[Senate Hearing 110-1127]
[From the U.S. Government Publishing Office]



                                                       S. Hrg. 110-1127
                         SWEATSHOP CONDITIONS 

                      IN THE CHINESE TOY INDUSTRY

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


                                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

                               __________

                            OCTOBER 25, 2007

                               __________

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




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       SENATE 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
   Christine D. Kurth, Republican Staff Director and General Counsel
                  Paul Nagle, 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 October 25, 2007.................................     1
Statement of Senator Dorgan......................................     1
    Prepared statement...........................................     3

                               Witnesses

Athreya, Bama, Executive Director, International Labor Rights 
  Forum 
  (ILRF).........................................................    14
    Prepared statement...........................................    17
Eio, Peter, Member, Governance Board, ICTI CARE Foundation.......    22
    Prepared statement...........................................    24
Kernaghan, Charles, Director, National Labor Committee...........     4
    Prepared statement...........................................     7
Sanders, Hon. Bernard, U.S. Senator from Vermont.................    30
Wu, Harry, Executive Director, Laogai Research Foundation........     9
    Prepared statement...........................................    11


                         SWEATSHOP CONDITIONS 
                      IN THE CHINESE TOY INDUSTRY

                              ----------                              


                       THURSDAY, OCTOBER 25, 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 9:38 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'm going to call the hearing to order this 
morning. I'm Senator Dorgan. I'll be joined by colleagues in a 
bit.
    Today, the Subcommittee here in the Commerce Committee is 
holding the fourth in a series of hearings that relate to 
international trade. This hearing deals with the issue of 
sweatshop conditions in the Chinese toy industry. There's been 
a great deal of discussion and concern about products coming 
into this country that are unsafe. Many of us have seen the 
reports of toys being pulled off the shelf of major American 
retailers because those toys are manufactured in China and come 
to this country with lead content that is higher than would be 
safe for children. We read the tragic stories of, for example, 
Jarnell Brown, who ingested a small charm that came with a 
Reebok tennis shoe, and, swallowing that charm, which turned 
out to have been made of 99-percent lead, young Jarnell Brown 
died. He was admitted to the hospital with brain swelling, and, 
when they X-rayed him, they found a heart-shaped object in his 
stomach. It was a charm that came with tennis shoes, but no one 
would have known that it was 99-percent lead. Of course, no one 
would have expected someone would swallow it, but a young child 
swallowed it, and the young child died.
    It's not an accident that products are containing lead, 
coming from China. Lead is cheap, and the contractors want to 
lower costs without respect to health consequences. And so, we 
have to be vigilant about these things, and we have to stand up 
for the interests of the consumer with respect to these 
matters.
    The issue of how a product is produced in China with 
respect to toy manufacturing is one issue; that is, what 
materials are used in its production. That's one issue. The 
second issue, that has been less discussed, but, I think, is as 
important, is, what are the conditions under which toy products 
are manufactured?
    The manufacturing of toys, of course, has migrated 
substantially. I think 80 percent of the toys are now 
manufactured in China. We have a witness today representing the 
Toy Industry Association. And we appreciate that. It's 
interesting that the term of ``toy industry,'' because it used 
to be ``toy manufacturing.'' But the term ``toy manufacturing'' 
would no longer apply appropriately, because we don't 
manufacture toys to any great extent in this country; they're 
manufactured elsewhere, mostly in China.
    The example of Etch-a-Sketch is one that I have written 
about. Etch-a-Sketch is a little thing that most of us have 
played with as kids, and Etch-a-Sketch was made in Bryan, Ohio. 
And they were proud of making Etch-a-Sketch. People from that 
little town--or, not so little--but that town of Ohio always 
referred to their home town as the ``Town of Etch-a-Sketch.'' 
``Where are you from?'' ``Well, I'm from the town that makes--
where we make Etch-a-Sketch.'' Everybody knew about Etch-a-
Sketch. But now Etch-a-Sketch is gone from Ohio, it's made 
exclusively in China.
    The question that we ask today is under what conditions are 
these toys made? Are there sweatshop conditions in China that 
are existing with respect to the production of toys? And the 
reason that I am interested in that is, I and my colleagues 
have introduced a piece of legislation, S. 367, titled the 
Decent Working Conditions and Fair Competition Act. And it 
relates to the question of the production of products--not just 
toys, but products--in sweatshop conditions in other countries. 
The first question I asked with respect to the issue of fair 
trade is, should we not, at least at the very start of this, 
decide that we will not allow into our country products that 
come from sweatshop labor? That is, persons who are working in 
other countries in gross violation of those other countries' 
labor laws. That ought to be the first step. Even if we 
disagree about trade strategy, all of us ought to agree that, 
after what we've done to pull ourselves up and create a middle 
class, and the kinds of things that represent safe workplaces 
and standards and dignity for American workers, we should at 
least be able to agree we will not allow the product of 
sweatshop labor to be brought into this country and sold on the 
store shelves in America.
    So, the question today is what is happening in China? What 
kind of assurances do we have that the substantial portion of 
toys, some 80 percent of which are produced in China, are being 
produced under conditions that we would condone, under 
conditions that we would not want to prevent coming into this 
country? What is happening with respect to sweatshops in China? 
We know they exist. Are they proliferating? Is it a substantial 
problem? What's being done to stop it, to correct it? All of 
these issues are very important in the construct of 
international trade, and they certainly are important with 
respect to legislation that a number of us are trying to get 
passed here in the U.S. Senate, S. 367, the Decent Working 
Conditions and Fair Competition Act.
    [The prepared statement of Senator Dorgan follows:]

