Vol. IX, Bulletin No. 11.                                                          December 6, 2004

China to Wal-Mart: Get in Step with Us

The story is all over the media.  Wal-Mart will let a union represent its 20,000 retail employees in the People's Republic of China.  After years of claiming that its "associates" (that is, its employees or workers) don't need unions in China or anywhere else, Wal-Mart last month appeared to take a different approach in a statement saying:

"Currently, there are no unions in Wal-Mart because associates have not requested that one be formed. Should associates request a union, Wal-Mart China would respect their wishes and honor its obligations under China's Trade Union Law."

Is this a breakthrough for the workers in Wal-Mart's 40 retail outlets in China, as some observers quickly claimed?  No, it isn't.

Wal-Mart has recently been under mounting public pressures in China, not from employees at its stores, but from three official Chinese institutions -- the National People's Congress, the Communist Party-controlled All-China Federation of Trade Unions (ACFTU), and China's media -- to establish ACFTU units in its stores (to call them unions is a misnomer).  This fall it became clear that the authorities are serious about starting to enforce an often ignored requirement in Article 10 of the Trade Union Law: all public or private enterprises having 25 or more employees must establish an ACFTU unit.

Eight Years of Exempt Status Ending for Wal-Mart

Wal-Mart, which opened its first outlet in China in 1996, has apparently believed it was exempt from Article 10.  Reportedly, it had received official word to that effect. If true, those assurances are outdated.  In Shanghai, for example, the city government recently rejected a new Wal-Mart project because Wal-Mart was snubbing the ACFTU.

Fundamentally, however, the positions of the Chinese and Wal-Mart officials are not that far apart.  Here's why and how the two sides can, and probably will, make a deal without violating the principles held by either side.

Under a business model not exclusive to Wal-Mart, employees owe loyalty to the company to such an extent that no one outside the company can represent them. ("There is no need for third-party representation," says a long-standing Wal-Mart statement on unions.)  Under the surviving Marxist labor model of the Chinese side, China's workers owe allegiance to the Communist Party and its government, and so cannot be represented by anyone outside the Party's own organization, the ACFTU. 

To make a deal within Article 10's parameters, Wal-Mart and the ACFTU have at hand a pattern already followed in many foreign-invested factories operating in China, especially those owned by Koreans and Taiwanese. Most of those factories have an ACFTU branch that is not a threat to management for one reason:  management chooses the head of the ACFTU unit and dominates it.  The person so selected (not elected) wears two hats, management's and labor's, and even three (that of a Communist Party official). Under this arrangement, it's quite simple to settle on wages, hours, and other rules and to formalize them in a collective agreement (not to be confused with a collective bargaining agreement made by two independent parties at a negotiating table).

No Need To Worry About 'Third Party Representation' -- Meaning Unions

Note, therefore, that under this arrangement there is no "third-party representation" of the kind that Wal-Mart abhors. Following the law, the company does periodically transmit a contribution of 2% of the payroll to the ACFTU, a small price to pay for the results. The arrangement, however unfair, does work smoothly -- except when the workers find that a serious grievance is ignored not only by their "union" but also by the local office of the Labor Ministry.  If things heat up, police are available to lock up protest leaders and frighten followers into silent submission. In short, Chinese workers with an ACFTU unit cannot count on having better employment conditions than workers without one.

Although Wal-Mart has been subjected to the most pressure, especially in the Chinese language press, it is not the only multinational in China targeted for failure to comply with Article 10.  The ACFTU has also specifically identified Dell, Eastman Kodak, KFC, Seagate International, Samsung Electronics, and McDonald's for failing to set up the required units.  Like Wal-Mart, most multinationals have long professed in writing that they follow all applicable laws and regulations in the countries where they operate.  In China they probably will be able to do so with only superficial changes in how they operate.

What about the Factory Workers Producing for Wal-Mart?

