Global Labor Strategies

A Global Program for Hard Times

[This is the second in a series of three posts on the Beijing Declaration’s proposals and next steps in implementing its vision.]

The times they are a-changing.  US government officials long known as market fundamentalists seize banks, buy mortgage and insurance companies, and commit $7.7 trillion – half of the US annual product -- to government intervention in financial markets.  The Clintonite “moderates” who once gutted the social safety net and sacrificed commitments to jobs programs in order to build up budget surpluses now propose vast public works programs financed by budget deficits.  The IMF, scourge of “irresponsible” countries that didn’t balance their budgets, advocates a trillion-plus dollars in global government deficits and claims to have replaced “structural adjustment conditionalities” with condition-free loans.      

These programs may well fail in halting the downward spiral of the global economy.  But they open the door to new forms of more social and public economy.  That’s one reason conservatives normally oppose them – and one indicator of how serious the present crisis really is.  The economic crisis it possible to put proposals on the table that have long been ruled inadmissible.   

While economists have asserted with great confidence that one after another trillion dollar “solution” would save the global economy, one after another has failed, raising the specter that it cannot be saved in its present form.  Peter Boon and Simon Johnson of the website baselinescenario.com recently raised that possibility in the Wall Street Journal.   They note that economists generally believe even the Great Depression of the 1930s could have been stopped by proper monetary policy.  But, Boon and Johnson argue, governments may simply not be able to prevent such huge deflationary spirals.  “Perhaps the events of 1929 produced an unstoppable whirlwind of deleveraging which no set of policy measures would truly be able to prevent.”  Their implication seems evident: The same could be true today.

The multi-trillion dollar rescues and bail-outs so far just attempt – possibly futilely -- to save the status quo.  But what can we do if the status quo can’t be saved?

An excellent starting point for discussion of what to do as present efforts to address the global economic crisis fail is the Beijing Declaration, issued by a group of NGOs and social movements who met in October on the occasion of the Asia-Europe People’s Forum in Beijing.  Many of its proposals would be valid in more normal times – indeed many are already functioning in some parts of the world.  But the present crisis [link to “Present crisis in historical perspective] puts them on the table everywhere. 

Neoliberalism and globalization have been comprehensive in their effect.  They have reshaped the economy at every level from local villages to global markets and institutions.  And they have reshaped every sphere, from private finance to government taxation, from government spending to international trade, from the environment to agriculture and industry.

The Beijing Declaration provides a vision [link to Globalization from below in hard times post] of a similarly comprehensive transformation.  Its proposals would affect local, regional, national, continental, and global economies.  And it makes concrete proposals for finance, taxation, public spending and investment, international trade and finance, environmental protection, agriculture, and industry.

The following account provides a bit of background on the problems in each of the spheres, then summarizes the main elements of the Declaration’s proposals.

FINANCE
With their trillions of dollars of financial bailouts, governments are acquiring new leverage over, and even outright ownership of, banks and other financial institutions.  The conservative officials who are conducting the bailouts hate this and would like to return control to private hands asap.  But once the financial system has proven itself to be so catastrophically dysfunctional, and once such vast sums of public money have gone into rescuing it, the argument for making finance a public utility serving public purposes becomes irrefutable. 

Trouble at Wal-Mart: The Rocky Road to Labor Reform in China

The industrial relations system in China is in play as workers, peasants, corporations, and a variety of civil society, state, and party actors vie to determine its future.  Now the collapse of the global financial system and the likelihood of a deep global recession/depression add a whole new dimension to the struggle of Chinese workers and reformers for a more equitable system. Global markets for goods made in China will shrink. Thousands of foreign companies with operations in China could be swept away or be forced to significantly downsize. Indeed, even global giants like automaker GM, one of China's biggest auto producers, are teetering on the brink of bankruptcy. China’s banking system—while somewhat isolated from global pressures—is likely to feel the effects of the financial crisis. No one knows what effect the crisis will have on the value of the vast quantities of the US dollars and debt that China currently holds.

Against this back-drop we take a look at aspects of the Chinese industrial relations system before China is sucked into the vortex of a global recession.

Trouble at Wal-Mart

It has been two years since the ferociously anti-union Wal-Mart recognized the ACFTU in its stores. The event made headlines around the world.