              Prepared Statement of Hon. Byron L. Dorgan, 
                     U.S. Senator from North Dakota
    Today the Subcommittee is holding the fourth in a series of 
hearings this year that relate to international trade. And the focus of 
today's hearing is the prevalence of sweatshop conditions in the 
Chinese toy industry.
    Why is this an important issue? First, because eighty percent of 
the world's toys are manufactured in China. Open the toy chest of any 
American child, and odds are that over three-fourths of the toys will 
be Chinese-made.
    Second, because these toys are all too often manufactured under 
inhuman production conditions that we would never tolerate in this 
country.
    And third, because these sweatshop practices ultimately have other 
consequences, including unsafe products that pose a health hazard to 
our children.
    In recent months, there have been countless reports of dangerous 
products being imported from China. For instance, Mattel, the biggest 
toy company in the United States, announced three major product recalls 
in just a five-week period involving Chinese-made products, the latest 
involving 848,000 Chinese-made Barbie and Fisher-Price toys that 
contained excessive amounts of lead.
    These safety issues involving Chinese imports should surprise no 
one. When production is outsourced to Chinese factories infamous for 
paying their workers pennies an hour, for dumping toxic sludge into the 
environment, and for covering up all kinds of health hazards, it should 
come as no shock that the products turned out by those factories pose a 
danger to our own health.
    Five years ago, the Washington Post ran a story entitled ``Worked 
Until They Drop''. The Post story described the story of a 19-year-old 
girl who was literally worked to death at a Chinese factory making 
stuffed toys for the U.S. market. Her coworkers said that she had been 
on her feet for 16 hours running back and forth in the factory on the 
day that she died, and it had been 2 months since she had had a day 
off. The factory food was so bad that she was severely malnourished. 
She woke up in the middle of the night coughing up blood, and died on 
the floor of the dormitory bathroom.
    According to the Post, some Chinese newspapers have a name for what 
happened to Li Chun Mei: it's called ``guolaosi,'' which literally 
means ``worked-to-death.'' I find it incredible that the phenomenon of 
working young people to death is so common in China that they actually 
have a name for it.
    This story ran on the front page of the Washington Post in 2002, 
but it was quickly forgotten. While I'm sure that the Post's readers 
were shocked by the story, they probably didn't really understand how 
it affected their own lives.
    Well, here is a story that hits closer to home. It happened in 
March 2006, when a 4-year-old Minnesota boy died of lead poisoning 
after swallowing a heart-shaped metal charm that came as a ``gift with 
purchase'' of Reebok shoes.
    The boy's name was Jarnell Brown. The charm he ingested was found 
to contain 99 percent lead. The safety threshold for lead content in 
jewelry is 0.06 percent. The little boy ingested a piece of the charm, 
and developed severe stomach pains. He was admitted to the hospital 
with brain swelling. X-rays showed that the little boy had a heart-
shaped object in his stomach.
    The charm was manufactured in a Chinese factory. Reebok recalled 
over 500,000 of these charms, in some 25 countries. The vast majority 
of the shipments had gone to the United States.
    It's no accident that Chinese products are being found to contain 
lead. The products contain lead because lead is cheap, and because the 
Chinese contractors who made the products were ultimately trying to 
lower costs without regard to the health consequence of the products.
    To me, these two stories show dual sides of the same coin: if you 
move production to Chinese factories that cut every possible corner to 
lower costs, you end up with young women worked to death in China and 
products that end up poisoning our kids here at home.
    At today's hearing, we will hear from four witnesses with a variety 
of perspectives on the issue of sweatshop conditions in the Chinese toy 
industry.
    Charlie Kernaghan is the Executive Director of the National Labor 
Committee, which investigates sweatshop abuses around the world.
    Harry Wu is the best-known Chinese human rights activist in the 
United States, having spent 19 years in Chinese labor camps. He is the 
Director of the Laogai Foundation, and an advocate for human rights in 
China.
    Bama Athreya is the Executive Director of the International Labor 
Rights Forum, which documents child labor, forced labor, and other 
abusive labor practices abroad.
    Peter Eio is testifying on behalf of the Toy Industry Association, 
Inc., of which he was recently the chairman. The Toy Industry 
Association represents the interests of the largest companies selling 
toys in the United States, representing about 85 percent of the U.S. 
toy market. Mr. Eio is also a former President of Lego Systems, Inc.
    I thank the witnesses for coming. Before turning to their 
testimony, I would note that I have been working with a number of my 
colleagues on S. 367, the Decent Working Conditions and Fair 
Competition Act. This is a piece of legislation that would prohibit the 
importation of products manufactured in sweatshop conditions. We have a 
growing list of bipartisan cosponsors that now stands at 14 Senators. A 
companion bill in the House of Representatives has 116 cosponsors. I 
hope this hearing will provide additional momentum for that bill.

