Global Labor Strategies

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.

A Call to Action

China’s new Labor Contract Law will become effective on January 1, 2008. At that time companies will be required to provide a written contract to each employee and to provide a handbook of company policies and procedures developed in consultation with worker representatives.

The new law gives new rights to employees and imposes new responsibilities on employers. There is evidence that some companies are taking evasive action to avoid complying with both the letter and the spirit of the law. This has provoked a great deal of controversy in China.

Last year, as the new law was being drafted, foreign corporations and their business associations took strong exception to some of its provisions. As a result changes were made in later drafts to address corporate concerns. Following passage, foreign corporations and their business associations pledged to support the law and abide by its provisions.

Given the public controversy in China over corporate compliance with the new law, it is time for trade unions, worker rights advocates, and political figures around the world to insist that foreign companies and their suppliers prove compliance with the new law and respect for their employees’ rights under the new law. They should demand that foreign corporations take the following 3 steps to prove compliance:

1. Make public the templates of the contracts that they are offering to their employees.
2. Make public copies of company policies and procedures handbooks with a description of how they were written.
3. Make public any instructions that they have issued to their suppliers and the measures that they plan to take to insure compliance by their suppliers.

Foreign companies and their business associations regularly insist that they are law abiding and committed to promoting strong labor rights and legal standards in China. By making key documents public they can demonstrate that commitment, on paper at least.

The time to act is now in the run-up to the Labor Contract Law’s implementation date on January 1, 2008. How the new labor law is implemented in China should be of concern to everyone who supports labor rights and adherence to the rule of law. Trade unions around the world should demand compliance and transparency from the companies that employ their members, from companies which they hope to organize, and from companies in the industries in which they are active. Non-Governmental Organziations working on labor and human rights issues should demand compliance from the companies and industries that they target. And governments in countries around the world should take steps to insure that multinational companies headquartered in their jurisdictions comply fully with both the letter and spirit of China’s Labor Contract Law.

Are US and EU Corporations Complicit in Evading China’s New Labor Law?

Evidence is mounting that they are. In a recent post we reported that some firms in China are firing workers in the run-up to the implementation of China’s new labor contract law which grants more rights to workers. Now it appears the problems are widespread and that foreign corporations--including Walmart--may be complicit.

In the interim period between the law's passage on June 29th, 2007 and its effective date on January 1, 2008 employers must bring personnel policies into compliance. Among its provisions, the new law requires a written contract for each employee; encourages open ended contracts rather than fixed term agreements; makes dismissals more difficult; automatically grants open-ended contracts to workers with 10 years of service; and requires that many company policies and procedures be negotiated with employee representatives.

Corporations are looking after their own interests: as 2008 nears, law firms and HR consultants are hard at work giving advice and holding seminars on how to best deal with the new law and HR staffs are drafting new contracts and policies. For workers it’s a different story. At a meeting here in the US last week a visiting Chinese scholar called the current situation “a-symmetrical”.  Citing the example of one firm that has laid off workers to avoid provisions of the new law he asked, “Who is looking out for the interests of the employees?”  Who indeed!   Against the power of the employers, workers have been left to their own devices.

China's New Draft Arbitration Law

With China increasingly setting wages and working conditions for workers the world over, the ripple effects from changes in Chinese labor law are likely to be felt in each of our home countries. So head's up: new Chinese labor legislation is in the works.

The latest draft law concerns labor dispute mediation and arbitration.  Since Chinese workers lack the right to strike, arbitration has been one of the few institutional ways for workers to address grievances with their employers. But the current system is failing, triggering an increasing number of worker protests and social unrest.

The new draft was submitted to the National People’s Congress for its first reading on August 26, 2007.  It comes on the heels of the Labour Contract Law passed last August, which extended an array of basic rights for Chinese workers—including protections for temp workers, just-cause firing provisions, etc.

The arbitration law is designed to address a number of government concerns.  According to the China Daily, PRC figures reveal that “labor dispute cases in China are continuously increasing in recent years. Statistics show that labor dispute arbitration organizations at various levels dealt with 1.72 million labor dispute cases involving 5.32 million employees from 1987 to the end of 2005, with a growth rate of 27.3 percent annually.”

Are Corporations Sacking Workers To Avoid China's New Labor Law?

A newspaper in China’s Guangdong Providence recently ran an article entitled "'The Labor Contract Law Made Me Lose My Bowl of Food." It relays the story of “a 50 year old worker Hua Yi, who was employed at a plant since 1996--until recently, when she was told there wasn't enough work for her. New workers, though, were hired in Hua's place. Another worker, A Yu, put in 21 years at a factory only to be informed that her work was unsatisfactory and fired. She was left to rely on her husband's 600 RMB per month salary to take care of aging parents and a daughter not yet four years old.”

As many GLS Blog readers know, last year US and EU corporate lobby groups launched a major campaign to block new protections for Chinese workers. They were successful in part—as one corporate lawyer put it “the business community appears to have had an impact…scal[ing] back protections for employees and sharply curtailed the role of unions”.  But their aggressive tactics also unexpectedly sparked major push-back from the international labor and human rights movements inside and outside of China.  This pressure forced companies like NIKE and others reverse their positions and support the new labor law, which was passed by the National People’s Congress in June 2007.

