello was a truck driver and workplace activist for many years;
following that, he worked on the staff of SEIU in Boston. He has extensive
collective bargaining experience in a many of industries. He has co-authored 4
books and written scores of articles on labor and globalization.

Brendan Smith is a legal expert (J.D. Cornell University Law School) specializing
in national and international labor law and policy. Besides his work at GLS, he is
currently co-director of the UCLA Law School Globalization and Labor Standards
Project. He has worked previously as a senior legislative aide for Congressman
Bernie Sanders and staffed the Subcommittee on Domestic and International
Monetary Policy, where he organized a series of hearings and legislative efforts on
the Asian financial crisis. Smith has also consulted for the AFL-CIO Solidarity
Center, International Labor Rights Fund and Service Employees International
Union, as well worked and traveled extensively throughout Asia, including China.

Jeremy Brecher is a leading labor historian, writer, and documentary script
writer best known for the labor history Strike!. For more than two decades Brecher
and Costello have studied and written about labor and globalization, writing such
well-known books as Building Bridges: The emerging Grassroots Coalition of Labor
and Community and Global Village or Global Pillage?. For the past 8 years they
have been joined by Brendan Smith, who collaborated with them on the book
Globalization from Below: The Power of Solidarity. Their Emmy-nominated
documentary Global Village or Global Pillage? has been used by unions and other
groups in the US and throughout the world to present an international grassroots
response to globalization.

Claudia Torrelli is an international trade activist specializing in Latin American
trade and economic relations with the Europe and the world. Besides her work with
GLS she is on the staff of REDES (Friends of the Earth, Uruguay). She is also an
activist in the Hemispheric Social Alliance, a Pan-American network of civil society
and labor organizations, and works with the Netherlands based Transnational
Institute's Alternative Regionalism Program.. She holds a degree in International
Relations from the University of Montevideo.




                               Global Labor Strategies                            13

				
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