    We have four witnesses today: first, Mr. Charles Kernaghan, 
the Executive Director of the National Labor Committee, in New 
York City. Mr. Kernaghan has previously testified before this 
Committee. Second, Mr. Harry Wu, Executive Director of the 
Laogai Research Foundation. Mr. Wu, I hope I have pronounced 
that correctly. Dr. Bama Athreya, Executive Director, 
International Labor Rights Forum; and Mr. Peter Eio, from the 
ICTI CARE Governing Board, member, past Chair of the Toy 
Industry Association.
    And let me begin with Mr. Kernaghan.
    Mr. Kernaghan, welcome back to the Committee. Thank you for 
the work that you do at the National Labor Committee, exposing 
sweatshop working conditions around the world. And I know that 
you've been working on these issues with respect to China.
    We will take your testimony, from all four of you. Your 
formal written testimony will be made a part of the permanent 
record, and I will ask all four of you to summarize your oral 
testimony.
    So, let's begin with you, Mr. Kernaghan. Why don't you 
proceed.

           STATEMENT OF CHARLES KERNAGHAN, DIRECTOR, 
                    NATIONAL LABOR COMMITTEE

    Mr. Kernaghan. Thank you, Senator. And thank you for 
holding these critically important hearings.
    Many Americans--many parents in America would be shocked 
and disturbed if they knew the abusive sweatshop conditions 
under which their children's toys are being made in China. 
Parents, however, have no way of knowing, as Mattel, the 
largest toy company in the world, hides its 40 or so contract 
plants in China, just as the other companies do, refusing to 
provide the American people with even the names and addresses 
of those plants. Mattel Barbie toys, along with Thomas & 
Friends toys for RC2 Corporation and Wal-Mart, are made at the 
Xin Yi factory in Shenzhen. The 5,000 workers there are 
stripped of their rights, forced to sign mostly blank temporary 
contracts lasting anywhere from just 10 days to a maximum of 3 
months. At management's discretion, new temporary contracts 
could be extended every 2 or 3 months. Workers could be at the 
factory for over a year, working full time, but always held as 
temporary workers, which means they are stripped of their 
rights--they have no right to paid maternity leave, no right to 
health insurance, no right to sick days, no right to vacation, 
no right to holidays.
    The standard shift at the factory is 14 and a half hours a 
day, from 7:30 in the morning until 10 p.m. at night, 6 days a 
week. Workers are at the factory 87 hours a week, while working 
70 hours, including 30 hours of overtime, which exceeds China's 
legal limit by 260 percent. In 2006, it was worse. The workers 
worked 7 days a week, from 7:30 in the morning until 10:30 at 
night. They were routinely at the factory over 100 hours a 
week.
    The factory is excessively hot. Everyone's dripping in 
their own sweat. The workers are prohibited from standing up 
during working hours and say that, after a few hours of this, 
their legs go numb. The workers say that you can see young 
women in the factory crying every day as the supervisors scream 
and yell at the workers, push them to go faster. Workers who 
speak up or speak back to a supervisor will be immediately 
fired.
    The base wage in Shenzhen is 53 cents an hour. But here, 
the factory cheats the workers of their overtime pay; at least 
20 percent of their overtime pay every week is confiscated from 
the workers. This is the equivalent of losing 2 days wages per 
week. It was, again, worse in 2006, when the workers were paid 
no overtime premium at all, and were cheated of 40 percent of 
the wages due them.
    The workers are housed in primitive dorms, 12 people 
crowded into each room, sleeping on double-level metal bunkbeds 
and fed company food the workers describe as awful.
    It doesn't have to be this way. This Mattel Barbie toy was 
made in that factory. This Barbie pet doctor toy. We know it 
entered the United States with a landed customs value of just 
$9. That's the total cost of production. Even on sale, the toy 
retails for $29.99. That's an astonishing markup of $20.99 on 
this toy. In other words, it's marked up 233 percent.
    There's enough money here to make toys safe and to treat 
the workers in China with dignity and respect, and at least 
adhere to China's labor laws. In fact, Mattel spent $3.45 to 
advertise this toy, which is 18 times more than the 19 cents 
they paid the workers to make it. It doesn't have to be this 
way.
    At the Guangzhou Vanguard Water Sports Products factory in 
China, they make goods for Speedo, such as this Condor mask--
swim mask. Speedo may be the best-known and the best-selling 
