[Joint House and Senate Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
WORKING CONDITIONS IN CHINA:
JUST AND FAVORABLE?
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ROUNDTABLE
before the
CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
NOVEMBER 3, 2005
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Printed for the use of the Congressional-Executive Commission on China
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CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA
LEGISLATIVE BRANCH COMMISSIONERS
Senate House
CHUCK HAGEL, Nebraska, Chairman JAMES A. LEACH, Iowa, Co-Chairman
SAM BROWNBACK, Kansas DAVID DREIER, California
GORDON SMITH, Oregon FRANK R. WOLF, Virginia
JIM DeMINT, South Carolina JOSEPH R. PITTS, Pennsylvania
MEL MARTINEZ, Florida ROBERT B. ADERHOLT, Alabama
MAX BAUCUS, Montana SANDER LEVIN, Michigan
CARL LEVIN, Michigan MARCY KAPTUR, Ohio
DIANNE FEINSTEIN, California SHERROD BROWN, Ohio
BYRON DORGAN, North Dakota MICHAEL M. HONDA, California
EXECUTIVE BRANCH COMMISSIONERS
STEVEN J. LAW, Department of Labor
PAULA DOBRIANSKY, Department of State
David Dorman, Staff Director (Chairman)
John Foarde, Staff Director (Co-Chairman)
(ii)
C O N T E N T S
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Page
STATEMENTS
Gearhart, Judy, Program Director, Social Accountability
International, New York, NY.................................... 2
Viederman, Dan, Executive Director, Verite, Amherst, MA.......... 6
Rosenbaum, Ruth, Executive Director, Center for Reflection,
Education, and Action, Inc., Hartford, CT...................... 11
WORKING CONDITIONS IN CHINA:
JUST AND FAVORABLE?
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THURSDAY, NOVEMBER 3, 2005
Congressional-Executive
Commission on China,
Washington, DC.
The roundtable was convened, pursuant to notice, at 2:35
p.m., in room 480, Ford House Office Building, David Dorman
(Senate Staff Director) presiding.
Also present: John Foarde, House Staff Director; Chris
Mitchell, Legislative Director, office of Representative
Michael Honda; Adam Bobrow, Counsel, Commercial Rule of Law;
Katherine Palmer Kaup, Special Advisor on Minority
Nationalities Affairs; and Patricia Dyson, Senior Counsel for
Labor Affairs.
Mr. Dorman. We are very pleased to have a distinguished
panel here with us to talk about working conditions in China.
But before we get started, I would like to tell everyone that
this is our first roundtable since the Commission's 2005 Annual
Report came out. If you have not seen the Annual Report yet,
you will find copies of it outside the front door. So please
feel free to take a copy. If they are all gone, please stop
down at the Commission's staff offices on the second floor of
this building and we can give you one there.
I want to apologize to everyone in the audience. This is
the first time we have used this room. As you probably noticed,
the room does not have microphones. So I am going to ask
everybody in the audience to raise their hand if you cannot
hear a speaker during the course of the roundtable. I will take
that as a notice to tell the person talking to speak up just a
little bit.
We will all try to keep our voices at the right level, but
it is easy to forget over 90 minutes. So, please feel free to
raise your hand if you cannot hear.
Mr. Foarde. It might also be useful if you would move
forward. There are plenty of seats up here in the front, so
move yourselves forward. Do not be shy.
Mr. Dorman. As in previous roundtables, I will introduce
each of our panelists individually, and then give each panelist
five minutes to make a statement. After all our panelists have
spoken, each individual on the dais will have an opportunity to
ask a question and hear an answer from one, or all, of the
panelists. We will continue asking questions and hearing
answers until we have reached 4 o'clock, or until we run out of
questions. Since I have been on the Commission staff we have
never run out of questions, so I think we will probably use up
all that time. So let's get started.
I would like to introduce our first panelist, Judy
Gearhart. Judy is the Program Director for Social
Accountability International [SAI]. Ms. Gearhart serves as the
program director at SAI and as an adjunct professor at Columbia
University. She joined SAI in 1998. She has worked on
democratization and women's labor issues in Mexico and
conducted evaluations for UNICEF in Honduras. Ms. Gearhart is
the author of a national child labor study in Honduras for the
International Labor Organization [ILO]. She has participated in
numerous public forums and published on topics including: NGO
networks' influence on policymaking, child labor, and
corporate social responsibility [CSR]. Ms. Gearhart holds a
master's degree in international affairs from Columbia
University.
Ms. Gearhart, thank you very much for joining us today. You
have five minutes for an opening statement.
Ms. Gearhart. Oh. Five minutes. I thought it was 10.
Mr. Dorman. Ten minutes. I stand corrected.
Ms. Gearhart. Thanks.
STATEMENT OF JUDY GEARHART, PROGRAM DIRECTOR, SOCIAL
ACCOUNTABILITY INTERNATIONAL, NEW YORK, NY
Ms. Gearhart. I will run through briefly what Social
Accountability International does and talk a little bit about
how we are working in China.
SAI published the SA8000 Standard for Safe and Decent
Workplaces in 1997, after an 18-month consensus-based drafting
process by our international advisory board, which includes
international business, trade unions, and non-governmental
organizations.
The SA8000 standard is based on ILO Conventions, the
Universal Declaration of Human Rights [UDHR], and other human
rights norms. It also defers to national law in the countries
where it is applied, whichever norm is stronger.
SA8000 is primarily a business-to-business standard, in
line with International Organization for Standardization [ISO]
principles of continuous improvement and management systems-
based implementation. SAI accredits independent organizations
which audit workplace facilities for compliance with the
standard. Once in full compliance, those facilities receive a
certification which lasts three years and requires semi-annual
surveillance audits. For us, certifications are an important
communication mechanism and they do three things: signal a
facility's social responsibility to brand customers; provide a
level of transparency for consumers--factory names and
locations are published on the SAI Web site and the facility is
required to publicly report on compliance; and provide a handle
for workers and their advocates, and all others, to claim their
rights--there is an open complaints process--both internal to a
certified facility and external through complaints filed with
the accredited certification body and to SAI. Resolutions of
complaints are posted to the SAI Web site.
As of June 2005, there are 710 certifications worldwide,
covering 436,600 workers, spanning 45 countries and 52
industries. In China, there are 99 certifications concentrated
in the apparel, footwear, housewares, and electronics sectors.
In addition to these certifications, there are thousands of
gap analysis audits conducted each year against SA8000, using
SA8000 as a benchmark, and numerous certification applicant
audits that do not result in certification. So, it is a well-
known benchmark.
SA8000, it is important to note, is a voluntary standard.
There are two main drivers behind these certifications and the
benchmark audits. One is international brand pressure,
international brands seeking to ensure their suppliers provide
decent working conditions in compliance with SA8000 and to
protect their reputation and the value of their brands. The
other driver is the motivation of managers or owners of
factories, farms, and service centers seeking, on their own, to
provide decent working conditions in compliance with the
standard and to gain a competitive edge in international
markets and/or to protect their reputation and the value of
their own local brands.
The uptake of SA8000 in China is among the strongest. It is
the country with the largest number of workers covered in
certified
facilities and the third largest number of certifications in
any country.
Nevertheless, much smaller countries, such as Italy, have
more than twice as many certified facilities--Italy has 233,
compared to China's 99--and a significantly higher proportion
of the population is covered. China is unusual among the top
countries for SA8000 certification, as the other leaders are
Italy, Brazil, and India, countries where there is already a
robust corporate social responsibility movement and debate.
This is mainly what I want to talk about today.
I think one of my first points here is that SA8000 is
working to encourage a robust CSR dialogue within China and
among forward-thinking business and opinion leaders. I think
that is an important step. So what I can tell you about the CSR
debate in China, from what we learned, is that the debate is
rapidly growing and SA8000 is frequently referenced. A key word
search in November 2005 yielded 118,000 references to SA8000,
just to give you an example. The debate in China, from 2004
through early 2005, tended to fall along two lines: those who
see corporate social responsibility as a threat and those who
see it as the right way to do business. These differing views
can be found within business circles as well as among
government institutions.
Those who see CSR as a threat to Chinese business
competitiveness are those who are focused on a low-cost
strategy, in our view. They cite CSR as the imposition of
foreign values on China, and it is regarded as a potential
trade barrier. They also seem to confuse the requirement of the
market with a government requirement. This is something
important to clarify.
There is a lot of misinformation about SA8000 in the
Chinese press. In the case of SA8000, the press was reporting
that the United States would require all imports from China to
be certified to SA8000 as of May 2004. That is not the case.
That is not anything we have put out, but it is one of the
points that speaks to the confusion.
In contrast, CSR in general--or SA8000 specifically--is
also seen by others in China as an attractive opportunity to
improve Chinese business competitiveness. That view is for
those looking to advance Chinese production toward higher
value-added goods, and who seek an advanced industrial relation
system in China, with ``best practice'' human resource
management, better-quality productivity, and retention of
workers. A couple of local governments currently provide
subsidies for local firms that seek to implement SA8000 within
China. This is an interesting indicator of some actors in China
being receptive to SA8000.
