[Senate Hearing 110-1062]
[From the U.S. Government Publishing Office]



                                                       S. Hrg. 110-1062
 
                OVERSEAS SWEATSHOP ABUSES, THEIR IMPACT
                   ON U.S. WORKERS, AND THE NEED FOR 
                       ANTI-SWEATSHOP LEGISLATION

=======================================================================


                                HEARING

                               before the

        SUBCOMMITTEE ON INTERSTATE COMMERCE, TRADE, AND TOURISM

                                 OF THE

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                           FEBRUARY 14, 2007

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation





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       0SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                   DANIEL K. INOUYE, Hawaii, Chairman
JOHN D. ROCKEFELLER IV, West         TED STEVENS, Alaska, Vice Chairman
    Virginia                         JOHN McCAIN, Arizona
JOHN F. KERRY, Massachusetts         TRENT LOTT, Mississippi
BYRON L. DORGAN, North Dakota        KAY BAILEY HUTCHISON, Texas
BARBARA BOXER, California            OLYMPIA J. SNOWE, Maine
BILL NELSON, Florida                 GORDON H. SMITH, Oregon
MARIA CANTWELL, Washington           JOHN ENSIGN, Nevada
FRANK R. LAUTENBERG, New Jersey      JOHN E. SUNUNU, New Hampshire
MARK PRYOR, Arkansas                 JIM DeMINT, South Carolina
THOMAS R. CARPER, Delaware           DAVID VITTER, Louisiana
CLAIRE McCASKILL, Missouri           JOHN THUNE, South Dakota
AMY KLOBUCHAR, Minnesota
   Margaret L. Cummisky, Democratic Staff Director and Chief Counsel
Lila Harper Helms, Democratic Deputy Staff Director and Policy Director
              Margaret Spring, Democratic General Counsel
             Lisa J. Sutherland, Republican Staff Director
          Christine D. Kurth, Republican Deputy Staff Director
             Kenneth R. Nahigian, Republican Chief Counsel
                                 ------                                

        SUBCOMMITTEE ON INTERSTATE COMMERCE, TRADE, AND TOURISM

BYRON L. DORGAN, North Dakota,       JIM DeMINT, South Carolina, 
    Chairman                             Ranking
JOHN D. ROCKEFELLER IV, West         JOHN McCAIN, Arizona
    Virginia                         OLYMPIA J. SNOWE, Maine
JOHN F. KERRY, Massachusetts         GORDON H. SMITH, Oregon
BARBARA BOXER, California            JOHN ENSIGN, Nevada
MARIA CANTWELL, Washington           JOHN E. SUNUNU, New Hampshire
MARK PRYOR, Arkansas
CLAIRE McCASKILL, Missouri


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on February 14, 2007................................     1
Statement of Senator DeMint......................................     4
Statement of Senator Dorgan......................................     1
    Prepared statement of William Jones, Chairman, Cummins-
      Allison Corp.; Member, Board of Directors, U.S. Business 
      and Industry Council.......................................    22

                               Witnesses

English, James D., International Secretary-Treasurer, United 
  Steelworkers...................................................    32
    Prepared statement...........................................    33
Fuentes, Beatriz, President, Sintrasplendor Union, Splendor 
  Flowers........................................................     5
    Prepared statement...........................................     6
Griswold, Daniel T., Director, Center for Trade Policy Studies, 
  The Cato Institute.............................................    38
    Prepared statement...........................................    40
Jesseph, Steven A., President/CEO, Worldwide Responsible Apparel 
  Production (WRAP)..............................................    11
    Prepared statement...........................................    13
Kernaghan, Charles, Executive Director, National Labor Committee.    25
    Prepared statement...........................................    29
Nazma, Sheikh, Founder/Former President, Bangladesh Center for 
  Worker Solidarity..............................................     8
    Prepared statement...........................................     9
Socolow, Hon. David J., Commissioner, New Jersey Department of 
  Labor and Workforce Development................................    35
    Prepared statement...........................................    37

                                Appendix

Athreya, Bama and Ferm, Nora, International Labor Rights Fund 
  (ILRF), joint prepared statement...............................    56
Snowe, Hon. Olympia J., U.S. Senator from Maine, prepared 
  statement......................................................    55


                    OVERSEAS SWEATSHOP ABUSES, THEIR



  IMPACT ON U.S. WORKERS, AND THE NEED FOR ANTI-SWEATSHOP LEGISLATION

                              ----------                              


                      WEDNESDAY, FEBRUARY 14, 2007

                               U.S. Senate,
   Subcommittee on Interstate Commerce, Trade, and 
                                           Tourism,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:05 a.m. in 
room SR-253, Russell Senate Office Building, Hon. Byron L. 
Dorgan, Chairman of the Subcommittee, presiding.

          OPENING STATEMENT OF HON. BYRON L. DORGAN, 
                 U.S. SENATOR FROM NORTH DAKOTA

    Senator Dorgan. I am calling the hearing to order this 
morning.
    This is a hearing of the Subcommittee of the Commerce 
Committee, and I am Chairman of the Interstate Commerce, Trade, 
and Tourism Subcommittee. Senator DeMint, who is the Ranking 
Member, will be with us shortly. And when he does arrive, I 
will recognize him for an opening statement.
    We have a hearing today on the issue of overseas sweatshop 
abuses, their impact on U.S. workers, and the need for anti-
sweatshop legislation. I have introduced such legislation here 
in the U.S. Senate, and today we will examine this issue in 
some detail.
    The global economy is producing a lot of interesting 
results, some quite wonderful and some very beneficial to our 
country and others around the world, and some that are not so 
wonderful, some that cause very significant problems in our 
country. And yesterday's announcement of a trade deficit, for 
the last year, of $832 billion is a demonstration of the fact 
that our trade policy is far out of balance and needs to be 
changed.
    When manufacturing plants in foreign countries are able to 
grossly mistreat workers with impunity, our own workers will 
suffer, as well. We see a movement going on, in the global 
economy, of American jobs moving overseas, and some think 
that's fine. I don't. It is an opportunity for those that 
produce products to circle the globe and find the lowest cost 
of production, and, with that lowest cost of production, to 
employ foreign workers--in some cases, in countries where you 
can pay pennies an hour; in some cases, in countries where if 
someone dares talk about organizing workers, they can be sent 
to prison; in some cases, in countries where workers have no 
rights at all.
    I think while there are differences of opinion about these 
trade issues, I believe there should be general uniform opinion 
on a couple of things. We've already reached a uniform judgment 
on the question of whether products that are produced in 
foreign prisons--that is, products of prison labor--should be 
imported into this country and represented as products that are 
engaged in fair competition with our producers. The answer for 
our country has been to say no, the product of prison labor is 
not acceptable. And so, we do not allow the import of the 
product of prison labor.
    What about the product of labor that is produced--or of 
goods that are produced in sweatshop labor conditions, in 
plants in which gross violations of the existing laws in the 
existing countries--gross violations of workers' rights, are 
routine? Should the product that comes from foreign sweatshops 
be allowed into this country? If not, what do we do to try to 
prevent the import of goods produced in sweatshop conditions?
    I've introduced a piece of legislation to deal with these 
problems, S. 367, the Decent Working Conditions and Fair 
Competition Act. The bill would do two things. First, the bill 
says it is illegal to bring the product of sweatshop factories 
to this country. In this bill, a ``sweatshop factory,'' is one 
where workers are abused, in violation of their own country's 
labor laws. Second, the bill would allow U.S. retailers the 
right to sue their competitors for damages in U.S. courts if 
their competitors are sourcing their merchandise from sweatshop 
factories.
    This is a bipartisan bill. I'm grateful that Senator 
Lindsey Graham, the Senator from South Carolina, has agreed to 
be the lead Republican cosponsor.
    And the reason I decided to introduce the bill was the 
revelation that there are serious sweatshop abuses in a number 
of areas of the country; most recently, discussions about 
sweatshop abuses in the country of Jordan. Some witnesses 
invited to testify today will speak about this issue.
    When our trade negotiators negotiated the Jordan Free Trade 
Agreement, in October of 2000, I gave the Clinton 
Administration credit for giving some thought to putting labor 
provisions in that trade agreement. It is the only trade 
agreement in which labor provisions have been included. But 
those labor provisions have not been enforced, and the result 
is the proliferation of sweatshops in a portion of Jordan. 
Examples of workers promised $120 in a month, and hardly paid 
at all; one worker, paid $50 for 5 full months of work; a 40-
hour shift in one plant--not a 40-hour week, a 40-hour shift.
    In November of 2006, BusinessWeek had a cover story on 
sweatshop abuses, titled ``Secrets, Lies, and Sweatshops.'' The 
article begins with a description of a Chinese company, called 
Ningbo Beifa Group. This Chinese company has made a great deal 
of money as a top supplier of pens, mechanical pencils, and 
highlighters to Wal-Mart stores and other major retailers.
    In 2005, according to the BusinessWeek stories, Wal-Mart 
inspected the company's factories. It found that the company in 
China was paying its 3,000 workers less than China's minimum 
wage, and violating overtime rules. So, they asked the company 
to fix the problems. On three successive inspections, it was 
clear the Chinese company had failed to do so. Three times, 
Wal-Mart told the company it would get another chance. When 
Wal-Mart issued a fourth warning, the Chinese turned to another 
Chinese company, called the Shanghai Corporate Responsibility 
Management & Consulting Company. For a $5,000 fee, the company 
promised to send a consultant to take care of the Wal-Mart 
problem. That consultant provided advice on how to create fake, 
but authentic-looking, payroll records, and the consultant also 
told the company that, on the day of the fourth Wal-Mart audit, 
they should give the day off to any workers with grievances so 
that they would not tell any inconvenient stories. Following 
the consultant's advice, the Chinese factory passed the Wal-
Mart audit, even though the China company later admitted it 
didn't change--hadn't changed any of its practices.
    I don't believe, in this case, Wal-Mart deliberately turned 
a blind eye to these practices. There are certainly documented 
cases of other companies that sell sweatshop products in the 
United States. But I do think that companies that decide to 
import products into this country should not be allowed to gain 
an unfair advantage by deliberately sourcing from sweatshop 
factories that abuse workers abroad.
    The bill I've introduced with Senator Graham would address 
such abuses by banning the importation or sale of products made 
in factories under, quote, ``sweatshop,'' unquote, conditions.
    This bill has also been sent to the Finance Committee. I've 
written to Chairman Baucus, asking for a hearing in that 
committee. It's appropriate for this committee to also hold a 
hearing to examine the issue of sweatshops. The import 
restrictions on sweatshop goods under this bill would be 
administered by the Federal Trade Commission, which falls 
within the jurisdiction of this subcommittee.
    Today, we're going to hear from a broad range of witnesses 
about the issue of overseas sweatshops, and I thank them for 
coming. Betty Fuentes is a Colombian worker in a flower 
plantation, and, 3 years ago, founded one of the first unions 
of flower workers in that country. Sheikh Nazma began working 
in a Bangladeshi sweatshop when she was 10 years old, and 
eventually organized her co-workers and formed the Bangladesh 
Center for Worker Solidarity. Charles Kernaghan is the 
executive director of the National Labor Committee, which has 
spearheaded a number of investigations into sweatshop abuses 
around the world. Jim English is secretary treasurer of the 
United Steel Workers, which has been actively involved in the 
fight against sweatshop abuses overseas. William Jones is 
chairman of the U.S. Business and Industry Council but it is my 
understanding that Mr. Jones, because of travel problems in 
Chicago, is not able to be with us today. David Socolow, a New 
Jersey commissioner of labor, is part of a multistate effort to 
fight sweatshop abuses through rules on State government 
procurement. Steven Jesseph is the vice chairman of Worldwide 
Responsible Apparel Production, a group founded by the American 
Apparel and Footwear Association. And Dan Griswold, director of 
the Center for Trade Policy Studies at the Cato Institute, a 
think tank based in Washington, D.C.
    I want to thank all of the witnesses who have come today, 
and let me call next, for an opening statement, on my colleague 
Senator DeMint.
    Senator DeMint?

                 STATEMENT OF HON. JIM DeMINT, 
                U.S. SENATOR FROM SOUTH CAROLINA

    Senator DeMint. Thank you, Mr. Chairman. I appreciate you 
pulling together this hearing. It is important that we have a 
comprehensive review of labor conditions that our companies are 
doing business with and that our consumers are buying products 
from.
    I think we all know that trade, on the whole, has done much 
around the world to raise the standard of living of many 
people. We've also seen that good trade agreements with other 
countries not only help to guarantee human rights, but also set 
labor standards, which these trade agreements call on for 
enforcement.
    We're very aware that we still have problems around the 
world. Hearings like this can continue to shine the light on 
those problems, and, hopefully, we can begin to solve them, 
working with our corporate citizens as well as other countries.
    We know the media has helped to bring these problems to 
light. Most of our companies in this country have demonstrated 
a lot of corporate responsibility in how they've dealt with 
this. Again, most are good. But we have some examples, as we'll 
hear today, where not all is perfect.
    One of the best things, I think, that is going on is the 
monitoring and certification of plants around the world so that 
American customers of these products will know who they're 
doing business with, and we can continue to put pressure on 
companies abroad.
    As we do that, it's important that we don't cause more harm 
than good. While there are sweatshops which we need to look at, 
Mr. Chairman, certainly many jobs have been provided around the 
world by American companies buying products from all over the 
world, and we want to make sure that, as we attempt to stamp 
out the bad actors, that we don't eliminate jobs for many low-
income workers around the world by creating undue liability and 
risk for companies who make products made abroad. A 
comprehensive evaluation is important.
    And, Mr. Chairman, if it would be acceptable to you, as 
part of the first panel, I understand that Steven Jesseph has 
some scheduling difficulties, and I may not be able to stay 
through the entire second panel, and it would probably provide 
good balance, on the first panel, if we could hear from the 
problems, but also how monitoring and certification is working. 
And unless you object, sir, could Mr. Jesseph possibly be the 
third witness on the first panel this morning?
    Senator Dorgan. That would be perfectly acceptable if Mr. 
Jesseph would be willing to come forward. I understand you have 
some scheduling issues, and I expect there are a lot of people 
in Washington, D.C., trying to figure out their schedules these 
days.
    Senator DeMint. Yes.
    Senator Dorgan. But let us have you on the first panel, and 
we will have you provide your testimony following the first two 
witnesses.
    Senator DeMint. Thank you, Mr. Chairman.
    Senator Dorgan. Of course.
    Senator DeMint. And I'll yield back.
    Senator Dorgan. Let me introduce the first panel.
    First, we have Betty Fuentes, a Colombian worker in a 
flower plantation. Three years ago, she founded one of the 
first unions of flower workers in that country. Her visit has 
been sponsored by the International Labor Rights Fund. Since 
Ms. Fuentes speaks very little English, Nora Ferm, of the 
International Labor Rights Fund, will serve as an interpreter. 
Nora speaks fluent Spanish and has worked in both Colombia and 
Ecuador.
    Next, we will have Sheikh Nazma--I hope I have pronounced 
that correctly. She began working in textile sweatshops in 
Bangladesh when she was 10 years old, organized her co-workers, 
and formed a Bangladesh Center for Worker Solidarity.
    I want to thank both of the witnesses for coming.
    Nazma speaks very limited English, and we have an 
interpreter with her. And I'll ask the interpreter to identify 
herself when we have Ms. Nazma testify.
    Let us hear now from Ms. Fuentes.

STATEMENT OF BEATRIZ FUENTES, PRESIDENT, SINTRASPLENDOR UNION, 
                        SPLENDOR FLOWERS

    Ms. Fuentes. My name is Beatriz Fuentes. I've been working 
in the flower industry in Colombia for 10 years, and I have two 
children. Today, on Valentine's Day, I'm here to talk about my 
experience in the flower sector.
    First, workers face a lot of harassment and retaliation 
when we try to form a union, to exercise our right to freedom 
of association, and to improve our working conditions. At the 
Splendor Flowers Plantation, which is owned by the 
multinational company, Dole, my co-workers and I formed a union 
in November 2004. The company used many tactics to try to 
weaken our union and avoid negotiating a collective bargaining 
agreement. The management called up a company union and signed 
a collective bargaining agreement with them. Any worker that 
joined this company union received approximately $20 as an 
incentive. In addition, management lent a company-owned bus to 
transport workers to the assembly of this management-sponsored 
union during working hours. Management representatives 
pressured workers not to join the independent union.
    The Colombian Government gave our independent union legal 
recognition in 2005. However, despite this recognition, Dole 
decided to close the Splendor plantation instead of negotiating 
with the facility that now had the strongest independent union 
among Dole-owned plantations. There is no proof that Splendor 
was a losing enterprise. We fear that Dole will soon declare 
the closure of its only other plantation with an independent 
union, La Fragancia.
    The second thing that worries us is the lack of protection 
against occupational health risks. This leads to health 
issues--allergies, respiratory complications, and eye problems. 
One reason I decided to organize a union was that I saw how 
they were simply firing my sick co-workers. If you are sick, 
you are simply out of a job.
    Another issue in the flower industry is the requirement 
that female job applicants submit to questioning regarding 
whether or not they are, or plan to become in the near future, 
pregnant. As well, they're required to undergo a medical 
examination by a company doctor to prove they are not pregnant. 
Unfortunately, this is common industry practice.
    Aggravating the situation for workers is the inordinately 
long time it takes for the Ministry of Labor to resolve worker-
rights cases. For example, in early 2005, my union filed 
several complaints before a labor judge regarding occupational 
health problems and violations of the right to organize. As I 
sit here, not one of these cases has been resolved. In 
contrast, there's another decision to be rendered rather 
quickly next week. It is one where Splendor Flowers, just 6 
weeks ago, asked the Ministry of Labor to approve the mass 
firing of all workers at that plantation. Next week, you 
Senators will still have your jobs, but my workers may not have 
theirs.
    In sum, workers in the Colombian flower industry are faced 
with low wages, long working hours, and poor and illegal 
company practices. All of this adds up to social instability 
and the disintegration of families in the flower-growing 
region.
    Thank you for allowing me to share this testimony, and I 
hope you take it into consideration in considering S. 367.
    [The prepared statement of Ms. Fuentes follows:]

Prepared Statement of Beatriz Fuentes, President, Sintrasplendor Union, 
                            Splendor Flowers
Introduction
    I am the President of the Sintrasplendor union, which was founded 
in November 2004 at the Splendor Flowers plantation in Colombia, a farm 
belonging the multinational Dole. I have more than 10 years of 
experience working in the Colombian cut flower industry. For 
Valentine's Day, the day when more Americans buy cut flowers from 
Colombia than any other day of the year, I have traveled to the U.S. to 
share my testimony about the poor working conditions that exist in many 
Colombian flower plantations, and which I have experienced firsthand 
over the past decade.
    My co-workers and I have witnessed the limitations of Colombian 
labor law enforcement, and voluntary initiatives in addressing these 
serious labor rights violations. New, enforceable strategies are needed 
to effectively guarantee workers' rights in this industry.
Occupational Health and Safety
    Flower workers are inadequately protected against occupational 
hazards. In the greenhouses, we are exposed on a daily basis to highly 
toxic chemicals, without sufficient protection. We are also exposed to 
extreme temperatures, and we work long hours doing repetitive tasks. 
These conditions cause serious health problems including allergies, 
respiratory problems, eye problems, spinal problems, and carpal tunnel 
syndrome.
    I have had a problem with carpal tunnel syndrome for the past 5 
years, due to the fact that I have had to spend 8-10 hours straight 
cutting stems with scissors. Most workers are assigned to one job for 
several months at a time, frequently causing repetitive motion 
injuries. Currently, we must trim 300-400 flowers per hour.
    On July 14, 2005, there was a tragic accident on one of the company 
buses on which we ride to work every day. On that day, as on most days, 
the bus was excessively overloaded. We had asked them to fix this 
problem but they hadn't done anything about it. Several workers were 
killed or injured. I was on this bus when the accident occurred.
Forced Pregnancy Testing
    It is also common for flower plantations to require female job 
applicants to take a pregnancy test to demonstrate that they are not 
pregnant, which is illegal. Or they ask if we are planning on having 
more children, and if we have had an operation. The management does not 
do this out of concern that the pregnant women are exposed to the same 
toxic pesticides as all of the other workers. They do it because they 
don't want to pay the maternity leave or the other benefits legally due 
to pregnant workers.
Union Busting
    Colombia is the most dangerous country in the world to be a trade 
union leader. Compared to other sectors, the cut flower industry 
fortunately has not experienced the same extreme level of trade union 
violence. Other forms of retaliation against unions remain all too 
common, however, and we hope that the violence will not escalate.
    My co-workers and I founded a new independent union at Splendor 
Flowers, called Sintrasplendor, in November 2004. We were motivated to 
form a union because of the worsening conditions at Splendor. The 
company began assigning more and more flowerbeds to each worker, making 
the workload intolerable. Over the past 10 years, the workload has 
doubled from 15-20 flowerbeds up to 30-40 flowerbeds per worker. This 
means more backbreaking labor for no more pay. Lately the company has 
been firing sick workers and old workers. They also announced that they 
would soon turn some jobs over to subcontractors, which means that 
those workers will lose the little job stability that they currently 
have. The company was writing up its own collective agreements and 
making the workers sign them, without even giving them a chance to 
voice their opinions. We hoped that a union would enable us to present 
a petition to the company, and therefore negotiate improved working 
conditions, guaranteed overtime pay, and salary increases.
    Sintrasplendor was the first independent union to be successfully 
established in a Dole-owned flower company in Colombia. When 
Sintrasplendor received its registration from the Ministry of Social 
Protection, the company presented a list of objections, asking the 
Ministry to revoke the registration. Splendor Flowers used various 
forms of persecution against the independent union, including assigning 
extra work on days when the Sintrasplendor had planned assemblies and 
other union-related activities.
    The company invited in another union and signed a collective 
bargaining agreement with them almost immediately. The agreement said 
that any worker who joined the company union, Sinaltraflor, would be 
rewarded with 40,000 pesos (approximately US$20). The company wanted 
the majority of workers to join Sinaltraflor, because they could then 
negotiate with Sinaltraflor instead of with Sintrasplendor. The company 
even lent one of its buses to take workers to a Sinaltraflor meeting, 
during working hours. Company representatives pressured workers not to 
join Sintrasplendor. When we distributed flyers in the plantation to 
explain to workers why we had formed an independent union, the company 
prohibited workers from reading them. According to Colombian law, it is 
legal to read this kind of flyer inside the workplace, during lunchtime 
or a break.
    The Colombian government recognized our union as a legal entity in 
2005. Nevertheless, the company still has not sat down to negotiate 
with us.
    On October 12, 2006 Dole announced that it would close the Corzo 
farm at Splendor Flowers. We believe that the motivation behind this 
closure is that the company did not want to provide basic rights and 
decent work conditions to its workers. Clearly, we can not trust our 
local laws to protect our labor rights--including our right to 
organize--but rather we need new and enforceable international legal 
tools to ensure these rights.
    Splendor-Corzo will officially close in mid 2007 after the company 
completes the necessary legal processes. Corzo is the larger of the two 
farms at Splendor Flowers. Dole justifies the closure of Splendor-Corzo 
by saying that it has ``historically produced products with limited/
seasonal demand and have high costs''. However, in 2001 Splendor 
Flowers was the second most successful flower company in Colombia, 
reaching 19 million dollars in sales. Dole has not provided evidence 
that Splendor is a losing enterprise. It appears that the plantation 
closure is a response to the growing support for Sintrasplendor. 
Splendor management has been offering workers compensation to get them 
to resign. This past weekend, they fired over 200 workers. Of more than 
2000 workers employed at this plantation in 2006, only 150 remain. We 
are worried that Dole will soon announce the closure of La Fragancia, 
the other plantation where an independent union has successfully been 
established.
Lack of Recourse to Labor Authorities
    Colombian workers who want to file complaints about labor rights 
violations are often discouraged because governmental institutions like 
the Ministry of Labor take so long to resolve these cases. For example, 
in early 2005, my union filed several complaints before a labor judge, 
regarding occupational health problems and violations of the right to 
organize. Almost 2 years have passed and none of these cases have been 
resolved. Meanwhile, a month and a half ago the company filed a request 
with the Ministry of Labor to approve the mass firing of all workers at 
Splendor Flowers, so they can close the farm. The decision is expected 
to be released next week. Apparently, justice comes faster for 
companies than for workers.
Conclusion
    Because of the low wages in this sector and the long working hours, 
I have very little time to spend with my two young children, and lack 
the money to give them a decent education. The realities of the flower 
industry have contributed to social instability and disintegration of 
many families in the flower-growing region of Colombia.
    We need effective legal mechanisms to ensure that these companies 
give us safe, healthy, and decent workplaces. Thank you for allowing me 
to share this testimony, and I hope you take it into account in the 
consideration of S. 367.