swimwear brand in the world, and an Olympic sponsor, but the 
400 workers at the factory are drowning in abuse. At the 
Guangzhou factory, the workers are forced to work 14-and-a-half 
hours a day, from 8 o'clock in the morning--8:30 a.m. in the 
morning until 11 p.m., 7 days a week. There are 15-and-a-half 
hour shifts, 17-and-a-half hour shifts, and even 24-hour 
shifts. The workers are at the factory over 100 hours a week, 
they're working overtime hours that exceed the legal limit in 
China by 430 percent. Workers are routinely cheated out of 40 
percent of their wages. It's an--they're losing, really, 2 
weeks' wages every month they're being shortchanged.
    Despite the fact that they're not paid overtime, if the 
workers miss a single shift--a single overtime shift, they are 
docked nearly 2 weeks' wages, despite the fact, again, that 
they're being routinely cheated of their wages. Supervisors 
constantly scream and yell and harass their workers, calling 
them ``idiots,'' ``garbage.'' Talking back to management is 
strictly prohibited. One worker who tried to defend himself by 
answering back to his supervisor was attacked, choked, beaten, 
fired.
    The pace of production is grueling. Workers in this factory 
are allowed a minute and a half to assemble this toy, this 
mask, this Condor mask, for which they are paid less than 2 
cents. Workers are so exhausted when they return to their 
dormitories that they frequently just climb into bed with their 
clothing and shoes on, collapse, and go to sleep.
    The dormitories--the bathrooms are filthy, the workers have 
no hot water. They have to make their own hot water by 
fashioning a wood-burning stove out of an oil drum. They heat 
their own water in a little plastic bucket, they take it back 
to their room, and they take a sponge bath.
    I don't think that there is a single Olympic athlete, no 
matter how committed, who could endure what China's sweatshop 
workers endure day in and day out.
    And, finally, Thomas & Friends went to China, stumbled, 
and, of course, was recalled. At the factory where the Thomas & 
Friend trains were recalled, the factory, called Hansheng Wood 
Products factory in Dongguan, the workers are suffering right 
up to the last minute, and being cheated right up to the last 
minute. That factory had 1,500 workers. Every single worker has 
now been laid off, and they have not received their full 
severance pay. They are suffering right up to the end. I don't 
think there's been one single medical examination provided to 
any of the workers who handled the lead paint, which is 
required by law in China, to see whether or not they're 
suffering any effects of lead paint.
    The workers at the Thomas & Friends factory or contractor 
were working 14-and-a-half to 15 hours, sometimes 16 hours, 
from 8 o'clock in the morning until 10:30 at night. During the 
peak seasons, they also worked 7 days a week and went for 
months without a single day off. They also were cheated of 16 
percent of their overtime pay which was legally due them.
    At the Li Cheng industrial complex in Dongguan, where RC2 
Corporation has its headquarters and makes toys for Thomas & 
Friends, Disney, NASCAR, under licensing agreements, conditions 
are also brutal. At the Yong Yi factory, RC2 workers are forced 
to toil all-night shifts, 21 to 23 hours, every single 
Saturday, from 8 o'clock until 5 a.m. or 7 o'clock in the 
morning the following morning. This is the only way the workers 
will receive Sunday off.
    At the Ri Sheng factory, the RC2 workers are systematically 
cheated their legal overtime wages. They're not paid overtime 
wages. They're cheated of 42 percent of the overtime wages 
legally due them.
    At the Pinghu factory, the largest in the zone, all they 
hire is temporary workers all of the time, full time. The 
workers--this is an illegal scam to strip the workers of their 
rights.
    The companies say that, ``We don't need laws.'' 
Corporations tell us, ``We don't need laws to protect our 
children against toxic or sweatshop toys,'' as they can 
regulate themselves through voluntary codes of conduct and 
private monitoring schemes. However, this summer's recall--
massive recall of toxic and hazardous toys made under sweatshop 
conditions in China clearly demonstrates that corporate self-
regulation is not enough. Toxic and sweatshop toys are two 
sides of the same coin and need to be regulated by enforceable 
laws, such as the law that you introduced, Senator Dorgan, 
which I think is absolutely essential to ending sweatshop 
abuse, not only in China, but across the world.
    Thank you very much.
    [The prepared statement of Mr. Kernaghan follows:]