At the moment, in the later months of 2005, the pro-CSR
voices seem to be growing stronger, especially with the Chinese
central government having issued the Harmonious Society Policy
in February 2005. Unfortunately, the China National
Certification Agency [CNCA], has also raised several concerns
and is currently taking a sharp look at certifications
throughout China. They required both facilities seeking
certification to any social or environmental standard, and also
the certification bodies to which they have applied, to first
seek permission from the CNCA before beginning a certification
audit. The effect has been to curb the rate of certification
and discourage Chinese certification bodies from applying to
SAI for accreditation or to audit against SA8000. We are
feeling this impact directly. As explained above, for us,
certification is an important point of transparency for a
business-to-business social compliance program.
Meanwhile, we know of numerous international organizations
working in China to improve workplace conditions, thus further
spurring the debate, but also adding some confusion.
The Global Compact conference coming up in December
promises to be another opportunity to elicit support for
corporate social responsibility in China. SAI, like many other
organizations, has capacity-building programs there and we are
seeking to collaborate broadly.
Finally, my last point. SAI's project right now on the
ground is to provide training for managers and workers
together. The project aims to help managers see the benefits of
running a socially
responsible business and to enable workers to understand the
competitive challenges facing the business and how they can use
voluntary codes and other mechanisms to exercise their rights.
A few factories in China are seeking to achieve
certification for the internal benefits, not just because a
customer has asked for it, rather than something in response to
those demands from U.S. and European brands. Most, however,
still seek to comply with SA8000 or other business codes or
other multi-stakeholder codes, like the Fair Labor Associations
[FLA], or others, because of foreign pressure. This is a
problem because monitoring has its limits. Double bookkeeping
is a well-known common practice, and workers are often fed the
answers that they are meant to give to the auditors. Even the
managers who are trying sincerely to meet the standard
frequently do not understand the concepts behind these codes of
conduct well enough to communicate those effectively to
workers. To this end, SAI is seeking to help these managers to
``own'' the implementation process, not just to prepare for
social audits.
SAI is also implementing strategies to encourage worker/
manager dialogue and worker participation in workplace
improvements within the parameters of Chinese law. Working in
partnership with several brands, a few suppliers, and local
NGOs, SAI has developed an innovative training program. It is
an important training program given China's superpower status
in manufacturing, with hundreds of thousands of factories. It
is a huge challenge for any
actors, businesses, trade unions, and NGOs alike, to improve
working conditions.
Any program requires both depth and reach. Since the early
1990s, all major Western companies have been relying on social
auditing or monitoring for acceptable working conditions, which
has significantly raised awareness, at least among their
primary suppliers, in China. Many have taken corrective actions
under those requests from the brands and their customers and
auditors. These days, however, many corporate compliance teams
have also realized that there are major shortfalls of an audit-
only compliance program: one, that such programs are external
or imposed; two, there is general agreement that workers are
the parties most affected and the ones who know the most about
working conditions. Unfortunately, all social auditing
programs--even with the best NGO monitors--are challenged as to
how deeply they can incorporate worker opinion and
participation. These programs can only help create the space
for workers, who then need to find their own voice.
So, in response to a call for more factory ownership of
compliance programs, SAI, in collaboration with our various
partners, initiated at the end of 2003, a worker/manager
training program aimed at deepening worker involvement in the
factories' implementation program. It is a comprehensive
training program in which we train all of the workers in a
factory and the managers, and, after a brief training for
everyone, there is a dialogue. There is a discussion about how
the factory measures up against international labor norms,
codes of conduct like SA8000, and Chinese Labor Law. In the
factories in which we have conducted this training, the workers
and the managers agreed that they needed a mechanism to
continue this dialogue, that this was a useful discussion. By
November 2004, workers had organized independent nominations
and elections and established worker committees in three
factories. Workers and managers in the fourth factory are
currently working to set something up as well there.
Since March 2005, project participants have conducted a
series of evaluations, and what we are finding is interesting.
The workers are enjoying much better opportunities to air their
concerns. Per one survey in one factory of 20 percent of the
workforce, 68 percent stated that the worker committee
significantly enhanced communication between managers and
workers.
Worker committees have been increasingly proactive. In one,
factory representatives are monitoring food quality; in
another, the worker committee worked together to successfully
convince the management to adjust unit prices for 80 percent of
the workers. This is a breakthrough. The ongoing dialogue
between the two groups has become at least one of the primary
factors contributing to, at various levels, better retention
rates, improved wages, and reduced working hours.
Workers and managers at all the factories participating
have been far more confident and willing to continue the
program on their own, and many have acknowledged that the
program has offered much added value potentially minimizing the
work needed on factory audits and the consulting that has been
frequently enlisted to prepare management for those audits.
A finding probably more critical than all the rest is that
the pilot project strongly suggests that workers in China do
care about their rights and identity, in addition to
recognizing the need for better working conditions.
Thank you.
Mr. Dorman. Good. Thank you very much for that statement. I
am sure it will generate good questions and dialogue.
Next, I would like to introduce Mr. Dan Viederman. Mr.
Viederman is Executive Director of Verite. Mr. Viederman became
Executive Director after three years as director of research,
where he managed Verite's efforts to assess labor conditions
for institutional investors, including the California and New
York State pension systems and government agencies. He has
spent over 10 years working in Asia with NGOs and businesses
focused on issues of environmental protection and rural
development. He served as CEO of World Wildlife Fund's China
program, where he established the first Beijing office for an
international environmental organization in China. He has
worked as country director for China for Catholic Relief
Services focused on relief and small-scale developmental work
in China's interior. Mr. Viederman served on the faculty of
Chongqing Architecture University. A graduate of Yale
University, he has a master's degree from Columbia University's
School of International and Public Affairs.
We might be accused of being biased toward Columbia at this
particular roundtable. [Laughter.]
Ms. Rosenbaum. I did not go there. [Laughter.]
Mr. Viederman. We owe it all to our graduate program.
Mr. Dorman. Mr. Viederman, you have 10 minutes for your
opening statement.
STATEMENT OF DAN VIEDERMAN, EXECUTIVE DIRECTOR, VERITE,
AMHERST, MA
Mr. Viederman. Thank you very much. I am trying to think of
how I can best work off of what Judy was introducing, because
clearly there is a lot of overlap between the work that SAI
does and what Verite does. We are not a certifying
organization. We are a nonprofit that works globally, and
extensively in China, for over a decade. We started as a social
monitoring organization, so our expertise and much of our core
competency remains in the area of going into factories and
finding out about labor conditions on behalf of international
brands.
So what I thought I would do is talk in three parts. First,
what is the picture that monitoring has presented to Verite of
working conditions in China. I will try and pull out a few key,
salient points. I am happy to go into as much detail as you
want about them later. Second, I will talk about some of the
positive impacts, and certainly some of the limitations, that
implementing codes of conduct from international corporate
involvement in China has accomplished. In other words, what has
been good, what has come out of monitoring against codes that
is useful, and what are the limitations. Then, third, to talk
about, from Verite's perspective, some of the key questions
that remain and some of the steps that we are aiming to take to
move forward to continue to improve implementation of labor
standards in China.
So, first of all, the picture of working conditions in
China is not a pretty one. Indeed, we believe it is fair to say
that most, if not all, international brands that are sourcing
in China are in violation of their own codes of conduct or
Chinese labor law at one point or another during their sourcing
experiences in China.
I am going to speak about the picture of Chinese workplaces
based on approximately 350 factory audits that we have
undertaken over the past three years, which we have conducted
for various international brands in a variety of sectors and
industries, largely garments and footwear, but including
others, including hard goods, accessories, and electronics. I
have four or five main points. The most complex issues that we
find in China are related to compensation and work hours. This
is a particularly complex issue for international brands, and
also for Chinese factories,
because of the vagueness of the Labor Law itself, which lends
to constant reinterpretation and a variety of creative forms of
bookkeeping. In 2004, from a sample of 80 of the factories that
we audited, only 9 factories did not have overtime hour
violations, and of those 80 factories surveyed roughly half had
wage violations related to regular working hours as well. In
2003, the figures were about similar: 75 percent of factories
that we audited had overtime wage violations. Over 90 percent
had overtime hour violations, meaning workers exceeded limits
on hours or days worked.
The second area of significant non-compliance with codes
and with international and domestic labor standards is
benefits. This is another area where the law is relatively new,
and designed, promulgated, and implemented in different forms
across different
regions and locations. It presents a significant challenge to
companies that are trying to be in compliance with Chinese
labor law, and obviously to Chinese factories as well.
In roughly the same sample of about 80 factories that we
surveyed in 2004, fewer than 5 were in full compliance with
benefits laws. Common violations in this area include no
provision of paid vacation for workers, which is a particularly
vague area of the Labor Law, and failure to enroll workers in
the legally mandated social security system. We must note that
some workers--particularly those who are migrant workers--
choose not to enroll in the system either because they do not
understand it, or because they do not trust it, or both.
The third main area of non-compliance that I wanted to
mention is health and safety. In China, conditions range widely
and many factors contribute to whether or not a factory is in
compliance with health and safety requirements, including
location, the level of local enforcement of safety laws, the
resources and devotion of the factory management to adequate
enforcement, the length of time the factory has been in
operation, and management quality and capacity, among others.
