Vol. XII, Bulletin No. 1                                               January 11, 2007

Foreign Multinationals Argue Against Labor Law Improvements

Battling China's Worker Rights Proposals

Pressured by Chinese government labor inspectors to cut excessive work hours, including some shifts 24 hours long, Andy Lee, a Hong Kong executive of a multinational toy company, flatly refused. As Lee explained to a Business Week reporter 18 years ago, "We told them, this is the toy biz.  If you don't allow us to do things our way, we'll close down our factories and move to Thailand."

U.S. and other multinationals still insist on doing things their way, and they're still threatening dire consequences if they don't get their way.

The pressure now comes not from a few labor inspectors but from the Beijing government and its proposed law to raise labor standards.  And the objections now come from an array of big name multinationals. Their negative views have been voiced through their own organizations, including the American Chamber of Commerce in Shanghai and the U.S.-China Business Council, since China allows foreign employers to organize and to defend their interests collectively by lobbying the government -- rights rigidly prohibited by law and practice to China's own workers.

Proposed Improvements in Protection Are Hardly Revolutionary

The proposed law would not make revolutionary changes. It definitely would not grant China's workers the same fundamental rights that foreign employers enjoy.  Still, if enacted and implemented, the law would make some improvements in the legal protections offered to ordinary workers. For example:
In its December 21 commentary on "Labor Rights in China," Foreign Policy in Focus says that the controversy over the draft law "links the interests of workers not only in China but everywhere," adding:

"The headquarters of the corporations opposing reforms for Chinese workers are in New York and Brussels, Los Angeles and London, and other cities and towns around the world.  Washington, too, must make a choice.  Will it support the rights of workers in China or the profits of U.S. corporations?"

The first principle of the "Universal Business Principles" of the U.S. Chamber of Commerce in Hong Kong states: "We shall abide by the laws of the United States and the countries where we operate."   The codes of conduct of many U.S. multinationals in China say substantially the same thing: that the company respects the law. 

So what will happen in the current case of disagreement between the government and the foreign companies?  Almost certainly, they will reach an accommodation, following the precedent already set by Wal-Mart and the government.  Wal-Mart, despite its visceral opposition to unions, now recognizes unions that are not real unions. For its part, the ruling Communist Party is able to place Party cells in Wal-Mart's retail outlets and other establishments and thus to guarantee having a source of patronage for the Party at Wal-Mart. 

Likewise, despite current disagreements, foreign firms will find a way to live with a changed labor law, especially as tempered by weak enforcement.  Whether China's workers will live with it is another question.  The small changes could awaken a desire for fundamental change.

Needed: Worker-Friendly Trade Reforms

Congress should renew the President's "trade promotion authority" (also called "fast track") this year with "better environmental and labor provisions." That's what Senator Max Baucus, a Democratic senator from Montana, advocates in an editorial page article titled "A Democratic Trade Agenda" published in the January 4 Wall Street Journal.

Not so fast, Senator Baucus.  As the new chairman of the Senate Finance Committee, he is now in a key position to help reshape U.S. trade and investment policies, but more is needed than "better labor and environmental provisions" tacked on to a large package of worker-unfriendly policies.

"Fast track," as adopted by the House at 3 one morning five years ago, expires on June 30.  That's a blessing.  Congress now has a splendid opportunity for an unhurried review of the range of policies cleverly bundled together under the label of "trade."  Those
diverse policies should be debundled, and each one -- not just the one covering trade in goods -- should be carefully assessed for its worker-friendliness.

Meanwhile, Robert B. Zoellick, formerly President Bush's trade representative, is
taking the offensive to expand the worker-unfriendly status quo. He is urging that Congress establish a new "Association of American Free Trade Agreements," or AAFTA, grouping the various trade agreements that the United States has reached with 12 nations.  In a January 8 Wall Street Journal editorial page article ("Happily Ever AAFTA"), Zoellick writes that "AAFTA could shape the future of the Western Hemisphere, while offering a new foreign and economic policy design that combines trade, open societies, development, and democracy."  (Who could be against that?)

Zoellick even endorses (unspecified) "better worker and environmental conditions," and seems to think that the new Congressional leadership will resist "America's populist protectionists."  Among those he is counting on to reject "backward policies" is none other than Senator Max Baucus. Why?   On the basis of Baucus' record as the 2001-02 chair of the Senate Finance Committee, when he "worked closely" with his Republican counterpart to authorize negotiations for Free Trade Agreements, including those for Peru and Colombia.

Zoellick writes from his current Wall Street perch as international vice president of Goldman Sachs, where he is among the beneficiaries of record high bonuses collected in part from a global economy whose rules favor the fabulously rich.
*   *   *
An Economist Attacks Zoellick's AAFTA

In an article syndicated world wide, Peter Morici, economist and professor at the University of Maryland School of Business, turns thumbs down on Zoellick's proposal, mainly because it would institutionalize policies that have failed to live up to the promises of free trade.  Excerpts from his article:

What Mr. Zoellick and the trade policy establishment fail to understand is that free trade is under attack because the U.S. government, under both Democratic and Republican administrations, has failed to make free trade agreements work as they should.  Most significantly, the United States and the European Union substantially opened their markets by admitting China to the World Trade Organization....[But] China engages in a myriad of industrial policies that promote exports, block imports, and create huge trade surpluses....

