Unions, Contracts, China, and the Cow

By Stormy

Last January, China passed a new contract labor law. Following its passage, the ACFTU (All-China Federation of Trade Unions) has been engaged in a serious membership drive. Because of a slowing world economy, the timing of both could not have been more inopportune. Nonetheless, looking more closely at each will give us some insight into how the Chinese economy is structured and governed.

Both the new law and the push towards more membership seem to be aimed at foreign firms.

Why the new contract law and the drive for more membership?

Between 1995 and 2006, Chinese workers became increasingly restless, resulting in mass demonstrations, wildcat strikes, and protests against super-exploitive foreign firms…such as Nike. That the new law invited public comment was in itself very unusual. The communist government had to do something; hence the law and the drive.

The Drive for New Membership

According to the China Daily:

All foreign-funded companies in China will be unionized by the end of next year, an official [Wang Ying]with China’s top trade union body said Tuesday.

Wang Ying, a division chief of the grassroots organizations and capacity building department of the All-China Federation of Trade Unions (ACFTU), said more than 4,100 major foreign companies run by the Fortune 500 are doing business in China.

Currently, Maersk Logistics, Lotus, IKEA, TNT, Kodak, FedEx, Home Depot, Emerson, Canon, Sony and ABB have trade unions.

“Most of the foreign companies have been cooperative, as they know they must abide by China’s laws if they do business in China,” she said.

She said the ACFTU had also met “tremendous resistance” from some foreign firms, especially American companies.

“Some US companies, such as Wyeth, Microsoft, 3M, AstraZeneca and PwC, have been quite uncooperative and have used various means to delay the establishment of trade unions,” she said.

Again, according to China Daily,

ACFTU Vice-President Xu Deming called on unions to learn from the experience and set up more branches in foreign companies, especially those that rank in the top 500 list.

Notably, Xu slammed multinationals such as Foxconn, Kodak and Dell for their long time refusal to allow the establishment of trade unions, and called on unionists at all levels to make the establishment of branches at those companies bases in China “breakthrough goals.”

Sixty per cent of the more than 150,000 foreign invested companies in the country are expected to have their own trade unions by the end of this year, Xu predicted.

Those 150,000 foreign firms parcel work among hundreds of thousands of subcontractors, most of them small indigenous companies. (I do not have to remind anyone that the Fortune 500 has a sizable presence in China; nor should I have to remind anyone that the number of foreign companies is considerable. ) That Xu “slammed” foreign firms is no accident.

The New Contract Labor Law

The law is somewhat flawed (does not allow the right to strike, for example). Chinese officials are walking a tightrope here. On the one hand, they had to do something. On the other hand, they had to be careful, lest they drove foreign firms away.

According to the New York Times,

The companies, many of which moved to China to lower manufacturing costs and some to avoid unions in their home countries as well, are now being asked to meet a Sept. 30 deadline to make their offices and factories union shops.

(The Koreans were very forthright about being unhappy. Most firms were careful with their pronouncements, lest word get back home. Officialdom everywhere was politely circumspect.) What does the law say? Here are some highlights:

  • Consulting with employers about labor rules and regulations regarding wage, hour, break, leave work safety and hygiene, insurance and benefits, training, work discipline, etc
  • Jointly coordinating with the local labor administration authorities and the employer to resolve any employment issues
  • Assisting and guiding workers in negotiating their employment contracts
  • Being advised and consulted with in connection with any mass lay-off
  • Demanding the employer rectify any legal violations or violations of a worker’s employment contract
  • Negotiating “collective contracts”

I am not sure any of us would want the U.S. government to be our labor union, negotiating contracts with corporate America.

But be that as it may, I welcome the push and the law. Something had to be done. The questions ultimately will be not only a matter of enforcement but also the spirit in which collective contracts are negotiated.

As I have said repeatedly, China offered its vast, impoverished, and unprotected population as the manufacturing export center of the world, combining that offering with tax and environmental inducements.

I love the remark that the director of Tal Apparel made:

“It’s quite understandable that Americans are annoyed, upset and fearful, but American production bases will not ever be able to compete with Asia,” Yip said, with the patience of someone coaching a slow child.

“In the United States, you want to milk the cow. You don’t want to be the cow.”

(Tal Apparel is associated with such brand names as Nike, Calvin Klein, L.L. Bean, Brooks Brothers, etc. The average age of its seamstresses is 20.)