But health and safety violations of varying severity are
commonplace in China. Major violations are in the areas of
machine safety, fire safety, chemical safety, and the provision
and use of personal protection equipment. According to our
findings in year 2002, 40 percent of the factories audited had
machine safety violations. In most cases, the machines lacked
safety devices. Toxic chemicals were mislabeled and mishandled
in over 30 percent of the factories, though this may be a low
estimate. Over half of the factories did not provide, or the
workers did not use, the appropriate personal protection
equipment. These are cut-and-dried numbers about violations at
the factory level that lead to quite severe problems, injuries,
and even death, for workers.
Other issues that we find include child labor, which is
generally not present in export factories, but juvenile labor
is quite common. This is particularly a function of inadequate
age verification procedures. Juvenile workers generally do not
work in accordance with the protections that are legally
required of juvenile workers, including medical examinations,
registration with the government, and the limitations on work
hours. Discrimination is something that we found reported,
particularly against pregnant applicants and pregnant
employees, in about 40 percent of the factories that we saw in
2004. These, then, are some of the standard code of conduct
issues about which we find endemic violations.
Having said that, and having painted this relatively bleak
picture, there are positives that have come out of the
implementation of codes of conduct by international brands, and
one of them is that we have access to this picture. In some
ways, without the implementation of codes of conduct and of the
regular auditing and monitoring that we do as a result of those
codes, we would not be able to know what is going on in Chinese
factories. This is something easy to overlook, and yet
important to mention, despite the fact, as Judy mentioned, and
as we as an organization strongly feel, that most of the
factory monitoring that is undertaken is inadequate in its
depth and quality.
Indeed, you can rarely find factories these days that do
not expect external audits, particularly those that source for
export industries, and they willingly provide, in most cases,
some sort of proof of social compliance; whether or not that
proof is reliable and as thorough as we might like is a
different question. Significantly, there is movement toward the
positive in export factories in other ways. This is
particularly apparent if you take a long enough perspective at
the issue and look back 10 years, and maybe look forward 10
years.
I participated in Verite's annual China sourcing conference
this summer, where we bring together staff from Chinese
factories with outside experts and NGOs in China. There was
something akin to a kind of pass/fail mania going on among the
Chinese factories. They are very eager for the stamp that will
allow them to achieve the expectations of their international
partners. Codes of conduct are a part of the common parlance
among factory management and ownership of this particular
cohort of Chinese society. At our conference this summer, we
presented case studies from two additional factories that have,
on their own, in many ways in reaction to international codes
of conduct and the requirements for other brands, come up with
high impact, significant, and innovative social compliance
programs that act to the benefit of their workers. There are a
couple of case studies on our Web site, and I can send those
case studies to anyone who is interested in seeing what those
are.
There is increased acceptance of the kind of worker
training programs that Verite has undertaken and the kind of
factory management training and interaction and collaborative
effort that Ruth will talk about, I assume, and that Judy
already talked about. So, these are significant positive signs.
They are, of course, tame in terms of the scale of the
actual problems and the number of workplaces in China. Despite
that scale imbalance, these positive developments are still
important for the potential that they represent.
The weaknesses in code implementation--i.e., labor
violations--persist for several reasons. Too often, companies
do not look carefully enough or with enough intention for the
problems that they no doubt find, or could find, in their
supplier factories. Companies are likely to ignore, in many
cases, their own role in the creation of these problems.
Sourcing practices are arguably an area where there is a high
potential for short-term improvement in social compliance
outcomes, as well as a great deal of control exerted by the
companies themselves. Factories are too often an object of the
compliance process rather than a partner. This is a limitation
of the overall social compliance model as it exists right now.
The project that Judy mentioned and that Ruth will talk about
are examples to the contrary, but they do not represent the
broad condition at this point. In addition, true compliance is
not valued by the market. Strong social compliance performance
is infrequently rewarded and, in fact, strong social compliance
performance is often contradicted by the corporate purchasing
policies of the brand to which vendor factories are attempting
to supply.
Compliance is, at this point, not compelled by Chinese
regulators due to unclear policies, policy contradictions, as
well as a fundamental lack of capacity. Furthermore, a
limitation on the impact of international codes of conduct,
when we are looking at China as a whole, is quite significant.
Our look is really through the keyhole presented by export-
oriented sourcing. Our view ignores the vast number of
workplaces in China that operate beyond the reach of
international codes of conduct. For example: those producing
for China's domestic market or for export to other poor Asian
countries rather than to the West; raw material suppliers down
the supply chain, including tanneries, embroidery workshops,
home work areas, and slaughterhouses for the leather that
becomes shoes; most agricultural workplaces, and workplaces
exporting in industries which have yet to implement strong
codes and code implementation mechanisms. Code of conduct
implementation is an area of effort that is most well-developed
in the apparel and footwear industries.
Last, sourcing that takes place out of Guangdong and
Fujian, where code of conduct monitoring is most active. This
is something that we have begun to work on more effectively
because we were brought there by our international partners, as
their sourcing moves beyond the Guangdong area. In fact, around
40 percent of the work that we do on a factory audit basis is
in inland provinces and the Yangtze River delta area. This
represents a significant shift away from the areas where
management capacity and civil society are more well-developed
to be able to deal with the social compliance problems.
Moving forward, clearly these are problems that we as a
group of concerned citizens, companies, and organizations need
to address. The efforts we have collectively undertaken are
really minuscule in comparison to the level of the problem. To
us, this points toward an obvious set of approaches, namely,
that we focus on integrating social compliance performance and
labor protections within Chinese society; that we have to move
beyond the small impact of our programs to larger and
sustainable societal impact. In order to do that, we need to
ensure that institutions in China develop and maintain
ownership of meaningful interventions and working conditions in
CSR. From our perspective, there are three key groups to work
with.
Obviously, government is a key player and has an obvious
role to play. As David mentioned, I come from a background in
the environmental field in China and saw the development of
significant and useful collaborative programs between
international organizations and government in environmental
protection. I look for the potential to create such programs in
the CSR or the labor arena as well. Chinese NGOs are a second
segment of society that needs to be engaged by international
actors, responsibly and in clear relation to their ability to
absorb funding. Again, in reference to the environmental field
where there has been an explosion of the number of NGOs working
on environmental issues, I look ahead and wonder whether there
will be a similar explosion of CSR-oriented Chinese NGOs. Then,
of course, Chinese workers and workers' organizations
themselves need to be much more fully integrated into workplace
assessments and the resolution of workplace problems.
Opportunities exist to expand worker training like we have
undertaken, worker participation and assessments, like SAI's
pilot program, and other such programs. We have engaged
individuals in our annual conference from within the All China
Federation of Trade Unions in dialogue, and found that in some
cases we have been able to facilitate a useful dialogue between
them and some of the companies with which we have been working.
So, overall, we see a picture where problems are endemic;
where there is some improvement, which is at this point almost
anecdotal in its scale; and that sustainable solutions need to
be developed that come from Chinese institutions themselves.
The role that we can play best is to help facilitate and
develop those sustainable institutions. Thank you.
Mr. Dorman. Good. Thank you very much. Next, we will hear
from Dr. Ruth Rosenbaum. Dr. Rosenbaum is Executive Director of
the Center for Reflection, Education, and Action, Inc., a
social-
economic research and education organization. Dr. Rosenbaum is
the creator of the Purchasing Power Index, a transcultural
measurement of the purchasing power of wages used to determine
what constitutes a sustainable living wage. She is associate
professor for research at the Labor Education Center at the
University of Connecticut. She received a bachelor's degree in
biology and chemistry from Hunter College, master's degrees in
molecular biology from Hunter College and in theology from
Manhattan College, and a doctorate in social economics and
social justice from Boston College.
Dr. Rosenbaum, thank you for joining us again. You have 10
minutes for an opening statement.
STATEMENT OF RUTH ROSENBAUM, EXECUTIVE DIRECTOR, CENTER FOR
REFLECTION, EDUCATION, AND ACTION, INC., HARTFORD, CT
Ms. Rosenbaum. Thank you. Every time I listen to that, I
think of what an eclectic background I bring to all of this.
Sometimes when I hear my colleagues speak about China, I
recall that we do a lot of work in a lot of other parts of the
world also, and it seems to me that what we are describing in
China, I also could be describing in El Salvador, Guatemala, or
Kenya. I could be describing so many places around the world.
So I think we need to keep that in mind, that the enormity,
just the size of China, makes it seem like it is the center of
many things or that the problems there are different. But
honestly, when I look at the work we are doing in other
countries, the parallels, to me, are simply overwhelming.
I think we are at a particular time in China where we are
beginning to see a few things that are changing. Number one, we
are hearing from factories that there is regional competition
for workers, that there is a worker shortage. If you think back
10 years ago when we talked about the labor supply in China
being unlimited, the fact that factories are now talking about
a labor shortage and therefore are seen holding onto workers
that are trained so that they can have an adequate work supply,
that this is something that might give us a handle to address
some of the issues that my colleagues have talked about.