U.S. workers displaced by imports from China are not finding good paying jobs making exports to be sold in the Middle Kingdom because Washington tolerates China's mercantilism.  Instead, these workers are forced into low-paying service industry jobs, where health insurance and other fringe benefits are scarce.

Top corporate managers, investment bankers, and other professionals, who engineer and arrange financing for outsourcing, enjoy rapidly rising incomes, but many ordinary working Americans are poorer for the game....

The United States doesn't need more trade agreements; it needs to make the ones it has work better.  Americans who embrace that position are not populist protectionists; rather they want something done about malignant Chinese protectionism.  Mr. Zoellick and his colleagues, by tarring those who disagree with him as protectionist, display an arrogant disregard for their ideas and integrity, and a disturbing neglect for the conditions of ordinary working people whose lives have been degraded by trade agreements gone awry.

Fairer Trade, Open Trade Aren't Enemies

"Many editorial writers and academic economists remain mired in the outdated debate about free trade versus protectionism.  In this narrow view, any criticism of a proposed trade agreement, or rejection about a particular approach, is excoriated as isolationist, xenophobic, selfish, and nationalist."

So wrote John Sweeney, AFL-CIO president, in a November 29 Financial Times op-ed article titled "Why fair trade does not mean an end to free trade."  He was responding to the November 8 Financial Times article by columnist Jacob Weisberg titled "Free trade is the real election casualty."

Weisberg, who edits Slate.com, trained his guns at a group of new Democratic Senators whom he called "economic nationalists" -- specifically, Jim Webb of  Virginia, Sherrod Brown of Ohio, and Claire McCaskill of Missouri.  Economic nationalism, he wrote, "focuses its energy on the poor abroad" by its opposition to outsourcing and to trade deals that have transferred U.S. jobs to Mexico, China, and elsewhere.

In his rebuttal, Sweeney wrote:

"Politicians who reject trade agreements that protect the profits of pharmaceutical companies at the expense of sick people in poor countries are neither protectionist nor anti-poor.  Politicians who demand that trade agreements include enforceable protections for worker rights are staking out a principled position for fairness in the global economy --  not an end to trade.  Fairer trade rules are essential to improving the lives of vulnerable and disenfranchised workers in developing countries, as well as the jobs and living standards of U.S. workers."

Targetting New U.S. Emphasis on Bilateral Trade Agreements

The AFL-CIO, Sweeney said, looks forward to working closely with the new Congress to improve worker rights both in the United States and overseas. Among the Federation's objectives is ensuring that "bilateral trade agreements include enforceable protections for core worker rights."  His pinpointing bilateral (country-to-country) trade agreements was a recognition of the U.S. government's new emphasis on reaching trade and investment deals with South Korea, Peru, and other governments, rather than going through  the multilateral route in the World Trade Organization.

Weisberg seemed to be nostalgic about the days when President Clinton followed a two-fold policy of embracing the North American Free Trade Agreement (NAFTA) and dealing with NAFTA's negative consequences only through worker retraining programs, government health care, and portable pensions in the United States.

Call it what you will -- protectionist, nationalist, whatever -- today the new blood in the Democratic Party seems to recognize that coping with the problems of international trade requires that the United States find international solutions and domestic ones reaching beyond the crutches favored by Weisberg and other free trade enthusiasts such as Wall Street's Robert Zoellick.

Shopping with a Clear Conscience

I'm glad that the stressful annual rite of Christmas gift-giving  is over.  Yet I will face similar anxieties as birthdays and other anniversaries arise in the course of 2007.  These occasions pose crises of conscience for me, because it's more and more difficult to find gifts not made in China, the world's sweatshop.

How do I know that this toy was not made by a Catholic priest or a falun gong member imprisoned in a force labor camp?  How do I know that this garment was not made in a sweatshop where young women work 10 or 12 hours a day, seven days a week, at unsafe machinery that can cut off their fingers?  I don't, nor do you. When you buy something made in China, you have absolutely no way of knowing whether you are complicit in violating the human rights of the men, women, and children who made it.

One limited way to avoid such complicity is to use a brochure just updated by Sweatshop Watch.  Its "Shop with a Conscience: 2007 Shopping Guide" lists a sampling of retail sweatshop-free products made by workers organized into democratic unions or worker-owned cooperatives. Fifteem worker rights organizations have given their endorsements to the guide.  Unfortunately, the list is limited to wearing apparel.

These Low Prices Have High Costs

The slides picturing the lives of very poor children in Latin America upset a boy in the kindergarten class of St. Catherine Siena school in Vineland, N.J.   "Why," the lad asked, "don't the adults do something?"

The guest speaker, Vincent A. Gallagher, a workplace health and safety specialist who has worked in eight Latin American countries, tried to reassure the child by saying that people do care, and --.

"No, they don't care," the boy insisted. 

The response startled Gallagher at the time, and now, many years later, he writes in a new book that "I think the child is right."