    Senator Dorgan. Ms. Fuentes, thank you very much for your 
testimony.
    Next, we'll hear from Ms. Nazma. And will the interpreter 
identify herself?
    Ms. Iqbal. My name is Sunita Iqbal. I'm a paralegal in New 
York, and I was asked to interpret for her. My parents speak 
Bengali, and I've been speaking it in the house since I was a 
child, so translating, in that sense.

              STATEMENT OF SHEIKH NAZMA, FOUNDER/

              FORMER PRESIDENT, BANGLADESH CENTER

                     FOR WORKER SOLIDARITY

    Ms. Nazma. My name is Sheikh Nazma. I'm from Bangladesh. I 
started working, when I was 12 years old, as a helper in a 
garment export factory, and we worked 10 to 14 hours a day, 7 
days a week.
    In 1993, I helped organize the first major struggle in a 
garment factory to win our rights and organize a union. I 
started--later on, I started the Bangladesh Center for Worker 
Solidarity, and--of which I was president. That is when serious 
threats began. Gang members, thugs, sent by management, 
constantly harassed and threatened me. On many occasions, I was 
assaulted and ruthlessly beaten.
    In March 2005, the threats became serious for me, and I had 
to come to the United States. In 2006, I applied for asylum. My 
colleagues at the Bangladesh Center for Worker Solidarity have 
been involved in a 9-month investigation of a large factory 
called Harvest Rich, which is located in the Narayarganj 
District of Bangladesh, where clothing is sewn for Wal-Mart, 
Hanes, JCPenney, Puma, and other European companies.
    When the research began, in June, we discovered scores of 
children, just 11, 12, and 13 years of age, working at the 
Harvest Rich factory; more than three- to four hundred 
adolescents, 14, 15, to 16 and 17 years old were also illegally 
employed at Harvest Rich. Halima was one of the 11-year-old 
workers. She was routinely forced to work 11 to 14 hours, from 
8 a.m. to 7 p.m., and most commonly until 10 p.m. She was at 
the factory 7 days a week, with an average of just 2 days off a 
month.
    It was not uncommon for Halima and the other children to be 
working at the factory 95 hours a week, but the situation got 
even worse. Before clothing shipments had to leave for the 
U.S., they were often mandatory 19- to 20-hour shifts, from 8 
a.m. to 3-to-4 a.m. The workers would sleep on the factory 
floor for the next few hours before getting up for their next 
shift in the morning. If they did anything wrong, they were 
beaten every day. They were also cursed at. And if they fell 
behind in their production goal, they were also beaten. For 
this, Halima and the other children were paid 6 cents an hour, 
53 cents a day, and $3.20 a week. We estimate that the workers 
were cheated for up to half of their wages legally due to them, 
and anyone daring to ask for their legal wages would be fired.
    Corporate monitoring did not work at the Harvest Rich 
factory. The monitors arrived, the children workers were hidden 
in the filthy bathrooms or put on the roof. The factory kept 
two sets of time records, using the falsified one to show to 
the monitors.
    Since the campaign has started on Harvest Rich, it has been 
largely successful in ending the hiring of children under 13 
years of age, though they're not getting their labor rights or 
violations--and they're being violated in the factory.
    The garment industry is doing very well in Bangladesh, and 
this would be good news if the garment workers were getting 
their legal rights and they were respected and they earned a 
wage that would allow them to live well. Bangladesh is sending 
1 billion garments to the U.S. last year, and it would be a 
good thing if the workers were being treated fairly and they 
were receiving their rights properly.
    The demands of the Harvest Rich workers are very modest. 
They're willing to work 10 to 12 hours a day, as long as the 
overtime is voluntary and paid correctly. They need 1 day off a 
week, as they are exhausted. And the beatings must end.
    Bangladeshi workers want to be able to work properly, but 
they also want their rights respected and the law followed.
    Thank you.
    [The prepared statement of Ms. Nazma follows:]

     Prepared Statement of Sheikh Nazma, Founder/Former President, 
                Bangladesh Center for Worker Solidarity
    My name is Sheikh Nazma and I am from Bangladesh.
    I started working when I was 12 years old, as a helper in a garment 
export factory called Bay Garments Ltd. At that time, in 1984 we worked 
10-14 hours a day and 7 days a week. For this we earned 240 Taka a 
month, which comes to 2\1/2\ U.S. cents an hour. I worked for 10 years 
in the garment factories, eventually becoming a skilled sewing 
operator. But in every factory I worked, the legal rights of the 
workers--80 percent of whom were young women--were repressed. Then, in 
1993, I helped to organize the first major struggle in a garment 
factory to win our rights and organize a union. The factory was called 
Comtret Apparels Ltd. It took 6 months of struggle, but eventually we 
won.
    That was how the Bangladesh Center for Worker Solidarity (BCWS) was 
formed, of which I was the president. The AFL-CIO Solidarity Center has 
helped us in our struggle.
    That is when the serious threats began. Gang members, thugs, sent 
by management constantly harassed and threatened us. On many occasions 
I was assaulted and ruthlessly beaten.
    For years, as we carried out the work of the Bangladesh Center for 
Worker Solidarity Center, accompanying and providing support for the 
garment workers in their struggle to win their legal rights, the 
threats continued.
    In March 2005 the threats against my life became very serious and I 
had to flee to the United States, where I was granted legal asylum on 
2006.
    In 1992, there were as many as 100,000 child workers toiling under 
unsafe conditions in Bangladesh's booming garment export factories. It 
was a huge problem, with children as young as 6, 7, 8 years old, forced 
to work 12 or more hours a day, often 7 days a week. Then, largely due 
to legislation proposed in the U.S. Senate, the exploitation of child 
workers was ended.
    But it is starting to come back again, and this is what I want to 
focus my testimony on.
    My colleagues at the Bangladesh Center for Workers Solidarity have 
been involved in a nine-month investigation of a large factory called 
Harvest Rich, which is located in the Narayarganj District of 
Bangladesh, where clothing is sewn for Wal-Mart, Hanes, J.C. Penney, 
Puma and other European companies.
    This is what we found. When the research began in June, we 
discovered scores of children just 11, 12 and 13 years of age working 
at the Harvest Rich factory. More than 300 to 400 adolescents--14, 15, 
15 and 17 years old--were also illegally employed at Harvest Rich. 
Under Bangladeshi law, factories are strictly prohibited from hiring 
anyone under 14 years of age, while adolescent workers between the ages 
of 14 and 17 can only be employed under special circumstances, and are 
allowed to work just 5 hours a day for a maximum of 30 hours per week. 
Also, adolescents may never work at night.
    Halima was one of the 11 year-old workers. Routinely, she was 
forced to work 11 to 14 hours a day, from 8 a.m. to 7, or more commonly 
10 p.m. She was at the factory 7 days a week, with an average of just 2 
days off a month. It was not uncommon for Halima and the other children 
to be at the factory 95 hours a week.
    But it got even worse. Before clothing shipments had to leave for 
the U.S., there were often mandatory 19 to 20-hour all-night shifts 
from 8 a.m. right through to 3 or 4 a.m. the following day, after which 
the workers would sleep on the factory floor for a few hours before 
beginning the next shift at 8 a.m. that same morning. Even the child 
workers could be forced to work such grueling all-night shifts three or 
four times a month. While paying a very rare unannounced visit to the 
Harvest Rich factory in November, U.S. company representatives found 
dozens of workers at 12:30 a.m. still sewing boys Faded Glory jeans for 
Wal-Mart, 16\1/2\ hours into what would have been a 19 to 20-hour shift 
had the executives not sent the exhausted workers home.
    Halima worked as a helper, just as I did when I started out when I 
was 12. A helper's job is to clean the finished garment by cutting off 
any loose threads that may remain. Halima was given a mandatory 
production goal of cleaning 150 garments an hour--she was working on 
Hanes underwear--one every 24 seconds. The pace was relentless.
    She was on her feet all day, standing at a high table. Sometimes, 
she said, she just fell down or fainted from exhaustion. The factory 
was hot and all the workers were sweating.
    If Halima or another young worker made a mistake, they were beaten. 
This happened every day, the workers said. They would be slapped very 
hard by their supervisor, who was always a man, and sometimes the 
children cried. They were also cursed at. If they fell behind in their 
production goal, they would also be beaten, or if they used the 
bathroom without permission. They were only allowed two visits a day, 
and the bathroom was filthy, without toilet paper, soap or towels.
    For this, Halima and the other children were paid six cents an 
hour, 53 cents a day and $3.20 a week. The wages are so low that Halima 
and many of the other workers actually brush their teeth with their 
fingers and ashes from the fire because they cannot afford a toothbrush 
or toothpaste.
    Even the skilled sewing operators at the Harvest Rich plant are 
being paid a wage of just 17 cents an hour, $1.35 a day and $8.09 a 
week. Such wages do not come close to providing even a minimally decent 
standard of living.
    Overtime was mandatory, but not one worker in the Harvest Rich 
factory was paid their correct overtime wages. We estimate that the 
workers were cheated of up to half the wages legally due them. Anyone 
who objected to working on Friday, which was supposed to be their 
weekly holiday, would have 3 days' wages docked as punishment.
    Anyone daring to ask for their legal wages would be fired.
    The corporate monitoring, even by some of the largest corporations 
in America, did not work at the Harvest Rich factory. When the monitors 
arrived for their usual announced visits, the child workers were hidden 
in the filthy bathrooms or put on the roof. The factory kept two sets 
of time records, using the falsified one to show the monitors. All the 
workers knew this. But anyone who spoke one word of truth to a 
corporate monitor would be fired the minute the monitor walked out the 
door.
    The workers at the Harvest Rich factory, and in garment factories 
all across Bangladesh, are in a trap. Of course our workers need their 
jobs--they desperately need these jobs, but without enforcement of 
Bangladesh's labor laws, the workers are left without rights and are 
actually seeing their wages falling every year.
    As I mentioned earlier, the exploitation of child labor in 
Bangladesh's garment export industry was wiped out, or greatly 
diminished, in 1992. After that, child labor was not a problem. This is 
why BCWS had to act quickly when we saw the re-emergence of child labor 
at Harvest Rich, as well as in some nearby plants. The campaign focused 
on Harvest Rich has been largely successful in ending the hiring of 
children under 13 years of age, though many other labor rights 
violations continue in the factory. But at least for now, we believe 
that the resurgence of child labor in Bangladesh's garment industry has 
been blocked.
    The garment industry in Bangladesh is booming--Bangladesh sent one 
billion garments to the U.S. last year--and this would be great news 
for the poor women garment workers if their legal rights were respected 
and they earned a wage that would allow them to climb out of misery. 
Today, there are 4,220 garment export factories in Bangladesh employing 
at least 2.2 million workers.
    Yet despite booming exports over the last 12 years, the real wages 
of Bangladesh's garment workers have been cut nearly in half as a 
cumulative inflation rate of 88 percent has eaten away at the 
purchasing power of their wages.
    The demands of the Harvest Rich workers are very modest. They are 
willing to work 10, 11 or even 12 hours a day, as long as overtime is 
voluntary and paid correctly. They need 1 day off a week, as they are 
exhausted. The beatings must end. The workers' dream would be to earn 
at least 5,000 taka a month, which is just $71.50 a month, $16.50 a 
week, or 35 cents an hour.
    Surely it is not too much to ask that the great U.S. and European 
companies must respect the labor laws of Bangladesh. If this happened, 
it would be a great step forward for the over two million garment 
workers in Bangladesh, who are some of the hardest working people 
anywhere in the world, but also among the poorest.

    Senator Dorgan. Ms. Nazma, thank you very much for your 
testimony.
    And finally, on this panel, we will hear from Ms. Jesseph. 
Mr. Jesseph is President and CEO of Worldwide Responsible 
Apparel Production.
    Mr. Jesseph, you may proceed.

   STATEMENT OF STEVEN A. JESSEPH, PRESIDENT/CEO, WORLDWIDE 
             RESPONSIBLE APPAREL PRODUCTION (WRAP)

    Mr. Jesseph. Mr. Chairman, thank you for inviting me here 
today to discuss this critically important issue, and for the 
opportunity to testify before this committee on the subject of 
working conditions in factories around the world.
    The views I express today are on behalf of the Worldwide 
Responsible Apparel Production Program, best known as WRAP. As 
the President and CEO of WRAP, I deal with these issues every 
day.
    From 1997 to 2000, the American Apparel and Footwear 
Association, or the AAFA, funded a task force of outside 
consultants and industry experts to examine working conditions 
in apparel and textile factories in major apparel-producing 
countries. Member companies made a clear commitment that they 
did not want to be associated with sweatshop conditions, and 
believed the best way to address the challenge was to create an 
industrywide global code of conduct enforced through a factory 
monitoring and certification program.
    In January of 2000, WRAP started operations as an 
independent 501(c)(6) nonprofit organization with its own 10-
member board and funding dedicated to ensuring legal, ethical, 
and humane working conditions in the manufacture of its own 
products. We believe WRAP is the most rigorous code of conduct 
for labor-intensive consumer products manufacturing, covering 
not only labor and human rights, but addressing environmental 
protection, Customs compliance, and security, as well.
    WRAP is completely separate from the AAFA; however, we do 
enjoy the support of the AAFA and 20 other trade associations 
that encourage members to have their factories and their supply 
chains certified to the WRAP standard. We have no members, and 
we do not rely on government grants. We're funded by 
registration fees from applicant factories, training fees, and 
monitor accreditation fees only.
    Our certification process involves a lengthy application 
that must be submitted by the factory. The factory must answer 
detailed questions regarding its practices in the areas of age 
of workers, working hours, wages and benefits, health and 
safety, and more. Then, an independent monitoring firm performs 
a rigorous inspection of the factory to determine if the 
information they've submitted to us is accurate. Frequently, 
factories do not pass on the first inspection. There are some 
areas of noncompliance we will not tolerate, such as prison 
labor, child labor, serious health-and-safety abuses, and 
physical abuse. A certification is generally valid for 1 year. 
And it gives companies considering using the factory a 
reasonable assurance that the factory's in compliance with 
accepted standards. Since the year 2000, over 5,000 factories 
have registered with WRAP.
    We also created an audit methodology that, in most parts of 
the world, is effective in gaining a true understanding of what 
goes on inside factories. We regularly conduct unannounced 
follow-up audits of certified factories to maintain their 
ongoing compliance. If they don't maintain compliance, and if 
those noncompliances are sufficiently egregious, we decertify 
the factory and advise that factory of its--our actions. 
Clearly, there are strong economic incentives for factories to 
maintain compliance with WRAP standards.
    There are other initiatives similar to WRAP. Their codes of 
conduct and audit methodologies might be a little different 
than ours, but we're all trying to do essentially the same 
thing: eliminate abusive working conditions and protect the 
health, safety, and rights of workers through positive force of 
economic incentives. Our experience has shown that training and 
education are essential to improving working conditions, and 
crucial at building capacity at the local level.
    In 2000, we received a grant from the U.S. Department of 
Labor to conduct factory training in 35 countries around the 
world. That grant expired long ago, but our work continues.
    In February of 2006, we participated in a USAID-funded 
trade capacity-building project related to technical barriers 
to trade in Colombia, South America.
    For the past 35 years, I've worked in a variety of 
government, manufacturing, and consulting environments, and, 
for the last 12 years, in the area of code of conduct and 
factory monitoring. I've literally visited hundreds of 
factories in 44 countries on this planet. I've seen, firsthand, 
the good, the bad, and the ugly. Are there bad factories out 
there? Yes, there are. But I've also seen a lot of very good 
progress in the last 5 years. We still have a lot of work to 
do.
    We need to help apparel-producing nations strengthen their 
rule of law and build expertise within their labor ministries. 
And we need to help employees understand their rights under the 
laws of their sovereign states. WRAP has been helping to do 
this, and we plan to do more.
    As we've learned from behavioral psychologists and 
economists, the best way to achieve positive and sustainable 
change is through market incentives and rewarding positive 
behavior. For us, that behavior is being in compliance with 
WRAP standards, and we believe we're on the right track.
    Mr. Chairman, thank you for your leadership on this issue. 
We appreciate the opportunity to submit this testimony and 
would be happy to answer any questions you may have.
    [The prepared statement of Mr. Jesseph follows:]

        Prepared Statement of Steven A. Jesseph, President/CEO, 
            Worldwide Responsible Apparel Production (WRAP)
    Mr. Chairman, thank you for inviting me here today to discuss this 
critically important issue and for the opportunity to testify before 
this Committee on the subject of working conditions in factories around 
the world. The views I express today are mine and represent the 
Worldwide Responsible Apparel Production program, best known as WRAP. 
My remarks do not represent the views of any trade association, 
retailer or branded company. As President and CEO of WRAP, I deal with 
these issues every day.
    From 1997-2000, the American Apparel & Footwear Association, or the 
AAFA, funded a task force of outside consultants and industry experts 
to examine working conditions in apparel and textile facilities in the 
major apparel producing countries. Member companies made a clear 
commitment that it did not want to be associated with ``sweatshops'' 
and child labor conditions and believed the best way to address the 
challenge was to create an industry-wide, global code of conduct 
enforced through a factory-based monitoring and certification program. 
In January 2000, WRAP started operations as an independent, 501 (c)(6), 
non-profit organization with its own 10-member Board of Directors and 
funding dedicated to ensuring legal, ethical and humane production of 
sewn products. We believe WRAP is the most rigorous and comprehensive 
code of conduct for labor-intensive manufacturing of consumer products 
covering not only labor and human rights issues, but addressing 
environmental protection, customs compliance and security as well.
    WRAP is completely separate from the AAFA. However, we do enjoy the 
support of the AAFA and 20 other trade associations around the world 
that encourage their members to have the factories in their supply 
chains certified to the WRAP standard. Last week, Caribbean-Central 
America Action, a trade promotion group based in Washington, D.C., 
issued the report of its recent annual meeting in which it encouraged 
all apparel and textile factories in the region to become certified by 
WRAP.
    WRAP has no members and therefore no dues. We do not rely on 
government grants to sustain our operations. We are funded by 
registration fees from applicant factories, training fees and monitor 
accreditation fees.
    The WRAP certification process involves a lengthy application that 
must be submitted by the factory seeking to be certified. The 
application requires the factory to answer detailed questions regarding 
its practices in areas such as minimum age of workers, working hours, 
regular and overtime wages, and health and safety, and more. When the 
application is complete, an independent monitoring firm then performs a 
rigorous inspection of the factory to determine if the written 
information previously submitted is accurate. Frequently, factories do 
not pass on the first inspection. Since our goal is to help them 
achieve certification, we advise them of the non-compliances so they 
can correct them and receive a certification recommendation during a 
subsequent audit.
    However, there are some areas of non-compliance that will not be 
tolerated such as prison labor, child labor and physical abuse. A 
certification is generally valid for 1 year and gives companies 
considering using the factory reasonable assurance that the factory is 
in compliance with accepted standards. Since 2000, over 5,000 factories 
have registered with WRAP and in 2006 we certified factories in 71 
countries.
    WRAP has created an audit methodology that in most parts of the 
world is effective in gaining a true understanding of what goes on 
inside factories. We certify factories that are in compliance with the 
WRAP standards. We also refuse to certify and decertify factories that 
aren't. We regularly conduct unannounced follow-up audits of certified 
factories to ensure they maintain on-going compliance. If they don't, 
and if those non-compliances are sufficiently egregious, I have no 
hesitation to decertify a factory and advise that factory's customers 
of our actions. Accordingly, there are strong economic incentives for 
factories to maintain compliance with the WRAP standards.
    There are other initiatives similar to WRAP. Their codes of conduct 
and audit methodologies might be a little different than WRAP but we 
are all trying to do essentially the same thing: eliminate abusive 
working conditions, and protect the health, safety and rights of the 
workers through the positive force of economic incentives.
    WRAP is also working with other certification programs, trade 
associations, technical training schools and universities to help 
develop courses and seminars for factory managers and owners in the 
areas of management systems, health & safety, compensation and 
benefits, working hours, environmental protection, regulatory 
compliance and more. We hope that eventually these courses and will 
lead to certifications and degrees in the area of corporate social 
responsibility.
    WRAP's experience with its factory certification program has 
demonstrated to us that positive efforts such as education and training 
are essential to improve working conditions. In 2002, WRAP received a 
grant from the U.S. Department of Labor to conduct factory training in 
35 countries around the world. That grant expired long ago but our 
training work continues. February 2006, WRAP participated in a USAID-
funded Trade Capacity Building project related to Technical Barriers to 
Trade (TBT) in Colombia. And, WRAP is also participating in a similar 
USAID-funded program in Morocco. We believe education and training, at 
all levels are crucial to building capacity at the local level.
    For the past thirty years, I've worked in a variety of government, 
manufacturing and consulting environments, and for the past twelve 
years in the areas of codes of conduct and factory monitoring. I've 
visited hundreds of factories in 44 different countries on five 
continents and have seen first-hand the good, the bad and the ugly. I 
understand this industry and its complexities very well. I've seen 
tremendous progress in the quality of management and working conditions 
in factories, especially in the past 5 years. However, with all the 
progress that has been made, there is still much work to do.
    We need to help apparel producing nations strengthen the rule of 
law and build expertise within labor ministries and with their 
inspectors. And, we need to help employees understand their rights 
under the laws of their sovereign states. WRAP has been helping do 
this, and more.
    As we've learned from behavioral psychologists and economists, the 
best way to achieve positive and sustainable change is through market 
incentives and rewarding positive behavior. For us, that behavior is 
being in compliance with WRAP standards. We believe we're on the right 
track.
    Thank you, Mr. Chairman for your leadership on this issue. We 
appreciate the opportunity to submit this testimony. I would be pleased 
to answer any questions you might have.