In some parts of China, especially in the Pearl River
Delta, we are certainly hearing about the problem of energy
availability. The last few times that I was in China working on
the project that I am going to describe, there was not a
factory that does not have at least one day without
electricity. So, the fact that electricity or energy
availability is being limited, and that this is an extra cost
in terms of having to purchase generators to be able to run
their factories, when you have a factory of 20,000 workers, I
cannot even imagine what kind of generators we are talking
about in a situation like that.
The other thing that has been very obvious to me, since my
first world really is molecular biology, is the increased rates
of pollution that we are finding, and also the exhaustion of
the ground water supply in some areas where the factories have
been located, and how this is going to play out in terms of
factories being able to continue to work in certain areas. We
really do not know. But these are certainly situations that are
there.
The three of us have been at the annual conference of
Business for Social Responsibility [BSR], and in listening to
speaker after speaker after speaker for the past couple of
days, and a lot of the meetings that we have had, everybody
keeps talking about corporate social responsibility. I keep
wanting to raise the question, why are we doing any of that?
What is the purpose of it?
So I am going to tell you up front that for CREA, which is
what we call our organization instead of our long name,
corporate social responsibility is bringing about change to
benefit workers, and in turn benefit their families and the
communities from which they come and in which they live, and it
does not make any difference whether that is in China or other
places.
So it is not just for the good name of the corporation and
it is not for the amorphous good that is out there, but we want
to be able to see tangible, positive change in the lives of the
workers and the communities. We believe that, in that
happening, that we are going to see positive change within the
factories.
What I would like to share with you today is just some
information about a project that we have been privileged to be
involved in. It is called Project Kaleidoscope, or Project K,
for short. It is a cooperative, collaborative project that has
involved 10 factories, two brands, socially responsible
investors from the faith-based community, the investment
community, the Connecticut State government or the Connecticut
State treasurer's office, research and NGO organizations that
are also SRI investors, NGOs in China, and academia. That is
academics in China, and I guess you could talk about myself as
an academic, even though that is really not the way I would
describe myself. This project involves factories that produce
toys, both plastic and plush, apparel factories, and footwear
factories. So, we have quite a spectrum of involvement.
What makes this project different? There are a number of
components that make the project different. Number one, we are
looking at management as partners in corporate social
responsibility rather than the object of CSR. I think that this
has brought about a mind-set change in the minds and ways that
the management within the factories have received what we have
proposed and what we have done. In the past, in audit systems--
and again, it does not make any difference whether it is in
China or in other places--you have outside auditors coming in
to check on the factories. It is what we call, in shorthand,
the ``gotcha'' approach. ``Gotcha.'' We caught you at A, B, C,
D, whatever it is. Now, if you think back to your own
experiences when you were a child and you went to school, like
in grammar school, and you had to take a test, and you were
hoping that the questions were going to be about the things
that you knew, and the teacher was not going to ask the things
that you didn't know, the things you were unsure of, and when
you got the test back, what you had on it most of the time were
things that were marked wrong. Am I correct? Is that not the
way you all experienced your tests?
What we are trying to do, instead of only focusing on the
things that are wrong, we are trying to focus on the things
that are right and helping them to grow. So to give back an
exam that would have the things marked right, and then ask how
do you increase that, rather than only the things that are
wrong. It is a change in respect or a change in the way we have
been showing our respect for what factory managers, factory
workers, and so on have been trying to do. In this new program,
this Project Kaleidoscope, as we call it, we are trying to help
everybody see things in a new way. I have two things that I use
to illustrate this point. I usually have them with me, and I do
not now, I am sorry. One is like a tubular, multi-lensed thing.
It is like a cone shape and has a multi-lens at the end. If you
look through that, you see the exact same thing over and over
and over again. It is almost like an insect's eye. That is
different from a kaleidoscope, in which you have a set of
pieces inside a tube, but as you rotate them you see something
different. That is essentially what we are trying to do with
management, with workers, with supervisors within the factory,
that is to say, when you look at what is going on here, how do
you look at it, and look at it in a different way.
The new program, Project Kaleidoscope, has asked the
factory management, working with their supervisors and worker
representatives, to design systems in the factory. The purpose
of these systems--and this is my shorthand, not the project
shorthand--is to find things that need to be fixed, to fix
them, and then to learn from that and prevent them from
happening again. So my three key words in the project are:
find, fix, and prevent.
And they can tell us about what they found, tell us how
they fixed it, and to tell us the systems that they have set in
place to prevent these things in the future. It is very
different from having outside auditors coming in and saying,
``We have found it, now you have to go fix it, and, well,
prevention will just be, did we find it again the next time? ''
In this process or in this new way of looking at things, the
factory has become a partner in this ``find, fix, and prevent''
process. It is a systems-based approach in which we have asked
the factories to take a look at anything that might go wrong,
try to prevent it, but to help everybody understand how they
participate in this effort.
Everybody in the factory has been involved--workers, line
managers, supervisors, senior management. On all levels, we
have had to do education, we have had to do training, and
especially we have had to do capacity building. The capacity
building has been necessary on every single level. It is one
thing to know something, it is another thing to be able to make
it operational. What we have emphasized is that everybody has
the responsibility and everybody has the ``response-ability,''
the ability to respond when something happens, and that to
respond when something happens is a positive rather than
saying, ``I do not want to get involved, I am going to hide and
not be part of whatever this problem is.'' We have tried to
work with the factories to develop internal systems that are
particular to the factory. The smallest factory has about 370
workers, the largest factory is almost 20,000 workers. Only
part of that 20,000 produce for the brand that is involved in
the project.
But the biggest issue for us has been capacity building at
all these levels. One of the training programs that we have
used has helped to create communication between the different
levels within the factory.
A lot of it has had to do with answering the question,
``How do we do this with an atmosphere or with behavior that is
respectful of the efforts that have gone on beforehand? '' And,
so just to tell you a story: I was walking around in one of the
largest factories in the project with the factory manager, and
we just happened to be talking to each other. And we got to one
floor of the factory and I said to him, ``Is this not curious?
'' I said, ``All of these lines in this part of the factory are
set up for production, but when we get over there everything is
set up in clusters.'' I said, ``Gee, do you have any idea why
the clusters are there? '' He said, ``Oh, I will go fix them.''
I said, ``Wait. Why do we not find out why it happened? ''
Well, it turned out that the workers had created the clusters
slowly, over time, because handing down what they were working
on, handing things down the production line, was not as
efficient for them as being able to hand it to the side, so
what they had done is created a square, and they were just able
to pass it around in the square and then hand it on when they
were done. So, that was the first thing.
Then we were walking around. And again, because my
background is in molecular biology, every time I go by an
exhaust system I put my hand underneath to see if it is on,
having been in numerous factories where you have these huge
systems and there is no vacuum or no suction. So I stuck my
hand underneath and I said to the manager, ``Where does it
vent? Outside? '' He looked at me and he said, ``I do not
know.'' We walked the entire factory as he was showing me
around--and there were many floors, like seven or eight floors
to this--and we followed the vent system. It was like this big
adventure. We followed the vent system. He said to me, ``I do
not even know if it has a filter on the outside.'' So we
looked. We got outside, and sure enough, there was a filter on
the outside and it was clean. It was relatively clean. I said,
``Whose job is it to keep it clean or to change the filter when
it is dirty? '' He said, ``I do not know.'' This was wonderful.
Everything was good. It was the way it was supposed to be. But
who was responsible for keeping it that way? Was it chance? Was
it just chance that it happened to be clean that day?
By the time we went back the second time, he knew who was
responsible, and also if that person was not there or if that
team of people were not there, who was going to be responsible
to train somebody else to change the filter, and to dispose of
the dirty filter. They do not really dispose of them, they
clean them. The point being that sometimes there are good
things happening there and they do not really know how it is
happening or why it is happening.
The manager said to me afterward, ``You are a very good
teacher.'' And I am not telling you this story because of what
he said to me. I said, ``What do you mean? '' He said, ``I did
not feel embarrassed by any of the questions you were asking
me.'' For me, that was a huge learning experience. In the
audits, they are embarrassed. They feel awkward, they feel
embarrassed, they feel on the spot.
Now, our process for this Project K is as rigorous as
traditional auditing. It goes into absolutely every aspect of
everything that goes on, not only in the factory itself, but in
the dormitories, in the cafeteria, et cetera. But the
embarrassment piece is gone because we are asking them to
figure out the things that need to be fixed, and to do that
with getting feedback from their workers. With participation in
this new approach, we have already seen a change in the
factories. Rather than being concerned about what an audit may
find, the internal self-correcting systems that they have
designed address these concerns and so they are happy to tell
us about them. There are some consistent problems that remain.
Excessive overtime and working hours, we consistently find
this, and then I would say the whole question of wage levels.
But I would like to suggest, and to build on what my colleagues
spoke about, that excessive overtime and the extension of
working hours is not always the responsibility of the factory
itself, but many times has to do with the sourcing practices of
the many brands that are in the factories.
