Labor rights a sore in US-China
relations By Benjamin A Shobert
In many ways, the United States Congress'
view of workers' rights in China has never
recovered from the Bill Clinton administration.
Prior to his pursuit of Most Favored Nation (MFN)
status for China, Clinton had publicly linked
progress on human rights with MFN.
His
reversal on this reflected widely received wisdom
that as China's economy grew, human-rights abuses
would lessen and workers' rights would advance. In
a broad sense, the growth in China's economy has
made the lives of millions of everyday Chinese
better. But problems remain, and many in congress
and elsewhere believe more could have been done
then, and must be
pursued now, lest the
rights of China's factory workers forever be
allowed to fester.
Added to this
legitimate concern are more insidious frustrations
that China's economic growth owes something to its
ability to bend rules to which Western nations
elect to hold themselves.
In the violation
of these rules, China creates cost advantages that
make it impossible for Western companies to
compete; unless, of course, Western governments
choose to involve themselves in leveling the
playing field through tariffs or import
regulations.
Both would have seemed
unlikely several years ago, but as the eurozone
enters recessionary waters and the United States
continues to struggle, both sets of policies are
now widely under consideration.
On
Tuesday, the Congressional Executive Commission on
China (CECC), led by Representative Christopher
Smith (Republican - New Jersey) turned its
attention to the question of how the working
conditions and workers' rights in China have
changed since problems at Foxconn in Shenzhen,
adjoining Hong Kong, came to light. Taiwan-based
Foxconn, a leading maker of mobile electronic
devices for Apple and other leading technology
companies, has been the focus of international
attention due to a number of high-profile suicides
at its factories over the past couple of years.
Perhaps not surprisingly, the consensus
from Tuesday's hearing was that whatever changes
have been made in China are inadequate, and that
only US-style controls will serve to provide
Chinese workers with adequate protections.
Thea Lea, the deputy chief of staff at the
AFL-CIO (the American Federation of Labor and
Congress of Industrial Organizations) shared her
opinion with the commission that whatever your
view on how the US government uses its informal
leverage on China, "so little happens".
Earl Brown, the labor and employment law
counsel and China Program director for the AFL-CIO
testified, "The remedy for this is to really
entrench in US federal law due-diligence
compliance on Chinese labor practices."
Brown's sentiment was widely reflected
across the six experts who testified as part of
Tuesday's commission hearing. All agreed that
whatever changes Chinese businesses would make
would only be made if their customers - for all
practical matters American and European retailers
and manufacturers - face legal problems if they do
not properly audit suppliers for compliance to
Western labor standards.
On this point,
Brown added that congress should "not shy away
from this because [these practices] take place
overseas ... supply chains should be monitored and
inspected".
The traditional push back by
business to this sort of federal legislation is
that, as Charles Kernaghan testified, it would
"limit free trade". Kernaghan, the executive
director for the Institute of Global Labor and
Human Rights, was adamant that "nothing will
change in the global economy without enforceable
labor rights".
In his mind, companies
aggressively pursue intellectual property rights,
but attempts to get them to view human rights as
important have thus far fallen on deaf ears.
Business has been quick to point at third party
auditing firms that are used; however, for many
who testified on Tuesday, this is inadequate.
As seen by those who testified at this
week's hearing, audit systems in China are
"ineffective and corrupt". When asked by a
congressman what could be done to buttress the
auditing of Chinese firms for Western standards,
Kernaghan noted, "there has to be outside
pressure, because without undercover people [in
these factories in China], we would not know what
was really happening".
He went on to add,
"If we don't keep up pressure on these companies
in China and their buyers, these practices will
continue."
One member of Tuesday's panel,
Li Qiang, heads up a group that has taken steps to
provide workers with the ability to report abusive
working environments. As the founder and executive
director of China Labor Watch, Li said his group
has installed more than 100 hotlines around the
country. Workers can pick up the phone and
anonymously report unsafe or illegal labor
practices.
Concerns on the part of workers
over whether their call is actually anonymous and
pushback from companies who like how such a
reporting vehicle improves their public image but
who resent the cost burden of compliance have thus
far prevented further adoption of China Labor
Watch's phone lines.
According to Mary
Gallagher, an associate professor of political
science at the University of Michigan, the US
government has a role to play in forcing American
companies to comply with international labor
standards. As she testified, "A voluntary code of
conduct is self-policing, and most companies
aren't really that interested in finding
problems."
Looking at the mixed motives of
third-party auditors who are paid for by the
companies themselves, Gallagher said, "The
auditors work for you and that is a problem." An
equal problem is, as she pointed out, "bottom
feeders who don't have a brand ... they don't
particularly care if they get caught violating a
labor law ... they can close down and open up
somewhere else the next day."
Where
Tuesday's hearings proved the most illuminating
was not reviewing what has changed in China since
the problems at Foxconn in late 2011. What was
most interesting was the connection made by
Congressman Sherrod Brown (Democrat - Ohio) on
workers' rights in China and lost jobs in America.
Brown was quick to point out that the US
trade deficit can be explained in a number of
ways, not least of which was that China competes
on the basis of labor practices that America has
chosen not to follow. According to Brown, it isn't
that American workers cannot compete against
Chinese-made goods; it is that they cannot compete
if different standards are required of the
businesses that employ both groups of workers.
Brown was particularly troubled that
"Innovation happens here, but production happens
elsewhere. We as a nation tend to use our
innovative edge ... they are making our drugs,
even our Olympic uniforms."
Cheap shots
about the Olympic uniforms aside, Brown is
concerned that America's economic model is overly
idealistic and does not reflect the brutal
realities his state in particular has faced as
part of the dislocation of traditional
manufacturing. As he sees it, jobs created through
innovation are not enough; it is the linkage that
exists between innovation and manufacturing that
America is not adequately protecting.
Referencing the trade deficit between the
US and China, Brown reflected what is becoming an
increasingly common view in congress: the status
quo of America's relationship with China needs to
change.
This has always been a dynamic
relationship with its own unresolved tensions, but
in the aftermath of the 2008 financial crisis,
more congressional leaders are finding China's
trade policies, labor practices, human-rights
abuses, and military build-up as cause to
fundamentally revisit what America should expect
of China as a trading and strategic partner.
On the broader question of human rights,
there are certainly practices that Beijing could
stop, and reforms it could start, that would
address congressional concerns. But on the
economic front, it is less clear that Beijing can
alter the labor practices of its workers in ways
that would be broad enough to substantially alter
the competitive landscape workers in the American
Midwest face.
In the aftermath of
Tuesday's CECC hearing, the options available to
the American people are of little comfort. Duties
could be imposed on companies that are found to
violate international labor standards, but by then
it is too late to protect dislocated
manufacturers.
Broad tariffs could be set
out against specific industries in China that are
believed to be worst offenders, but it is unclear
whether this would be an action the World Trade
Organization would enforce.
Consequently,
America's mood towards China continues to sour,
fed by a constant stream of frustrations that seem
poorly matched to actions US politicians have the
power to take.
Benjamin A
Shobert is the Managing Director of Rubicon
Strategy Group, a consulting firm specialized in
strategy analysis for companies looking to enter
emerging economies. He is the author of the
upcoming book Blame China and can be
followed at www.CrossTheRubiconBlog.com.
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