In a historically unprecedented visit, influential Chinese scholar and labor-law expert Liu Cheng arrived in Washington, DC, 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 (NPC) in China. Liu Cheng has been a key adviser to the drafters on a 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 (GE) and other global corporations that 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 US and around the world.

Imagine that.  Chinese labor reformers having to come to America to lobby for support for a bill pending in China's legislature.  Boggles the imagination, doesn't it?  At least, until you realize how profitable sweatshop labor in China can be for those multinational corporations who have moved a significant portion of their manufacturing to The People's Republic, or retailers (Ding! Ding! Ding! Walmart shoppers, there's a special in aisle 8B on ladies longerie!) who rely on cheap Chinese goods to lower their labor costs around the globe.  

Roughly 66% of the increase in Chinese exports in the past 12 years can be attributed to non-Chinese owned global companies and their joint ventures .  Foreign owned global corporations account for 60% of Chinese exports to the US.   Indeed, if the US retail giant Wal-Mart were a country it would be China's 8th largest trading partner. The "Chinese threat" is less about trade with China than it is about trade with Wal-Mart and GE.  Global corporations move to China to lower labor costs -- and they use those lower labor costs as a lever to drive down wages and working conditions for workers in other countries, and even within China itself.

So profitable in fact, that American businesses lobbied fiercely against a proposed labor reform package last year which threatened those profits, and succeeded in making the Communist regime in China kowtow to their demands:

In March 2006, the Chinese government, with considerable popular backing, proposed a new labor law with limited but significant increases in workers' rights. But the American Chamber of Commerce (AmCham) in Shanghai, the United States-China Business Council, and US-based global corporations are lobbying to gut the proposed law. They have even threatened to leave China for such countries as Pakistan and Thailand if the law is passed.

Their aggressive tactics appear to have had an impact. Last December, the Chinese government released a revised draft of the Labor Contract Law with significant changes in contract, collective bargaining, severance, and other rights guaranteed for Chinese workers that would favor corporate interests.

And what reforms exactly were these American companies opposing so vehemently, and apparently successfully?  Pretty basic stuff really.

1.  The right to an implied contract between employer and employee giving all workers basic benefits and protections currently denied to the vast majority of China's labor force. (Link)

2.  The right to collective bargaining.  (Link)

3.  The freedom to change jobs without fear of reprisal under standard, but oppressive, "non-compete" contracts which many companies require workers to sign, making them virtual slaves of the companies for which they work.  (Link)

Non-compete agreements are a regressive feature of US and other western systems that have crept into the Chinese economy. They prevent workers from changing jobs easily if they have access to proprietary knowledge as determined by an employer.

4.  Limitations on probationary periods.(Link)

Currently corporations can set probationary periods unilaterally, often for an entire year, keeping people in a highly precarious employment status.

5.  The right to wages while being trained, and the right not to charged for the costs of ones training:

Under current practice employees sign a separate contract that allows companies to recover any training costs if a worker terminates his/her employment. Under current law almost anything that management considers"training"--including many of the kinds of on-the-job training that are standard for any new job--can be subject to re-payment, leaving a departing worker either in debt or, if unable to repay the training expenses, bonded to his/her current employer.

Instead of an increase in worker protections and a greater role for unions which appeared in the original draft of the reform bill last March, the revised bill actually reduced worker protections and severely limited the rights of unions.  And yet these concessions still weren't enough for American Chamber of Commerce (a/k/a AmCham), and the U.S.-China Business Council, the principal groups lobbying the Chinese government on behalf of American business interests in China.  They have proposed even more changes, seeking to eliminate essentially all worker protections that remain in the current labor reform bill.

The US-China Business Council, for example, has told the Chinese government that elements of the revised draft are "burdensome", are "prohibitively expensive", and will have "an adverse impact on the productivity and economic viability of employers". One corporate lawyer ominously warned: "We will have to wait until the final draft is written and see how the law will be implemented. If the law is too negative for employers, then we might see a slowdown of recruitment."

Not surprisingly, the Bush administration has thrown its support behind the efforts of AmCham and the US-China Business Council to limit the rights of Chinese workers.  Income inequality is not just a policy goal in the United States, but one the Bush administration pursues around the world, apparently.

Still, I wonder how long this current system of a "race to the bottom" strategy by corporations to lower global labor costs can continue.  Increasingly, a restive Chinese work force is taking their anger over their lack of standard (for Westerners) workers' rights to the streets:

Faced with a labor law system that does not seem capable of correcting even the most basic of worker rights violations, such as the widespread employer practice of failing to pay wages due and owing on time and in full, Chinese workers are increasingly hitting the streets, and, in some cases, resorting to violence to get their due. Without industrial institutions to systematically speak for workers in trouble, and a legal framework promoting such representation and fostering conflict resolution and rights enforcement, it is doubtful that China can attain its own form of 'democracy' or even stability.

You can see why the Chinese government has allowed worker reforms to be "put on the table."  More unrest will lead to increased demands for democratization, demands to which the Communist regime is greatly adverse.  However, it's one thing to run over a few thousand student demonstrators in Tienanmen Square, quite another to deal with widespread social unrest caused by workers strikes and protests.

And not all US corporations agree that labor reform is bad for business.  Companies that want to sell to an expanding market in China need worker incomes to rise, unlike companies that rely upon cheap labor to keep their manufacturing costs down.  Which explains why some in the US business community (and the European community) disagree strongly with the tactics employed by the corporations allied with AmCham and the US-China Business Council:

... AmCham is meeting resistance to its position from some of its own most powerful members. For example, Nike has virtually repudiated AmCham's position.

According to Nike vice president Hannah Jones, "Nike has a long history of actively supporting the Chinese government's efforts to strengthen labor laws and protections of workers' rights." When AmCham took its position on the law, Nike "had yet definitely to state a position either internally or externally to AmCham on the draft labor law currently under review".

And thankfully, some of our Democratic representatives in Congress understand that labor reform in China is an issue for American workers, as well:

On December 8th, 2006, shortly after the 2006 elections, U.S. Representatives Lynn Woolsey (D-CA), Barbara Lee (D-CA), George Miller (D-CA), Barney Frank (D-MA) and twenty-eight other House Members introduced legislation calling on the President   to express public support for the workers' rights and protection provisions of China's draft labor law and repudiate efforts by some U.S. corporations and their representatives in China to limit new rights for Chinese workers. This legislation properly places the focus on the actual role of U.S. corporations in China.  Their action is part of the broader effort of a Democratic Congress to take the policymaking initiative away from the Bush administration.

About time, I might add.  In the next decade, how labor reform plays out in the hyper-capitalistic economy of China will presage what happens to workers around the world, including American workers, like you and your children.  We can continue toward a world of greater income inequality where there are essentially two classes of people -- the ultrarich and everyone else -- or we can expand economic opportunity and human rights for all people, creating a world where the greatest number possible benefit from the fruits of our collective labors. There can be no social justice without economic justice, after all:

It is important to rescue China's workers from the 'race-to-the-bottom' in labor standards--important for the quality of life of working families everywhere. China is setting global labor standards. Workers in Southeast Asia, in Europe and in the U.S. are being drawn into a downward spiral in wages, occupational health and safety, and in social protections that is being justified by employers by reference to 'more competitive' Chinese labor conditions. Chinese workers and their allies in the trade union, in the labor bar and in academia are beginning to seek to reverse this spiral. Worker rights advocates, and persons concerned with social justice in America, Asia and throughout the globe, should support these changes by urging foreign employers in China to withdraw their opposition.