The example I used when we presented this yesterday at the
BSR conference is: I am at an NGO and I get a call on Thursday
just as I am closing down for the day. I am the Executive
Director, and somebody says, ``Ruth, we need this report on
Monday morning.'' I know that that means Thursday night,
Friday, Friday night, and probably Saturday and Sunday, I am
going to have to work on this report. That is excessive
overtime, folks. It happens to everybody who is sitting in this
room, I would be willing to bet. Why? Part of it has to do with
planning. The other part of it has to do with the sourcing
practices and brands and nobody wanting to assume the risk of
having supply on hand. So they have pushed it down with just-
in-time production and lean manufacturing and so on, so it is
the factory that has to assume all that risk. The factory does
not want to assume the risk of overproduction either, so what
do they do? They wait to see whether they have the orders. So,
somehow within all of this we have to come up with some way of
addressing this part of the problem.
The piece that continues to be of concern to me, and this
is because of the work we do really around the world, is the
sustainable living wage. The wage levels in Chinese factories
need to go up. The fact that there are many workers that are
willing to work at those wage levels is not the same thing as
saying that those wages really provide enough purchasing power
for the workers to have a dignified standard of living.
As we are seeing the deconstruction of the hukou system and
as we are seeing more and more workers not return to their
villages and stay within the towns and cities where the
factories are located, those workers are going to want to be
able to get married and to be able to support their families,
to have children, send their children to school, et cetera. I
cannot imagine that those things are going to take place
without the demand for wages to go up, so I think that this is
something that we are going to see in the future.
The last thing I would say is that with the educational
materials that the factories have developed, some of the
factories, when we were there in June, had big charts on the
self-auditing they had done and the things they had found. They
were big charts. They are posted for all the workers to see,
for everybody to see. The workers will stand there and they
will translate them for us. Anyway, they were able to show us
what the progress is, what it is that they are trying to do to
improve. We now hear factory management saying, ``We want to be
a code of conduct [COC] factory.'' This, to me, says that in
some way, shape, or form, we have gotten the message across.
What it is going to take to fully implement all of that? Of
course, that is going to take time. But I do think that there
are changes that we are beginning to see that give me hope. I
wish that when I was in other parts of the world there would be
the same response. I am still waiting to go into my first
factory in Central America where a factory manager says, ``Gee,
we want to be a COC factory.'' Right, Judy? Have you ever heard
it? I have not heard it either.
So, thank you very much.
Mr. Dorman. Good. Very important and very interesting
statements. So, we will move into the question and answer
phase. But, first, I would like to check with the audience. Can
everybody hear us in the back? Are we doing all right, speaking
loud enough? Good. I will start with a question for each of you
and then we will move down the dais to other staff that will
have questions.
Judy, in your statement, you said that the Chinese
Government is running an examination of standards right now,
and part of the outcome of this examination has been decreasing
interest in applying for such standards. Did I understand you
correctly?
Ms. Gearhart. Yes.
Mr. Dorman. Do you believe that this policy originates with
the central government, and this review is driven by the
central government? That is the first part of my question.
The second part is whether or not it is your sense that
this decreased interest, or the decreasing numbers of
applications, is an intended outcome of this policy or an
unintended outcome?
Ms. Gearhart. The organization that is looking at
certifications in the process is the CNCA, which is the
government agency overseeing accreditation activity in the
country. As I mentioned in my remarks, there appear to be
varying views within the different government organizations,
and the whole concept of corporate social responsibility is
still very much being defined by how people are viewing it, and
I think people are changing their views as we speak, so it is
in flux.
Whether or not the consequences will be limiting in the
long term is unclear, but it seems that has been the effect up
to now. I do not have a determined conclusion yet whether it is
intended or unintended.
We are in conversations with them. So far, I think that is
positive, that we are talking with them directly and we are
looking at how to understand each other better. But it is
something to watch, is all I would say.
Mr. Dorman. Mr. Viederman, Dr. Rosenbaum, any comments on
that? I have an additional question, but I thought you may have
something to add.
Mr. Viederman. I think, clearly, there is a lot of debate
going on in China, as elsewhere, about what role certification
plays. In China, there is an added political component to this
debate, and certainly it seems to us that there is an effort to
create a ``certification with Chinese characteristics,'' some
sort of domestically more acceptable model. I think it is
unclear at this point, bureaucratically, how much broad sway
that this certification effort has.
Then again, it is clearly an indication on the part of some
segment of the government that CSR is something to be endorsed
in one way, shape, or form. We could quarrel about the specific
certification standard, but the fact that it is clearly stated
as a topic that is up for discussion is, as Judy says, worth
paying attention to.
Mr. Dorman. Good.
Ms. Rosenbaum. I agree with what my colleagues have said.
The only thing I would add is I think part of it has to do with
national pride, instead of having CSR being imposed from the
outside, an effort to make it something that is owned within
China and to come up with a Chinese standard of doing it,
which, if we can get the standard to match the kinds of
standards that are already out there, would raise the standard.
Mr. Dorman. Mr. Viederman and Dr. Rosenbaum, in terms of
the auditing process, can you give us a sense of the level of
interest by local governments, and by local trade unions. Are
they interested in what you are doing, the outcome? Are they
helpful?
Ms. Rosenbaum. Well, I know that before we started Project
K, the brands were in dialogue with the government on a whole
variety of levels to make sure that we had buy-in from them,
that there was not going to be any negative repercussions and
so on. But that is pretty much it. We have not heard anything
else since then.
Mr. Viederman. The formal auditing that we do tends to
happen without any significant involvement from government
agencies. Clearly they are aware of it, as a significant
manifestation of international interest in Chinese factories,
and there are members of the bureaucracy, or ex-members of the
Chinese labor bureaucracy who have begun to participate in one
way, shape, or form in factory assessments, or as consultants,
and in helping to improve factory conditions. So there is a
sort of an informal interaction, but from our perspective there
has not been either a real formal endorsement of, or
interaction with, the audit process that we have undertaken.
Mr. Dorman. Good. Well, thank you.
Ms. Rosenbaum. Just one other thing. One of the things we
have insisted on as part of this project is that every factory
that is involved has an active worker committee, and not just a
worker committee, but an active worker committee, and that
membership in the worker committee is something that workers
have the option to join if they want to join it. So the whole
idea of worker representatives, or for the workers, having the
idea that they have the right to have somebody represent them,
is something that we are really trying to grow within the
factory. So far, it seems to be progressing. That is probably
the best way to describe it.
Mr. Dorman. Thank you.
I am going to turn my questioning over to my colleague,
John Foarde, who is Staff Director on the Commission for our
Co-Chairman, Representative Jim Leach.
John.
Mr. Foarde. Thank you, Dave.
First of all, thanks to all three of you for being here
this afternoon and taking time out from the conference to come
over and share your views with us. Dan and Ruth have been
panelists before at CECC roundtables, so welcome back. Judy,
this is your first time, and I hope not your last.
I would like to pick up on the theme that Dave was
questioning you about just a moment ago, but turn it around a
little bit and ask you for your views on what it would take,
from the central government level, to push along, and what sort
of changes would it take, to make CSR and perhaps SA8000 as a
standard, and sustainable wage and environmental standards,
really work in China, not only in the export sectors that most
of you are working in, but also in the internal sector? What
sort of policy changes, what sort of attitude changes, and what
is the likelihood of that happening?
Mr. Viederman. I think the one area of clear need is
increased capacity, and I would say increased expertise on the
part of the people who are tasked with doing factory
inspections for the government. There is just a fundamental
lack of capacity, a bureaucratic gap in their ability to
achieve the relatively high standards that are written into
Chinese law.
One significant intervention would be to make a commitment
at a national level, and at a local level as well, that such
capacity gaps should be filled. There also are clarifications
that are needed of the law itself and the regulations that
implement the law that would be beneficial to international
companies sourcing in China in their interaction with Chinese
factories, particularly in the newer manifestations of the
Chinese Labor Law, the newer pieces on benefits, and in the
area of overtime. So I see a clear need there, and a role for
those of us on the outside to play in bringing that expertise
and that capacity to facilitate improved implementation of the
law.
As for what kind of attitude change needs to happen, I find
it significant that there is an official Chinese standard, in
the sense that it is an attitude change. The bureaucratic
commitment is there; and whether or not it becomes reality, at
least it is something for people to organize around. I think
that it is a significant statement there that we can make use
of. But the attitude change is a relatively bigger piece, I
think, even than the capacity change.
Ms. Rosenbaum. The other thing that we also hear from
factories is that they would like to see some sort of--what is
the word I want--they would like to see the laws on the local
level and on the national level at least match.
Mr. Foarde. Harmonization?
Ms. Rosenbaum. Harmonization. That is a very good word.
Thank you. They would like to see these laws harmonized.
Because it is like, if you do one then you are not going to be
in compliance with the other, and so on. So, part of it is the
notion that you do not have to be in compliance with either
one, so the whole idea of standardizing or harmonizing the laws
and regulations so that it is possible to come up with some
kind of unified set of standards, this step would really be
helpful. Then I echo what Dan said about the capacity of
enforcement.