    Senator Dorgan. Mr. Jesseph, thank you very much for being 
here.
    Let me thank all three of you for your testimony today. I 
think--as I hear the testimony, Ms. Jesseph, I don't think you 
are at odds with--at least your goals are not at odds with--the 
testimony of the other two witnesses. You indicate that the 
goals of WRAP are to attempt to make certain that factories are 
adhering to the local standards and local laws, and that the 
industry is not interested in bringing into this country the 
product of sweatshop labor. So, the legislation that we will 
attempt to move through the Congress should not be at odds with 
your goals, in any event.
    Let me talk just a little, by virtue of asking questions of 
the three of you, and then I'll turn to my colleague Senator 
DeMint.
    Ms. Nazma, you are describing, in your testimony, a young 
woman named Halima, who is an 11-year-old worker. Your 
description of that particular plant--you dwelled on that 
particular plant. What is the timeframe of the investigation of 
that plant? Was that just within the past year or so?
    Ms. Nazma. From last June, they started the investigation, 
until now.
    Senator Dorgan. And that is a plant that produces products 
to be shipped to this country. You're describing an 11-year-old 
worker named Halima, 11 to 14 hours a day, 7 days a week, and 
the scores of children, 11, 12, 13 years of age, working at 
that factory. What kind of evidence exists to corroborate that, 
Ms. Nazma?
    Ms. Nazma. She's saying that they have testimony from them 
that there was video taken at the Harvest Rich factory and that 
her--and her colleagues were also involved in making--getting 
this evidence from the factory workers.
    Senator Dorgan. I think most of us would probably agree 
that a factory that is producing products with 11-year-old 
workers, working 11 to 14 hours a day, 7 days a week, 2 days 
off a month--I think almost everyone in this room would agree, 
that represents a sweatshop condition that probably is in 
violation of the local laws. The question is, Is this just an 
aberration, a very unusual circumstance, or is it the kind of 
thing that we see frequently in parts of the world where one 
can access cheap labor and access labor with no rights, so that 
workers really have no legal capability to complain?
    Ms. Fuentes, you described workers in Colombia who, in 
support of trying to better their situation, formed a labor 
union that you indicated was a legal labor union under 
Colombian law. The companies then sponsored another labor union 
to try to undercut the ability of workers to organize. Can you 
describe, in slightly more detail, what happened there?
    Ms. Fuentes. One of the main things that I already 
mentioned was that they offered money to our union affiliates 
so that they would join the other union instead. Also, company 
representatives, such as those from human resources, and 
supervisors, and company social workers, approached workers 
inside the workplace and told them that this was an unethical 
union, that they were trying to bankrupt the company, and that 
they should not join this union.
    They also prohibited us from distributing any materials 
that explained what the union was about and what we were trying 
to do, and they held meetings inside the workplace, where they 
told workers that it was prohibited to read these things or 
comment on them. And many workers who belong to the board of 
directors of the union were isolated, moved to a different part 
of the factory, where they wouldn't be able to talk to other 
workers.
    Another flower worker who works at another plantation and 
is also a union leader was put to peeling potatoes in an 
isolated part of the flower plantation, so that she wouldn't be 
able to talk to her co-workers.
    Senator Dorgan. I'm going to call on Senator DeMint in just 
a moment, but I wanted to point out the BusinessWeek farticle, 
of November of last year, just 3 months ago entitled ``Secrets, 
Lies, and Sweatshops,'' which describes the circumstance around 
the country--and in this case, in China, in which there is very 
substantial abuse of workers and sweatshops.
    Mr. Jesseph, you know, I read your testimony, and I think 
it's important that you do the work you do. The question that I 
have is, How effective are you? For example, I described the 
circumstance of Wal-Mart going in, in a plant in China, on four 
occasions, and then, on the last occasion, a consultant 
explained to the company how you--how do you hide what you're 
doing so that the company can't see it? My understanding is, in 
your case, where you issue certifications, that you had 
actually issued a certification to the plant that Ms. Nazma 
talked about, and had certified it as meeting approval. You 
know, I have a picture of the 11-year-old girl, whom I think is 
the subject of much of the testimony. This is that young woman 
named Halima, working 11, 14 hours a day, 7 days a week. 
Clearly, that's violative. And I assume that your organization 
would think that is a sweatshop condition, hiring a young child 
in contravention of existing laws in Bangladesh. But tell me 
what kind of capability do you have, as you go take a look at a 
factory like this, which, incidentally, has now been--I believe 
the contract for this company has been yanked by the Hanes 
company--producing Hanes underwear. And let me just quote: ``We 
had audits that did not catch some of the excessive working 
hours, did not catch some of the double books. Our first clue 
to the double books issue was making a midnight visit to the 
plant and finding about 50 employees who were still working.'' 
So, Hanes yanked their contract from this. But what kind of 
capability exists for them to show you enough to allow you to 
certify them, when, in fact, they're probably hiring 11-year-
olds?


    Mr. Jesseph. Senator, those are great questions, and ones 
we struggle with every day, We certified this factory about a 
year ago. And one of the challenges we have is, a lot of us 
have seen in recent issues with--issues such as Enron and 
others--where companies try and purposely deceive and lie to 
their auditors, conceal information, create double books, coach 
employees, and so forth, as outlined in the BusinessWeek 
article; it becomes increasingly challenging for groups like 
ours to identify what the specific issues are. I personally 
visited the Harvest Rich factory in November--got on a plane, 
flew to Dacca, and went through that factory from top to 
bottom. I met with representatives, the Bangladesh Committee 
Solidarity Workers Groups, along with Robert Wong, with the 
U.S. State Department, who's the labor attache there, and 
specifically asked the question--and I was looking to meet a 
number of the employees who were alleged to have worked in that 
factory. The factory told me they could find absolutely no 
record of Halima ever having worked in that factory. I asked 
the Workers Committee if I could meet with her, because I was 
looking for proof and verification. As you pointed out earlier 
in your questions, What kind of verification do we have of 
these allegations? That's precisely why I went there.
    What did we find? We did find there were double books. We 
did find there were excessive working hours. And what I found 
was a management team that had been specifically working to 
subvert the system that we've put in place to try and certify 
factories. We were looking for verification of information, not 
to make a snap judgment, and not to make an off-the-cuff 
judgment, but to look for verified information. And when we 
found that information, we decertified the factory. They're out 
of the system, period.
    Part of that decertification is also notifying customers 
that do business in that factory that we no longer certify it. 
So, there are some economic incentives. As you saw, Hanes 
decided to leave the factory in December. We think some of the 
best incentives for factories to maintain compliance are the 
economic incentives of retaining business, and, if they're way 
out of compliance, they lose business.
    Senator Dorgan. That's only to the extent that someone 
catches them. And I might suggest that if the managers there 
were subverting with respect to double bookings and various 
things, you would expect they would subvert on a number of 
things, including child labor. But I only make the point that I 
think organizations that are attempting to try to clean up this 
mess are valuable additions here. My only point is that the 
BusinessWeek article suggests that this is rampant, number one; 
number two, it's very hard to find and detect, and very hard to 
stop.
    I have a couple of other questions, but I want to call on 
my colleague Senator DeMint, who I know has some time issues.
    Senator DeMint?
    Senator DeMint. Thank you, Mr. Chairman. I really 
appreciate all the testimony.
    Mr. Jesseph, I want to focus on you for a minute, because I 
do believe, as the Chairman has pointed out, that the goals of 
the industry sponsors of your group, as well as his goal, are 
basically the same. I think the question here is, What would 
really work to improve what's going on? And I think you know, 
as I think most media who reported on this, that we are making 
a lot of progress. I believe, as you do, that decertifying one 
or two plants will send shockwaves around. These folks know not 
to do it because they'll lose a lot of business.
    But my concern is the legal liability, which Senator 
Dorgan's bill would create, and we know--I know, from being in 
business for years, you can be set up for these kind of 
lawsuits, in this country, for not being handicap accessible or 
whatever, and be sued before you have a chance to even know 
you've got a problem. I'm concerned, just as a testimony 
today--well, I'll just take Colombia, for instance--Ms. Fuentes 
says there was pregnancy testing. And I'm sure it's correct, 
but it's against the law to do that in Colombia. Dole says they 
do not do it. But, under the Chairman's bill, Dole would have 
to prove that they didn't do it in a foreign country, and, like 
you said, in a situation that could have changed, and it would 
be very difficult for companies to defend themselves. Instead 
of a lawsuit, in Bangladesh, you have decertified and 
accomplished, I think, much of the same goals, and probably 
created a warning for a lot of other companies. I'm just 
concerned if we're going to come in with a sledgehammer here, 
creating a legal playground where companies throughout America 
may have bought something from a company that may have been a 
sweatshop, that they cannot possibly defend themselves against, 
and we've got the same legal problem that we have with our own 
companies, here in this country now, with plaintiffs' lawyers 
who are just eating them alive.
    What do you think would be the effect of--and I don't know 
how familiar you are with the Chairman's bill, and I know, with 
him here, you've got to be very careful what you say, but what 
would be the effect of going in with this system that, I think, 
will create a playpen for lawyers?
    Mr. Jesseph. Senator, you did ask a loaded question, 
especially with Senator Dorgan here. I'm not a lawyer, and I'm 
not a legislator, and I am certainly not in a position to 
render, I think, a reasonable opinion on this bill. My great-
grandfather was a representative of the State of Washington 
legislature, as a Democrat, and he believed less is more. I do 
believe that the kinds of market incentives and positive 
reinforcing incentives that we're trying to create, the market-
based incentives, to make sure factories are doing the right 
thing on behalf of their customers, obeying the law, is the 
most effective kind of incentive there is, which is precisely 
why we put this into place.
    If--and what we would--the question you asked earlier, How 
can we make this better?--I think is by having more and more 
retailers, brands, factories around the world participating in 
programs like WRAP and making a stand, as some companies do, in 
saying, ``We're not going to tolerate working in factory--
working with factories that have abusive working conditions. We 
are leaving, and we're leaving now.'' If you have multiple and 
repeated audits and repeated audits and repeated audits, and 
continually reinforce that kind of behavior, that working in 
substandard conditions is OK, then I think that becomes a 
challenge and a different message for everybody. I think the 
answer, for me, is, let's create positive market incentives, 
which is what we're trying to do with WRAP, and move everybody 
to the same standard. If buyers refuse to buy from factories 
with substandard conditions, I think it's the most effective 
and quickest way to handle it.
    Senator DeMint. Do you think--and I know I'm biased on 
this, and I do believe that trade, not aid, is the best way to 
improve working conditions, particularly as we have been 
insistent, in our country, on labor standards in our 
agreements. I'm afraid that if we create liability, that 
certain countries, because of their, perhaps, inability to 
enforce a lot of laws or to assist us in how we enforce, that 
there will be a lot of job loss or economic problems in 
countries where American businesses just decide not to buy 
from. Do you see a downside do creating a legal liability 
system in this country, at all, or--I know you said you weren't 
a lawyer, but----
    Mr. Jesseph. Well--
    Senator DeMint.--we're just trying to figure out the best 
way to move forward. It seems like your organization has made 
some significant strides, and we're just trying to decide if 
creating this legal liability is a good way to move ahead.
    Mr. Jesseph. I don't--again, I don't have a firm opinion on 
the best way to do that. That--I read, in the papers, like 
everybody else, that the court systems are clogged, and it 
takes 2 and 3 and 4 years sometimes to get cases to court. This 
may be an effective measure. Again, I don't know. We're 
focusing on the market side, and, hopefully, on the positive-
enforcement side.
    Senator DeMint. Good. That's very helpful.
    Thank you, Mr. Chairman.
    Senator Dorgan. It appears to me that Senator DeMint may 
well be opposed to the legislation, based on his questions.
    [Laughter.]
    Senator Dorgan. Senator DeMint and I--
    Senator DeMint. I'm very open-minded.
    Senator Dorgan.--have great respect for each other, but I 
would disagree with the central premise of his first statement, 
``a lot of progress has been made.'' And that's the purpose of 
the hearing and the bipartisan legislation. I don't think 
nearly enough progress has been made, I would say to my 
colleague, and I would put up the BusinessWeek--and 
BusinessWeek, as you know, is a conservative journal of 
American business--and they've done their own investigation. 
``Secrets, Lies, and Sweatshops: How Chinese Suppliers Hide the 
Truth From U.S. Companies''--this only applies to China, but 
the fact is I think we have a very serious problem. Yesterday, 
there was a $832-billion trade deficit. It's hard for anyone to 
argue that that is a success, but embedded deep in the recesses 
and the crevices of that policy represents, in my judgment, 
substantial failure, because the market system itself--the 
market system--will be a persuasive element to try to move the 
lowest-cost goods into this country. The lowest-cost goods will 
come from a company that you can employ in Bangladesh or in 
Northern Jordan, with Chinese textiles and Bangladeshi workers 
being jetted in to work in unbelievable conditions. That will 
be the lowest-priced products, and perhaps the best way to 
compete. But as BusinessWeek says in a document obtained last 
year of a Chinese fabric factory--let me just read what 
BusinessWeek obtained from a factory--and I don't think this is 
unusual, ``If they are going to be audited'' if an auditor 
shows up unexplained and unscheduled, ``First, notify the 
underage trainees, underage full-time workers, and workers 
without identification to leave the workshop through the back 
door. Order them not to loiter near the dormitory area. Second, 
immediately order the receptionist to gather all relevant 
documents and papers.''
    I guess Senator DeMint and I will have, I think, a longer 
conversation about these issues, and I look forward to working 
with him on it. But liability is exactly the point of this 
legislation. If you're abusing foreign workers, if you are 
producing in sweatshops for the purpose of undercutting 
competitors in this country, you ought to be liable. At this 
point, you are not. You ought to be liable. That's why Senator 
Lindsey Graham and I have introduced the legislation.
    So, Senator DeMint, you and I will have, I assume, long and 
entertaining conversations about trade and related matters.
    Mr. Jesseph, your conversation with this committee, saying 
you're interested in trying to track down these companies and 
stop these practices, that's not at odds at all with the 
legislation that we propose. To the extent that you're 
successful, I commend you, but evidence of today indicates 
something different. You certified the very plant that we heard 
testimony on, that's the Hanes Corporation--Hanes underwear 
corporation--subsequently decided to decertify; the fact is, it 
has become a game and a practice to try to make certain that 
people coming into the plants in some of these foreign 
countries are not able to see what's really happening. And I 
think all of us in this room would agree, and I expect that my 
colleague Senator DeMint would agree, if we see a factory in 
which an 11-year-old is working 11 to 14 hours a day 7 days a 
week, with 2 days off a month, then, by God, there's something 
wrong with that. That is not the product of which we want to 
make purchases in this country. That is sweatshop labor. And 
there ought to be someone liable and accountable for it.
    And so, let me thank the three witnesses. We have another 
panel of witnesses. And I understand, Senator DeMint, you have 
a commitment, but I appreciate your participation today. And, 
as I indicated, Senator DeMint and I will work on a wide range 
of trade problems, I assure. Thank you very much for being 
here, Senator DeMint.
    I would like to, Mr. Jesseph, perhaps submit a couple of 
questions to you, but in the interest of time, I want to 
proceed, and I hope that this has helped your scheduling 
circumstance. And I appreciate your being with us.
    Senator Dorgan. I want you to succeed. I don't believe your 
work, alone, is sufficient. That's why I've introduced 
legislation. But I have great concern about this, and I believe 
that Congress needs to pass legislation. You should keep up the 
work that you do but understand that they will do for you what 
this BusinessWeek article describes they've done for others. 
And you'll show up at a plant and come out of there saying, 
``Things look fine,'' and the minute you're gone, 11-year-olds 
are on the factory floor, producing, and they bring out the 
other book of records.
    So--
    Mr. Jesseph. Well, Senator, what I can tell you, with great 
honesty, is that our chairman is a forensic accountant, former 
inspector general of the U.S. Department of Labor. Our 
investigation techniques and our audit methodologies are 
changing rather rapidly, and as we speak, to identify the kinds 
of issues brought out in that article, and to make sure that we 
don't walk away with bad information, and we get better 
information all the time. This is not something static for us. 
We're taking some very positive steps in this regard.
    Senator Dorgan. Mr. Jesseph, thank you.
    Ms. Fuentes and Ms. Nazma, thank you for standing up for 
workers. I know you do so at risk to yourselves. It is not easy 
to do what you are doing, to stand up for workers' rights and 
to speak out publicly, but we owe you a debt of gratitude, and 
I appreciate your being here. Thank you very much.
    For the next panel, we will call Mr. David Socolow, the 
commissioner of the New Jersey Department of Labor and 
Workforce; Mr. James English, on behalf of Mr. Leo Gerard, who 
is the President of the United Steelworkers; Mr. Charles 
Kernaghan, Executive Director of the National Labor Committee; 
and Mr. Daniel Griswold, the Director of the Center for Trade 
Policy Studies at the Cato Institute.
    If you would all please come forward and take a chair, we 
would appreciate that.
    We will ask that the record include the statement by Mr. 
William Jones, who is unable to be with us because of weather-
related travel issues, but we will make that a part of the 
record, without objection.
    [The prepared statement of Mr. Jones follows:]

 Prepared Statement of William Jones, Chairman, Cummins-Allison Corp.; 
     Member, Board of Directors, U.S. Business and Industry Council
    Good afternoon, everyone. I am very grateful to be here today to 
provide the perspective of an American manufacturer.
    Thank you, Senator Dorgan for inviting me to testify on the problem 
of sweatshop labor. This is a critical issue for many corporations 
committed to manufacturing in the United States and I applaud you for 
your leadership in trying to correct this problem.
    My name is William Jones and I am the Chairman of Cummins-Allison 
Corp., a privately held Chicago corporation founded in 1887. Today, 
Cummins is a manufacturer of security equipment, particularly focused 
on the processing of coin and currency at high speeds. We employ 
approximately 900 individuals in the U.S. and provide work for another 
10,000 Americans employed by our key U.S. suppliers. Ninety-five 
percent of the products Cummins sells worldwide are manufactured in 
Chicago, Illinois.
    Perhaps some Senators are not familiar with the challenges facing 
our domestic manufacturers, or the benefits that we bring to the 
American economy. Manufacturers are so often the backbones of our 
communities--creating wealth, providing decent-paying jobs with good 
benefits. Our companies pay taxes, company management pays taxes, and 
our employees pay taxes. Those taxes make possible schools, roads, 
water treatment plants, first responders, libraries, social services, 
and hospitals.
    Our Company headquarters and manufacturing are in Mt. Prospect, 
Illinois. About 2 years ago, the head of the Mount Prospect, IL school 
district called me up and invited me out to lunch. I said sure but why 
call on me. He said because you're the largest taxpayer in our town and 
we wouldn't have the schools, facilities, and classes we do without 
you.
    Let me give you my views on sweatshop labor and then turn to some 
of the other, broader issues facing domestic American manufacturers. 
First and foremost, sweatshop and slave labor are one of the moral 
outrages of our time and must be abolished. Something is very, very 
wrong when wealthy people and corporations get even wealthier on the 
backs of the working poor.
    In addition, sweatshop and slave labor can end in economic 
catastrophe for us all. This abuse does not create a healthy middle 
class of consumers in the sweatshop countries, who in turn embrace 
democratic political values to protect what they have gained by the 
fruits of their hard labor. It does not advance these countries' 
economies more than marginally--with a robust middle class of consumers 
driving the economy.
    Why not? Because unlike the sweatshops of America's past, today's 
sweatshops are found in very low-income countries with towering rates 
of un- and underemployment. Whereas the chronic scarcity of labor 
throughout American economic history eventually helped our wages rise, 
the mammoth glut of labor throughout the developing world is bound to 
keep wages at rock bottom for, at least, many decades.
    At the same time, sweatshops have sucked much of the life out of 
the remaining labor-intensive sectors of American manufacturing--which 
remain far and away the best hopes for middle-class lives for our own 
poor. If unchecked, these trends will threaten much of our remaining 
domestic manufacturing base--a manufacturing base which underpins our 
national defense and prosperity. Ultimately, the demise of so much 
manufacturing will undermine the entire American economy, which is the 
engine of world growth.
    The owners of the sweatshops may get rich; the owners of the brand 
names may get rich; and the retailers who trade in these goods in the 
American market may get rich--but at the expense of American workers 
and factory owners. There are those who mistakenly suggest that 
sweatshops bolster U.S. living standards by providing cheap goods for 
consumers. A first world country raises its living standards on a 
sustainable basis by helping workers become employed, genuinely more 
productive and earn higher wages, not by helping consumers get cheaper 
socks or toasters. I am not aware of any country in history that become 
a great power by consuming, rather than by producing.
    So I commend you for introducing S. 367, your bipartisan measure to 
prohibit the import, export and sale of goods made with sweatshop 
labor. My company, Cummins Allison, and the U.S. Business and Industry 
Council, of which I am a member, both heartily endorse this bill. A 
$10,000 fine for violations combined with the right to sue for damages 
for those who produce the goods under fair working conditions is a fair 
and balanced approach to solving the scourge of slave and forced labor.
    Across the developing world from large countries like China to 
smaller competitors like Jordan, slave and forced labor is epidemic. 
These nations need to do a better job enforcing their own laws and 
commitments on the issue. S. 367 gives them and some of the shady 
players that are manufacturing illegitimately, the right incentives to 
clean up their acts and improve working conditions for millions of 
individuals. Again, I am most appreciative of the spotlight that you 
have shone on these horrible practices and look forward to the 
enactment of this vital legislation.
    Now I want to discuss some of the broader American trade and 
international economic policies that are contributing to the demise of 
domestic manufacturing.
    In the last few years the Governors of four States have contacted 
me asking me to move from Illinois to their states. I've politely 
declined because no matter what tax breaks they offer me, they can't 
change the U.S. trade policies that are killing companies like mine. 
Only you in Washington can do that. But in fact over the last three 
decades, Washington has taken my tax dollars and used them to try to 
put me out of business.
    Some corporate leaders would say I should move to Europe, where the 
governments would protect me because my creating jobs would mean that 
they don't have to carry people on welfare rolls. Most governments 
there, of course, provide health care and pension coverage that would 
reduce the competitive pressures on my company. Others might say that I 
should go to China so my business could survive by paying low wages and 
minimal benefits. Some who move their manufacturing to China 
subcontract with firms that use forced or penny-wage labor in order to 
gain a competitive advantage. That, too, is an available option.
    So, I could take the high road and move my manufacturing to Europe 
where they have industrial policies to keep their nations competitive, 
or I could take the low road and go to a low wage area that would 
reduce my production costs. Those are the choices that U.S. trade and 
international economic policy force on companies like mine.
    But don't worry, I'm not going anywhere. I intend to stay right 
here in the USA providing great machines and great jobs, and fighting 
to preserve the domestic manufacturing base.
    It is clear to me that the Federal Government's trade policies of 
the past three decades--through Republican and Democratic 
administrations alike--have vastly eroded our domestic manufacturing 
base. Three million manufacturing jobs have been lost since 1997--and 
believe me, it's not just because American manufacturing has become so 
much more efficient and productive, as you often hear from the 
globalization cheerleader crowd. No, tens of thousands of companies 
have closed their doors for good--not because they got more productive 
but because they were put out of business by unfair foreign 
competition, whether subsidies, non-tariff barriers, currency 
manipulation, dumping, or other anti-competitive practices.
    So I hope I'm starting to convince you that we have a lot in common 
and we share a certain vision for the American people: work with 
dignity, with good wages, and good benefits, healthy families, and 
healthy cities and rural areas.
    The inequalities brought about by the decline in domestic 
manufacturing are profound and far reaching. They affect every segment 
and institution in our society, and yet Washington has been asleep at 
the switch while our trade deficits soar and the East Asians hold so 
much of our public debt. How much longer can the current situation 
continue before the dollar collapses and we enter a serious worldwide 
economic adjustment?
    We must approach trade policy as more than just winning legislative 
battles in Washington--Our chief concern must be about helping to put 
America's living standards and economic power back on a rising path by 
strengthening our economy's ability to produce. We need to restore our 
country's ability to earn its way in the world. That's the only way to 
create lasting, broadly shared prosperity for the American people, and 
ensure our national security.
    That's also the only way that we'll be able to preserve a 
functioning global economy that can provide expanding opportunity 
around the world--because an economically healthy American import 
market is central to growth prospects everywhere. Don't ever let anyone 
call you a protectionist because you are challenging current trade 
policy--what you are doing is to try to restore balance to a world 
trading system that is completely out of whack essentially because 
foreigners are gaming the system to grab more than their fair share of 
the wealth.
    Achieving this goal means enacting into law measures that 
strengthen in major, concrete ways companies like mine and the tens of 
thousands of others like it that create middle-class jobs and anchor 
communities. And it means enacting into law concrete measures to help 
new companies realize the advantages of starting up and creating jobs 
in America.
    If our legislative strategies don't seek these results, they will 
not save a single existing job or create a single new one. Indeed, 
domestic manufacturing and all the employment benefits it creates will 
start shrinking faster than ever.
    How can Congress help? By strongly supporting new trade policies 
that will make much bigger changes than most critics have been talking 
about so far.
    By all means, let's keep pressing for better labor and 
environmental provisions in new trade agreements. Let's use trade with 
our market, by far the largest in the world to abolish slave and forced 
labor. But let's also realize that actually helping boost production 
and employment and wages in the United States will require much more.
    The United States Business and Industry Council we will be working 
hard for prompt passage of the Ryan-Hunter bill, which would enable 
domestic manufacturers to win import relief against Chinese currency 
manipulation. It attracted some 170 co-sponsors in the last Congress. 
This bill deserves to be a very high priority of yours this session as 
well. Let's get it passed in the House quickly--and introduced and 
passed in the Senate in short order as well.
    In addition, we need to do something about inequalities created for 
our domestic producers by the widespread use of Value-Added Taxes by 
136 of our trading partners. All of our major trading competitors 
rebate all Value-Added taxes on their exports and levy the full VAT on 
American imports coming into their markets. This creates, on average, a 
30 percent competitive disadvantage with our major trading partners.
    Today, the VAT disparity is a huge factor for U.S. producers. The 
total yearly VAT penalty paid by American producers of goods and 
services is roughly $380 billion. We need to put in a border 
equalization tax, so that goods imported into America face the same 
hurdle that American goods do going into foreign companies. I know it 
is a very technical issue, but $380 million is real money and the 
resulting distortions of trade flows have destroyed hundreds of 
thousands of American jobs.
    We will be working hard to help attract more co-sponsors for the 
Trade Balancing Act that Rep. Mike Michaud from Maine introduced in the 
House at the end of the last session--and to find Senate co-sponsors to 
introduce a companion bill. The Trade Balancing Act makes use of 
Article XII of the WTO and puts into place an emergency import 
surcharge until major trade imbalances are corrected.
    The president has announced that he will seek renewal of Fast Track 
authority, which expires in July. We desperately need to block 
traditional Fast Track authority, under which all these bad trade deals 
have been passed for the last thirty years. Fast Track is an abdication 
of the authority that the Constitution gives the Congress. It has 
allowed the Executive Branch to mostly ignore the Congress all these 
years and the results have been devastating. We need for Congress to 
reclaim its trade authority. We need to develop an entirely new way of 
negotiating trade agreements.
    In fact, we need to announce a moratorium on all further trade 
agreements until we figure out what we are doing wrong and how to get 
our trade deficit under control--which specifically includes enforcing 
the trade agreements we have. Those who support the failed trade 
policies of the past maintain that just one more trade agreement will 
help us export our way out of the mess we are in. That's nonsense. We 
need a set of comprehensive solutions to solve our trade problems--and 
piecemeal new trade agreements are not among them.
    Finally, anyone genuinely concerned about preserving American jobs 
and living standards must help us find ways of protecting American 
intellectual property better and preventing dumping of foreign products 
in the American market below their cost of manufacture. I know that 
there's some resentment surrounding the use of IP trade laws by 
American multinational companies. But the very survival of countless 
smaller domestic companies like mine heavily depends on strengthened 
intellectual property protection. If there have been abuses, let's 
correct them. But let's make sure not to do anything that could set 
precedents that wind up throwing the baby out with the bath water. 
Otherwise, you'll deal a fatal blow to many of our country's best 
companies and best employers.
    Make no mistake about it. Domestic companies like mine, who are 
passionately devoted to keeping their production and their work force 
in the United States, are under attack in the world economy. We and our 
workers are under attack from high-income countries like Germany and 
Japan. We are under attack from low-income countries like China and 
India. Foreign governments do what they can, whatever it takes, to 
advance their national interests and those of their companies--despite 
the negative consequences for other countries and other peoples.
    American domestic companies and their workers also deserve policies 
from their government that further their interests--not abandon them. 
Unfortunately, Washington's priorities have long been elsewhere, but we 
live in a democratic system where the ineffective trade policies of the 
past can be changed. With enough help from this committee and other 
Members of Congress, that's exactly what we can do.