The new enforcement policy, at least as publicly announced, does not cover the millions of women and men producing goods for the multinationals but employed by separate enterprises, contractors who in Wal-Mart's case number more than 5,000 firms.  It is among the contract firms that the worst sweatshops flourish.

Wal-Mart and the other foreign companies heavily involved in China cannot, of course, be sure that today's accommodations will work tomorrow. In the city of Guangzhou, workers recently filed a court case seeking to nullify the appointment of a high-level manager to head the ACFTU unit at their company.  As President Bush says, people everywhere hunger for freedom.

(For more on Wal-Mart in China and the United States, see "Women Taking On Wal-Mart," the lead article in HRFW's July 15 issue.)

More Economists with Free Trade Doubts

You could say that Human Rights for Workers scooped Business Week.  In a December 6 article titled "Shaking Up Trade Theory," the business magazine reports that it is dawning on some important economists that the 19th century theory of free trade might not work to the advantage of the United States now, two centuries later.  That is not news to readers of HRFW, since quite a few of our articles have covered the trend in recent years. The most recent was in our October 2 issue:  "Economist on 'Complacencies' of Economists," which quoted the doubts of Paul Samuelson, a Nobel laureate in economics, about the application of free trade theory to today's America.

The subtitle of the four-page Business Week article by Aaron Bernstein is a good summary of its contents: "For decades economists have insisted that the U.S. wins from globalization.  Now they're not so sure."

Economists are not inclined to express their uncertainties in public. Now more and more of them are doing so, however, mainly because U.S. white-collar jobs are rapidly following blue-collar jobs to China, India, and other countries. Among the economists besides Samuelson whom Bernstein quotes is Gary Hufbauer, a senior fellow at the Institute for International Economics, the intellectual bastion of free trade theory and practice. Hufbauer, one of the star advocates of free trade, concedes: "Now we've got trade patterns that challenge the common view of trade theory, which might not be so true anymore."

The Likely Costs of a Huge Global Labor Pool Analyzed

Bernstein wisely takes up a neglected question about the present and the future: although the United States as a country gains from globalization, how are those gains distributed?

"Until now," he writes, "the pain of globalization has been borne by less than a quarter of the workforce, mostly lower-skilled workers, whose wage cuts outweighed the cheaper-priced goods globalization brings. But the other three-quarters of American workers still came out ahead since they weren't affected by foreign wage competition. If blue- and whitecollar alike are thrown into the global labor pool, a majority of workers could end up losing more than they gain in lower prices. Then the benefits of increased trade would go primarily to employers."

Here Bernstein quotes Dani Rodrik, Harvard University economist and author of Has Globalization Gone Too Far?:  "It's entirely possible that all workers will lose and shareholders gain: you have to be concerned about that."

Bernstein does not quote a statement made 10 years ago by a prominent Asian, Lee Kuan Yew, Singagore's senior leader and an oracle once highly revered by the Western media.  In the September 11, 1993, issue of the Economist,  Lee made this prediction about globalization's future impact on the United States:  "America's top 10% will still enjoy the highest incomes in the world.  But the wages of its less-educated citizens will drop to those of workers in the developing countries with equal or other educational standards.  Telecommuting transfers jobs world wide." 

This transfer of jobs, he added, wouldn't improve the position of ordinary workers abroad either.  "Globalization," he predicted, "will widen income differences within each society."

 Limitations of Electronics Labor Code

When multinational corporations say they are following fair labor policies, they generally are referring to employees on their own payrolls, not to people working for their contractors. By greatly expanding the "contracting out" business model, however, they have created a global supply chain of uncounted millions of men and women around the world, many in the sweatshops of China, Indonesia, and other countries.  Worker rights organizations have for years insisted that corporations also accept responsibility for assuring the decent treatment of these other workers. 