          Prepared Statement of Charles Kernaghan, Director, 
                        National Labor Committee
    Senator Dorgan, I want to thank you for holding this very important 
hearing investigating illegal sweatshop conditions under which our 
children's toys are made. In 2006, the American people spent $22.3 
billion purchasing over three billion toys and sporting goods. Last 
year, China accounted for over 86 percent of all toy imports into the 
U.S., and to day in 2007, China's toy imports have surged another 16 
percent. The timing of your hearings could not have been more 
appropriate, as the last 3 months of the year typically account for 
almost 80 percent of all toy sales. Last year, holiday sales in the 
U.S. reached a total of $457.4 billion. This year, each consumer is 
expected to spend $791 on holiday purchases, including toys and 
sporting goods.
    Many parents in America would be shocked and disturbed if they knew 
of the abusive sweatshop conditions under which their children's toys 
are being made in China. Parents, however, have no way of knowing, as 
toy companies like Mattel (which is the largest in the world) hide 
their 40 or so contract plants in China, refusing to provide the 
American people with even the names and addresses of their plants.
    Mattel's Barbie toys, along with Thomas & Friends toys for the RC2 
Corporation and Wal-Mart are made at the large Xin Yi factory in 
Shenzhen. The 5,000 workers there are stripped of their rights, forced 
to sign mostly-blank temporary contracts lasting anywhere from just 10 
days to a maximum of 3 months. At management's discretion, ``new'' 
temporary contracts can be renewed every two to 3 months. Workers can 
be employed full time for a year or more, but always remain temporary 
workers with no legal rights. Temporary workers can be easily fired for 
being ``inattentive'' at work, or for ``speaking during working 
hours.'' Temporary workers have no right to participate in the 
mandatory national Social Security program which provides health care, 
no right to paid holidays, vacation, sick days, maternity leave, or 
severance pay.
    The routine shift is 14\1/2\ hours a day, from 7:30 a.m. to 10 
p.m., 6 days a week. Workers are typically at the factory 87 hours a 
week, while toiling 70 hours, including 30 hours of forced overtime, 
which exceeds China's legal limit by 260 percent!
    In 2006, it was even worse, as the young toy workers were routinely 
kept at the factory 15 hours a day, from 7:30 a.m. to 10:30 p.m., 7 
days a week, going for months without a single day off. The workers 
were typically at the factory 105 hours a week, while forced to work 50 
overtime hours a week, which exceeds China's legal limit by 530 
percent!
    The factory is excessively hot and everyone is drenched in their 
own sweat. Workers are prohibited from standing up during working 
hours, and cannot leave their hard wooden benches, which do not have 
back rests. The workers say that after several hours, their legs become 
numb. It is routine for the supervisors to yell and curse at the 
workers and every day, the workers, say, you can see young women 
crying. Workers have but two choices: to bow their heads and remain 
silent despite the humiliation, or speak up and be immediately fired 
without receiving their back wages. Independent unions are, of course, 
prohibited in China, leaving the workers with no voice. Workers who 
fall behind in their assigned production goal are docked 5 hour's 
wages.
    The base wage in Shenzhen is just 53 cents an hour, $4.27 a day, 
and $21.34 a week. Despite being forced to work a 70-hour week, workers 
report being routinely cheated of nearly 20 percent ($8.31) in overtime 
wages legally due them each week. This is the equivalent of being 
cheated out of 2 day's wages each week. For working 70 hours, the 
workers earn just $39.79 while they should have been paid $48.60. In 
2006, this too was even worse, since the Xin Yi factory illegally paid 
no overtime premium at all, robbing the workers of 40 percent of the 
wages legally due them!
    Workers are housed in primitive dorms, 12 people crowded into each 
room, sleeping on double-level metal bunk beds and fed company food the 
workers describe as ``awful.'' Every morning workers have to cue up to 
