It’s hard to get accurate information about what’s really going on in China’s economy or its workplaces. This is a big problem for unions that need information about the companies they bargain with and the industries within which they operate. It’s also a problem for consumers who need to know about product safety and regulatory standards—as recent scandals involving contaminated pet food, toothpaste, and children’s toys make clear—and for environmental organizations, human rights advocates, and other watchdog NGOs—all of which play important roles in the civil societies of the industrialized world.
It’s easy to blame the Chinese government for the information gap. But corporations in China—both foreign and domestic—are as much or more to blame. While how much information corporations can keep secret from the public as “proprietary knowledge” is contested in every country, in China corporations have far exceeded acceptable bounds by creating a raw capitalism based on secrecy and short term advantage. This is at odds with the transparency needed for the rule of law and social accountability. If labor laws, product safety standards, and environmental regulations are to be enforced public access to a wide range of information is required.
Now pressure is building for more transparency. For instance, on a recent trip to China US labor leaders agreed to an information exchange with their Chinese counterparts—something that could serve as the basis for further cooperation between Chinese and non-Chinese unions. Some corporations are also questioning the corporate climate of secrecy and have even taken steps in the direction of transparency that could serve as the basis for a campaign by labor and civil society organizations to tear down the wall of secrecy that characterizes corporate business practices in China.
A corporate culture of secrecy
Veteran US journalist James Fallows, reporting from China, writes in this month’s Atlantic Magazine:
....In decades of reporting on military matters, I have rarely encountered people as concerned about keeping secrets as the buyers and the suppliers who meet in Shenzhen and other similar cities. What information are they committed to protect? Names, places, and product numbers that would reveal which Western companies obtain which exact products from which Chinese suppliers.
According to Fallows the secrecy is driven by two factors. First, “the Nike problem”, that is, a desire not to repeat Nike’s past experience of being identified with sweatshop production (more on this below); and, secondly to prevent competitors from copying successful supply chains. Since few foreign companies actually produce anything in China the art is in constructing a productive supply chain.
….Companies that have solved… [this] problem don’t want to tell other companies how they did so. ‘Supply chain is intellectual property,” is the way [one Western businessman] put it. Asking a Western company to specify its Chinese suppliers is like asking reporter to hand over a list of sources.” [Atlantic Monthly, July/August 2007, on-line by subscription only]
Speaking of secrecy and reporters, New York Times business reporter David Barboza—who has been reporting on how contaminated products have made their way to markets in the US—recently found himself a hostage for nine hours in a Chinese toy factory. His story tells a lot about where power lies in modern China.
You’ve intruded on our property,” one factory boss shouted at me. “Tell me, what exactly is the purpose of this visit?” When I answered that I had come to meet the maker of a toy that had recently been recalled in the United States because it contained lead paint, he suggested I was really a commercial spy intent on stealing the secrets to the factory’s toy manufacturing process.
How do I know you’re really from The New York Times?” he said. “Anyone can fake a name card.”
Thus began our interrogation, which was followed by hours of negotiations, the partial closing of the factory complex and the arrival of several police cars, a handful of helmet-wearing security officers and some government officials, all trying to free an American journalist and his colleagues from a toy factory.
Factory bosses, I would discover, can overrule the police, and Chinese government officials are not as powerful as you might suspect in a country addicted to foreign investment.
But my toy factory visit made me wonder: who really holds the balance of the power in that relationship these days?
Many experts have told me that one of the most serious problems in China is that the government lacks the power to control the nation’s Wild West entrepreneurs, deal makers and connected factory owners…….
Indeed, the impotence of local officials was clear to me from my visit to the RC2 Industrial Park in the city of Dongguan, which is thought to be the largest toy manufacturing center in the world.
The private plant is the main supplier to the RC2 Corporation, an Illinois company. And the Hong Kong or Chinese entrepreneurs who run the facility seemed to hold great sway over the government.
Finally, after hours of waiting, a higher-level government official arrived to settle the dispute.”
He was a friendly man who admitted that he could not release us, that he didn’t have the power. We should negotiate, he said. For the next five hours, he shuttled between rooms in the villa trying to negotiate a settlement. There were shouting matches. There were demands that pictures be turned over.”
The factory management released Barboza when he agreed to write a statement saying that he has not asked for permission to take pictures.
When we were released early Tuesday from a local police station, where we were sent to fill out a report, we noticed that while our translator was giving an account of the day to the police, the factory bosses were laughing and dining in another room, making the nexus of power in these parts and in this age ever more clear.”
Breaking ranks
Is transparency too much to ask of corporations? Nike—the poster company of the anti-sweatshop movement of the 1990s—says no. The company’s latest corporate responsibility report, released in May, makes interesting reading on this account.
After the battering Nike took from the anti-sweatshop movement it launched an ambitious program to address labor abuses in its supply chain in order to clean up its corporate image. Nike contracts with about 700 firms in 53 countries employing 800,000 workers, 80% of whom are women ages 18-24. Nearly 300 of its suppliers are in China. Time will tell whether Nike’s actions will match its rhetoric. But as one part of its plan, a few years ago Nike made public the names and location of each factory in its supply chain.
In its latest corporate responsibility report Nike reports on why they went public and what has happened since then.
According to Nike it is “….an inherited wisdom within the industry that locations are competitive information….” and that this prevented cooperation with other buyers interested in monitoring conditions.
To counter that situation and enable greater cooperation and collaboration, we broke ranks with the industry model and disclosed our contract factory locations. Some have since joined us in publicly or privately sharing their locations. We are seeing successes as a result of collaboration—shared information, shared best practices, leveraged resources and more effective coverage of supply chains within our industry. By FY11 we expect to leverage multi-brand collaboration in 30 percent of our contract factories to share best practices and maximize resources.
We continue to advocate for transparency and encourage all companies in our industry to disclose publically their supply chains. We have realized no competitive disadvantage from bringing greater transparency to our supply chain. In fact, many of our suppliers have welcomed it for leading to streamlining and harmonization of monitoring approaches, reducing the burden on them, and allowing partners to collectively focus resources and energy on more than just policing.
Nike’s action demonstrates that there is no need to wait for the Chinese government to act to achieve greater corporate transparency. Labor and its allies should demand that US based and other foreign corporations follow Nike’s lead and reveal their supplier chains and other details of their business practices in China.
On Friday, June 29, China’s new labor law was passed by the National People’s Congress. It will go into effect on January 1, 2008. As the bill worked its way through the Chinese decision making process, US based corporations complained bitterly that since China does not enforce existing laws new laws were unnecessary. They argued that while US companies obey labor laws, Chinese companies do not and would not. What better way to change this situation, we ask, than by revealing the names and locations of all of the companies in their supply chains and the steps they are taking to insure compliance?
M.O.
I’ve never any pity for conceited people, because I think they carry their comfort about with them
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