    Senator Dorgan. Mr. Kernaghan, I'm going to start with you 
today. Mr. Kernaghan, you are the Executive Director of the 
National Labor Committee. I know that you have spent some years 
investigating these issues, and bringing to the attention of 
the American public--and to the Congress, for that matter--
labor abuses and sweatshop conditions around the world. I 
personally appreciate the work of your organization. I think it 
has been productive and helpful, and I appreciate the fact that 
you have come today. And you may proceed.

 STATEMENT OF CHARLES KERNAGHAN, EXECUTIVE DIRECTOR, NATIONAL 
                        LABOR COMMITTEE

    Mr. Kernaghan. Thank you very much, Mr. Chairman. And it is 
an honor to be here to discuss worker-rights standards in the 
global economy.
    I'd like to just make a quick comment on the Harvest Rich 
case, because, after we released our report on the Harvest Rich 
factory in Bangladesh, the company sent their monitors back 
again, and, I believe, including WRAP. They found no 
violations. They told us the factory was excellent. It wasn't 
until we invited Hanes, Marks & Spencer, and Tesco to return to 
Bangladesh, and we set up a meeting with the workers, and the 
workers themselves said to the Hanes representative, ``You must 
go to the factory tonight. You'll see workers working. You'll 
see them working at midnight, and past midnight''--It was only 
when Hanes did that, and paid a rare unannounced visit at 
night, and marched into the factory, they found dozens of 
workers making Faded Glory jeans for Wal-Mart. They were 16\1/
2\ hours into their 19-hour shift. It was only at that moment 
that Hanes said they understood that they were being misled by 
the factory.
    So, they didn't catch it on their own. They only caught it 
because the workers themselves had the courage to meet with 
them, tell them the truth, and tell them to go to the factory. 
That's the only reason that that factory was decertified. It 
did not happen under the normal monitoring programs.
    Well, I want to quickly address the Jordan issue, and 
China.
    The U.S./Jordan Free Trade Agreement was initiated in 
December of 2001. And it looked miraculous, because, within the 
next 5 years, apparel exports from Jordan to the U.S. soared by 
2,300 percent. They went from $52.1 million to $1.2 billion in 
2006. But, unfortunately, the Jordan Free Trade Agreement 
quickly descended into human trafficking of guest workers from 
Bangladesh, China, Sri Lanka, India--36,100 guest workers were 
trafficked to Jordan to work in 114 factories, producing 
clothing for the United States. Ninety percent of those 
factories were foreign-owned, mostly Asian-owned. In those 
factories, the workers were stripped of their passports, not 
given their identity residency permits, so they couldn't even 
go out on the street. Once they were trapped in those 
factories, stripped of their passports, and held under 
conditions involuntary servitude--for example, in the Al 
Shahaed factory, 115 Bangladesh workers found themselves 
working 15 hours a day, 38 hours a day, 48 hours a day--or 48-
hour shifts, and 72-hour shifts. They actually worked 3 days in 
a row without sleep. They would go 2 or 3 days at work without 
sleep. When the workers passed out at the factory, they were 
beaten with sticks to wake them. The workers were supposed to 
be paid $250 a month with overtime. They got 2 cents an hour. 
They got $2.31 for 98 hours of work. When they complained about 
their wages, they were imprisoned in Jordan for 3 days without 
food. When the workers finally demanded their wages, they were 
beaten and forcibly deported back to Bangladesh without any of 
the back wages owed them. At the Western garment factory, which 
made fleece jackets for Wal-Mart, there were 14- and 15-year-
old kids in that factory, working 16 to 20 hours a day. They'd 
work from 8 o'clock in the morning until midnight or until 4 
a.m. They did this 7 days a week. They didn't get paid at all. 
For the first 4 months of 2006, they did not receive one cent 
in wages. They were working as slave labor. They had not any 
wages. And when they passed out, they were hit with rulers. 
When they passed out from exhaustion, they were struck with 
rulers to wake them up. There were four girls in the factory 
who were raped by management, one of them, a 16-year-old girl. 
These were the conditions in these factories.
    In the Al Safa factory, which made clothing for Gloria 
Vanderbilt, a young woman--we believe, about 20 years old--a 
young Bangladesh woman hung herself in the bathroom, committed 
suicide, after she was raped by a manager. Such terrible 
feelings, such humiliation, she hung herself. And they kept her 
body in Jordan for many months before it was even sent back to 
Bangladesh.
    After we put out our report, in July 2006, the Trade 
Minister of Jordan admitted, bravely, that their inspection 
regime may have failed them. And he said, ``may have failed 
them miserably,'' which was, of course, the case.
    Jordan had 88 labor inspectors for 98,000 businesses in the 
country. The labor inspectors were really just there to hand 
out work permits to the guest workers. There was no monitoring 
of the factories. There were no--there was absolutely no 
oversight. And the situation deteriorated into human 
trafficking.
    I must say, under pressure, there has been a positive 
response on the part of the Jordanian Government. And today, 
because they've started to implement their own law, under 
pressure, we think that the major--the major direct-contract 
factories in Jordan, the larger factories--there's 59 of them--
that those factories largely now adhere to Jordanian law. Those 
workers have received their passports back. They're working 11 
hours, not 15 hours. They're getting at least the minimum wage. 
However, in the smaller subcontract factories, of which there 
are 55, violations continue. At the Classic factory in 
Bangladesh, workers are working 14 hours a day, 7 days a week, 
today--and collapsing of exhaustion.
    In the Hussein Jordan factory, workers have not received 
their passports back. If they come to work 1 minute late, 
they're beaten.
    So, there are still problems. But the good news is that the 
Jordanian Government, under pressure, is moving definitely in 
the right direction. In fact, they've closed about a dozen 
factories and relocated 1,000 workers to better factories. So, 
they're acknowledging these very, very terrible conditions.
    Regarding China, we did a recent investigation of a factory 
called Kaisi, which has 700 to 800 workers making furniture 
parts for export to the U.S. And, in fact, one company in the 
United States, based in Michigan, Knape & Vogt, imported $10.4 
million worth of furniture parts from this factory in a recent 
3-month period. In this factory, workers are working 14 and a 
half to 15 hours a day, forced overtime, 8 o'clock in the 
morning until 10:30 or 11:30 at night. The workers are working 
7 days a week. They're routinely working 80 hours a week. 
They're often at the factory 100 hours a week. The workers are 
cheated of their minimum wage. This is going on in broad 
daylight. They're not paid their minimum wage, they're not paid 
any overtime premium. Our estimate is they're cheated of half 
the wages that they're legally owed under China's law.
    It gets even worse. The factories are a dangerous place to 
work, and management in the factory has set these wildly 
excessive production goals. All the workers are paid by a piece 
rate. And management has actually set production goals of 7,800 
pieces a day to 11,800 pieces a day. That means workers are 
getting--they have to produce a piece every 4 to 6 seconds, and 
they pay them six-hundredths of a cent for each operation they 
do. So, the workers are frantically going through this pace all 
day long, they're doing this 14\1/2\ to 15\1/2\ a day, and 
they're doing it under dangerous conditions.
    So, a 24-year-old, Dai Kehong, working at a stamp molding 
machine in the factory, 9 o'clock at night, 13 and a half hours 
into a shift that was going go on to 10:30 at night, both of 
his hands were crushed in the molding machine, and his right 
hand was completely mangled and deformed. He lost all the 
fingers, except his thumb and his forefinger, which are frozen 
in place and just jutting out. He can't use the hand. His left 
hand was crushed into a claw grip. He can't open it. He can't 
move the fingers. He has no use of either hand now. He needs an 
artificial limb. The factory is not paying for it, they're not 
helping him at all.
    On September 29, 2006, a worker by the name of Zhao 
Chengquang was working on furniture parts for export to Knapp & 
Vogt in Michigan, and his stool slipped out from under him, and 
his left hand got stuck in the machine and crushed it. He lost 
the whole left side of his hand. His fingers, his knuckles, and 
a large part of his left hand is gone.
    That September--September, 2006, five workers were injured 
at the factory, seriously. We estimate that six fingers were 
severed in that 1 month. You know, there's an estimate, in the 
Pearl River Delta area of factories, that 40,000 fingers a year 
are severed in China. They don't have workman's comp. They have 
workman's comp, as a law, but the factories just ignore it 
completely, so they don't have work injury insurance for the 
workers. So, when the workers are injured, they're basically 
just abandoned with nothing.
    Living conditions are abysmal. Workers are housed in 
dormitories, six to eight workers to a room. Double-level 
bunkbeds line the wall. Workers hang plastic over the openings 
for a little bit of privacy. They're fed food that the workers 
describe as absolutely horrible. There's no hot water; so, when 
they want to bathe in the wintertime, they actually have to 
walk down four flights of stairs, get a little plastic bucket, 
get hot water, and walk it back up to their room and do a 
sponge bath with it. The conditions are off the charts.
    This is a dangerous factory, where every single labor right 
in China is violated, every single labor right, and every 
single internationally recognized worker-rights standard is 
violated in broad daylight.
    The U.S. companies would never tolerate a similar treatment 
for their products. In this very factory, the U.S. companies 
worked with the Kaisi management to bring their factories up to 
international standards for their packaging, because they 
demanded their products reach the United States unharmed. So, 
they worked for a year with management to bring them up to 
speed with international standards--packing standards, so that 
their goods would arrive in the United States safely. They 
never uttered one word about the young workers in the factory 
who are being seriously injured and maimed for life--whose 
lives are now destroyed. They never said a word about the low 
payment of the minimum wage. They never said a word about no 
overtime payment. They never said a word about the miserable 
primitive living conditions. But they protected their products.
    I believe that the legislation which you and your 
colleagues have introduced, the Decent Working Conditions and 
Fair Competition Act, is the single most important action that 
can be taken in today's global economy to end the sweatshop 
abuse and to end the race to the bottom. This legislation would 
favor U.S. companies that try to live up to the law, that 
strive to live up to the law. And it would also have the impact 
of raising worker-rights standards in China and in Bangladesh, 
and in countless other countries across the world. And it would 
lift tens of millions of workers up to improved conditions.
    It's wrong----
    Senator Dorgan. I want you to summarize, if you would. I 
didn't want to interrupt you, until you had----
    Mr. Kernaghan. Yes.
    Senator Dorgan.--properly supported the legislation I had 
introduced.
    [Laughter.]
    Mr. Kernaghan. But----
    Senator Dorgan. But----
    Mr. Kernaghan. It----
    Senator Dorgan. But I need to have you summarize it, if 
you----
    Mr. Kernaghan. I think the legislation is the single most 
important thing to end sweatshop abuse in the United States and 
around the world.
    [The prepared statement of Mr. Kernaghan follows:]

     Prepared Statement of Charles Kernaghan, Executive Director, 
                        National Labor Committee
    Mr. Chairman, members of the Committee, I appreciate the 
opportunity to testify at this very important hearing regarding worker 
rights standards in the global economy.
    The U.S.-Jordan Free Trade Agreement went into effect in December, 
2001. Over the next 5 years, apparel exports from Jordan to the U.S. 
soared by 2,300 percent, growing from $52.1 million in 2000 to $1.2 
billion in 2006.
    The U.S.-Jordan Free Trade Agreement was reported to be a model 
agreement, since for the first time, worker rights standards and 
environmental protections were included in the core of the agreement.
    Yet something went terribly wrong, as the U.S.-Jordan Free Trade 
Agreement quickly descended into Human Trafficking and involuntary 
servitude. At least 36,149 foreign guest workers are employed in 
Jordan's 114 garment factories, at least 90 percent of which are 
foreign-owned, mostly by Asian investors. The guest workers come from 
Bangladesh, China, Sri Lanka and India.
    Bangladeshi guest workers had to pay $1,000 to $3,000 each to 
unscrupulous manpower agencies in Bangladesh to purchase a two-to-
three-year contract to work in Jordan. This is an enormous amount of 
money in Bangladesh, and as poor workers, they had to borrow the money 
on the informal market at exorbitant interest rates of five to 10 
percent per month.
    From the minute they took the loans, these workers were in a trap, 
and a race against time to pay off their large debts. But the workers 
were promised that they would be able to earn $134.28 a month for 
regular hours and up to $250 a month with overtime. All housing, food 
and medical care would be free. The workers were told they would live 
well, ``like they do in the West.'' They would get at least 1 day off a 
week, sick days, vacation time and national holidays.
    But there was a catch: The contract tied the guest workers to just 
one factory, prohibiting them from working elsewhere.
    One hundred and fifteen workers from Bangladesh purchased contracts 
to work at the Al Shahaed Garment factory in Irbid, Jordan.
    Upon their arrival at the airport, management immediately 
confiscated their passports. Nor were the workers provided with 
residency permits, without which they could not go out on the street 
without fear of being detained by the police for lack of the proper 
papers.
    Once in the Al Shahaed factory, the workers found themselves forced 
to work shifts of 15, 38, 48 and even 72 hours straight, often going 
two or 3 days without sleep. They worked 7 days a week. Workers who 
fell asleep at their sewing machines would be slapped and punched. 
Instead of being paid the $250 a month that the ad promised, the 
workers earned two cents an hour, or $2.31 for a 98-hour workweek. 
Workers who asked for their legal wages could be imprisoned up to 3 
days without food. Workers who criticized the food the company provided 
were beaten with sticks and belts. Twenty-eight workers had to share 
one small 12-by-12-foot dorm room, which had access to running water 
only every third day. These workers sewed clothing for Wal-Mart.
    When, in desperation, the workers demanded their legal wages, they 
were forcibly deported and returned to Bangladesh without their back 
wages. Many of these workers are now hiding in Dhaka City and peddling 
bicycle rickshaws to survive. They cannot return to their home villages 
because they have no possible way to pay off the mounting debt they 
incurred to go to Jordan in the first place.
    At the Western factory, also in Irbid and producing clothing for 
Wal-Mart, Bangladeshi guest workers who were trafficked to Jordan faced 
much the same fate. They too were stripped of their passports and 
forced to work 16 to 20 hours a day, 7 days a week. Despite working 109 
hours a week, the workers routinely went for months without being paid. 
In the first 4 months of 2006, the Western workers were not paid a 
single cent in wages. There are also credible of reports of sexual 
abuse, including the rape of a sixteen year-old girl. Workers who asked 
for their wages would be beaten and threatened with forcible 
deportation.
    At the Al Safa factory in the Al Hassan Industrial Estate, a young 
Bangladeshi woman no more than 20 years of age hung herself after being 
raped by a factory manager. This happened in February 2005. She hang 
herself in a bathroom using her scarf. Her body was not immediately 
returned to Bangladesh, but rather, remained at the local morgue for 
several months. In this factory, they sewed clothing for the Gloria 
Vanderbilt label.
    The National Labor Committee released our report on Jordan in May 
2006. By July 2006, Jordan's Trade Minister at the time, Mr. Sharif Al 
Zuibi, declared: ``Our inspection regime may have failed us and may 
have failed us miserably.'' Jordan's labor department had just 88 labor 
inspectors to oversee 98,000 business operations. The primary role of 
the labor department inspectors was to issue work permits to foreign 
guest workers. By law, Jordan's unions were not permitted to organize 
foreign workers.
    Acting quickly, the Jordanian Government to date has closed at 
least ten of the worst garment factories and relocated over 1,000 
workers to better factories. Across Jordan, especially in the 59 larger 
direct contract factories, conditions have improved. Guest workers 
passports have been returned and most workers now have their necessary 
residency permit. At most, workers are toiling 11 hours a day and not 
the 15-plus-hour shifts that were routine in the past. Most workers are 
being paid at least the legal minimum wage. Factory conditions and 
treatment have improved.
    However, problems continue in some of the 55 smaller subcontract 
factories in Jordan.
    In the Concord Garment factory in Cyber City Industrial Park near 
Irbid, 350 workers have not been paid for the last 3 months, despite 
the fact that they are forced to work 15 to 16 hours a day, from 8 a.m. 
to 11 p.m. or 12 midnight, 7 days a week. Women workers report being 
cursed at, slapped and punched by factory managers. There is no heat or 
hot water in the dorm, and even the toilets lack running water several 
days a week. Many of the workers are falling ill. If any worker asks 
for their legal rights, they will be immediately attacked, beaten and 
deported. Nor has management returned the workers' passports or issued 
their necessary work permits.
    At the Classic Fashion factory in Jordan, 500 workers are required 
to work 7 days a week, putting in routine 14-hour shifts from 7:30 a.m. 
to 9:30 p.m. As a result, the workers are sick and exhausted There are 
no sick days and management provides no medical care. This factory 
produces for Jones Apparel, the Gloria Vanderbilt label.
    At the Hussein Jordan Garment factory in the Al Hassan Industrial 
City, the workers are being forced to work 10 regular hours rather than 
the legal 8 hours. If workers arrive 1 minute late to the factory, they 
are beaten. Nor have these workers received their passports and 
residency permits. They are being paid below the legal minimum wage and 
the factory is illegally charging workers for food and medical care. 
All overtime is obligatory and sick days and national holidays are not 
respected. The Hussein Jordan factory produces for Victoria's Secret.
    On balance however, much has improved in Jordan's garment industry, 
and the government is seriously responding to reports of continued 
violations. But must remains still to be done. The guest workers are 
still denied the freedom of association and the right to organize.
    We do not know of a single prosecution of factory owners for human 
trafficking and holding tens of thousands of workers under conditions 
of involuntary servitude.
    Nor do we know of any case where the foreign guest workers were 
paid the outstanding back wages legally due them. But there is hope 
that the significant improvements will continue.
    A second concrete example I want to raise is that of the Kaisi 
Metals factory in Guangzhou in the south of China, where 600 to 700 
workers toil under dangerous and illegal conditions producing furniture 
parts for export to U.S. companies. Among those companies is the Knape 
& Vogt Manufacturing Company--located in Grand Rapids, Michigan--which 
imported $10.4 million-worth of goods from the Kaisi factory in a 
recent three-month period. Every single labor law in China is routinely 
violated at the Kaisi factory, along with the International Labor 
Organization's core worker rights standards, while the U.S. companies 
sourcing production there say and do nothing.
    Grueling, exhausting, numbing, dangerous and poorly paid would be 
the only way to describe the workday at the Kaisi Metals factory. Kaisi 
workers are routinely forced to toil 14 \1/2\ to 15 \1/2\ hours a day, 
from 8 a.m. to 10:30 or 11:30 p.m., often 7 days a week. It is not 
uncommon for the workers to be at the factory 100 hours a week, while 
toiling 80 or more hours.
    Workers are paid on a piece rate basis. It is standard for 
management to arbitrarily set wildly excessive production goals 
requiring workers to complete 7,780 to 11,830 pieces in a day, which is 
640 to 980 operations an hour--or one piece every four to 6 seconds--
for which they are paid an astounding six-hundredths of a cent per 
piece. The work pace is brutal, relentless and dangerous.
    Workers are paid below the legal minimum wage and cheated of their 
overtime premium, earning less than half of what they are legally owed. 
Workers are paid just $24.33 for a 77-hour work week, and 32 cents an 
hour. The workers should be earning at least $52.56. The current 
minimum wage is 58 cents an hour.
    It is a dreary life for the 600 to 700 workers at the Kaisi 
factory, who are housed in primitive over-crowded company dorms located 
on the seventh floor of the factory. Each room measures 11 feet by 24 
feet and its walls are lined with double-level metal bunk beds. There 
is no other furniture, not even a bureau, a table or chair. Six to 
eight workers share each room. For privacy, the workers drape old 
sheets and plastic over the openings to their bunks. There is a tiny 
bathroom, which the workers say is filthy. There is no hot water and 
any workers who want to bathe during the winter must walk down four 
flights of stairs to fetch hot water in a small plastic bucket and 
return to their dorm room for a sponge bath. The dorms are very over-
crowded and the air reeks of perspiration and sweaty feet.
    Married couples must live ``off campus'' under equally deplorable 
conditions, since they are able to afford only the smallest, most 
primitive one-room apartments. Zhu Shenghong, who lost three fingers at 
the Kaisi factory, lives in a single room with his wife. Their only 
furniture consists of a bed, which is broken, a few primitive wooden 
tables and three tiny chairs Zhu made himself before he was injured, 
using scraps of wood he picked up on the street. They cannot afford a 
television. The toilet is an outhouse, and the kitchen is in a hallway 
partitioned with some planks of wood. Zhu and his wife often cook with 
wood, largely subsisting on turnips. This is all that two people, both 
working in export factories, can afford.
    Much worse still is the fact that the Kaisi factory is a dangerous 
place to work, where scores of young people have been seriously 
injured, and some maimed for life.
    Dai Kehong was just 24 years old when both his hands were crushed 
while working on a punch press molding machine producing furniture 
parts for export to U.S. companies. It happened at 9 p.m. when Dai was 
13 hours into his routine 15 \1/2\ hour shift. Dai's right hand is 
mangled and deformed, with only the thumb and forefinger remaining, but 
frozen in place. His left hand was also crushed and frozen into a claw, 
as he is unable to bend or straighten any of his fingers. He has no 
ability to use either hand and will need an artificial limb.
    On September 29, 2006, Zhao Chengquang's left hand was crushed 
while he was working on an order for the U.S. Knape & Vogt company. His 
stool suddenly slid out from under him leaving his left hand caught in 
the machine. His hand was crushed, severing two fingers with the 
knuckles and a large part of his left hand.
    In September 2006 alone, five Kaisi factory workers were seriously 
injured, resulting in the loss of at least six fingers.
    In direct violation of China's laws, the Kaisi factory failed to 
inscribe its workers in the mandatory national work injury insurance 
program, which is China's equivalent of Worker Compensation. Kaisi 
management also failed to report these serious work injuries to the 
local authorities. The Kaisi factory refused to pay anywhere near the 
full compensation these injured workers were legally owed. Management 
is even refusing to pay for Dai Kehong's artificial limb.
    U.S. companies could never tolerate such abusive treatment of their 
products and have gone out of their way to work with the Kaisi factory 
to bring their contractor into compliance with international packing 
specs so that their products will not be damaged en route to the U.S. 
Knape & Vogt spent 1 year working with its contractors in China 
spelling out acceptable criteria that its packing must meet and 
demanding that each package pass rigorous tests before shipment.
    At the same time, the U.S. companies stood by and did not say a 
word as scores of young workers were injured and maimed due to 
dangerous working conditions. Nor did the companies sourcing production 
at the Kaisi factory utter a single word to protest the 7-day, 80-hour 
work weeks, or the fact that workers were being paid below the legal 
minimum wage and cheated of their overtime premium while working on 
their goods. Nothing was done to bring the primitive dorm conditions up 
to a level of acceptable decency.
    In fact, the companies give every indication that they care much 
more about their products than about the human beings in China who make 
them.
    This is just one example--and there are hundreds--of how easily the 
paper-thin labor laws in China are flaunted by the multinational 
corporations with complete impunity. Here too, the voluntary corporate 
codes of conduct and private monitoring schemes have failed 
completely--and with such tragic results for the workers.
    Senator Dorgan, I believe that the Decent Working Conditions and 
Fair Competition Act, which you and your colleagues recently introduced 
in the U.S. Senate, is the single most important action that can be 
taken to end the race to the bottom in the global economy. Once passed, 
this legislation will reward decent U.S. companies which are striving 
to adhere to the law. Worker rights standards in China, Bangladesh and 
other countries across the world will be raised, improving conditions 
for tens of millions of working people. Your legislation will for the 
first time also create a level playing field for American workers to 
compete fairly in the global economy.
    Thank you for allowing me the opportunity to testify on this 
critical issue, of raising standards in the global economy rather than 
lowering them.