wait their turn to brush their teeth and use the toilet. After 
deductions for room and board, the workers' take-home pay drops to just 
46 cents an hour.
    It does not have to be this way! As an example, Mattel's ``Barbie 
Hug `N Heal Pet Doctor'' set costs just $9.00 to make in China, yet--
even on sale--it retails for $29.99 in the U.S. This means that the 
price of the Mattel toy is being marked up an astonishing $20.99--or 
233 percent.
    So there is clearly sufficient money around both to make safe toys 
and to treat the toy workers as human beings, respecting their most 
basic legal rights.
    Mattel spent nearly $2 billion in advertising over the last 3 
years, which amounts to 11\1/2\ percent of its revenues. This means 
that Mattel spent $3.45 to advertise the Barbie Pet Doctor toy--more 
than 18 times the 19 cents they paid the workers in China to make it!
    There is absolutely no need for toxic and hazardous toys, as one 
industry estimate puts the price of thoroughly screening toys at just 
10 cents per toy. Further, with a 233 percent ($20.99) mark-up on each 
toy, it is clear that Mattel could afford to assure respect for worker 
rights in China and pay the workers a fair wage so they could climb out 
of misery and at least into poverty. After all, Mattel's CEO paid 
himself $7.3 million last year, 6,533 times more than he paid his toy 
workers in China.
    It is important to note that while Mattel's Barbie brand is 
fiercely protected by all sorts of enforceable laws backed up by 
sanctions--(Mattel sues an average of once a month to protect Barbie 
and its other toys)--there are no similar laws to prevent toxic toys 
from reaching our children, and certainly no laws to protect the 
fundamental human and worker rights of the young toy worker who makes 
Barbie. To legally protect the rights of the human being--according to 
Mattel and the other corporations--would be ``an impediment to free 
trade.'' So Barbie is fiercely protected, but not the human being who 
made Barbie.
    Like many Americans, I was embarrassed and angered when Mattel's 
vice president apologized to a Chinese government official for the 
massive toxic toy recalls. Mattel apologized after the official pointed 
out that Mattel makes a large proportion of its profits from its 
Chinese manufacturers and that Mattel ought to appreciate China's 
``cooperation.''
    This is the sort of cooperation they meant: As late as 2005, Mattel 
sought and won special ``waivers'' so they could pay their workers less 
than the already-below-subsistence legal minimum wage. And to this day, 
Mattel has additional special ``waivers'' allowing its toy workers to 
toil 77 hours a week--including 32 hours of forced overtime--which just 
happens to exceed China's legal limit by 295 percent!
    Corporations say there is no need for laws to protect our children 
against toxic or sweatshop toys, as they can regulate themselves 
through voluntary codes of conduct and private monitoring schemes. 
However, this summer's massive recall of toxic and hazardous toys--made 
under abusive sweatshop conditions in China--clearly demonstrates that 
corporate self-regulation is not enough. Toxic and sweatshop toys are 
two sides of the same coin, and need to be regulated by enforceable 
laws.
    The Guangzhou Vanguard Water Sports Products factory in China 
manufactures swimming gear and sporting goods for Speedo, their major 
client, as well as Toys ``R'' Us, the giant French retailer Carrefour, 
which is second only to Wal-Mart--and others.
    Speedo may be the top-selling and best-known swimwear brand in the 
world, and an official sponsor of the upcoming 2008 Olympic Games in 
China, but the 400 workers producing Speedo goods at the Guangzhou 
Vanguard factory are drowning in abuse.
    One worker told us, ``What lies in front of us is a blanket of 
darkness. We have no hope.'' Another worker shed tears as he described 
being forced to work a grueling all-night 23-hour shift on a dangerous 
compression molding machine, explaining how exhausted he was, and 
terrified that his hands would be crushed by the relentless motion of 
the machine if he slowed down even for a second.
    The routine shift at the Guangzhou factory is 14\1/2\ hours a day, 
from 8:30 a.m. to 11 p.m., 7 days a week. There are also frequent 15\1/