His book, "The True Cost of Low Prices: the Violence of Globalization" (Orbis Books) is an eloquent effort to motivate people to care about global injustice and to do something about it.  "The values of competition, materialism, and consumerism," he writes, have "colonized" our minds, making us insensitive to cries for justice. His eight chapters are a short course in decolonization.

Globalization and Us -- the Basics

Globalization is in trouble, as even some of its ardent supporters agree.  To get at the roots of the trouble, I wrote the article "5 Points on the Sorry State of Globalization," published in the May issue of Human Rights for Workers. I tried to identify some basic truths about our rapidly integrating global economy, and to formulate them in a series of short propositions that make sense. 

In rereading the list the other day, I realized that a drastic revision is in order.  Here is my revision, with no promise that it is a final one.
  1. Globalization has created a new dimension -- a vast space of human activity, an international marketplace -- beyond the traditional jurisdiction of national laws. 
  2. The global network of international trade, investment, and other rules laid down in bilateral, regional, subregional, plurilateral, and multilateral agreements, plus various intergovernmental agencies that enforce them, is designed to establish a rule of law in that space.
  3. Those agreements have established a global rule of law only partially, however, in two senses -- partial as in incomplete and partial as in favoring the rights and interests of one group over others.
  4. In its present partial form, globalization protects and promotes the rights and privileges of commerce and capital (particularly the multinationals  headquartered in the United States, Western Europe, and Japan), to the neglect of labor (the men, women, and children in the international labor market).
  5. Those pro-capital rights and privileges, as enforced by governments and intergovernmental institutions, with the World Trade Organization at the pinnacle, are balanced by no -- or by very ineffective -- matching responsibilities or accountability, creating a huge imbalance.
  6. That imbalance leads to an imbalance of power that advances the interests and multiplies the wealth of multinational corporations and allied elites, to the disadvantage of other "stakeholders" in all countries, particularly the many millions of vulnerable men, women, and children, as well as the poor communities deprived of the means to protect their own rights and interests.
  7. The imbalances are wrong, grievously so, and are increasingly understood as wrong, thanks to improved global communications and the proliferating non-governmental groups committed to human rights -- both happy products of globalization.
  8. Since globalization itself demonstrates that the well-being of  people can be improved, those now left out are less and less willing to accept their deprived status, often as sacrificial lambs to further enrich those already fabulously rich.
  9. Explosive consequences are more and more likely if the rightful demands for justice continue to be ignored.  
  10. Since the U.S. government, under both Democratic and Republic Administrations, took the lead in determining the unbalanced and unfair rules of globalization, it has the responsibility to review those rules and to initiate reforms, but with a strengthened role for Congress, which has the constitutional authority and responsibility to regulate trade.
  11. That process of review and reform needs to cover the full range of international policies now grouped together under "trade," including the two significant areas which are not really trade issues -- the protection of investment/investor rights and the protection of intellectual property rights -- and which may contribute more to global inequities than trade does.
  12. The highest priority for action is to integrate worker-friendly policies into globalization -- adopting global reforms, in other words; domestic reforms such as financial aid to workers who have lost their jobs are not substitutes for action on the global level.
  13. Labeling such an initiative as "protectionist" is misleading, since all trade policies protect some group, for good or ill, whereas an honest approach focuses on questions like Who is being protected?  And for what purpose?
  14. Given the central role of multinational corporations in globalization, the corporate social responsibility movement can improve the environment  for reform, but it needs the support of socially responsible global rules to produce lasting results.
  15. Integrating socially responsibility into trade rules, and into intergovernmental bodies like the World Trade Organization, is not a cure-all; other initiatives to achieve worker-friendly policies, national and international, governmental and non-governmental, are also needed.
I invite critiques of these propositions.  I developed them during reflections while I was writing two magazine articles being published in early 2007:  "The WTO in Crisis" (America, January 1-7) and "Corporate Social Responsibility" (Dissent, Winter issue).

New Labor Voice in U.S.-China Relations

House Speaker Nancy Pelosi last month appointed  Jeffrey R. Fiedler, a strong advocate of international worker rights, as a member of the U.S.-China Economic and Security Review Commission (USCC), which investigates and assesses the economic and security implications of the U.S.-China trade and investment.  Fiedler, formerly president of the now disbanded Food and Allied Service Trades Department (FAST) of the AFL-CIO, is president of the Research Associates of America, a FAST spin-off.

Among the specific items on the USCC's agenda are China's restrictions on speech and information, China's compliance with its accession agreement to the World Trade Organization, and "the degree of [its] non-compliance" with the U.S.-China agreement on prison labor exports to the United States.

Fiedler's credentials for the USCC post include co-founding the Laogai Research Foundation, which studies and publicizes China's forced labor system. When China detained the Foundation's executive director, Harry Wu, in 1995, Fiedler set up a task force and led the campaign that won Wu's release. (See "The Saga of Harry Wu.") Fiedler is still an active member of the Foundation, which has just published a 514-page handbook listing 1,045 laogai sites throughout China.

Human Rights for Workers: Bulletin No. XII-1   January 11, 2007
Robert A. Senser, editor
Copyright 2007
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