Under Chinese labor law if 25 workers petition for a union, a committee can be elected and the union must be recognized. Normally this is a top-down pro-forma affair in which both management and the official union play a part, but in this case, Wal-Mart’s refusal to play by the normal rules forced the ACFTU to actually recruit workers at the workplace and establish the union without management participation. Once Wal-Mart recognized the first union branch, at its Fujian store, recognition quickly followed at Wal-Mart’s other Chinese facilities. Today, the ACFTU says it represents 50,000 Chinese workers at 108 Wal-Mart locations in China. Many hoped the Wal-Mart experience would be a breakthrough in the development of the Chinese industrial relations system and in the evolution of the ACFTU. Things have not turned that way.

We have a good glimpse into the world of Wal-Mart’s workers through voices of the workers themselves as they discuss and debate--and criticize--the actions of Wal-Mart and the ACFTU in on-line blogs. Some of these discussion threads, as well as relevant articles from the Chinese press, have been translated by the excellent, and increasingly indispensible, China Labor News Translations (CLNT). Read them here.

Wal-Mart has not engaged in serious collective bargaining and the ACFTU has fallen into a typically cozy relationship with Wal-Mart’s management. After Wal-Mart and the ACFTU signed a substandard contract at a store in Liaoning province, the company presented the agreement as a template for contracts at stores throughout China and essentially refused to bargain any further. Among the contracts provisions were a pay increase that did not keep up with inflation and which will not come into effect until mid-2009.  According to CLNT report, “Many individual store unions were not even given a chance to sign the template themselves. Indeed in Shenzhen City, for example, the Buji store has signed a collective contract on behalf of fifteen other outlets in surrounding areas.”

For its part, the ACFTU defends its approach to bargaining with Wal-Mart. According to Zhang Jianguo, the ACFTU’s director of collective bargaining, the new contracts require annual negotiations, wages above the minimum wage, and contain language on working hours, vacations, and social security and training.

But workers at Wal-Mart’s Bayi store wanted to negotiate a better agreement. A grassroots leader, Gao Haitao, who has become a hero to Wal-Mart workers throughout China for his combative defense of Wal-Mart workers’ interests, organized a fight back and made new demands in negotiations with management. Instead of negotiating, “Wal-Mart simply bypassed Gao by convening the staff and workers’ congress and finding a trade union chair from another store to sign the contract in his place!”, according to CLNT.

The ACFTU—which says it supports Gao—stood by while Wal-Mart refused to bargain leading the CLNT to conclude. “….the experience of Gao Haitao and the farcical top-down collective bargaining contract negotiation procedure shows that there is no genuine collective bargaining by workers’ representatives. When a Wal-Mart union did come out to negotiate a good contract, the ACFTU did not tender its support.” As a result of Wal-Mart’s actions Gao resigned from his job in frustration in September in a move that many see as a blow to authentic union development in China.

Labor Charts a New Course on China

Trade unions and labor organizations around the world are seeking to establish a presence in China. Initially, that means beginning a dialogue with the All China Federation of Trade Unions (AFCTU)—China’s only legal union. Last year, following its split from the AFL-CIO, the US Change to Win federation, comprised of 7 US unions, broke new ground when it opened talks with the ACFTU.  And in December, the Brussels based International Trade Union Confederation (ITUC), the global union umbrella organization comprised of 309 affiliated organizations in 156 countries, voted to begin a “critical dialogue” with the ACFTU. (The AFL-CIO is the largest affiliate of the ITUC, while Change to Win  is not a member.)

This is not simply a story of bureaucratic relationships. Trade unions are an especially important non-governmental interlocutor on labor and worker rights issues in China—a country with few civil society organizations but a significant formal trade union sector. The lack of civil society organizations means that rights oriented NGO’s have many fewer dialog partners in China than do trade unions. 

Today, one in four workers in the global economy is Chinese. Many are employed by the same global corporations or their contractors that employ union members in other countries. This employment relationship potentially gives foreign unions more standing to advocate for the labor rights for co-workers employed in China by those companies and for Chinese workers generally.   

We’ve written extensively about why the new engagement is a good thing and suggested topics for discussion. Labor’s opening to China represents a significant move away from its Cold War era shunning doctrine, long considered outmoded by many labor activists. Under that doctrine, most trade unions have had little contact with the ACFTU because they do not consider it a legitimate trade union but an arm of the Party/State apparatus. Chinese law does not recognize crucial international labor rights such as the right of workers to establish independent unions, to bargain collectively, to strike, or to elect union officials of their own choosing. 