    Senator Dorgan. We have your entire statement as a part of 
the record, and you've included a great deal of the 
information, some of which you've noted today, Mr. Kernaghan. 
And thank you. Thank you very much for your work and your 
testimony.
    Mr. English is the person who's here on behalf of the 
United Steelworkers, representing the president, Leo Gerard, 
who was not able to be with us today.
    Mr. English, thank you for being with us. You may proceed.

    STATEMENT OF JAMES D. ENGLISH, INTERNATIONAL SECRETARY-
                 TREASURER, UNITED STEELWORKERS

    Mr. English. Thank you, Senator Dorgan.
    My name is Jim English, and I'm the Secretary-Treasurer of 
the United Steelworkers of America, and I'm here in support, 
today, of Senate bill 367.
    Senator I would thank you for introducing the bill, thank 
you for having this hearing. And I'd also thank you for ``Take 
This Job and Ship It.'' It's a book that we've distributed 
widely among our union members. I would note that there's a 
special piece in there on George Becker, the former president 
of the United Steelworkers. Mr. Becker was buried, this past 
Friday. He died after a long bout with cancer. He had served on 
the China Commission. He had really been a spokesman on behalf 
of fair trade in this country, and I appreciate the fact that 
you recognized that fact in your book.
    With me today--well, in your book, you also make reference 
to the shutdown of the Pennsylvania House furniture plant in 
Pennsylvania--with me today--and I'd ask them to stand briefly 
to be recognized--are Tom Riegle and Leroy Reagle. Their last 
names are spelled--are pronounced the same, but they're spelled 
differently. They're both men that have family--had family 
supportive jobs at making high-end quality wood furniture at a 
factory owned by Pennsylvania House, in Lewisburg, 
Pennsylvania. Both Tom and Leroy were long-time woodcraftsmen 
who permanent lost their jobs on December the 28th of 2004, 
along with 425 other USWA-represented employees at Pennsylvania 
House. The corporate owner of Pennsylvania House decided to 
close the Lewisburg factory and move production to China, where 
labor costs and working conditions are easily exploited. Today, 
Pennsylvania House furniture products are largely made in 
China.
    It is not unusual for elected officials, when dealing with 
the question of trade, to say that American workers are the 
most productive in the world, and that they can--given a level 
playing field, they can compete with anyone. The problem is 
that we don't have a level playing field in the global economy 
today. You can't have a level playing field when American 
workers are being asked to compete against forced labor. You 
can't have a level playing field when American workers are 
being asked to compete against persons who are required to work 
long hours without getting paid. You can't have a level playing 
field when workers are jailed for trying to form an independent 
union. You can't have a level playing field when workers in the 
United States are forced to compete against workers in other 
countries who are required to work at subsurvival wages.
    This legislation would be a good step in the direction of 
trying to create that level playing field. And I applaud you, 
Senator, for introducing it, because I think it is a--it's a 
good, strong step in that direction. But, more important than 
that, it is a statement to the world that this country stands 
strong in favor of a moral principle that people who work for a 
living should get a decent wage, should be able to work in 
conditions that are tolerable, that they should be able to have 
the right to organize, have the right to bargain collectively.
    On behalf of the Steelworkers, I've had the privilege of 
visiting Mexico on a number of occasions with George Becker, 
people who work for the Steelworkers have visited China, have 
visited Jordan. And it is a appalling to look at the conditions 
in which people are forced to live because of the poverty wages 
that they are paid. And I think that this bill is a good first 
step in trying to correct that condition. Until we correct that 
condition, we cannot truly say that we have a global economy 
that works for all people.
    So, I thank you for the legislation, and indicate to you 
our strong support for it.
    [The prepared statement of Mr. English follows:]

    Prepared Statement of James D. English, International Secretary-
                     Treasurer, United Steelworkers
    Mr. Chairman, members of the Committee, on behalf of the 1.2 
million working and retired Steelworkers in the United States and 
Canada, I appreciate this opportunity to testify in support of Senate 
Bill 367, The Decent Working Conditions and Fair Competition Act. I 
applaud you for your leadership in authoring this important 
legislation. And I applaud as well Senator Graham from South Carolina 
who is a primary co-sponsor on the bill. All too frequently, 
policymakers have ignored the dark side of increased globalization and 
its impact on workers both domestically and around the globe. Your 
actions suggest a growing bi-partisan awareness that new measures are 
needed to establish effective standards to defend the most vulnerable 
among us if the promise of expanded international trade is to be 
realized.
    For far too long, the United States Government's trade agenda has 
focused on corporate protections while ignoring the lives of human 
beings toiling within the global economy. One result is that products 
reaching American soil often come with the taint of being produced in 
inhumane conditions. Many workers making products destined for the 
United States do not have the option of rejecting forced labor, unsafe 
conditions, indecent pay, discrimination, or other violations of their 
rights. Instead, because of their poverty and desperation, they are the 
victims of a global trading system that allows, if not encourages, 
horrendous working conditions to swell corporate bottom lines.
    The recent period of trade liberalization has not been kind to 
working Americans. Despite the negotiation of a series of so-called 
free trade agreements over the last dozen years, real income and wages 
in the U.S. are stagnating or falling, inequality is growing, more 
people are in poverty, debt is growing faster than income, and millions 
of decent, good paying manufacturing jobs have disappeared. Unfair 
trade policies, and the massive and ultimately unsustainable trade 
deficits that have resulted, are a key contributing factor to the job 
loss, destroyed communities, and falling wages and benefits that 
American workers are facing today.
    These problems are not limited to U.S. workers. Indeed, for workers 
in the countries of many of our trading partners, the situation is 
considerably worse. In export processing zones alone, hundreds of 
thousands, if not millions of workers are trafficked to work in 
sweatshops, making products for export to the U.S. Many of these 
workers have their passports confiscated and are forced to work 
inhumane hours for pittance wages, sometimes going months without a 
paycheck. These workers are often denied their basic human rights at 
the workplace, especially the right to organize and bargain 
collectively, even while they make products for some of the largest and 
richest corporations in the world. If corporations can demand and win 
strong, enforceable laws, backed by sanctions to protect their products 
and intellectual property, certainly workers should demand and achieve 
laws to protect the rights of workers who make those products. The 
enactment of S. 367 would be a significant step forward in bringing 
some balance to the global economy.
    The Decent Working Conditions and Fair Competition Act simply 
states that if products are made in sweatshop conditions, they are not 
welcome in our markets. A product is considered a sweatshop good if it 
is produced under conditions that do not meet core labor standards. 
Those standards include the right to associate, organize and bargain 
collectively, a prohibition on forced or child labor, and basic 
conditions of work including wages, safety and health protections, and 
hours of work.
    The idea of linking conditions of work to trade is not new. It has 
been present in our national dialogue on international economic affairs 
for more than 100 years. The McKinley Tariff of 1890 included a 
provision banning the import of prison made goods. In 1912, the U.S. 
banned the import of white phosphorous matches because of health 
hazards associated, not with their use, but with their production. The 
Administrations of President Eisenhower, President Nixon, President 
Reagan, the first President Bush, and President Clinton all sought to 
include worker rights and standards in multilateral trade agreements. 
Their collective reasoning was perhaps best expressed 20 years ago in a 
1987 letter to the House Ways and Means Committee from President 
Reagan's Labor Secretary Bill Brock who wrote:

        ``Those countries which are flooding world markets with goods 
        made by children, or by workers who can't form free trade 
        unions or bargain collectively, or who are denied even the most 
        minimum standards of safety and health are doing more harm to 
        the principle of free and fair trade than any protectionist 
        group I can think of.''

    While sadly little progress has been made at the multilateral 
level, Congress has over the last 20 years introduced the concept of 
linking worker rights to trade in a variety of U.S. laws. The Caribbean 
Basin Initiative, the Generalized System of Preferences, the Andean 
Trade Preference Act, the Overseas Private Investment Corporation, and 
Section 301 of the 1988 Trade Act, to name just a few, all contain some 
form of worker rights conditionality. While all well intentioned, 
enforcement of their worker rights provisions has been lacking.
    It is in this context that The Decent Working Conditions and Fair 
Competition Act holds the most promise. In assigning enforcement 
responsibilities to both the Customs Service and the Federal Trade 
Commission, the bill sends a clear message that abusive labor 
conditions in trade will no longer be tolerated. Perhaps more 
importantly, by creating a private right of action, the indifference or 
passivity on the part of the Executive Branch will no longer be able to 
block needed action. I would suggest however, that the section of the 
bill that deals with who has the standing to sue, be amended to include 
workers and their unions. Workers are on the front lines of unfair and 
abusive trade and need to have the ability to seek redress in the same 
manner as companies or investors.
    The Decent Working Conditions and Fair Competition Act seeks to 
address one of the questions that need to be answered as our Nation 
confronts an expanding global economy. This is not about free trade or 
protectionism, but rather what are the rules that should be in place to 
insure just and fair competition. For workers, the overriding issue in 
discussions on international trade is not free trade or protection, 
open markets or closed markets, or more investment or less. Rather, the 
debate for us is over how the gains of economic activity are to be 
distributed and who has a say in making that determination. If the 
growing internationalization of the U.S. economy results in economic 
growth, we are concerned with who will benefit--the tiny number of 
people on the top rungs of the economic ladder--or the vast numbers on 
the bottom and middle rungs. And we certainly do not believe that the 
only choice is between autarky and an unrestrained free market.
    History teaches that there is no reason to expect that an 
unregulated free market will bring sustained equitable economic growth 
and progress. For trade unionists, most of the historic achievements of 
our movement, the establishment of a minimum wage, the abolition of 
child labor, the development of workplace health and safety laws, as 
well as the establishment of collective bargaining were intended to 
temper and restrain some of the most brutal effects of the free market.
    We now have to extend our domestic experience into the 
international arena. By setting a floor on labor rights and standards, 
The Decent Working Conditions and Fair Competition Act does exactly 
that. Consumers have a right to know the products they purchase are not 
produced in sweatshop conditions. Businesses have the right to compete 
fairly, and not with companies that engage in worker abuses. 
Shareholders have the right to invest with the knowledge that they are 
not supporting sweatshop practices. And, most importantly, workers 
around the globe have the right to earn a living without the 
degradation of toiling in inhumane conditions.

    Senator Dorgan. Mr. English, thank you very much.
    Let me make a note about Pennsylvania House furniture. One 
of the things that struck me about that is that it was a high-
end furniture company. The furniture, made by craftsmen and 
women, who cared a lot about their jobs. Those jobs went to 
China. And the Pennsylvania wood is actually shipped to China 
and then put together in China, sent back to our country, still 
as Pennsylvania House furniture. Apparently the skilled 
workers, the craftsmen at Pennsylvania House furniture, turned 
over the last piece of furniture coming off the line at 
Pennsylvania House furniture, as it came off the line, and 
decided they would all sign their names on the bottom of the 
last piece of American domestic-made Pennsylvania House 
furniture. Some customer somewhere purchased something that has 
the proud signature of craftsmen who cared about their work, 
and did good work, who signed the bottom of that piece of 
furniture. But they can't compete with 20- and 30-cent-an-hour 
labor. And that labor is sufficient to even allow the shipment 
of the wood to China to be produced and to then be shipped back 
to American consumers.
    I think it is a compelling story, and one that deserves the 
attention of Congress as we consider this issue of 
globalization and its impact on this country.
    Mr. Socolow is the Commissioner of the New Jersey 
Department of Labor and Workforce.
    Mr. Socolow, we appreciate your being here today, and you 
may proceed.

 STATEMENT OF HON. DAVID J. SOCOLOW, COMMISSIONER, NEW JERSEY 
         DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT

    Mr. Socolow. Senator Dorgan, thank you very much for 
holding this important hearing, and thank you for the 
invitation to testify about what States like New Jersey are 
doing to help stop workers from being abused in sweatshop 
conditions.
    We are using the purchasing power of State government to 
counteract sweatshop labor practices. And we've recognized 
that, rather than buying goods based solely on the lowest 
possible price, we ought to include, in our procurement 
policies, a recognition of the true cost of the apparel and 
other goods that we buy.
    Over the past 2 years, New Jersey State government agencies 
purchased nearly $7 million worth of apparel for uniformed 
staff, employees, and individuals for whom the State provides 
clothing and linens in our State correctional and developmental 
institutions. And it's estimated that all State governments 
purchase something on the order of $400 million a year worth of 
those types of apparel items.
    In 2002, our State government took a historic step forward 
to address sweatshop abuses by implementing Executive Order 20, 
which requires that all apparel purchased by the State of New 
Jersey be manufactured in the United States under fair labor 
conditions. And this procurement policy is making a real 
impact, Mr. Chairman, in protecting workers. We have avoided 
buying goods that were not manufactured in accordance with our 
required labor practices. And there are specific examples of 
that in my written testimony, which I've submitted for the 
record. What all of those examples show is that we're often 
alerted to these potential abuses by competitors of the 
contractors and bidders during the procurement process. And 
that is, of course, a market-based mechanism whereby one bidder 
would notify us that another bidder might be attempting to 
supply us with goods produced under abhorrent labor conditions. 
And that way, we can keep sweatshops out of our State supply 
chain while minimizing the cost to State government.
    It is worth paying a small premium--typically around 20 
percent--to avoid supporting sweatshops with our residents' tax 
dollars in order to uphold the values of the people of New 
Jersey.
    And now, Governor Corzine of New Jersey has acted to take 
the next step toward ending worldwide sweatshop conditions. 
Last September, New Jersey joined a State and local consortium 
of governments, which was proposed originally by Governor 
Baldacci of Maine, with the goal of ending the use of State 
taxpayer funds to purchase apparel manufactured in sweatshops. 
The inaugural meeting of this consortium is planned for next 
month with representatives from the States of Maine, New 
Jersey, and Pennsylvania. And what we're going to do is 
establish standards for production of apparel, we're going to 
implement monitoring to investigate factories around the world, 
to root out sweatshop conditions and abuses. But, most of all, 
we're going to combine our purchasing power to try to create a 
market niche for fairly produced products.
    Working together, State and local governments can strike 
with even greater force against sweatshop conditions. With the 
buying power of these many entities joined in a national 
consortium, we hope that global manufacturers will recognize 
the value of producing goods for our market while meeting basic 
workplace requirements, paying living wages, offering fixed 
working hours, putting an end to the use of child labor, 
ensuring the right to collective bargaining, and protecting 
worker health and safety.
    Mr. Chairman, a single State, town, or university cannot, 
on its own, end the global exploitation of sweatshop workers, 
but each of us can take steps to combat the economic incentives 
that give rise to sweatshop abuses.
    So, thank you for the opportunity to testify. I appreciate 
the opportunity to answer your questions.
    [The prepared statement of Mr. Socolow follows:]

 Prepared Statement of Hon. David J. Socolow, Commissioner, New Jersey 
             Department of Labor and Workforce Development
State Initiatives to Prevent Abusive Sweatshop Labor Conditions
    Chairman Dorgan, members of the Subcommittee, thank you for this 
opportunity to come before you to discuss what states like New Jersey 
are doing to help stop workers from being abused in sweatshops. I am 
David Socolow, and I serve as the Commissioner of the New Jersey 
Department of Labor and Workforce Development.
    As this committee has heard from the compelling personal stories of 
witnesses at today's hearing, workers continue to be exposed to 
sweatshop conditions around the world, leading to horrendous child 
labor abuses, dangerous working conditions and unconscionably low wage 
levels, as global manufacturers produce low-cost apparel for the 
world's most affluent nations.
    Here in the United States, governments at both the State and 
Federal levels have worked for almost a century to eliminate these 
terrible working conditions from our economic landscape. As state labor 
commissioner, I lead an agency whose daily mission is to ensure that 
the workers of New Jersey are paid fair wages and are provided safe 
workplaces. However, now that much of the apparel in the global 
marketplace is manufactured overseas, we must not turn a blind eye to 
sweatshop abuses elsewhere that we would not tolerate in our own 
backyard.
    We can do our part by using the State's purchasing power to 
counteract sweatshop labor practices. Rather than buying goods based 
solely on the lowest possible price, we should include in our 
procurement policies a recognition of the real cost of the apparel we 
buy. Such enlightened procurement policies take into account the harm 
that sweatshop conditions cause, not only to those workers exploited in 
overseas factories, but also to American workers and manufacturers who 
cannot compete against unscrupulous contractors paying poverty wages 
while ignoring workplace health and safety.
New Jersey's Apparel Procurement Executive Order
    In my home state of New Jersey, over the past 2 years, State 
governmental agencies purchased more than $7 million worth of apparel 
for uniformed staff, employees and individuals for whom the State 
provides clothing, and linens in our State correctional and 
developmental institutions.
    In 2002, our State government took an historic step toward 
addressing sweatshop abuses by implementing Executive Order 20, which 
requires that all apparel purchased by the State of New Jersey be 
manufactured in the United States under fair labor conditions. 
Moreover, this Order requires contractors providing apparel to the 
state to provide the names and locations of all subcontractors involved 
in the manufacture of that apparel and to sign Affidavits certifying 
that: their workers are paid a ``non-poverty wage''; workers are 
afforded a mechanism to resolve employer-employee disputes; the 
employer is committed to neutrality in regard to union organizing 
efforts; and that workers are afforded a safe and healthy work 
environment free from discrimination.
    This policy is making a real impact in protecting workers. In one 
recent example, a winning bidder swore in an affidavit to supply the 
State with domestically manufactured apparel at a cost lower than three 
other bidders who offered non-domestic product. When we found in an 
audit that the company had supplied a mix of both domestic and imported 
products, we gave them a choice: give up the contract, or provide only 
linens manufactured according to the State's anti-sweatshop standards. 
The company agreed to provide sweat-free products and this was 
confirmed in subsequent audits.
    In another case, a losing bidder challenged the recommended award 
of an apparel contract to another vendor. In responding to the protest, 
the winning bidder withdrew their affidavit, stating that they could 
not supply the domestically made apparel at the prices they bid. After 
a re-bid, the original winning bidder made a new offer to supply 
domestically produced apparel at a price 20 percent higher than the 
lowest bid for imported product. New Jersey has found that this is the 
typical price differential required to avoid purchasing products made 
in sweatshops. It is worth paying this small premium with our 
residents' tax dollars to uphold the values of the people of our state.
    In implementing the State's Apparel Procurement Executive Order, we 
have been alerted to potential abuses by competitors of contractors or 
bidders during the procurement process. This market-based mechanism is 
vital to enforcing New Jersey's apparel procurement standards while 
minimizing the cost to State government. In this way, the State can 
work for the best interests of the people we represent.
National Initiative: State and Local Government ``Sweat-Free'' 
        Consortium
    While our Apparel Procurement Executive Order has provided New 
Jersey with a useful tool to avoid purchasing sweatshop-produced 
apparel, Governor Corzine has acted to take the next step toward ending 
worldwide sweatshop conditions. Last September, Governor Corzine 
announced that New Jersey would join a State and Local government 
consortium proposed by Governor Baldacci of Maine, with the goal of 
ending the use of State taxpayer funds to purchase apparel manufactured 
in sweatshops. The inaugural meeting of this consortium is planned for 
next month with representatives from the states of Maine, New Jersey 
and Pennsylvania, and we are currently recruiting other state and local 
governments to join this effort.
    This consortium initiative will be modeled on the efforts of more 
than 160 colleges and universities that have banded together to end 
sweatshop production for collegiate apparel under the Workers Rights 
Consortium (WRC). The WRC sets high standards for the production of 
collegiate apparel and investigates factories around the world to root 
out sweatshop conditions and abuses.
    As with colleges and universities, state and local governments are 
a group of buyers with the common interest of avoiding sweatshop-
produced goods. To date, more than 170 state and local jurisdictions 
across America have adopted procurement policies aimed at eliminating 
sweatshops from their supply chain. Now, working together, State and 
local governments can strike with even greater force against sweatshop 
conditions.
    With the buying power of all of these entities joined in a national 
consortium, global manufacturers will recognize the value of producing 
goods for this market while meeting basic workplace requirements, 
including paying living wages, offering fixed working hours, putting an 
end to the use of child labor, ensuring the right to collective 
bargaining and protecting worker health and safety.
    A single state, town or university cannot end the global 
exploitation of sweatshop workers. But each of us can take steps to 
combat the economic incentives that give rise to sweatshop abuses.
    Thank you again for the opportunity to testify today. I look 
forward to responding to your questions.