2\ hour shifts to midnight and 17\1/2\ hour shifts to 2 a.m., which is 
common with Speedo production. There are even grueling 24-hour, all-
night shifts. Workers report toiling for months at a time without 
receiving a single day off. Workers are routinely at the factory over 
100 hours a week, including at least 44 hours of mandatory overtime 
each week, exceeding China's legal limit on overtime by 430 percent!
    Workers are also routinely cheated out of 40 percent of the wages 
legally due them. The minimum wage in Guangzhou is just 60 cents an 
hour, $4.77 a day and $23.87 a week. All weekday overtime must be paid 
at a 50 percent premium, or 90 cents an hour, while weekend overtime 
must be compensated at a 100 percent premium, at $1.19. Factory 
management refuses to pay any overtime premium at all. So instead of 
earning $70.43 a week, the Guangzhou factory pays just $41.32 for 84 
hours of work, meaning that the workers are being cheated of $29.11 in 
wages legally due them each week. This is an enormous loss for these 
poor workers, whose regular weekly pay is just $23.87. The workers are 
earning on average just 49 cents an hour--including all the grueling 
overtime hours--while the legal minimum wage is 60 cents an hour.
    Despite the fact that the workers are illegally not paid any 
overtime premium, if they fail to show up for even a single overtime 
shift, 2 days' wages will be deducted from their pay as punishment.
    Supervisors constantly abuse and harass the workers, calling them 
``idiots'' and ``garbage'' and screaming at them to work faster. 
Talking back to management is strictly prohibited. One worker who tried 
to defend himself by answering back to a supervisor was attacked, 
choked, beaten and fired. Workers have no voice or rights. Workers have 
no choice but to bow their heads and remain silent.
    The pace of production is also grueling. For example, someone 
working on a compression molding machine--which forms the swim masks--
must complete one operation every nine to 12 seconds, 310 to 410 per 
hour, and 3,720 to 4,920 operations in the standard 12-hour shift. 
Production line workers are allowed just 1\1/2\ minutes to assemble 
each Speedo ``Condor'' swim mask, for which they are paid less than two 
cents.
    Workers are so exhausted by the long hours and grueling production 
goals 7 days a week that they often return to their dorms after work 
only to collapse into bed, falling asleep with their clothes and shoes 
still on--despite the fact that the dorm rooms are stiflingly hot. 
Workers are drenched in their own sweat all day, but on the shop floor 
and in their dorms.
    Workers report handling potentially dangerous chemicals, oil paint, 
thinners and solvents including benzene. Yet they do not know the names 
of the chemicals, let alone their health hazards or how to respond in 
case of an emergency. In the silk screening department, workers say 
they are working with a solvent which, if even one drop touches their 
body, their skin begins to burn and fester.
    In another direct violation of China's laws, management has refused 
to inscribe its workers in the mandatory national Social Security 
program, leaving the workers without health insurance, including for 
work injuries. There is no paid maternity leave, no paid holidays and 
no paid sick days.
    Eight workers are crowded into primitive 14-by-19-foot dorm rooms, 
sleeping on double-level metal bunk beds that line the walls. There is 
no other furniture, not even a chair. The rooms reek of perspiration 
due to the stifling heat, leading the workers to refer to their dorm 
room, sarcastically, as a ``sauna.'' The shared bathrooms are filthy, 
and due to a shortage of hot water, workers wishing to wash must heat 
their own water on a makeshift wood stove they set us using an old oil 
drum. Workers carry small plastic buckets of hot water back to their 
rooms where they take a sponge bath. The workers can afford to spend 
only $1.52 a day on food.
    The Guangzhou Speedo workers are in a trap, with no voice, no 
rights, and no exit.
    It is unlikely that any Olympic athlete--no matter how committed--
could endure what China's sweatshop workers suffer day in and day out.
    Speedo and the others must clean up this factory and guarantee that 
the workers' legal human and worker rights will finally be respected.