There have been some previous attempts to create a dialogue with the ACFTU, particularly in the 1980s when China adopted a market economy and opened up to foreign investment. While some individual unions and Global Labor Federations have maintained contact over the years through various joint projects, most unions severed formal relations following the suppression of the pro-democracy movement in 1989.

Meanwhile global corporations and investors flocked to China to take advantage of China’s low wage labor force and business friendly environment.  The consequences of labor’s absence from China were graphically illustrated last year during the debate over the Labor Contract Law which extended new rights to workers. Foreign corporations and their business associations in China actively lobbied the Chinese government to weaken some of the law’s key provisions. But global labor—with no organization or influence on the ground in China—could only comment from afar. Many realized that this asymmetry needed to be addressed.

A GLS Report Back: The Crisis in Chinese Industrial Relations

Take a walk through Beijing or Shanghai or any big Chinese city and you will experience, in a very tactile way, China’s economic miracle. The forest of construction cranes, the neighborhoods being torn down and rebuilt, the shops bursting with consumer goods, the traffic clogged streets, and a prosperous looking citizenry all speak to the country’s remarkable achievements. China’s 20 year run of nearly double digit growth has transformed an economic basket case into a world economic power.

Look a little closer and you can see another side to China’s spectacular growth. The temporary dormitories on building sites for migrant construction workers, the barracks-like housing in the factory districts, the train stations full of workers with bindles or cheap suitcases coming from or going to their hometowns in the provinces. These images graphically portray the turmoil of life for large segments of the Chinese working class and they beg the big question yet to be answered: what role will workers have in the new economic order?

In this and a following post we offer some observations gleaned from recent conversations by GLS staff with dozens of knowledgeable observers—including workers—in China, in the US, and in Europe about what is currently happening inside and outside of China in the battle for economic fairness and labor rights and why it matters for workers everywhere.

China's Challenge: Air Pollution and Greenhouse Gases

Labor movements around the world are beginning to confront the consequences of global warming. Big changes are in store over the next few decades whether humanity acts, or fails to act, to effectively address global warming.  What happens in China, the world’s fastest growing economy and now the largest total emitter of greenhouse gases, matters to people everywhere. But like the rest of the world, China seems trapped in an unsustainable economy with dire consequences for us all.

A toxic haze

In our last post, following our return from a trip to China in April and early May, we wrote about some of the environmental consequences of China’s rapidly growing dependence on private automobiles.  The exhaust fumes from those cars mingles with the smoke from the mills, factories, and coal fired power plants that ring China’s big cities to form a toxic haze that takes a high toll in lives and money. The World Health Organization estimates that about 656,000 people each year die prematurely as result of all types of air pollution.

Air pollution is a major public issue in China, one that elicits public protests, press attention, and increasingly, government action.  The old idea of industrialization first, environment later is slowly giving way to a more nuanced approach to development. The Chinese government is taking steps to reduce air pollution. Higher quality gasoline is now being sold in China; automobile emission controls and tougher mileage standards are being phased in; new scrubbing technology is being built into (some) new coal power plants; more efficient boilers are coming on line in buildings and factories; new energy saving building codes have been enacted in Beijing and elsewhere; public transport systems are expanding; and some steel mills and power plants are being moved away from big cities.

Global attention is focused on Beijing’s air pollution as this year’s Olympics Games draws near. Athletes have expressed concerns about the health hazards of breathing Beijing’s air: world record marathoner Haile Gebrselassie, has actually opted out of running the marathon.  In response, authorities in Beijing have instituted additional measures to reduce pollution: construction will temporarily be halted to keep down dust and fumes; alternate day car use schemes will be put in place to reduce traffic; and the operation of polluting mills, factories, and power plants will be halted or curtailed.

Driving Dangerously

(GLS staff members have returned from a visit to Beijing and Shanghai in April and early May. This is the first of a number of posts prompted by the trip that will appear over the next month or so.)

According to a new report, China has now surpassed the US as the world’s largest total emitter of greenhouse gasses. (Of course, the US retains the dubious honor of leading the world in per captia emissions.) This raises the question: is it possible for China and the developing world to find a path to sustainable development at a pace necessary to raise hundreds of millions of people out of poverty while reducing greenhouse gas emissions? Given the current development trajectory, there is reason to worry.