    Senator Dorgan. Mr. Socolow, thank you very much. That is 
an interesting approach, and one that gives me comfort, to see 
that there is activity at the State level on these issues.
    Mr. Griswold is the director of the Center for Trade Policy 
Studies at the Cato Institute. We've had occasion at previous 
times, to discuss trade.
    Mr. Griswold, welcome, and you may proceed.

  STATEMENT OF DANIEL T. GRISWOLD, DIRECTOR, CENTER FOR TRADE 
               POLICY STUDIES, THE CATO INSTITUTE

    Mr. Griswold. Chairman Dorgan and members of the 
Subcommittee, thank you for inviting the Cato Institute to 
testify today on global working conditions.
    First, we should reject any notion that American workers 
are pitted in zero-sum competition with workers in poor 
countries. There is no race to the bottom in labor standards. 
Global incomes and working conditions can rise for workers in 
all countries that participate in the global economy. As 
America has become more globalized in the last 25 years, 
American workers and their families have enjoyed significant 
increases in real compensation, disposable incomes, and wealth.
    Nor has trade with developed countries undermined America's 
manufacturing base. Output of America's factories last year was 
more than 50 percent higher than it was in the early 1990s, 
before we joined NAFTA and the World Trade Organization. 
American factories are producing more aircraft and 
pharmaceuticals, more sophisticated machinery and 
semiconductors, more chemicals, and even passenger vehicles and 
parts, than 15 years ago. We can produce more with fewer 
workers, because manufacturing productivity has been growing so 
rapidly.
    When U.S. multinational companies invest abroad, their 
primary motivation is not a search for low wages and low 
standards. More than low costs, they seek wealthy consumers, 
skilled workers, an infrastructure that works, the rule of law, 
political stability, and the freedom to trade and repatriate 
profits. That is why more than 80 percent of U.S. outward 
manufacturing direct investment flows to other high-income, 
high-standard economies, such as the European Union, Canada, 
and Australia. Trade and globalization are lifting wages and 
working conditions for hundreds of millions of people in 
developing countries. The pay and working conditions in 
foreign-owned factories and export industries are usually much 
better than in the local domestic economy. Those jobs offer 
poor workers, especially young women, their best opportunity at 
financial independence and the simple pleasures and dignities 
of life that we take for granted.
    According to the World Bank, the share of the world's 
population living in absolute poverty has been cut in half 
since 1981, from 40 percent to 19 percent, and poverty has 
fallen most rapidly in those areas of the world that have 
embraced globalization the most aggressively, including China. 
By raising incomes in poor countries, free trade and 
globalization have helped pull millions of kids out of the work 
force and helped them enroll in school, where they belong.
    The International Labor Organization recently reported that 
the number of children in the world, ages 10 to 14, who are 
working rather than attending school, has dropped by 11 percent 
since their previous report in 2002. There are 20 million fewer 
Halimas today than there were just 4 or 5 years ago. And it's 
not because of a legislative billy club, it's because of trade 
and growth in developing countries. The number working in the 
most hazardous jobs has dropped even more steeply, 26 percent. 
Parents in poor countries love their children just as much as 
we love our own. When they rise above a subsistence income, the 
first thing they do is remove their children from the work 
force and put them in school. Studies confirm that labor-force 
participation rates by children decline sharply with rising per 
capita GNP.
    The overwhelming majority of child laborers toiling in poor 
countries work in sectors far removed from the global economy. 
More than 80 percent work without pay, usually for their 
family, and typically on subsistence farming. I notice we don't 
have any representative from a rural farming area, where most 
poor people live in the world, and most child laborers toil. 
Most others work for small-scale domestic enterprises, 
typically nontraded services, such as shoe-shining, newspaper 
delivery, and domestic service.
    So-called sweatshop conditions persist in poor countries 
today, not because of globalization, which is a relatively new 
phenomenon, but because of poverty, poverty perpetuated by 
their own governments' failed policies of protectionism, 
inflation, corruption, hostility to foreign investment, and 
lack of legally defined property rights. Globalization is not 
the cause of bad working conditions, but the best hope for 
improving them.
    Withholding trade benefits because of alleged sweatshops 
would, in effect, punish poor countries for being poor. Trade 
sanctions would eliminate the very export-oriented jobs that 
are pulling standards upwards, forcing workers into informal 
domestic sectors, where wages and working conditions and labor-
rights protections are worse. Lower wages paid to parents would 
make it more difficult for families on marginal incomes to keep 
their children in school and out of factories or fields.
    If Members of Congress want to encourage higher labor 
standards abroad, they should support free trade and investment 
flows so that less-developed countries can grow more rapidly 
and make more progress against poverty. Congress should seek a 
more robust International Labor Organization that could 
systematically monitor and report on enforcement of labor 
rights in member countries. Civil-society organizations can 
wage campaigns of education and put a spotlights on abusive 
situations, while importers can cater to consumer preferences 
for higher standards through labeling and other promotions.
    If members of this committee want to see fewer sweatshops 
and child workers in the world--and I believe you do--then I 
recommend you support more open trade and investment ties with 
workers in developing countries.
    Thank you very much, and I look forward to your questions.
    [The prepared statement of Mr. Griswold follows:]

 Prepared Statement of Daniel T. Griswold, Director, Center for Trade 
                   Policy Studies, The Cato Institute
    Mr. Chairman and members of the Subcommittee, thank you for 
inviting the Cato Institute to testify today at this hearing on U.S. 
trade policy and global labor standards. My name is Dan Griswold, and I 
am Director of the Institute's Center for Trade Policy Studies.
    The Cato Institute is a non-profit, non-partisan, voluntarily 
funded education institution. Through research and public events, we 
have worked for three decades now to broaden the parameters of public 
policy debate to allow consideration of the traditional American 
principles of limited government, individual liberty, free markets and 
peace among nations.
    The constituents you represent have no reason to fear America's 
growing trade with people around the world, including trade with 
workers in developing countries. Expanding trade with developing 
countries not only promotes more U.S. exports, but just as importantly 
it provides a wider array of affordable products for American 
consumers--such as shoes, clothing, toys, and sporting goods. Tens of 
millions of American families benefit from more vigorous price 
competition in goods that make our lives better everyday at home and 
the office. Lower prices and more choice translate directly into higher 
real compensation and living standards for American workers.
There Is No ``Race to the Bottom''
    American workers are not pitted in zero-sum competition with 
workers in poor countries. There is no global ``race to the bottom'' on 
labor standards. Through specialization, global incomes and working 
conditions can rise for workers in all countries that participate in 
the global economy. American workers can compete profitably in world 
markets because we are so much more productive. Because of our 
education, infrastructure, efficient domestic markets, the rule of law, 
political stability, and a generally open economy, American workers 
compete and prosper in a broad range of sectors. As our country has 
become more globalized in the past 25 years, American workers and their 
families have enjoyed significant increases in real incomes, 
compensation, and wealth.
    Nor has trade with developing countries undermined America's 
manufacturing base. According to the latest figures from the Federal 
Reserve Board, the output of America's factories in 2006 was more than 
50 percent higher than in the early 1990s before NAFTA and the World 
Trade Organization came into being. American factories are producing 
more aircraft and pharmaceuticals, more sophisticated machinery and 
semiconductors, more chemicals and even more passenger vehicles and 
parts than 15 years ago. It is true that output of clothing, shoes and 
other low-tech goods has been declining, but those are not the 
industries of the future for the world's most sophisticated economy. 
U.S. factories can produce more with fewer workers because 
manufacturing productivity has been growing so rapidly.
    If there were a ``race to the bottom,'' then the lower wages and 
labor standards in less developed countries should be attracting large 
shares of global investment. Of course, developing countries attract 
foreign investment in those sectors in which they enjoy a comparative 
advantage, such as light manufacturing, but in fact, the large majority 
of manufacturing foreign direct investment (FDI) flows between rich 
countries. \1\
---------------------------------------------------------------------------
    \1\ For a more detailed critique of the ``race to the bottom'' 
thesis, see Daniel Griswold, ``Trade, Labor, and the Environment: How 
Blue and Green Sanctions Threaten Higher Standards,'' Cato Trade Policy 
Analysis no. 15, August 2, 2001.
---------------------------------------------------------------------------
    When U.S. multinational companies look to invest abroad, their 
primary motivation is not a search for low wages and low standards. Far 
more important than lower costs are access to wealthy consumers, a 
skilled work force, modern infrastructure, rule of law, political 
stability, and freedom to trade and repatriate profits. That is why 
most outward U.S. FDI flows to other high-income, high standard 
countries. Between 2003 and 2005, more than 80 percent of U.S. direct 
manufacturing abroad flowed to the European Union, Canada, Japan, South 
Korea, Taiwan, and Singapore. \2\
---------------------------------------------------------------------------
    \2\ U.S. Department of Commerce, Survey of Current Business, Bureau 
of Economic Analysis, September 2006.
---------------------------------------------------------------------------
    Openness to trade and investment leads to faster growth, which 
leads to higher wages and labor standards, including so-called core 
worker rights. That is why the world's most developed economies, which 
account for most of the world's trade and attract most of its foreign 
direct investment, also pay the highest wages, and maintain the highest 
labor standards related to freedom of association, discrimination, 
forced labor, and child labor.
Trade and Globalization Are Raising Labor Standards in Developing 
        Countries
    Trade and globalization are lifting wages and working conditions 
for hundreds of millions of people in developing countries. The pay and 
conditions offered in foreign-owned factories are almost always far 
higher than those offered in the domestic economy. In fact, working for 
multinational companies that export are almost invariably the best jobs 
available in poor countries. Those jobs offer poor workers, especially 
young women, their best opportunity at financial independence and the 
simple pleasures and dignities of life we take for granted.
    For example, apparel jobs are among the lowest paying manufacturing 
jobs in our country, but they are among the best paying in poor 
countries. A recent study from San Jose University found that the 
apparel industry actually pays its foreign workers well enough for them 
to rise above the poverty line in the countries where they invest. In 
Honduras, for example, where college protestors have targeted its 
alleged ``sweatshops,'' the average apparel worker earns $13 per day, 
compared to the $2 a day or less earned by 44 percent of the country's 
population. \3\
---------------------------------------------------------------------------
    \3\ Benjamin Powell and David Skarbek, ``Sweatshops and Third World 
Living Standards: Are the Jobs Worth the Sweat?'' Journal of Labor 
Research, 2006, Volume 27, Issue 2, pp. 263-274.
---------------------------------------------------------------------------
    Rising levels of global trade have lifted hundreds of millions of 
people out of the worst kind of poverty and working conditions. 
According to the World Bank, the share of the world's population living 
in absolute poverty, defined as an income equivalent to one U.S. dollar 
per day or less, has been cut in half since 1981, from 40.4 percent to 
19.4 percent. \4\ Poverty has fallen the most rapidly in those areas of 
the world that have globalized the most rapidly, especially China. It 
has fallen the least or actually increased in those regions that are 
the least touched by globalization, in particular sub-Saharan Africa.
---------------------------------------------------------------------------
    \4\ World Bank, World Development Indicators, 2006, available at 
devdata.worldbank.org/wdi2006/contents/Section2.htm.
---------------------------------------------------------------------------
    Openness to trade and the growth it brings exert a positive impact 
on the welfare of children in less developed countries by reducing 
rates of child labor. The International Labor Organization recently 
reported that the number of children in the work force rather than in 
school worldwide has dropped by 11 percent since its last report in 
2002, to about 200 million. The number working in the most hazardous 
jobs has dropped even more steeply, by 26 percent. \5\
---------------------------------------------------------------------------
    \5\ International Labor Organization, ``The End of Child Labor: 
Within Reach,'' Geneva, 2006.
---------------------------------------------------------------------------
    Globalization is a major reason for the positive trend in child 
labor. As household incomes rise in developing countries, especially 
wages paid to adult females, fewer families face the economic necessity 
of sending their children to work. Studies confirm that labor force 
participation rates by children aged 10 to 14 decline significantly 
with rising GNP per capita. \6\
---------------------------------------------------------------------------
    \6\ Keith E. Maskus, ``Should Core Labor Standards Be Imposed 
Through International Trade Policy?'' Policy Research Working paper no. 
1817, The World Bank, August 1997, p. 14.
---------------------------------------------------------------------------
    The overwhelming majority of child laborers toiling in poor 
countries work in sectors far removed from the global economy. More 
than 80 percent work without pay, usually for their parents or other 
family members and typically in subsistence farming. \7\ Most other 
child laborers work for small-scale domestic enterprises, typically 
non-traded services such as shoe shining, newspaper delivery, and 
domestic service. \8\ A report by the U.S. Department of Labor found, 
``Only a very small percentage of all child workers, probably less than 
5 percent, are employed in export industries in manufacturing and 
mining. And they are not commonly found in large enterprises; but 
rather in small and medium-sized firms and in neighborhood and home 
settings.'' \9\
---------------------------------------------------------------------------
    \7\ ILO, p. 8
    \8\ ``Breaking the Labor-Trade Deadlock,'' Carnegie Endowment for 
International Peace, Inter-American Dialogue, Working Papers 17, 
February 2001, p. 17.
    \9\ U.S. Department of Labor, ``By the Sweat & Toil of Children 
(Volume I): The Use of Child Labor in U.S. Manufactured and Mined 
Imports,'' 1994, p. 2.
---------------------------------------------------------------------------
    Parents in poor countries do not love their children any less than 
we love our own. When they succeed in rising above a subsistence 
income, the first thing they typically do is remove their children from 
working on the farm, domestic service, or factory and enroll them in 
school. By raising incomes in poor countries, free trade and 
globalization have helped to pull millions of kids out of the work 
force and put them in school where they belong.
    In Central America, trade liberalization and other reforms of the 
past two decades have spurred not only growth in incomes but also 
measurable social progress. According to the World Bank, literacy rates 
for men and women 15 and older have risen significantly in every one of 
the six DR-CAFTA countries since 1980. In fact, between 1980 and 2001, 
the average literacy rate in the region has increased from 67 percent 
to above 80 percent. At the same time, the percentage of children aged 
10 to 14 who are in the work force has been steadily declining in all 
six countries. The average share of children in the labor force across 
the six countries has dropped from 17.4 percent in 1980 to 10.0 percent 
in 2002. \10\ Expanding trade with the United States will likely 
accelerate those positive trends.
---------------------------------------------------------------------------
    \10\ The World Bank, World Development Indicators.
---------------------------------------------------------------------------
    It is certainly true that working conditions in less developed 
countries can strike Western observers as unacceptable if not 
appalling. But two points need to be considered. First, wages and 
working conditions are likely to be even worse in non-trade-oriented 
sectors, such as services and subsistence agriculture, sectors that 
have been largely untouched by globalization. Second, poor working 
conditions in those countries are not a new development but have always 
been a chronic fact of life. ``Sweatshop'' conditions persist today not 
because of globalization, a relatively new phenomenon, but because of 
previous decades of protectionism, inflation, economic mismanagement, 
hostility to foreign investment, and a lack of legally defined property 
rights. Globalization is not the cause of bad working conditions but 
the best hope for improving them.
Punitive Tariffs Aimed At Sweatshops Will Only Hurt the People We Are 
        Trying to Help
    Perversely, withholding trade benefits because of allegedly low 
standards would in effect punish those countries for being poor. It 
would deprive them of the expanded market access that offers the best 
hope to raise incomes and standards. The use of trade sanctions would 
target the very export industries that typically pay the highest wages 
and maintain highest standards in those countries.
    The effect of sanctions would be to shrink the more globally 
integrated sectors that are pulling standards upwards, forcing workers 
into informal, domestic sectors where wages, working conditions, and 
labor-rights protections are much lower. Lower wages paid to parents 
would make it more difficult for families on marginal incomes to keep 
children in school and out of fields or factories. ``Tough'' sanctions 
to allegedly enforce higher standards would be tough only on the 
poorest people in the world.
    Demanding that poor countries eliminate child labor under threat of 
trade sanctions can easily backfire. In 1993, Congress seemed poised to 
pass the U.S. Child Labor Deterrence Act, which would have banned 
imports of textiles made by child workers. Anticipating its passage, 
the Bangladeshi textile industry dismissed 50,000 children from 
factories. Most of those children did not end up in school but instead 
fell into prostitution and other ``occupations'' far more degrading 
than weaving cloth in a factory. \11\
---------------------------------------------------------------------------
    \11\ Jagdish Bhagwati, In Defense of Globalization (New York: 
Oxford University Press, 2004), p. 71.
---------------------------------------------------------------------------
    America's trade policy is already biased against workers in poor 
countries without making it more so through ``anti-sweatshop'' 
legislation. The United States and other rich countries currently 
impose their highest trade barriers against products of most importance 
to poor countries: clothing, textiles, and agricultural products. In 
fact, our average tariff imposed on imports from poor countries is 
about four times higher than those imposed on imports from other rich 
countries.
    Our regressive tariff system imposes punitive tariffs on workers in 
some of the poorest countries in the world. According to the 
Progressive Policy Institute, the U.S. Government collects more tariff 
revenue on the $2 billion in mostly hats and t-shirts we import from 
Bangladesh in a year than on the $30 billion in planes, computers, 
medicines and wine we import from France. Imports from Cambodia face an 
average tariff of 16, ten times higher than the average 1.6 percent we 
impose on all imports. \12\
---------------------------------------------------------------------------
    \12\ Edward Gresser, Testimony before the Senate Subcommittee on 
International Trade, October 27, 2005.
---------------------------------------------------------------------------
    Our trade policies also hurt the world's poorest farmers and their 
children. A 2002 study for the National Bureau of Economic Research 
found that higher rice prices in Vietnam were associated with 
significant declines in child labor rates. Specifically, a 30 percent 
increase in rice prices accounted for a decrease of children in the 
work force of 1 million, or 9 percent. The drop was most pronounced 
among girls aged 14 and 15. As the incomes of rice-growing families 
rose, they chose to use their additional resources to remove their 
children from work in the field and send them to school. \13\ If U.S. 
rice subsidies are indeed depressing global rice prices, as evidence 
confirms, then those same programs are plausibly responsible for 
keeping tens of thousands of young girls in Vietnam and other poor 
countries in the labor force rather than school.
---------------------------------------------------------------------------
    \13\ Eric Edmonds and Nina Pavcnik, ``Does Globalization Increase 
Child Labor? Evidence from Vietnam,'' NBER Working Paper no. 8760, July 
2002.)
---------------------------------------------------------------------------
    Attempts to ``enforce'' labor and environmental standards through 
trade sanctions are not only unnecessary but also counterproductive. 
Sanctions deprive poor countries of the international trade and 
investment opportunities they need to raise overall living standards. 
Sanctions tend to strike at the very export industries in less 
developed countries that typically pay the highest wages and follow the 
highest standards, forcing production and employment into less-
globalized sectors where wages and standards are almost always lower. 
The end result of sanctions is the very opposite of what their 
advocates claim to seek.
    If Members of Congress want to encourage higher labor standards 
abroad, they should support policies that encourage free trade and 
investment flows so that less developed nations can grow more rapidly. 
As a complementary policy, Congress could seek a more robust 
International Labor Organization that could systematically monitor and 
report on enforcement of labor rights in member countries. Meanwhile, 
civil society organizations are free to raise public awareness through 
campaigns and boycotts, while importers can cater to consumer 
preferences for higher standards through labeling and other promotions.
    The demand for trade sanctions as a tool to enforce labor standards 
confronts Americans with a false choice. In reality, the best policy 
for promoting economic growth at home and abroad--an economy open to 
global trade and investment--is also the best policy for promoting 
higher labor standards.