Good news right?  Not so fast. Recent reports like the one from Guangdong reveal that some companies are quietly firing workers before the new Labor Contract Law takes effect.  While passed in late spring of ’07, the new law does not become binding until January 1, 2008, giving employers a six-month window to continue to take advantage of China’s rights-free labor market.

China’s New Contract Labor Law

China’s new Labor Contract Law was enacted by the National People’s Congress on June 29th. It will go into effect on January 1, 2008.

The law was enacted with an unusual amount of debate and controversy both in China and worldwide. GLS has written extensively about the attempts by foreign corporations to gut important provisions of the law. The law's final version has received mixed reviews from the foreign corporations and their lawyers doing business in China.

According to the New York Times:

Many multinational corporations had lobbied against certain provisions in an earlier draft of the new labor law. An early draft gave unions greater powers and made it more difficult to fire workers.

Companies argued that the rules would substantially increase labor costs and reduce flexibility, and some foreign businesses warned that they would have little choice but to move their operations out of China if the provisions were enacted.

International labor experts said several of the most delicate clauses had been watered down. But lawyers representing some big global companies complained that the new law still imposed a heavy burden.

''It will be more difficult to run a company here,'' said Andreas W. Lauffs, head of Baker & McKenzie's employment law group, which represents many of America's biggest corporations in China.

The Christian Science Monitor reports,

"As is always the case with China's laws, the real question will be in whether the new laws are enforced, how they are enforced, and against whom they are enforced," says Dan Harris, an expert at the law firm Harris & Moure.

But, he adds, "there is a feeling the new labor law is more likely to be enforced than the old and, in particular, will be enforced against foreign companies."

Challenging Corporate Secrecy in China

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.

Why Labor Can and Should Lead a Reassessment of Approaches to China

With US labor leaders holding talks (see here, here and here) with the ACFTU in China, we thought it would be worthwhile to examine the role of the U.S. labor movement in the reassessment of approaches to China.  A later post will explore the questions raised by  U.S. labor's emerging engagement with the ACFTU.

Why Labor Can and Should Lead a Reassessment of Approaches to China

1. Established approaches to China are obsolete. 

China is no longer a cold war adversary, but it is now a global economic powerhouse.  The current policies of labor and of the U.S. government have not adequately recognized today’s reality. 

2. The jobs and wages of workers in the US and everywhere are at stake.

Unions and workers all over the globe are confronting the challenges posed by the emergence of China as a global economic powerhouse.  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.

3. A new China strategy is an economic necessity for labor.

China is a global problem for workers and their unions.  Every day footloose corporations move or threaten to move jobs to China. The “privileged” position of workers in the global North is being rapidly undermined while the aspirations of workers in the developing world are being dashed as China becomes the wage setting country in many industries.

False Representation?

In a statement posted on its website dated April 5, 2007 the US-China Business Council (USCBC) alleges that “A group called Global Labor Strategies has repeatedly mischaracterized the US-China Business Council (USCBC) position on China's proposed new Labor Contract Law” and accuses GLS of making “false representation.”  In a letter to the Washington Post April 17 it charges GLS with “misrepresentation.”  On the contrary, it is the USCBC that is misrepresenting GLS.

GLS has indeed issued two extensively documented reports, BEHIND THE GREAT WALL OF CHINA:  U.S. Corporations Opposing New Rights For Chinese Workers and UNDUE INFLUENCE: Corporations Gain Ground In Battle Over China’s New Labor Law – But Human Rights And Labor Advocates Are Pushing Back, which detail the actions of the USCBC and other representatives of U.S. corporations in China.  Along with its reports, GLS has also directly posted or linked to all of USCBC’s comments on the draft law so that readers could examine them in their entirety.

An examination of the USCBC’s statement and letter reveals that they do nothing to refute GLS’s charges.  Indeed, the USCBS makes a number of allegations that are simply false.

The Global Battle Over New Rights for Chinese Workers

Editor's Note: GLS has taken the lead in exposing the role of U.S. corporations in opposing the proposed Chinese labor contract law.  Here’s an update on the campaign of the “sweatshop lobby” – and the response by labor worldwide.

In a historically unprecedented visit, the influential Chinese scholar and labor law expert Liu Cheng arrived in Washington, D.C. this week to garner support from US legislators and labor leaders for a law that is pending not before the US Congress but before the National People’s Congress in China.  Liu Cheng has been a key advisor to the drafters on a new labor law reform bill currently working its way through the Chinese legislative process.

His visit is part of a behind-the-scenes battle that is raging worldwide over reforms in China’s labor law.  On the one side are Wal-Mart, Google, General Electric and other global corporations who have been aggressively lobbying to limit new rights for Chinese workers. On the other side are pro-worker rights forces in China, backed by labor, human rights, and political forces in the U.S. and around the world.

Liu Cheng’s visit to Washington was part of that international support campaign.  He warned in an interview that support for the new law within China is not enough “if there is no support from labor supporters outside China…Some National People’s Party Congress representatives are influenced by the employer lobby.  Although the principles of the amendments are secure, there may be concessions on the details, so we call for help.”