One thumbnail measure of how aggressive a country is in combating global warming is how easy it is to cross a city street. This tells you a lot about which mode of transportation is privileged by law and public policy: do non-polluting pedestrians and bicycles have the right-of-way, or do carbon spewing motor vehicles? In China, the answer in cities like Beijing and Shanghai becomes clear as soon as you step onto the street on the walk signal: cars, trucks, and buses, utilizing the right on red rule, regularly honk and push through the throngs of people on the cross walks. Pedestrians and bicyclists beware.

China has plunged headlong into the automobile culture and on China’s roads, the car is now king. Gone are the massed pelotons of workers riding bicycles home at rush hour, replaced now by traffic jams of cars, taxis, and buses and (on a more positive note) subway cars loaded to “crush” capacity. While bike lanes are still a fixture on Chinese roads, and many in Beijing and Shanghai still ride bikes or electric mopeds, one now has to travel to European cities like Copenhagen and Amsterdam to find genuinely bicycle friendly big cities.

While Beijing and Shanghai both have clean and efficient subway systems that would be the envy of any city, they are hopelessly overburdened and do not yet provide adequate coverage in these rapidly sprawling cities. New public transport is desperately needed and some is on the way.

But, China has massively invested in the internal combustion engine. It has built a world class road and highway system in much of the country. Automobile production is growing by double digits every year: according the Beijing Review, production in the first quarter of this year was up 20% and by 24% in March.  Each day 1300 new cars join the 3.35 million vehicles already on Beijing’s roads.

When Global Labor and China's Union Talk

(Note: half of GLS's staff is travelling in China, the other half is busy on different assignments, so we will be posting only sporadically until early May.)

In our recently released report, Why China Matters: Labor Rights in the Era of Globalization and in a subsequent post, Labor’s Opening to China, we discuss new and on-going efforts by global labor organizations to open a dialogue with the All China Federation of Trade Unions, China’s only legal union. We argue in some detail that the talks are long overdue but that they pose problems for both sides.

Western unions want a presence on the ground in China where so many of the companies that employ their members have set up shop.  But they worry about giving their stamp of approval to a state/party affiliated union that may sign sweetheart agreements with global corporations. And indeed, at the local level, the ACFTU, by all accounts, often functions as a management dominated company union in the workplaces where it is present. 

The ACFTU wants global recognition and support in a world increasingly skeptical of Chinese institutions but they must also worry that Western unions often talk cooperation abroad and practice protectionism at home.  China bashing is still a standard part of the repertory of many unions despite the fact that it is US based and other foreign corporations—not the Chinese government—that drive much of China’s export oriented economy.

Both sets of concerns are legitimate.

It is a given that unions, like other organizations, have institutional, industrial , and national interests that they seek to promote and these interests shape their actions abroad to a significant extent.  But unions are also learning an important lesson of modern diplomacy:  it is essential to talk even with those with whom you may not agree.  Engagement need not be a sign of approval, but rather a search for common interests. It is in this spirit that non-Chinese labor organizations and the ACFTU should conduct their dialogues.

New GLS Report - Why China Matters: Labor Rights in the Age of Globalization

Nearly three years ago GLS undertook an informal listening project to hear what was on the minds of labor leaders, labor rights advocates, and NGO staff from around the world as they grappled with the challenges of globalization.

It is clear that globalization has produced a host of challenges for worker and social movements. But when we asked those we interviewed what specific issues they faced were most perplexing, at or near the top of nearly everyone’s list was what to do about China.

No wonder. China has become a focal point for much of the questioning and insecurity that globalization has produced. For the past two decades China has experienced explosive economic growth that has attracted jobs and capital from around the world. Today 25% of the global workforce is Chinese. No other industrializing country has ever attracted jobs at both the high and low ends of the production chain. From basic level assembly work to the upper tiers of industry and services, China is setting the global norm for working standards around the world.  Workers in rich countries and poor countries alike, in almost every nook and cranny of the global economy, feel the effect of China.

Crucial to addressing China’s global impact is the often ignored fact that the driving forces in China’s labor market are the global corporations that move to China to lower labor costs and use the threat of this mobility as a lever to drive down wages and working conditions for workers in other countries, and even within China itself. China has welcomed foreign firms with open arms. A partnership has developed based on a quid pro quo: the Chinese government provides a compliant low wage labor force in exchange for massive foreign investment.

Over the past 3 years, GLS has produced scores of articles and two major reports on labor law reform in China. We have paid particular attention to the critical role played by global corporations in China’s development.  This report builds on that work. Why China Matters: Labor Rights in the Age of Globalization provides background information needed to understand the issues involved and why the outcome of this battle matters so much to people everywhere.