Mr. Foarde. Along those same lines, do you get the sense
from the types of discussions that you are having that people
are looking for a commitment, a public commitment on the part
of central government authorities, perhaps from the political
leadership at the very top, to this sort of thing because they
are not sure whether or not it might be accepted?
Ms. Rosenbaum. I do not know. I have not heard that as much
as, you kind of hear that CSR is something that the government
is pushing. But to say it is has come down as a mandate, that
you have to do it, I have not heard it that strongly yet. But
you do get the feeling that it is out there and everybody knows
that it is out there. That certainly has been a change, I
think, in the past two years.
Mr. Foarde. Thank you.
Ms. Gearhart. There were several conferences canceled
earlier this year, so I think there are some concerns as to how
much the discussion around corporate social responsibility can
move forward easily. So to speak to your first question, my two
main recommendations are going back to encouraging the national
corporate social responsibility dialogue and discussion and
looking at how to make that more organic to China and, as Dan
mentioned, looking at not just the export industries, but the
other industries, the growing Chinese domestic companies and
how they are looking at these issues.
The other point I would make is that it is important to
clarify the complementarity between voluntary mechanisms, codes
of conduct or other voluntary initiatives, and government
regulations. I think that international actors should seek to
clarify that CSR and voluntary codes of conduct are not a
substitute for government
regulation. The voluntary initiatives are really a
reinforcement of support, a tool, really, for employers and
factory managers to move forward and understand. I think for
many of us, the management systems element is a core component
that Ruth talked about, and it is one of the core requirements
of the SA8000 standard. We are not just talking about a
checklist approach to improving labor conditions, but really
about improving how businesses are run and the sustainability
of businesses, and the long-term vision of those businesses.
Ms. Rosenbaum. The last time I was here before the
Commission staff, one of the things I said, just to build on
what Judy said, one of the questions that I raised, was how
appropriate it is or inappropriate it is to have corporations
creating an environmental standard or creating labor standards?
I offered the view that this is really the role of government
acting on behalf of its citizens. I would say that that still
is the major question. It is part of what I think you are
asking in terms of what the role of the Chinese Government
should be. I think that it should be the organization or the
entity that says, ``This is what the standard should be.'' Our
hope is that they would be as high, if not higher, than the
kinds of standards we have had in CSR and that they would
apply, as you were saying, across the board both for Chinese
production for China and for production for export. But that is
really their responsibility.
Mr. Foarde. Thank you. Very useful.
Mr. Dorman. Good. Thank you, John. Next, I would like to
recognize Mr. Chris Mitchell, who is Legislative Director for
Representative Mike Honda, a CECC Member.
Mr. Mitchell. Thanks. Ms. Gearhart and Dr. Rosenbaum, I
think you hit on what I was going to ask you to elaborate on,
and that is, just in general, management and practices. It
seems like improvements in corporate social responsibility are
so linked to better management practices. So that leads to the
question, how well are some of these NGOs that look at
corporate responsibility working with other organizations that
focus on management practices that have experience working with
local Chinese companies?
Ms. Gearhart. I think that local NGOs in China are going
through growing pains or a learning curve, if you will. Most of
them are very new. Even the kind of institutional
infrastructure that it takes to run an organization, train and
maintain staff, etc. takes time to build; so things are in flux
on that level.
In March, we held an informal discussion with several of
the organizations that are doing manager training or worker-
manager training. Many of these are locally based NGOs. In
those discussions, I found that the consensus among the group,
for example, is that, yes, worker training is important, but
manager training is equally as important, as I mentioned in my
remarks. Even if managers are trying sincerely to implement a
CSR management program and respect workers' rights, it is
something they have not dealt with before. As we said, you see
that the world over. I mean, people do not usually study these
issues when they set out to be factory managers.
So I would say that I found the NGOs to be quite aware and
thinking about how to relate to managers. As for what their
experience levels are, I think everybody is looking at how to
do this work in new and innovative ways, and sometimes you find
management consultants that have the longest running experience
of training managers and they are not necessarily the ones that
are going to be the most effective trainers on social issues.
They can be very effective, but sometimes the NGOs bring in a
new, fresh perspective. The ideal is to have a multi-
disciplinary team.
Mr. Mitchell. Yes.
Ms. Rosenbaum. Our experience has been that when you have a
team that is working with management, with the rest of the
factory, then you have this spectrum of abilities, and a
spectrum of experiences. It is part of what we have had in
Project K. There is a group of people working together and none
of us has all the experience that is needed, but different
people have had it. At the same time as we have been working
together, we have each then been gaining experience from the
expertise of the others in the group. So we will be able to
multiply that, both here in the United States in terms of
working with brands, and the groups that are in China, the
expertise they have been sharing with us, and vice versa. The
number of groups, the number of organizations, the number of
people with expertise that are needed to really do this, I
would say we are a drop in the ocean right now, to be honest
with you. It is long, hard work.
Mr. Mitchell. With respect to some of the practices by U.S.
companies that may lead to excessive overtime and some of these
other issues that we are concerned about, to what degree have
U.S. companies started to alter their purchasing policies,
either as part of this Project Kaleidoscope or any other
effort?
Mr. Viederman. I think it is in the very early stages. I
think it is one of the newer topics in the discussion,
particularly around overseas labor standards. I think a few
companies are explicitly identifying, in public reports, that
this is an issue that they recognize is a contribution on their
part to the difficult and persistent problems at the factory
level. There is certainly dialogue going on about best
practices or better practices, and it is not something that has
achieved either widespread acceptability among U.S. or European
companies or brands, though it is certainly a part of the
dialogue that factories have with the brands.
In fact, Verite did a study on the problem of overtime a
couple of years ago, looking at brand practice, looking at
worker perception, looking at manager perception. The leading
response from managers was that they wanted better
communication with the brands to whom they were selling. So,
they certainly see that it is an issue that needs to be
addressed, and I think the brands here are beginning--in some
cases, not all--to understand that and to reflect it .
Ms. Rosenbaum. Yes. It is just the very beginning stages. I
would echo what Dan is saying. What we have the managers
pleading for is to level the load, because that allows them to
have a workforce that they can maintain and to keep those
workers busy, to employ them at full capacity, and yet not have
to do the excessive overtime. And how the brands are going to
do that, both in Europe and in the United States, that is still
a work in progress, shall we say. But at least some are
beginning to hear it.
Ms. Gearhart. I think it is a collective action problem
because this has been an issue raised for us. We had a
conference in China in 2001 and some of the brands that were
there spoke up and opened the door for this to become a
discussion. We never had a chattier conference in China before
that, but the suppliers really wanted to talk about this issue.
However, some of the brands we work with that have tried to
change the timing of their orders or the way they are doing
their orders to address this issue, report that most factories
turn around and take orders from other brands. So, unless there
is a system-wide change--and I think Ruth's mentioning of the
just-in-time practices is part of it, it will be difficult to
sustain change. I mean, it used to be something, 10 years ago,
everybody was complaining about. Now it has sort of dropped out
of the common discussion. How do you bring the brands together
in order to address this?
I think one positive step forward, besides the fact that
this is a relatively hot topic now in these discussions, that
it is going along with a moment when major brands are beginning
to publish their supplier lists and they are beginning to share
information about factories. That sharing of information about
the social compliance of factories and the supplier lists, and
everything, is, I think, another important part to bringing
these problems toward a collective action solution; that could
help change how these orders happen.
Ms. Rosenbaum. I guess I really hope that you are right,
Judy. I just know, when the FLA and the Worker's Rights
Consortium [WRC] were formed, one of the things we did at CREA
was assemble this enormous data base with all the factories,
all the universities that were either in the WRC or the FLA. It
was all the
factories or anything that they had at their university level
on it where they produced. So we were able to--we still are
able--to look in a country and say these are all the
universities that produce there, therefore, these are all the
brands that are in there. We offered that information to
anybody who wanted it and we could not get anybody--anybody--to
use it in terms of any kind of cooperative sourcing.
So it is my hope that now that this problem has been around
long enough, that maybe--we may have to just wait until
something hits the moment to address it--it is going to begin
to come up again, but it is still a problem that is on the
table. And I am not sure it is solvable at the factory level. I
really think it has to be solved in terms of order placement. I
said this yesterday at the conference when I spoke. It was not
the most popular thing I have ever said to a group of brands.
There was dead silence in the room when I said it.
Mr. Dorman. Good. Thank you. I would like to turn the
questioning over to Dr. Kate Kaup, who is a Special Advisor on
the Commission staff.
Kate.
Ms. Kaup. Thank you very much. I would like to ask Dan a
question and then I have a related question for all of the
witnesses.
Dan, you mentioned that in Verite's audits you found a good
deal of discrimination against pregnant women. Did you also
find discrimination against ethnic minorities?
And for all of our witnesses, will you please tell us if
most of your work is conducted primarily in the east coast or
do you also focus on western areas? Do you conduct any work in
Xinjiang? You mentioned that 40 percent of your work is
conducted in the
interior. Could you please clarify what you consider to be the
``interior? ''
Mr. Viederman. Not the very interior yet. Coastal interior.
Ethnic discrimination is not a problem that has come up as a
priority finding, especially in southern Chinese factories.