A significant breakthrough in that direction came this fall when leading electronic multinationals agreed on joint policies designed to ensure decent labor and environmental policies are followed not only within their own firms but by firms upon whose factories they depend for manufactured goods.  In October Hewlett Packard, Dell, IBM, and several smaller firms established the Electronics Industry Code of Conduct, and then in November Cisco Systems, Microsoft, and Intel also signed on.

Under the labor section of the code, companies "are committed to uphold the human rights of workers and to treat hem with dignity and respect as understood by the international community."  Among other things, this means that companies "are to respect the right of workers to associate freely, join labor unions, seek representation, and to join workers' councils in accordance with local laws."

Blame the U.S.-Led Coalition of the Willingly Myopic

The As You Sow Foundation, which represents the interests of socially concerned investors, praised the new code as "an important precedent for the electronics industry and for other industries that rely on global supply chains."  But will it have any impact on how workers are treated -- in China and Vietnam, for example?  There is no guarantee of that.

In the last decade or so, there's been amazing progress in raising awareness on worker rights and in producing documents like codes of conduct -- but very little progress in translating those words into progress at the workplace level. 

One crucial reason: woeful neglect by governments and insufficient pressure on governments for that neglect.  Multinationals are not the only force in shaping labor policies and practices in the world economy. The most powerful force is still governmental -- meaning both national governments and the many intergovernmental organizations within and outside the UN.  On worker rights, they form a U.S.-led coalition of the willingly myopic. 

For every Nike or Gap labor scandal  in Chinese or Indonesian factories, the United States government also bears some responsibility because of its failure to take leadership on human rights for workers. It deserves to feel as much heat as Nike and Gap do.

Oceans: a World of Freedom Gone Amok

In its annual reports on the state of freedom across the world, Freedom House omits three-quarters of the planet -- the oceans.  "It is easy to forget that our world is an ocean world," William Langewiesche, a national correspondent for the Atlantic Monthly magazine, writes in his fascinating new book, The Outlaw Sea: A World of Freedom, Chaos, and Crime.

The key characteristic of this ocean world is that it is "radically free," with more than 40,000 large merchant ships traversing it under an arrangement that is "free enterprise at its freest, a logic taken to extremes."  That is not completely a bad thing, Langewiesche concedes.  For example, the cost of transporting tea to England has dropped a hundredfold since the days of the sail, and "there are similar efficiencies across the board."

But, as the book's title and subtitle suggest, the outlaw sea he describes is cruel and chaotic, one in which the strong, chiefly the shipowners, use their  unrestricted freedom to exploit the weak, chiefly several million seafarers (or "sailors," as he calls them), most of them from Asia.

Rigging the System To Escape Responsibility

The system is rigged to avoid responsibility, and in a perfectly legal way. It links seafearers "employed by independent Third World 'manning agents' [recruiters], who are in turn paid for the labor they provide by furtive offshore management companies that in many cases work for even more elusive owners -- people whose identities are hidden behind the legal structures of corporations so ghostly and unencumbered that they exist only on paper, or maybe as a brass plate on some faraway foreign doors," Langewiesche reports.

The names of ships and the national flags they fly can change almost as quickly as the weather.  The easy availability of "flags of convenience" -- even from landlocked countries like Bolivia and Mongolia -- allows shipowners to shop around for countries with the weakest labor laws, instead of having to comply with the laws of their native country.  Langewiesche correctly identifies the purpose: it is "to limit responsibility, maximize profits, and allow for total freedom of action in a highly competitive world."

In a serious omission, Langewiesche does not discuss how the International Transport Workers Federation and the UN's International Labor Organization are trying to humanize the lives of seafarers, including those working on ships flying flags of convenience. He does, however, examine the work of the International Maritime Organization, a specialized UN agency. 

The IMO is charged with promoting maritime safety and security, but it has no power to enforce its rules -- that is left up to its member states, many of which have neither the capability nor the inclination to enforce those rules. The myriad documents the system produces make everything look good, but they are actually "a facade behind which groups or companies can do whatever they please." 