    Senator Dorgan. Mr. Griswold, thank you very much.
    First, let me ask you, Mr. Griswold--you have a couple of 
people sitting behind you that lost their jobs because 
businesses now ship Pennsylvania furniture to China. You 
indicated that that, generally, is not a search for cheaper 
labor. Do you really believe that La-Z-Boy didn't close down a 
Pennsylvania plant and ship those jobs to China in order to 
create a piece of furniture and ship the furniture back here 
for sale. Do you really believe that they did that for reasons 
other than cheap labor?
    Mr. Griswold. No, I think labor costs were an important 
driver there. My point is, that isn't the primary driver for 
most investment decisions made by U.S. companies. Eighty 
percent or more of our investment goes to Europe, Japan and 
Australia and countries like that where, if anything, the labor 
standards are higher. I'm just saying it's one factor of many. 
There are some industries where labor is particularly 
important, labor-intensive industries--the apparel industry, 
the footwear industry. Obviously, those are going to go to 
less-developed countries. It's all about comparative advantage. 
Their comparative advantage is lower labor cost, and that is 
important in labor-intensive industries.
    Senator Dorgan. I--you know, I wonder if Ricardo wouldn't 
be rolling in his grave at your definition of ``comparative 
advantage.'' The doctrine of comparative advantage had nothing 
to do with all of this. That was country to country, before 
corporations existed, and the doctrine of comparative advantage 
has nothing to do with what I call a--an advantage created by 
the Chinese, for example, for their workers. I'll give you the 
names of Chinese workers who are in prison because they wanted 
to organize workers. I can give you examples of the plants in 
China where they're having kids work. That's not a comparative 
advantage, some sort of natural comparative advantage, that is 
a political advantage that is created by a Chinese Government 
that doesn't enforce labor laws and environmental laws and so 
on.
    But let me try to understand where we are on this. I think 
you're saying--and I'll give you a chance to respond to this--I 
think you're saying, and some others have said, ``Look, things 
are going pretty well, dramatic improvement, fewer kids 
working, fewer sweatshops, and so on. The market system will 
deal with this.''
    Mr. Kernaghan, you're saying, ``That's not true at all. 
There are substantial sweatshop abuses. In fact, the market 
system probably won't even detect them. And, to the extent the 
market system is at work here, the companies try to get the 
cheapest goods into this marketplace and have a competitive 
advantage by employing people in sweatshops.''
    So, reconcile that. Mr. Kernaghan, you first.
    Mr. Kernaghan. Mr. Chairman, this speaks a thousand words, 
that the U.S. corporations would never allow voluntary codes of 
conduct and private monitoring schemes to defend their 
intellectual property rights or their labels or their 
trademarks. In other words, they want laws, enforceable laws, 
backed up by sanctions. It's only when you say to the 
companies, ``Excuse me, but can we have similar laws to protect 
the rights of the 14-year-old girls in Bangladesh who made this 
garment?'' And the companies frequently say, ``No, that would 
be an impediment to free trade.'' So, there are laws to protect 
the label and the trademark, but no laws to protect the human 
being. This is something companies themselves would never 
accept.
    We did reach a 232-and-a-half-billion dollar trade deficit 
with China, just this year. The figures just came out. Foreign 
investment's pouring into China, and the companies themselves 
are saying, ``U.S. wages and benefits are no longer competitive 
in the global economy.'' And this is Wall Street talking.
    We see what's happening. We see the conditions in China. 
The workers at the Kaisi factory making that furniture were 
getting 32 cents an hour, and being maimed and cheated of their 
wages. And, by the way, after we put out our report, the 
factory agreed that they were violating the law. I don't know 
why they did it, but they came out and told Associated Press 
that, ``Yes, we have been violating the laws, but we're going 
to do our best to clean up the factory.''
    Right now, it's a race to the bottom, where workers are 
pitted against each other over who will take the lowest wages, 
the least benefits, and the most miserable living and working 
conditions. This is what workers are experiencing. They need 
the right to organize. They don't need patronizing. They need 
the right to organize to fight for their legal rights.
    Senator Dorgan. All right. Now, Mr. Griswold, I think what 
you have said, generally, is, ``Third World workers are better 
off--even with sweatshops, because they have a job--than not 
having a job.'' And I guess I'd ask you to answer the question 
that might be a reflection of the impact on Third World 
workers: What about the impact on American workers? Because 
we're talking, here, about policy in one of the most advanced 
countries in the world. Alan Blinder, Former Vice Chairman of 
the Federal Reserve Board, has written that there are about 42 
to 56 million American jobs that are so-called tradable or 
outsourceable. Not all of them will be outsourced, he says, but 
even those that remain will have downward pressure on their 
income, because of the global economy.
    So, what about that group of Americans? What about American 
policy, when you talk about Third World workers being 
advantaged by at least having a job, even if it's in a 
sweatshop?
    Mr. Griswold. Well, first, I think there's a huge amount of 
evidence that American workers are better off today than we 
were 10, 20, 30 years ago, by virtually every measure. We are 
living better. We are living longer. Our wealth is greater. Our 
disposable income is greater. And globalization has played a 
role in that.
    Yes, some workers are put out of work because of trade. And 
there are some in this room. Three-hundred thousand Americans 
line up every week for unemployment insurance. The churn in the 
job market is a natural, healthy feature of a dynamic market 
economy like ours. Far more Americans are put out of work each 
year because of technology. You know, Kodak has laid off 30,000 
workers because of digital cameras that you and I own. Are we 
going to tax digital cameras to save those jobs? No. We're 
going to let the marketplace sort it out. There's things we can 
do to help people retrain, to offer unemployment insurance, to 
soften the transition. But to throw up walls and say, ``We're 
going to stop change from happening,'' is not the right policy. 
It's going to leave America a poorer, more isolated country.
    Senator Dorgan. I'm wondering, though: My impression of 
this economy is that it has produced about 5 and a half million 
people, added to the poverty rolls in the last 6 or 7 years. 
Wages and salaries are the method by which most workers get 
their income; they are the lowest percent of GDP since they 
started keeping score in 1947. And so, I always hear these 
things about averages. And you would, perhaps, say ``on 
average,'' are the numbers. I think of the story about nine 
guys sitting in a bar, nine working guys sitting in a bar, and 
Bill Gates walks in. Now, on average, all ten are wealthy. 
Nothing has changed in the lives of the other nine; it's just, 
on average, all ten are wealthy.
    We'll have a longer discussion, perhaps, about the plight 
of the American worker trying to face competition from low-wage 
workers elsewhere and from companies that want to access low-
wage workers, to produce a product to ship back to this 
country. For the purpose of providing a less-expensive product 
for consumers? Maybe. But, more importantly, for the purpose of 
expanding profits. And that's the kind of economy we have. The 
question that I have is--having built, over a century, basic 
standards that don't exist in many other parts of the world--
fair labor standards, minimum wage, safe workplace, child 
labor, and so on--are we seeing those standards diminished by 
virtue of the so-called global economy and the presence of 
sweatshops? I think the compelling evidence is yes.
    I'll give you a chance to answer that in just a moment, if 
you'll hold that thought.
    Mr. Socolow, how extensive are the States involved in this? 
You've mentioned your Governor and others. It gives me some 
good feelings to understand that you are developing policies 
that really care about conditions under which these products 
are produced. So, how extensive is it?
    Mr. Socolow. Well, right now, we'll be starting our first 
meeting with just three States, although we are--we appreciate 
this opportunity to expand our outreach to all of the 
Governors. And we are actively seeking other State governments, 
as well as local governments. You know, cities, by virtue of 
having police forces and other needs, buy a lot of apparel, as 
well as State governments, by virtue of, you know, all of our 
corrections institutions and others. So, there's a lot--there's 
a big market, that could be as big as a billion dollars 
annually, of apparel procurement, just by government.
    Senator Dorgan. And your three States are New Jersey, 
Maine----
    Mr. Socolow. New Jersey, Maine, and Pennsylvania. The--
Governor Baldacci, of Maine, Governor Rendell, of Pennsylvania, 
and, of course, my own Governor, Governor Corzine, your former 
colleague here in the Senate, who are leading the way on this. 
And so, we're hopeful that we can really create a consortium 
that includes a number of different governments, so we get as 
many of them as possible, all agreeing to create a market niche 
for buying fairly produced domestic apparel and linens.
    Senator Dorgan. Mr. English, Mr. Griswold calls the 
legislation a ``billy club,'' I think. Respond to that. You 
apparently support the legislation that I and Lindsey Graham 
have introduced. He says it's a ``billy club.'' You respond to 
that, if you would, and then I'll ask Mr. Griswold to respond.
    Mr. English. Well, I think, if you look back at the 
development of labor laws in this country, we created labor 
laws to help allow workers to organize and bargain 
collectively. We didn't go to corporations and say, ``Be nice, 
and treat people nice.'' We created a ``billy club,'' if you 
will. We created a measure of compulsion, because we felt 
that--the people that passed the Wagner Act felt that 
compulsion was necessary. And I think any fair evaluation of 
the global trading system and of the tremendous incentive of 
companies to exploit the poverty around the world, would lead 
one to the conclusion that we need a measure of compulsion 
here, as well. And I think that's what this piece of 
legislation does.
    Senator Dorgan. Mr. Griswold, in the 1930s, FDR pushed the 
Fair Labor Standards Act. We have since passed child labor 
laws, safe workplaces, and so on. My guess is--I shouldn't 
ascribe this to it--my guess is that you might have come to 
testify against all of those. Certainly, American business, in 
most cases, took positions against all of those kinds of 
initiatives that raised standards in this country. I think, 
looking back, in most cases, they're pretty generally accepted 
to have done something important for America. But would you--
looking back at these things that we have done to raise 
American standards, would you think you would have supported 
them as they were proposed over the period of time, or would 
you have come in to say, ``You know what? Let the market system 
decide that. This is the `billy club' of the Federal Government 
trying to tell a factory, `Here are the records you have to 
keep, here is where you have to pay overtime,' '' and so on? 
Give me where that extension of your philosophy might lead.
    Mr. Griswold. I don't know how I would have testified back 
then. It was a different time, a different era. I do know that 
our overall living standards have risen, not because of 
legislation Congress has passed, but because of rising 
productivity in our economy, because we have the resources. You 
can legislate all you want. India has labor laws that are 
comparable to ours, in terms of controlling the ability of 
employers to fire workers, and setting minimum wages, and all 
that; and yet, they're still a very poor country. And so, laws 
themselves do not lift people out of poverty; they're lifted 
out of poverty by increasing production and wealth.
    The other difference is, we didn't have some foreign power 
waving that billy club over us. It was a decision we made about 
our own laws. Here, you are trying to dictate and legislate 
conditions in other countries. And I think that creates 
resentment at a time when American policies are creating enough 
resentment around the world the way it is.
    Senator Dorgan. The legislation is not an attempt to do 
anything to other countries; it is an attempt to say to 
companies that want to produce in foreign sweatshops, ``You 
can't sell that product in America, because it doesn't meet the 
basic standards of fairness and decency and humanity that we 
have spent a century building.'' So, we're not in the business 
of enforcing something in foreign countries. We are talking 
about the conditions under which those products could be sold 
to the United States.
    I might mention one other issue. Recently, I guess it's 
been about a year or 2 now, the President of the Philippines 
announced that she thought there should be an increase in the 
minimum wage in the Philippines. And a well-known American 
corporation that is doing business in the Philippines by hiring 
people in the Philippines immediately, the very next day, said, 
``You increase the minimum wage in the Philippines, we are 
gone.'' My point is, the same naysayers in this country, over a 
century, when we built the standards--and, by most accounts, 
have dramatically improved standards of work in this country--
the same naysayers who opposed that every step of the way do 
the same with respect to conditions in China, conditions in the 
Philippines and elsewhere. By and large, I think that they are 
there to access cheap labor. And anything that would in any way 
dramatically increase, or incrementally increase, labor costs 
abroad, they will resist. Do you disagree with that?
    Mr. Griswold. I guess we disagree on how humans progress. I 
think it's through--largely through market and rising creation 
of wealth, and that allows these standards to rise. But let's 
just look at the example of China. There are 400 million fewer 
people living in absolute poverty in China today than 25 years 
ago. Is it because of legislation that this committee, or 
Congress, passed? Is it because of legislative labor laws 
passed by the Chinese Government? No. It's because of rising 
trade, globalization, and markets being allowed to work. Yes, 
you need a framework of the rule of law. Yes, there needs to be 
laws against abusive child labor and slave labor and that sort 
of thing. I'm all for those. But I'm afraid that some of the 
ideas being talked about in Congress would interfere with those 
forces that are bringing about these advantages that I talked 
about in declining global poverty and child labor.
    Senator Dorgan. At least a part of the experience you 
describe in China, with about--is it 1.3 billion people?--so 
400 million would leave another 900 million in a different 
situation--at least part of their progress, I suppose, is jobs 
that are producing Huffy bicycles, Radio Flyer little red 
wagons, Pennsylvania House furniture, Levis, Fruit of the Loom, 
among many others. And I could go on for about 20 minutes. It 
might well be nice that the Chinese have those jobs. It would 
be much nicer, in my judgment, if those jobs were in Trenton, 
New Jersey, and Philadelphia, and places in this country.
    However, having said all that, that's a different 
discussion--whether the global economy, which produced, last 
year, an $832 billion trade deficit with this country, is 
beneficial to this country. I think free trade is not much more 
than a chant. I think fair trade is an essential ingredient for 
the way we should view trade agreements. Trade agreements 
should be mutually beneficial between us and those with whom we 
have agreements. And, in my judgment, that has not been the 
case.
    Let me ask a couple of additional questions, getting back 
to the basic issue of sweatshops.
    Mr. Kernaghan, you support the legislation that we have 
introduced. Mr. Griswold--and I think some others, and my 
colleague Senator DeMint--have concern about it. Senator DeMint 
talks about the liability side of it. Mr. Griswold talks about 
the ``billy club'' side. You describe it differently. You 
describe it as giving rights to American business that are 
being injured by this practice. Go through that again for me, 
if you would.
    Mr. Kernaghan. Companies in the United States that are 
trying to do the right thing and live up to the law are being 
undercut by companies which are blatantly violating the law. 
So, for example, we have workman's compensation in New York 
State. The workers at the Kaisi factory in China had no 
workman's compensation, even though they were supposed to have 
it by law. We have a minimum wage. They have a minimum wage in 
China, but the minimum wage is violated. They have overtime 
laws. Overtime laws are violated. They have right-to-organize 
laws. They're violated. Companies that want to do the right 
thing in the global economy are having their legs cut out from 
under them by unscrupulous companies and--and countries, for 
that matter--that want to abuse worker rights.
    Having gone--probably have spoken to more workers in the 
world than anybody I've met--workers don't want to work in a 
sweatshop. No worker has ever said to me, ``Oh, we need more 
sweatshops in our country. This is exactly what we need.'' 
Every single worker wants a job. Every person wants a job. But 
there's an--even if they don't know the laws of the land, they 
know that their legal rights--they know that there's basic 
human rights that should be respected. And that's what they 
want. They want their legal rights respected. And yes, they 
want the right to organize so that they can stand up and 
collectively bargain and have some sort of a democratic voice 
on the shop floor.
    I think that workers--frankly, the hundreds of millions of 
workers around the world, when they hear of this legislation, 
will endorse it, because this is a ticket for them to raise 
worker-rights standards in their country, and legal standards 
in their country, which will then lift tens and tens of 
millions of workers out of misery, and at least into poverty. 
And I think it would be the single most important act that 
could be taken to end this race to the bottom and put a floor 
on it, that there are certain standards beneath which you 
cannot go in the global economy.
    Senator Dorgan. Mr. William Jones, who is the Chairman of 
Cummins-Allison Corporation in Chicago, was to be a witness 
here today. He was not able to be here, because of travel 
problems. But I want to read three sentences from his 
testimony.
    This is a CEO of a significant corporation: ``Sweatshops 
have sucked much of the life out of remaining labor-intensive 
sectors of American manufacturing, which remain, far and away, 
the best hope for the middle class and for our own poor. If 
unchecked, these trends will threaten much of our remaining 
domestic manufacturing base, a manufacturing base which 
underpins our national defense and prosperity. Ultimately, the 
demise of so much manufacturing will undermine the entire 
American economy, which is the engine of world growth.''
    Let me thank all four of the witnesses today for being 
here. I'd be happy to entertain any additional thoughts you 
have before we close this hearing.
    This is the first hearing on legislation of this type. I 
recognize that the legislation will be resisted by some, 
supported by others, including support from people in the 
business community who believe they are disadvantaged by being 
told they have to compete with others that are willing to hire 
children in conditions of--sweatshop conditions abroad in order 
to drive down the price of their product here at home. I 
recognize that this can be controversial.
    I don't think there's a disagreement among us that trade 
can be beneficial. I believe in trade. I believe in plenty of 
trade. But I also believe in rules of trade that are fair to 
us, and I think that has been sadly lacking in our trade 
policy.
    Mr. Griswold, you and I have previously discussed all of 
these issues, and we have a disagreement about them. I think we 
want the same thing for our country. We just have different 
views of how to achieve those things.
    Mr. Socolow, you have described to me something I wasn't 
aware of, and that is an effort by several States, which I both 
commend and think makes a great deal of sense.
    Mr. English, your discussion of the steelworkers who lost 
their jobs and the Pennsylvania House furniture is another 
example of what is happening with the inevitable pull of good-
paying jobs, which has expanded the middle class in this 
country, to get those jobs moving to parts of the world where 
you can pay a fraction of the price that you now pay in this 
country.
    And, Mr. Kernaghan, your organization has done a lot of 
work over a long period of time, and I know that, without your 
work, much of the disclosure that has existed would still be 
undisclosed, and we would still have abuses in those areas 
where you have described them and where you have been 
successful in trying to shut them down.
    So, I want to thank all of you. Anybody have any final 
comments you wish to make today?
    Mr. Griswold?
    Mr. Griswold. Just two quick points, Senator.
    Senator Dorgan. Yes.
    Mr. Griswold. First, this isn't a choice of whether we have 
a manufacturing base in this country or not, it's about what we 
manufacture. And I will be the first to point out that we're 
producing less furniture and fewer shoes and T-shirts than we 
were, and that they're producing more in China. But our overall 
manufacturing output is up 50 percent. Our manufacturing 
capacity has continued to increase because of rising 
productivity. We are producing more semiconductors, chemicals, 
sophisticated machinery, pharmaceuticals, even passenger 
vehicles and parts. This is trade in action. We're specializing 
in the higher-end parts.
    Let me make one other point. This is also a consumer issue. 
You know, my friend to the right here, he pointed out that the 
State of New Jersey is happy to pay a 20-percent premium. And 
that's fine. The State of New Jersey can just pass the costs on 
to the taxpayers, and they may not even know. But if you're a 
middle-class or poor family in North Dakota, a 20-percent-
higher bill for your expenses is real money, and that 
translates into lower real wages and a lower standard of 
living.
    Senator Dorgan. Since you raised it, Mr. Griswold, let me 
ask you, as a consumer: if you knew that a product that was 
coming from the work of an 11-year-old working 11 to 14 hours a 
day, 7 days a week, in a sweatshop--if you knew that, would you 
prefer to pay a premium for a product--identical product that 
was produced in circumstances that were not coming from a 
sweatshop from an 11-year-old child?
    Mr. Griswold. Well----
    Senator Dorgan. Would you make that choice, as a consumer?
    Mr. Griswold. I would ask myself, Would that child--would 
her family be better off if I did not buy that product? And I'm 
not sure. You know, we had an experience in the early 1990s 
when Congress was considering quite stringent legislation aimed 
at child labor abroad. In Bangladesh, they laid off 50,000 
child workers, rapidly, to avoid coming under that law. It 
never became law, but just the threat of it displaced 50,000 
workers. The ILO, UNICEF, and Bangladeshi labor activists went 
and investigated, and they found that most of those 50,000 kids 
did not go to school, they either were unemployed and their 
families were worse off, or many of them ended up in 
occupations that were even less acceptable than a garment 
factory--stone crushing, street hustling, some of them even 
ended up in prostitution. So, I buy products from poor workers 
in poor countries, and I make no apologies.
    Senator Dorgan. There's been a separate study since that 
time that debunks the study you described, so we can put both 
studies in the record. *
---------------------------------------------------------------------------
    * The information referred to has been retained in Committee files 
and can be found at http://www.unicef.org/sowc97/download/sow1of2.pdf. 
and http://www.ilo.org/public/english/standards/ipec/publ/download/
2001_syn_bgmea_en.pdf.
---------------------------------------------------------------------------
    Senator Dorgan. But I think--your answer, kind of, stuns 
me, because your answer suggests that an 11-year-old, and the 
family of an 11-year-old, would be better off having that 11-
year-old in a sweatshop, working 11 to 14 hours a day, 7 days a 
week, and, therefore, you would not have any moral objections 
to either buying the product or suggesting that the presence of 
that sweatshop is not in any way objectionable to you. I----
    Mr. Griswold. It is.
    Senator Dorgan.--I find it personally and morally 
objectionable that anyone would put children in these 
circumstances. Are their parents better off having them earn an 
income? Well, I don't know. But I--but is this about money to 
parents while we abuse children? In my judgment, there's a 
pretty clear moral demarcation here where you and I differ.
    Mr. Griswold. It's about survival, for many of these 
families, unfortunately,. That's the moral objection. Why are 
so many people living in poverty? It's because of the failed 
policies of their governments--protectionism, corruption----
    Senator Dorgan. But----
    Mr. Griswold.--the long list.
    Senator Dorgan. But abusing children for the purpose of 
survival is--I mean, that's the very purpose of this hearing, I 
guess, and I think we've penetrated to the roots of some of the 
disagreement.
    Mr. Kernaghan?
    Mr. Kernaghan. Senator, if I may, when the children were 
removed from the garment factories in Bangladesh, the industry, 
since that time, has grown from 800,000 workers to 2.2 million 
workers, because the factories had to hire their older brothers 
and sisters and the parents, and couldn't hire children 
anymore. So, it was a victory. They didn't need children. They 
wanted them because you could pay them less and you can exploit 
them more. The industry has boomed. But it's boomed now with 
older children and--their older brothers and sisters.
    I'd also like to point out that we run a $37-billion trade 
deficit with China on advanced technology goods, that five out 
of six ships that come from China to the United States return 
to China empty, and that one ship that goes back off and 
carries trash and garbage to be recycled. We have a big 
problem. It's not just in manufacturing. It's also in advanced 
technology and engineering and so on.
    Senator Dorgan. Mr. English?
    Mr. English. I would point one other evil out about child 
labor. When that child is in the factory, working to try to 
help his family make a living, that child is not in school. And 
that means that we continue the cycle of poverty that exists as 
a result of that. We've got to break the cycle. And I think 
this piece of legislation is a good start in trying to break 
that cycle, because it says to the world, ``We are not going to 
allow sweatshop-made goods into this country, and we're not 
going to allow it to be made here in this country, either. 
We're going to stand up for the rights of workers around the 
world.''
    Senator Dorgan. Let me, just as a final point, say we don't 
have to look abroad to find sweatshops. You can find them in 
the history--the dark history of this country, and a century 
and a half ago, you could find them in children going into coal 
mines. And we've changed that. I mean, we, I think, have made 
great progress. But when I hear, as I have, stories of very 
young children working on the looms in carpet factories having 
their fingers scarred by putting sulfur on the top of their 
fingertips, setting them on fire to create burns to create 
scars so that, as they use the needles with these rugs, they're 
not going to stick themselves and hurt themselves and bleed on 
the rugs--when I hear those kinds of stories, I ask myself, 
Isn't that the sort of thing that we decided, as a country, 
long, long ago, that we were not going to tolerate? Why should 
we, as a global economy, tolerate it? We should not. The global 
economy is simply a definition that has been created and 
branded by some to suggest that we should accept that which we 
long ago decided we would not tolerate.
    The issue of sweatshops and the conditions under which 
products are imported into this country is a very important 
issue for this country. We've already decided that the product 
of prison labor is unfair and should not come to this country. 
You cannot go to a big-box retailer and buy a pair of tube 
socks made in a foreign prison. It's illegal. The question is, 
Should you be able to go to a big-box retailer, or to some 
other store, and purchase those same products if they are made 
under conditions of sweatshop labor in which children are 
abused? The answer, in my judgment, should be no. And I believe 
those companies in America who are having to compete with 
companies that are importing the product from that circumstance 
ought to have a remedy. And that would be a market remedy, 
rather than a billy club, Mr. Griswold--a market remedy by 
which other companies would begin to work to enforce this by 
disclosing and exposing the unfair shipment of products from 
sweatshop labor into our market.
    This has been an interesting discussion. Mr. Griswold, I 
assume we'll have you back, given the disagreement Senator 
DeMint and I have about trade. We will have other trade 
hearings because this is a very important issue. Yesterday's 
$832-billion trade deficit demonstrates dramatic failure, in my 
judgment, of our trade policy. So, we're going to have trade 
hearings in this subcommittee, and my colleague and I will make 
certain that, Mr. Griswold, you and others who take your 
position will be invited. We think debate is good and important 
in order to hear different viewpoints.
    So, I want to thank all of the witnesses who have come 
today and who have given us their evaluation of a very 
important piece of legislation.
    This hearing is adjourned.
    [Whereupon, at 12 p.m., the hearing was adjourned.]
                            A P P E N D I X