When we say ``interior,'' we are talking more about upriver
from Shanghai on the Yangtze River. So, Anhui, certainly to
Jiangsu, Jiangxi, but not much farther west than that at this
point.
Ms. Kaup. Is that a result of having trouble getting proper
approval to go out west or just of having your hands full on
the east coast?
Mr. Viederman. I think it is a question, because we will go
in when brands ask us to go essentially in response to where
they are sourcing. They are still sourcing closer to the coast,
probably purely for transportation and logistical reasons.
I was having a conversation with someone the other day who
described factories eager to take advantage of wage
differentials between coastal areas and inland, poorer areas,
you know, even on the order of a few hours' drive. I think it
is only a matter of time until sourcing increasingly pushes
inland simply because the transport networks are improving.
Ms. Rosenbaum. Just to make you laugh, the only
discriminatory issue that came up had to do with food that was
appropriate to where the workers came from. In one factory,
this was a very big issue, whether it would be spicy or not
spicy. The factory solved it by having two types of food
available.
But aside from the pregnancy issue which is there, or has
been there at different times, not so much in this project
because it is addressed directly in the project, well, that
really is the only issue that has shown up. We have not seen
anything in terms of ethnic minorities at all.
Ms. Gearhart. And how far out were you?
Ms. Rosenbaum. Not very far at all. Again, the same answer
as Dan. The brands are facilitating access for these programs
at the moment. But there has been some interest in other areas.
We cover more than apparel and footwear, so to the extent
that the agriculture production sector starts to look at
standards, SA8000 would be a tool that could be used, but it
has not really happened yet. We are talking to some brands that
are looking at the whole supply chain down to the cotton
production, so that may be on the horizon.
Ms. Kaup. May I ask a couple more questions?
Mr. Dorman. Yes.
Ms. Kaup. It is not really a follow-up question. Dan, you
mentioned domestic Chinese NGOs and their involvement with CSR.
Could you please discuss the challenges that Chinese NGOs face
compared to those faced by international NGOs?
Mr. Viederman. Sure. Domestic Chinese NGOs face a very
uncertain--what is the right phrase--legal environment in which
they can exist. International NGOs, for that matter, do as
well, but it is obviously of less risk to international NGOs
than it is for Chinese NGOs. Certainly those NGOs that are
working on labor issues particularly can run into conflict with
institutions that want to promote economic growth, or
entrenched economic interests within particular factory groups.
My experience has been that NGOs in China are still
generally in the personality phase of organizational
development, so there is not sort of a strong, institutional
understanding or societal understanding of what role an NGO
plays and how it differs from other institutions. Therefore, it
is rare to find people who can effectively manage the difficult
institutional environment that NGOs face in China. That
difficult environment limits the number of people who can
effectively work within NGOs, and a limitation on increasing
their professionalism. Not to say that there are not some
striking examples, because there are, but it is not certainly a
widespread phenomenon at this point. It is really in some ways
a systemic challenge for the organizations themselves.
Mr. Dorman. I should have mentioned that Dr. Kaup is our
Special Advisor on Ethnic and Minority Affairs, but you might
have guessed that by her questions.
Mr. Viederman. I figured that out. [Laughter.]
Ms. Kaup. That is helpful. Thank you.
Mr. Dorman. Next, I would like to introduce Adam Bobrow,
who is a Senior Counsel for Commercial Rule of Law on the
Commission staff.
Mr. Bobrow. Thank you to all the members of the panel for
being here. I have two things which are totally unrelated, but
one picks up on what Chris Mitchell asked. Are there any
efforts, are there any thoughts, about working with what the
companies would call the demand side? It seems as though the
brands have an interest and they attempt to market some
advantage that they have because, let us say, outside of the
China context, the advantages that are created by having a
product that is produced in a responsible manner. But actually,
if it were inside China, it seems to me that you would need to
develop a consumer desire for products produced that create a
sustainable wage or that are done in a way that does not impact
workers in a strongly negative way. So is there any move toward
consumer education or public education on the issues of
sustainable wage?
Ms. Rosenbaum. In the United States or in China?
Mr. Bobrow. In China. I mean, is there any support for
that?
Ms. Rosenbaum. We have been contacted by a few folks who
are connected to organizations--that is all I can say about
them--where the whole idea of doing some kind of sustainable
living wage study--in fact, in two instances, we have even
trained people on how to do it. But it has really been deemed
too dangerous to do right now. So in terms of the wage issue,
it is a very difficult landscape, but that is not just in
China, that is true in a variety of places.
I think the first question would be getting people to be
paid the legal wages to which they are entitled, both for
regular time and for overtime. So then what a sustainable
living wage would be, would be some place above that. I do not
know. I have not heard of anything except from NGOs or people
who are teaching in the university who are teaching about some
of these things, but not the same kind of consumer demand or
questions that are being raised throughout the United States. I
have not heard anything like that. I do not know.
Mr. Viederman. I would say it is only a matter of time.
There is certainly no institutional structure yet that seems to
be pushing those sorts of issues in a formal way. But just as
there is sort of a noticeable, if small, demand for so-called
``green food,'' or organically certified food, according to
Chinese organic standards as well as other environmentally
sensitive products, and there are brands that have developed in
China around that marketing angle, much as there are brands
elsewhere. It is probably only a matter of time until someone
tries to exploit that market purely from a commercial side. But
I am not aware of it happening yet, in the sense that someone
is marketing a domestically branded sweatshop-free garment.
Ms. Rosenbaum. I think the question is how dangerous would
it be for somebody to try to do that. The word that came back
to us in terms of the wage issue, was that it would be
dangerous to try begin that kind of a public conversation. That
was just a couple of months ago.
Ms. Gearhart. Last year there were some legal shifts that
make it easier for retailers to open up shop in China, so you
will see more Wal-Marts and more Carrefours, and more of these
international branded retailers in China. The retailers
interact with the consumer market very differently than the
international brands, which are mostly going there to export.
Also, the auto industry, I think, is another place to look.
The industries that are really looking at the Chinese
consumer market are the industries that need to be brought into
the efforts to promote CSR. I mean, this whole CSR debate, if
you go to the BSR conference that we are all here for, you do
not just see apparel and footwear. It is a broader discussion.
So how do you bring those groups together to then talk within
China? Hopefully, the Global Compact conference in December
will spark some of that.
Mr. Dorman. I would like to turn the questioning over to
Pat Dyson, who is Senior Counsel for Labor Affairs on the
Commission staff.
Pat.
Ms. Dyson. First, I want to thank you very much. I called
most of you to ask you to come, and thanks for coming. It is
very enlightening for all of us.
I wanted to ask Dan and Ruth: how much do you think workers
know about their own rights before you come to train them and
give them some idea? Do they know that they should have
overtime pay? Do they know what overtime is? Do they know what
the minimum wage is that they should be getting when you go
into a community?
Mr. Viederman. In a word, no. Not much.
Ms. Rosenbaum. Yes, I agree. No, not much.
Mr. Viederman. And, in fact, one of the findings that we
frequently see in our factory audits is that information is not
shared with workers, as most brand codes require it to be. So
there is little transparency internally in the workplace, not
to mention the complication of figuring out whether someone is
working on a piece rate or whether the overtime is paid on the
piece rate. I cannot even figure it out and I have looked at
lots of these documents. It is very complex.
Ms. Dyson. So I assume there is no poster like we have in
our workplace here saying what the minimum wage is.
Ms. Rosenbaum. Now there is, with this project. In some of
the factories I have been in, I also have seen the posters. But
in terms of how to figure it out, one of the things that a
number of the factories that are part of this project have done
is to set up computer systems to which the workers have access.
They can put in their name, they can put in the number of hours
that they have worked for that pay period, and it says right in
there how much of it is regular time, how much of it is
overtime, how close they are to meeting their piece rate that
they have to meet. The workers can stand there. Obviously,
somebody is translating for me. I mean, Dan speaks Chinese, I
do not. They can just go through and just tell you how the
whole thing works. So, the education that has been done is
really to help the workers understand all of this.
One of the systems that we have really insisted on be set
up in the factories, when a worker has a question about his or
her paycheck, who do they go to? We teach them how to ask the
appropriate questions; not, there is a problem with my
paycheck, but I see this, I see this, or whatever kind of
thing. So, to help them to be able to verbalize that is
something we have worked very hard on doing.
Ms. Gearhart. Through the worker training project that we
have been doing, I think the workers have learned very quickly,
to the point where I think they have brought ideas to the
table. So, for example, one worker committee that actually
addressed wage levels and overtime rates.
One of the complicated things that we have heard before
from auditors or from compliance officers at different brands,
is that it is difficult to calculate overtime premiums because
of the piece rate; so how do you figure that out without
creating too much extra work for the payroll department? From
the reports we have gotten from the factories, the workers on
the worker committee had ways to look at that and figure out a
system. How they define it and how they look at it may not be
in the same language we would use, but I think they are very
aware.
Also, of course, education levels have varied depending on
the factories we are in. We find workforces that have very
different average education levels. But that does not seem to
necessarily determine how quickly they are able to uptake and
understand the issues. It just may determine how quickly and
strongly they want to move forward on addressing the issues.
