Saturday, November 18, 2006

Chinese Slave Labor in the U.S. Import Supply Chain

This week's Business Week has an interesting piece on the problem of Chinese labor standards in the U.S. offshore manufacturing supply chain. Here's a snippet of what's at issue:

CHINESE EXPORT manufacturing is rife with tales of deception. The largest single source of American imports, China's factories this year are expected to ship goods to the U.S. worth $280 billion. American companies continually demand lower prices from their Chinese suppliers, allowing American consumers to enjoy inexpensive clothes, sneakers, and electronics. But factory managers in China complain in interviews that U.S. price pressure creates a powerful incentive to cheat on labor standards that American companies promote as a badge of responsible capitalism. These standards generally incorporate the official minimum wage, which is set by local or provincial governments and ranges from $45 to $101 a month. American companies also typically say they hew to the government-mandated workweek of 40 to 44 hours, beyond which higher overtime pay is required. These figures can be misleading, however, as the Beijing government has had only limited success in pushing local authorities to enforce Chinese labor laws. That's another reason abuses persist and factory oversight frequently fails.

Some American companies now concede that the cheating is far more pervasive than they had imagined. "We've come to realize that, while monitoring is crucial to measuring the performance of our suppliers, it doesn't per se lead to sustainable improvements," says Hannah Jones, Nike Inc.'s vice-president for corporate responsibility. "We still have the same core problems."

This raises disturbing questions. Guarantees by multi-nationals that offshore suppliers are meeting widely accepted codes of conduct have been important to maintaining political support in the U.S. for growing trade ties with China, especially in the wake of protests by unions and antiglobalization activists. "For many retailers, audits are a way of covering themselves," says Auret van Heerden, chief executive of the Fair Labor Assn., a coalition of 20 apparel and sporting goods makers and retailers, including Nike, Adidas Group, Eddie Bauer, and Nordstrom. But can corporations successfully impose Western labor standards on a nation that lacks real unions and a meaningful rule of law?
Take a look at the whole thing. There's been a real shift toward corporate social responsibility in international outsourcing, particularly in light of anti-globalization protests against major corporations such as Nike (further discussed in the piece) and Starbucks. But the paragraph above raises more questions: Why are we establishing Western labor standards in Third World countries? Are wages and working conditions best set by local market conditions and business practices, or should an international regime of fair labor standards be imposed universally throughout the developing world? Do rich country demands for fair labor practices hamper the development efforts of low-income countries? Are rich nations using labor standards as a protectionist ploy to shelter unionized jobs from international competition?

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