  Prepared Statement of Hon. Olympia J. Snowe, U.S. Senator from Maine
    Mr. Chairman, thank you for calling this meeting. Although I have 
just joined the Subcommittee on Interstate Commerce, Trade and Tourism 
this year, the issue we discuss here today is by no means new to me. 
The scourge of foreign sweatshops and its impact on U.S. workers is, 
indeed, distressingly familiar to me as a Mainer and a long-time member 
of the Senate Committee on Finance, which oversees trade policy.
    Early in the twentieth century, the mills flanking the falls of the 
Androscoggin River in my hometown of Lewiston-Auburn produced one 
quarter of the Nation's textiles. Today, those mills--which supported 
my family and thousands like it--are silent. A bellwether of what was 
to befall other American manufacturing sectors, the U.S. textile 
industry is nearly extinct--the domestic jobs it once supplied now 
almost all overseas.
    It would be one thing if so total a shift in production could be 
attributed to honest means of securing a comparative advantage--if, for 
example, foreign factories were more efficient or its workers more 
skilled, both of which are demonstrably untrue. It is quite another, 
however, where advantage is gained by market-distorting, immoral means 
of reducing costs long outlawed and vigorously policed in the United 
States.
    That is why I was particularly troubled by reports that emerged 
last May of labor abuses in Jordanian factories that made goods 
destined for the U.S. market. These claims of forced labor and human 
trafficking would be horrifying no matter where they took place--but in 
this case, such inhumane practices were taking place in a country with 
which the United States already had a Free Trade Agreement!
    During its subsequent consideration of the Oman Free Trade 
Agreement this past May, I was heartened to see the Senate Committee on 
Finance fulfill its duty under the procedures set forth in the Trade 
Promotion Authority to carefully consider each negotiated agreement, by 
unanimously passing an amendment to the agreement that would deny its 
benefits to goods made with the use of forced labor. Therefore, like 
the other members of that committee, I was extremely disappointed to 
find that the Administration has refused to reflect the Finance 
Committee's amendment in the implementing legislation it later 
officially submitted to Congress in June.
    The unanimous will of that committee to improve the labor 
provisions of the Oman FTA in light of nearly identical agreements' 
obvious failure to adequately protect workers should not have been 
dismissed so lightly. Lacking the necessary labor protections, such 
agreements will put U.S. workers and businesses- which must adhere to 
our robust labor laws--at risk from unfair competition by overseas 
producers who willfully exploit workers in their facilities. It is 
vital that we continue to seek such protections not only in all our 
present and future trade agreements, but in our domestic laws as well.
    That is why Senator Rockefeller and I introduced the Trade 
Complaint and Litigation Accountability Improvement Measures Act--also 
called the Trade CLAIM Act--in January of this year. That act would 
give U.S. businesses and workers a greater say in whether, when, and 
how U.S. trade rights are enforced by amending Section 301 of the Trade 
Act of 1974--the statute setting forth general procedures for the 
enforcement of U.S. trade rights--to limit the U.S. Trade 
Representative's ability to decline an interested party's petition to 
take formal action against unfair foreign trade practices, and make 
those determinations reviewable by the U.S. Court of International 
Trade.
    With U.S. exporters supporting over 12 million jobs and paying an 
average of 18 percent higher wages, the U.S. Government has an 
obligation to create and consistently use enforcement mechanisms to 
protect them from the unfair or underhanded trade practices of foreign 
governments and businesses, especially those as vile as labor 
exploitation.
    Thank you.
                                 ______
                                 
        Joint Prepared Statement of Bama Athreya and Nora Ferm, 
                 International Labor Rights Fund (ILRF)
Introduction
    The International Labor Rights Fund (ILRF) has since its inception 
fought to end the scourge of sweatshops around the world. Over the past 
two decades, we have witnessed the limitations of current legislative 
and voluntary strategies. During this period, while we have observed 
some gains for workers in some industries, we have also seen the much 
more widescale flight of domestic production in virtually all sectors 
to low-wage countries with unsafe and exploitative working conditions. 
We are not an organization that opposes global trade, per se, but we 
cannot ignore the fact that the flight of these industries is driven by 
the ``race to the bottom.'' Multinational corporations seek out 
production destinations where there is little or no regulation of labor 
or environmental conditions; they find such destinations in the 
developing world.
    In this statement we seek to provide an assessment of anti-
sweatshop initiatives to date, to highlight the cut flower sector as an 
example of the sweatshop problem in today's global economy, and to make 
the case for why new and binding legislative efforts are needed to 
regulate workers' rights in global supply chains.
History of ``CSR'' Initiatives
    There have been numerous exposes of child labor, forced overtime, 
and inhumane wages and working conditions in factories overseas 
producing garments, shoes, and toys for the U.S. market. The typical 
response of companies or industries exposed by the media is to adopt 
and publicize voluntary codes of conduct as a non-binding promise to 
consumers that the problems will be corrected. This is a device we see 
used, for example, by Wal-Mart today to explain why binding regulations 
are not needed to correct human rights abuses. Collectively the various 
codes and monitoring initiatives that have emerged over the past two 
decades are referred to under the broader rubric of ``Corporate Social 
Responsibility,'' or CSR.
    Interestingly enough, if we look back to the early history of the 
codes of conduct trend, we find an excellent case for the need for U.S. 
regulation to bind the behavior of US-based multinational corporations 
overseas. In the 1970s, revelations of the involvement of International 
Telephone and Telegraph and other U.S. corporations in the bloody coup 
against the Allende government in Chile in 1973, and of huge bribes 
paid by the Lockheed Corporation to Japanese political figures to gain 
military contracts in 1975, led to a movement by non-governmental 
organizations (NGO's) and governments of developing countries to demand 
greater corporate accountability. In 1975, the United Nations created a 
Commission on Transnational Corporations which set out to negotiate a 
U.N. Code of Conduct on Transnational Corporations. However, during the 
1980s, the U.N. Commission found it impossible to develop any 
mechanisms to make this code relevant, or even to research the level of 
compliance by companies or countries with the terms of the codes. By 
the end of the decade, the Commission itself was virtually without 
funds and unable to carry out even a fraction of its original mandate.
    Thankfully at that time U.S. Congress did not leave the matter in 
the hands of voluntary initiatives, but enacted strong Federal 
legislation, the Foreign Corrupt Practices Act (FCPA). We will return 
to a discussion of the FCPA later in this testimony.
    We would like to mention two additional multilateral voluntary 
initiatives and their weaknesses, in order to put to rest the notion 
that human rights and labor standards can be safely trusted to 
multilateral organizations or to voluntary changes in corporate 
behavior. We have now had thirty years to witness the progress of such 
initiatives and it should be clear that they have failed. In 1976, the 
Organization of Economic Cooperation and Development (OECD) passed 
guidelines on multinational corporations that, on paper, uphold the 
basic core rights of workers. To date, while a number of complaints 
have been brought, there has not been a single instance of actual 
enforcement of the OECD code. In 1977, the International Labour 
Organization (ILO) adopted a Tripartite Declaration of Principles 
Concerning Multinational Enterprises and Social Policy, a code which 
encompasses a broad range of rights and principles, and which includes 
a detailed complaint procedure which allows for an ILO Standing 
Committee on Multinational Enterprises to investigate a company's 
practices. However, this code has no sanctions or other enforcement 
mechanisms, and the Standing Committee has been unable even to launch 
investigations. For example, in 1993 the committee received a request 
to review labor practices at a PepsiCo bottling facility in Guatemala 
following severe harassment and intimidation of trade union members 
there. \1\ The employer representatives on the ILO Standing Committee 
blocked the request and the case ended at that. These examples are, 
arguably, the strongest and most developed of the CSR initiatives; 
their limitations provide a compelling argument for the need for 
legally binding and enforceable alternatives.
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    \1\ Correspondence from the International Union of Food, 
Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers' 
Associations to the International Labor Rights Fund, on file at ILRF.
---------------------------------------------------------------------------
Case Study: The Cut Flower Sector
    What, exactly, is the problem? We will use a description of the cut 
flower sector to illustrate conditions in industry after industry 
producing goods for U.S. consumers today. The cut flower sector is far 
from the most egregious of sectors in terms of labor rights violations; 
it is precisely the fact that the violations we are about to describe 
are so routine, so mundane, in so many sectors that make this an 
appropriate illustrative case.
    Consumers of cut flowers associate roses, daisies and other flowers 
with beauty and romance. Unfortunately the reality for the workers who 
produce those flowers is not so lovely. A mere 10 years ago, most of 
the cut flowers retailed by U.S. florists were produced in the United 
States. In a decade, thanks to the expansion of global trade agreements 
and preferential access to the U.S. market, the flower industry has 
changed entirely, consolidating distribution in the hands of a few very 
powerful corporations and relocating most flower production onto 
plantations in South America.
    It is particularly appropriate that we focus on this industry 
today, as Valentine's Day is the most important retail day in the 
United States for cut flowers. Most of the flowers we will buy for 
loved ones today are imported from greenhouses in Colombia and Ecuador. 
The U.S. buys a third of Ecuador's yearly production just for one 
holiday: Valentine's Day. \2\
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    \2\ ``Ecuador Fears Valentine's Flower War,'' BBC News, January 29, 
2003.
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    We mentioned the consolidation of the cut flower industry. No 
longer are small cultivators selling to ``mom and pop'' florists. Today 
cut flowers are a concentrated and lucrative business for a small 
handful of multinational corporations. Colombia exports 85 percent of 
its cut flowers (approximately $600 million) to the United States. \3\ 
In 2005, the Colombian flower industry provided 111,000 jobs directly, 
and an additional 94,000 indirectly. US-based Dole Fresh Flowers, a 
subsidiary of the Dole Food Company, is the largest flower plantation 
owner and exporter in Colombia, and the biggest exporter of flowers 
from Latin America.
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    \3\ Asocolflores 2006.
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    Ecuador exports 70 percent of its cut flowers to the U.S. market. 
Flowers are Ecuador's 5th largest export. The flower industry employs 
nearly 40,000 workers directly and another 15,000 jobs are created 
indirectly. \4\
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    \4\ FUNDESS.
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Poverty-level Wages
    The majority of Colombian flower workers receive no more than the 
minimum wage, $180 per month, which covers less than half of what a 
family needs to meet basic human needs. \5\ A similar situation exists 
in Ecuador, where the minimum wage is $160 a month.
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    \5\ DANE. ``Encuesta Nacional de Hogares,'' 2001.
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    Obligatory and unpaid overtime is common. The Colombian non-
governmental organization CACTUS produced a report covering the period 
of January 2000 through June 2004, which found that the most common 
reason for Colombian flower workers to seek legal advice was failure to 
pay salaries, including unpaid overtime. The second most common reason 
was unfair dismissal, which leads to a high turnover rate within the 
industry.
Child Labor
    Child labor is common in the cut flower plantations of Ecuador. The 
International Labor Organization's 2000 Rapid Assessment estimated that 
there were at least 12,000 15- to 18-year olds hired by Ecuadorian 
flower plantations. This work is considered one of the worst forms of 
child labor, because of the risks posed by intensive and repetitive 
work, injuries from thorns, use of sharp tools, prolonged exposure to 
heat, cold, and sun, and exposure to toxic pesticides. \6\ The IPEC 
project found that 45.8 percent of surveyed children working in the 
flower industry had suffered some kind of occupational accident or 
illness, including respiratory problems, wounds, lesions, and digestive 
tract problems (2003).
---------------------------------------------------------------------------
    \6\ IPEC Aug 2003 Project Document.
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Discrimination and Sexual Harassment
    In a poll of almost 1400 Colombian flower workers, CACTUS found 
that 84.8 percent of female workers had been required to undergo a 
pregnancy test as a prerequisite for employment. CACTUS also reports 
that an average of two flower workers arrive at their office daily 
after being fired as a result of pregnancy, in violation of national 
labor laws.
    Obligatory pregnancy testing is also routine in Ecuador. An 
Ecuadorian woman interviewed by ILRF in late 2006 recounted: ``I have 
been working in flowers for a total of 7 years. I was working in a 
small plantation for almost a year when I got pregnant. They saw that 
my pregnancy became quite advanced. I was 8 months pregnant. The new 
supervisor wanted me to do the same work, and I told him no, because in 
my condition I couldn't do the same things. One has to work bending 
over and it is dangerous. The supervisor told me: ``If you want to keep 
working here, you have to do all of the work, and if not, you can just 
leave . . . the truth is I don't want to have problems, the truth is I 
don't want pregnant women here,'' he told me. They fired me. In July 
they didn't pay me, or compensate me for the months I worked before 
they fired me.''
    A 2005 study by the International Labor Rights Fund and Ecuadorian 
researchers found that over 55 percent of Ecuadorian flower workers 
have been the victims of some kind of sexual harassment. \7\ is was 
higher for 20-24 year old workers (71 percent). Many women also said 
that they had been asked out by their bosses or supervisors, who 
offered to improve their jobs in exchange. Alarmingly, we also found 
that 19 percent of flower workers have been forced to have sex with a 
coworker or superior and 10 percent have been sexually assaulted on the 
job. Workers on flower plantations have no recourse to any sort of 
grievance or complaints process to address this serious problem.
---------------------------------------------------------------------------
    \7\ Study by ILRF, Norma Mena (IEDECA), and Silvia Proano (INNFA), 
2005.
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Violation of the Right to Associate
    The Latin American flower industry is characterized by a lack of 
respect for core worker rights, reflected primarily in the industry's 
failure to address freedom of association, the right to organize and 
the right to bargain. This industry has a long history of vigorous and 
effective opposition to the formation of independent democratic unions, 
using a variety of tactics to block union organizing, including illegal 
firings, threats to close plantations where workers are organizing, 
anti-union discrimination, and bringing in company-favored unions.
    In Ecuador, only two plantations, out of a total of about 380, have 
unions. In Colombia, to date, independent flower unions have been 
unable to win a single collective bargaining agreement despite nearly 
two decades of organizing efforts. \8\
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    \8\ US/LEAP, February 2007.
---------------------------------------------------------------------------
    In late 2004, workers founded a new independent union, 
Sintrasplendor. This was the first independent union that had been 
successfully established in a Dole-owned flower company in Colombia. 
When Sintrasplendor received its registration from the Ministry of 
Social Protection, the company presented a list of objections, asking 
the Ministry to revoke the registration. Splendor Flowers used various 
forms of persecution against Sintrasplendor, including threats that 
union affiliates will be fired; assigning extra work on days when the 
union has planned assemblies and other activities; hostility, including 
via the presence of members of the Armed Forces and police at union 
activities held off company property.
    The company successfully convinced the Ministry to revoke the 
union's registration, but after a lengthy appeal the workers reinstated 
the union.
    Dole has also used a variety of ploys to deny Sintrasplendor its 
right to a collective bargaining agreement, such as signing a different 
collective bargaining agreement with the company-backed union, and 
refusing to support a fair process to determine union representation at 
the company.
    On October 12, 2006 Dole announced that it is closing the Corzo 
farm at Splendor Flowers.
Health Impacts
    Consumers of bouquets from Latin America may be interested to note 
the range of chemicals applied to the flowers before they bring a 
bouquet to their noses. A study of 8,000 Colombian flower workers found 
that they were exposed to 127 different pesticides, three of which are 
considered extremely toxic by the World Health Organization. In 
addition, 20 percent of these pesticides are either banned or 
unregistered for use in the U.S. because they are extremely toxic and 
carcinogenic. To make matters worse, greenhouses are not always 
completely cleared of people before fumigation begins. Doctors in the 
floricultural regions of Colombia report up to five cases of acute 
poisoning each day. A survey by the International Labor Organization 
(ILO) found that only 22 percent of Ecuadorian flower companies trained 
their workers in the proper use of chemicals. Two-thirds of Colombian 
and Ecuadorian flower workers suffer from work-related health problems, 
according to the Victoria International Development Education 
Association (VIDEA).
    According to CACTUS, when entirely unprotected workers are exposed 
to the toxic pesticides regularly used on flower plantations, reactions 
including headaches, vomiting, and fainting can be felt immediately. 
Other short term effects include rashes, impaired vision, and skin 
discoloration. Repeated exposure to these chemicals can lead to asthma 
and neurological problems.
    Women workers suffer particular health problems as a result of 
pesticide exposure, including miscarriages and stillbirths. 
Furthermore, a 1990 study by the Colombian National Institute of Health 
found that 17 percent of children born to former flower workers had 
congenital malformations. Almost 80 percent of Ecuadorian flower 
workers and 70 percent of Colombian flower workers are women.
    Other health problems often result from the intensive, repetitive 
work, and long working hours. In 2006, a Colombian woman told ILRF 
about her problems with carpal tunnel syndrome: ``I had been working at 
this plantation for 4 years when my hands started to fall asleep. I 
would work from 6 am until 5 or 6 pm, using clippers all day long. The 
pain went all the way up to my shoulder. I have had surgery on my right 
hand three times. I feel like I am going to lose this finger. It is 
really hard to bend it or move it. I get to work at 6 am, and by 8:30 
am my hands hurt so much I can't stand it. They didn't give me enough 
time to recover from the surgery before sending me back to work. I 
haven't recovered, and every day my hand hurts more.''
Voluntary CSR Initiatives in the Cut Flower Sector
    All of the abuses described above exist despite the industry's 
participation in two voluntary CSR initiatives, Florverde and Social 
Accountability International.
    In 1996, the Colombian cut flower industry, in the form of the 
Association of Colombian Flower Exporters (ASOCOLFLORES), developed its 
own voluntary response to forestall consumer pressure to end labor 
rights abuses. This program, Florverde, was essentially a better 
business practices association that evolved into a certification 
system. The Florverde program is ``based on the principle of self-
management . . . aiming at gradual but continuous progress''. \9\ It 
requires signed work contracts with employees, trainings on first aid 
and pesticide use, adequate and clean toilets and other facilities. It 
also monitors issues regarding salary, bonuses, overtime, disciplinary 
measures, and health care. Florverde has remained resistant, however, 
to adopting the right to free association and collective bargaining as 
part of its certification standards, even though this is one of the 
ILO's fundamental labor conventions.
---------------------------------------------------------------------------
    \9\ Asocolflores 1999, cited in ``On Export Rivalry and the 
Greening of Agriculture--The Role of Eco-Labels.''
---------------------------------------------------------------------------
    As for Dole Fresh Flowers, which has a lion's share of distribution 
of South American cut flowers for the U.S. market, its parent company 
Dole also responds to all criticism of its abuse of workers by pointing 
to its membership in a weak and unenforceable voluntary CSR initiative, 
the Social Accountability International program. However, its 
membership in SAI has not prevented it from violating key labor rights, 
including freedom of association, and even ignoring SAI's direct 
encouragement to comply with these standards. The NGO US/LEAP worked 
with SAI in 2005 to pressure Dole to recognize and negotiate a 
collective bargaining agreement with the legally established union 
Sintrasplendor at its plantations Splendor Flowers in Colombia. On 
September 15, 2005, Dole agreed to sit down and negotiate with 
Sintrasplendor in good faith. SAI assisted in negotiating the agreement 
with Dole and promised to help ensure that the agreement was fully and 
promptly implemented. US/LEAP, Dole, SAI, and a Sintrasplendor member 
met on September 20, 2005 to begin discussing next steps toward 
carrying out the agreement. By October 2005 it was clear that Dole was 
not honoring these new agreements with SAI and with US/LEAP. A year 
later, Dole still had not sat down at the negotiating table with 
Sinatrasplendor, and in October 2006, Dole announced it would close 
Splendor Flowers in 2007. As a voluntary initiative, SAI did not have 
the power to help Sintrasplendor workers get any response from Dole 
except to cut and run.
New Strategies to End Sweatshops
    Surely we can do better than to leave these horrific abuses to the 
market to address through such weak and voluntary efforts. None of the 
systems noted above contain any truly meaningful sanction for bad 
behavior. The need for voluntary CSR initiatives to continue a business 
relationship with participating corporations has compromised their real 
ability to expose problems. Consumers need and deserve an independent 
watchdog rather than the current ``fox guarding the henhouse'' 
programs.
    Nor can we simply rely on the enforcement of domestic laws in most 
developing countries. Just as employers' interests are the determining 
factor in the voluntary CSR systems, so too do employers exercise much 
greater influence than workers in the political landscape of countries 
such as Colombia and Ecuador. As we have seen first-hand in our current 
case against Wal-Mart, retailers who have played such a strong role in 
the development of voluntary systems are usually loath to see such 
systems assist in holding the companies themselves legally liable for 
non-compliance with local labor laws. This alone is evidence enough 
that local law enforcement is not the answer.
    Corporate behavior generally is hardly on the upswing, despite many 
years of exposes by human rights advocates; ILRF's recent investigative 
work has uncovered cases of brutal exploitation of child workers, 
continued instances of forced labor, and torture and murder of trade 
unionists. Multinational corporations continue to be heavily implicated 
in such practices, despite the supposed world consensus that these acts 
constitute fundamental human rights violations. Apparently corporations 
can only be convinced to respond to such abuses when there is a real 
threat of sanctions.
    That is why we are so grateful for the initiative of Senator Byron 
Dorgan and Senator Lindsey Graham to promote a new legislative remedy 
for worker rights abuses in the global supply chains that bring 
consumer goods to the United States. It is truly a pleasure to find 
ourselves in a political moment where the debate is no longer, is 
binding legislation necessary? but rather, what shape should such 
legislation take. There are sufficient precedents in U.S. legislation 
already to begin to move toward the long-term goal of ending the trade 
in sweatshop-made goods. We will summarize some important precedents 
below, and look forward to a lively, substantive exchange on the 
contribution the S. 367 Bill to amend the Tariff Act of 1930 to 
prohibit the import, export, and sale of goods made with sweatshop 
labor will add to the efforts that have gone before.
    There is ample precedent in U.S. law to support the new steps now 
proposed in S. 367. The U.S. Government has long defined the repression 
of the right to organize as an unfair trade practice, through Section 
301 of the Trade Act of 1974. However, this section of the Trade Act 
has never been effectively enforced. Current ILRF work includes 
representation of workers who have been severely harassed, detained, 
`disappeared' and tortured by paramilitaries in Central America for 
attempting to organize unions. It is high time the sweatshop movement 
take on such cases and argue publicly that U.S. tradeofficials treat 
the torture and murder of workers as at least as serious a problem as 
dumping. We believe the public arguments can be effectively made, and 
that companies benefiting from extreme repression of trade unionists 
can and should be penalized both under current trade rules and through 
new legislation.
    The Tariff Act of 1930 itself has long contained a prohibition 
against the importation of prison-made goods; in the late 1990s, that 
language was amended by then-Representative (now Senator) Bernie 
Sanders and Senator Tom Harkin to include prohibitions against the 
importation of goods made by forced child labor. Again, the language of 
this act provides for a potential mechanism to sanction offending 
corporations directly, by designating their imports as ``hot'' goods; 
however, to date enforcement of this act has been weak. Sweatshop 
advocates working specifically on cases of child labor or forced labor 
should, however, continue to push the process created under this act as 
it raises at least the possibility of real sanctions against offenders.
    In recent years, additional legislation with a broader scope than 
thes acts has been proposed, though never passed. As early as 1991, the 
U.S. Congress attempted to legislate a code of conduct for U.S. 
corporations doing business in China. The code would have required an 
annual review of the practices of all corporations in China, and would 
have provided for some sanction to those companies that failed to 
implement the code. The initiative has been revived a number of times 
over the past decade, and at different moments was passed by both the 
House of Representatives and the U.S. Senate. During the debate over 
whether to grant Permanent Normal Trade Relations status for China in 
1999, a new version was circulated, allowing for public review of 
corporate behavior, and sanctioning non-compliant corporations by 
prohibiting them from access to any commercial support from the U.S. 
Government. The legislation was not adopted. A parallel initiative was 
taken by the European Parliament, which passed a resolution calling for 
EU-based corporations to abide by a set of human rights principles in 
their operations worldwide. However, while the European Parliament may 
be empowered to review corporate behavior, it is unable to impose 
sanctions on violators.
    Finally, we note again the tremendous example set by the U.S. 
Foreign Corrupt Practices Act (FCPA) and request that Congress look to 
the moral example set by Senator Frank Church and that bill's 
supporters in the 1970s as a model for the way forward today. The FCPA 
empowers Federal authorities to launch investigations and to sanction 
offending corporations. This power exists in U.S. law today and 
therefore provides an important, and workable, precedent for the 
proposed S. 367 bill. The FCPA demonstrates that laws governing 
corporate accountability globally can be enforced. Countries around the 
world have seen the FCPA as a model and it has been a shining example 
of moral leadership by the United States on the critical global issue 
of corruption.
    We need more such examples of moral leadership by the United States 
today. We extend once again our gratitude to Senators Dorgan and 
Graham, and the co-sponsors of S. 367, for blazing a path forward for 
workers' rights around the world.

                                  
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