Download the pdf version of the report here. Read below for a summary of the report.

Why China Matters: Labor Rights in the Age of Globalization

This report examines the forces at work inside and outside of China pushing for and against labor rights reforms.

Part one provides a survey of China’s new global economic power and its impact on the global economy.  A case study from Namibia shows how employers use China as leverage to suppress wages, working conditions, and labor rights in other countries.

Part two examines the development of the Chinese working class. We briefly look at the structure of the Chinese workforce in the period before the era of economic reform began in the 1980s. Then we look at how the largest migration in human history—the movement of 200 million people from China’s countryside to its cities—reshaped China’s working class and its labor markets.  Finally, we look at the reasons migrants leave the countryside and the conditions they face in the cities.

Labor’s Opening to China

The announcement in December by the International Trade Union Confederation (ITUC) that it would begin a “dialog” with the All China Federation of Trade Unions (ACFTU) marks a sea change in global labor’s approach to China.  Equally significant is the endorsement of the talks by the AFL-CIO.  Until now, the ITUC, the AFL-CIO, and most national labor federations shunned official contacts with the ACFTU—China’s sole legal union—because they did not consider the party-state controlled organization a legitimate representative of China’s workers. 

But, according to Guy Ryder, the ITUC’s General Secretary,

“By starting a dialogue with the Chinese trade union, ITUC wants to have more influence on the ground in China….It should enable us also to discuss the role of China in the world.”

The action actually caps a gradual shift toward engagement with China by unions from around the world. Some European unions affiliated with the ITUC have been active in China for over a decade. The Change to Win federation in the US began talks with the ACFTU last year. Officials have exchanged visits and plans are underway to expand contacts in the coming months.

The policy shift by the ITUC, the AFL-CIO, and other global unions is long overdue. Three decades of rapid economic growth have transformed China from an economic backwater into the world’s workshop.  Workers, trade unions, communities, and countries throughout the world are confronting the challenges posed by China’s growing role in the world. Today, about 25% of all the workers employed in the global economy are Chinese.  The “China price” sets the global norm for wages and working standards up and down the value chain, from inexpensive garments to sophisticated electronics.  As a result the hard-won gains of workers in the global North are being rapidly undermined, while the aspirations of workers in the developing world are being dashed, as China becomes the wage setting country in industry after industry.

China’s export oriented development model has had a particular impact on trade unions everywhere. Multinational corporations—the very firms that employ millions of union members around the world—have flocked to China seeking to take advantage of its low wage workers and business friendly policies, reducing labor’s bargaining leverage and the number of union jobs. These firms have been central to China’s development. Roughly 66% of the increase in Chinese exports in the past 12 years can be attributed to foreign owned global companies and their joint ventures. (Stephen Roach, Business Times, Singapore, 8/8/06) These companies account for 60% of Chinese exports to the US. Despite all of the talk in the current presidential campaign, the “Chinese threat” is less about trade with China than it is about “trade” with US based companies like Wal-Mart, GE, or any of the other of the hundreds of Fortune 500 companies that have set up shop in China to cuts labor costs and avoid environmental regulations. Ways, however imperfect, must be found to reach out to Chinese workers to find mutually acceptable ways to halt a global race to the bottom, which in end, hurts all workers.

Beyond China's New Labor Contract Law

China’s new labor code went into effect on January 1. It could have important consequences for workers in China and in the rest of the world.

The Financial Times on January 2 reports that,

Employers in China fear that a new labour contract law that took effect on Tuesday will intensify growing pressures on manufacturing costs by enhancing the bargaining power of workers.

We estimate that, added together, labour costs [in mainland China] will be close to 40 per cent higher for this year [2008],” said Willy Lin, Hong Kong-based managing director of Milo’s Knitwear (International) Group.

Mr Lin says the new labour contract law, which will make it harder to dismiss workers, could increase costs by about 8 per cent this year, with the rest of the increase caused by higher minimum wages, social security payments and the renminbi’s steady appreciation against the US dollar.

The new law was designed to address some of the rampant abuses in Chinese industry including long hours, dangerous working conditions, and employers that cheat workers out of wages or delay payments.  But like all laws everywhere, the new law will be worth little if it is not interpreted broadly and enforced strictly. If the past is any guide, this could be a problem. China has been notoriously lax in enforcing labor laws. Absent vigorous enforcement, the new law could lead to workers being squeezed even harder in an effort to keep labor costs down.