Ms. Rosenbaum. One of the things you have done, too--I have
done this in the past with the factory managers--is to say to
them, ``How do you figure out the piece rate in terms of
overtime? I want to see exactly how you do it. What are the
formulas you use? '' If the answer is, like, ``Well, you know,
we really do not have a formula,'' we ask, ''Well, how do you
do it then? Is it a spinning wheel and you throw a dart? I
mean, what is it that you use? '' The more you pin them down
and the more you ask them exactly how do they do it, then that
is something that can be transferred to the workers. So it is
difficult. The whole relationship of piece rate and overtime is
difficult, but they have to have a formula to do it. Then there
is the question of, does the formula comply with the Labor Law,
but first you have to know exactly what method they are using
and to really push them until you get it.
Ms. Gearhart. One thing I wanted to add. One of the impacts
we have seen from the worker committee process and worker/
manager dialogue, is that some of the workers reported that
they now see themselves differently. I am certainly not a
Chinese linguist, but the language change for them is
apparently significant; going from considering themselves
migrant workers to workers is a status jump up within their
context and thus has been important for them. They have
reported feeling that now that they have gotten this dialogue
and this participation, that they now feel like workers, which
is a positive point and necessary to helping them to claim
their rights.
Ms. Rosenbaum. Another thing we have done with managers, is
to say, ``Do you look at your workers as a cost or do you look
at them as an asset? Because without your workers you cannot
produce.'' Just raising the question has been startling in some
of the factories. They said, ``We only look at them as a cost,
almost like a piece of machinery.'' If you look at them as an
asset that enables you to grow your business and to operate in
a responsible, on-time way, then you are going to look at your
workers in a totally different manner. So, just those kinds of
wording things, just the way we asked the questions, has really
made a big difference.
Mr. Dorman. Well, we have just six minutes left. Like
always, our time seems to disappear. So I am going to ask a
couple of quick wrap-up questions and then give the last
question to Pat Dyson to finish up the roundtable.
Dan, you talked earlier about Chinese labor NGOs. You also
mentioned a Chinese CSR NGO. Is there a CSR NGO in China?
Mr. Viederman. I will speculate on that.
Mr. Dorman. I do not mean to put you on the spot.
Mr. Viederman. No. I was speculating that it is potentially
a productive way to describe an NGO that might yet develop. A
labor NGO that is also working on CSR issues, especially to the
extent that they are engaged with international brands, might
effectively define itself as a CSR organization.
It may be semantic, but productively semantic, to change
the terminology and talk about them as corporate social
responsibility NGOs, because clearly corporate social
responsibility is something that is well-accepted within a
particular swath of Chinese society. But I did not have a
specific organization in mind.
Mr. Dorman. I did not mean to put you on the spot.
Mr. Viederman. No, no. I think is an area for exploitation
by Chinese NGOs.
Mr. Dorman. Dr. Rosenbaum, during your testimony you
mentioned that you do not see a child labor problem in the
export sector.
Ms. Rosenbaum. Did I say that?
Mr. Viederman. I think I may have said that.
Ms. Rosenbaum. Yes.
Mr. Dorman. This is an issue that our Commissioners have
focused on. But you did bring up that you do see juvenile labor
in the export sector. Are there Chinese laws and regulations
that provide additional protection for juvenile workers?
Mr. Viederman. Without reference to a document, I think
that there is. The Chinese Labor Law does require that juvenile
workers have special protections, including that they have to
have regular medical examinations and that they are not allowed
to work overtime. Juvenile workers have a more strict limit on
the number of hours that they can work, for example. So, there
is a difference. I would be happy to find out more information.
Ms. Rosenbaum. I thought, also, that they are not allowed
to work at night, to do night shifts.
Mr. Viederman. Right.
Mr. Dorman. So that is something to look at.
Mr. Viederman. There is a distinction.
Mr. Dorman. One final question. I think this came up in
conversation a couple of times in the last hour and a half, and
some additional comments would be useful. Can you tell us more
about the programs that train factory managers on labor
relations, and the formation of independent committees. Three
factories were mentioned, out of a much larger number that do
not participate. What, or who, initiated the programs at these
factories? What accounts for the programs? Enlightened factory
management? Brands helping local government? What distinguishes
the factories that choose to take this road? Can you provide us
additional insights?
Ms. Rosenbaum. In terms of the project that we worked on,
each of these 10 factories was invited to participate.
Mr. Dorman. So you initiated it.
Ms. Rosenbaum. That is right. Now, whether this will then
spread in terms of, let us say, other factories being
interested in doing something like this, at this point we do
not know. We still have a number of months to go in the
project. But I think there has to be a business case for CSR. I
mean, we can make the labor case and we can make the
environmental case and the occupational health and safety case
for it, but I think that there has to be a business case for
CSR also, that factories that are good at these things, that
are willing to make the investment of time, energy, and effort,
are somehow going to see that this affects their business in a
positive way. If we are able to do that, I would suspect that
we will see factories that are going to do it.
At the same time, and I would say this comes from
background in other countries more than in China, I think there
are some factories whose management are never going to get it.
I just think that is the nature of the beast, that there are
some people who are slow learners on some of these topics. So I
do not think there is going to be like a magic tipping point
and all of a sudden everybody is going to get it.
Just the fact that we are hearing factories say, ``We want
to be a COC company, we want to be known that way, we want to
be in compliance so that when you come in you do not find us
with a set of problems that you have to tell us how to fix, but
that we have already addressed these things.'' This, for me, is
progress. I do not know if that really addresses it.
Ms. Gearhart. We have seen factories be more interested and
more willing based on long-term relationship and trust with a
given brand.
Ms. Rosenbaum. Yes.
Ms. Gearhart. However, I would say that that needs to be
combined with individual factory managers, and preferably the
owners, having the will. In some factories you will find those
individual managers who have enough autonomy, enough trust from
the factory owner to move forward, and they are thinking
innovatively. It does still come down to individuals at that
level.
Mr. Dorman. Last question to Pat Dyson.
Ms. Dyson. Thank you. Dan, I think that you looked into the
wage issue in a number of factories. There is some thought that
if wages improve in China, and living conditions and benefits,
that companies will then flee to other parts of Asia that are
cheaper. So, in other words, improvement is not going to help
the Chinese workers in the end. Do you think that is a fair
point? I see you smiling. Do you have an opinion on that?
Ms. Rosenbaum. That is the excuse.
Mr. Viederman. I guess there are a couple of ways to look
at that question, one of which is that the brands that are
currently sourcing in China and the factories that are
currently operating there with Chinese management do face a
legal and an ethical obligation, be it articulated in the code
of conduct or otherwise, to operate in accordance with that
code or with local law. So whether or not there is an argument
to be made that, economically, good labor practices would force
Chinese workplaces to close and people would go source in Burma
or Bangladesh, in a sense avoids the question of what do you do
while you are still there.
So I do not find it a particularly productive question to
ask at this point. There is so much that can be done in the
short-term, and needs to be done, just to bring labor standards
up to where they ought to be based on existing commitments.
Beyond that--I cannot speak for brands--it certainly seems to
me that they are sourcing, and have decided where to source,
for a variety of different reasons, not simply on the basis of
the strictest identification of the lowest wage country. So, I
would be surprised if you would see a mass exodus from China if
working conditions were improved.
Ms. Rosenbaum. Pat, I get asked that all the time. It does
not matter whether we are talking about China, whether you are
talking about Central America, or Africa. It does not make any
difference.
There is this other piece that says--and I say this to
brands all the time--if you want to expand your markets, more
people have to be able to afford your products. So at some
point, those two points have to coincide. We will run out of
places on the face of earth to run for cheap labor, and at some
point we will have to deal with all of this. But we hear that
in country after country when you raise the wage issue.
But there is an ethical and a moral thing that is involved
here, and it is what should any worker who works for a 40-hour
or a 48-hour work week be able to do as a result of that work?
I would say the same thing to people who are employing people
here in the United States. What do workers have the right to
expect in return for the labor that they give, good, honest
work? There should be a decent standard of living and the
ability to care for yourself and for your family. That should
go without saying. You can call it a family value. I am sorry,
I am being fresh. I apologize. No, I do not. [Laughter.] I
think I did that the last time I was before the Commission
also.
Ms. Dyson. We will still ask you back.
Ms. Rosenbaum. Sure.
Mr. Dorman. Well, as you all know, the Commission mandate
calls on us to look at rule of law and human rights development
in China. This is a broad mandate, and our Commissioners are
attuned to the entire range of issues in this mandate. But
there is a smaller set of issues that generate a particular
level of interest by our Commissioners, and this is one of
them. Especially because of this, I would like to thank each of
you for sharing your wisdom, your insights, and your knowledge
on this issue. I found this to be a very interesting and useful
conversation, so I hope you will come back and join us in the
future.
Ms. Rosenbaum. Thank you for having us.
Mr. Viederman. Thank you.
Ms. Gearhart. Thank you.
Mr. Dorman. With that, we will call the roundtable to a
conclusion. Thank you.
[Whereupon, at 4:05 p.m. the hearing was concluded.]