The result is "something of a fantasy floating free of the realities at sea."  He illustrates that point with two very dramatic accounts of ships that were designed, built, and maintained to full IMO standards, and on paper met all other IMO requirements, including regular and spot inspections, but were still so unsafe they sank to the bottom of the unruly sea.

In the Jet-Age Global Economy, Organizations Move at Snail's Pace for Workers

In passing, Langewiesche takes a swipe at the basic idea on which almost all today's intergovernmental organizations are built. "The IMO." he points out, "is a typically idealistic construct for bringing order to the world -- a democratic assembly of 162 member nations, all of them determinedly equal, who work with the assistance of a technical staff and the consultation of accredited non governmental groups [mainly global unions such as the ITF]  to establish regulatory packages known as 'conventions,' which the individual member states are free to adopt (or not) in their sovereign maritime laws."

Also fitting  the definition of this "idealistic construct" is the International Labor Organization, formed nearly a century ago to improve the lot of working men and women, including seafarers. For all the good work that the IMO and ILO do, however, improvement has come at a snail's pace in a global economy that moves at jet speed.

Another kind of "construct" is the World Trade Organization. Thanks mostly to the U.S. government,  the WTO does not rely solely on member nations to enforce its rules.  The WTO itself has the power to do so by threatening and applying sanctions.  Unfortunately, WTO rules focus mostly on protecting the international rights of business and property owners. 

The U.S. government devised and still supports the irresponsibility inherent in flags of convenience, and it is largely thanks (or no thanks) to the U.S. government that neither the IMO nor the ILO has enforcement powers to curb the outlaws of the ocean world.

Media Watch: What! George Will a Liberal?

One media habit that vexes me is the glib use of  labels for putting people and ideas into boxes.  George F. Will, a thoughtful writer, fell into that habit in his Sunday, November 28, Washington Post column titled "Academia, Stuck To Left."  In it he discussed surveys showing that "liberal" professors outnumber "conservative" professors on university campuses.  From my own personal surveys, based mostly on my years of monitoring political controversies, I find that it is more and more difficult to slot people into such boxes.  Modern life, with its shifting complexities on many issues, just doesn't hold still enough to permit rigid categorization 

Among the current issues to which that critique applies is the liberalization of international trade. It should follow that people who favor liberalization, the "free traders," should be categorized as liberals. With that in mind, I wrote a short email to the Washington Post, cc George Will, on the evening of the day that his column appeared.  I should have teased by calling him a liberal, or a mixed-up liberal.

Letter to the editor of the Washington Post:

George Will uses his essay to document a recent study's finding that "liberals dominate campuses."  Beyond categorizing people by political party, however, Will does not define "liberals" or "liberalism."  If he had done so fully, he would have run into at least one contradiction.  That's because when it comes to trade liberalization, or so-called free trade, "liberals" dominate not only academia but also the media and the top levels of both political parties.

Yet, as shown in public opinion polls, most Americans are not "liberals" when it comes to the free trade theory and practice promoted by almost all American political and intellectual leaders, Republican or Democrat.  Most Americans believe that in the international economy, as in our domestic economy, market values should not trump human values and that global trade and investment rules must do more than protect and advance the rights of international business people and financiers.

When will our leaders in Congress and the White House start respecting the country's non-liberal values when it comes to the global marketplace?  The opportunity to do so arises next year, when Congress must deal with several crucial foreign trade issues, including the proposed Central-American Free Trade Agreement, a review of  U.S. membership in the World Trade Organization, and the expiration of the President's so-called "fast track" authority to negotiate trade agreements and speed them through Congress.                                                                                                                                                                                                                                     -- Robert A. Senser

Human Rights for Workers: Bulletin No. IX-11, December 6, 2004

Robert A. Senser, editor
Copyright 2004
hrfwtoo@yahoo.com. (Send e-mail)

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