    Senator Dorgan. Mr. Kernaghan, thank you very much. I have 
a good number of questions for you, but I'm going to wait and 
have the other witnesses testify first.
    Mr. Wu, thank you for being with us. You, I believe, have 
testified before this Committee on a previous occasion, some 
many years ago. I know that you have been incarcerated in China 
for many years. You've spoken out aggressively on Chinese 
policies. We appreciate very much your courage in doing so.
    Why don't you proceed to give us your testimony.

          STATEMENT OF HARRY WU, EXECUTIVE DIRECTOR, 
                   LAOGAI RESEARCH FOUNDATION

    Mr. Wu. Thank you, Mr. Dorgan.
    I want to ask that you put my written testimony in the 
record, and I will also say something not in my written 
testimony.
    First of all, I feel a kind of difference that we, today, 
are talking about the toy industry. Number one, the Chinese 
have set up their prison system to manufacture things from 1949 
until today. And the Laogai system is still effective today.
    Fifty years ago, I made some comments. One was about the 
Hungarian Revolution in 1956. Second, I criticized the 
government for dividing people into different classes. That is 
a kind of violation of human rights. And I was sentenced to 
life in a prison camp. I spent 19 years over there. Has there 
been a change or not?
    Unfortunately, today there are many people who just for 
writing an article on a website or saying something that 
criticizes the government, are still in jail. So, whatever the 
economic development is like today in China, the political 
system has not changed. The Laogai system plays a very 
important role--it is meant to quiet the people, to quiet those 
who criticize the government. It's to assist in that. But the 
Chinese stopped using the word ``Laogai.'' ``Laogai'' is a 
regular name, it is a government issue. But, later, they 
stopped using it, using ``prison system'' instead--they tried 
to say, ``Well, we have prisons, the same as in America.'' But 
in the Chinese prison system, there's a lot of prisoners who 
are there because they disagree with the government.
    And since 1990, America has had a big problem with MFN, 
most-favored nation trading status, and it is related to the 
prison labor--forced labor. And America has had a law since the 
1930s forbidding any product made from forced-labor to be 
imported into the United States. And there were five to six 
American companies that were publicized by American customers, 
but, unfortunately, those cases were dismissed.
    And there are two customs representatives today in Beijing. 
They spend money and do nothing. For example, this is their 
report. There's a court paper. Shandong province--a prison, 
they produce 8 million to 10 million mugs which they export to 
the United States. And now they have won the case. The Chinese 
company was published--was punished, and--unfortunately, that 
customs representative had no response on this issue.
    And--a prison, using a small company in front of the 
prison, and using the police family and policemen to export 
instead of the prisoners. It means the present prison--the 
prison can force the products to be indirectly exported to the 
United States. This indirect exporting is much larger than ever 
before. Many prison camps today have stopped the production in 
the agricultural and construction areas and are working in the 
processing of products, particularly in garments, toys, 
electronical components, footballs, crafts, all kinds of 
things, which are processed by prison labor, and exported to 
the United States.
    The second problem is in the so-called sweatshops. 
Unfortunately, I received this newspaper just recently, from 
Salt Lake City. An importer reported on what's happening inside 
China. The total (I have 2 days reports from newspapers that 
tally the Chinese) how long they work, just as he described, 
and how much they're paid, and, particularly, that people have 
lost their arms, lost their fingers, lost their legs, and 
nobody cares about it. And I want to share with you about this 
newspaper.
    And, finally, I want to say, in China there's a union, so-
called--let me explain the name, because we don't care about 
this name. Chinese National Trade Union. It is a government 
union. It is a Communist union. That's the only union in China. 
And no one accepted it. But today, Wal-Mart accepts it. Wal-
Mart does not allow any of its American workers to organize 
unions in America, but they accept the Chinese union, and 
cooperate with the Chinese union.
    When I was here 20 years ago, I heard that Wal-Mart was 
very proud that of all its products, maybe 70 percent, 80 
percent, were made in America. But today, probably the reverse, 
70 percent, 80 percent come from China.
    This can be combined into one story about our relationship 
with the Chinese. It is a Communist regime. And we are so 
enthusiastic to trade with them, do business, and we say that 
capitalism can destroy socialism. That is true. The ideological 
crisis is serious in China today. But the profit from the trade 
not only benefits America, but it also benefits the Chinese 
Communist system. That's why you see the Chinese Communist 
system doing something in Sudan, Burma, and North Korea. And 
you will see that the Chinese government is going to do more.
    Thank you.
    [The prepared statement of Mr. Wu follows:]

          Prepared Statement of Harry Wu, Executive Director, 
                       Laogai Research Foundation
    Good morning, I would first like to thank the Senate Commerce 
Subcommittee on Interstate Commerce and Trade and especially Chairman 
Dorgan and his staff for inviting me here today. This issue is 
extremely timely in light of recent toy recalls, and I am pleased that 
the U.S. Senate is concerned about labor conditions in China's toy 
industry.
    I have been asked to focus on the Chinese labor system and the 
working conditions in toy factories in China. For many years human 
rights organizations have raised awareness about the atrocious 
conditions in Chinese sweatshops where workers make most of the clothes 
we are wearing right now, and most of the toys our children play with. 
Today my testimony will confirm that Chinese and foreign-owned 
companies operating in China consistently violate international labor 
standards in the toy industry and the Chinese Communist Party (CCP) 
ignores these violations in order to maintain economic growth and 
foreign investment. The Chinese government placates the international 
community by agreeing to promote labor rights in multi-lateral meetings 
while continuing to allow the abuse of its workers at home.
    First, I will cover a subject less discussed in the international 
arena--forced labor. I will begin with early CCP theories on forcing 
prisoners to work, and will provide current examples of forced labor 
being used in the toy industry specifically. Next, I will discuss 
China's so-called national trade union, the All China Federation of 
Trade Unions (ACFTU), and its role as one of the Party's many tools to 
repress its people. I will conclude with what actions the U.S. 
Government and American companies should take.
    My knowledge of this subject originates from my 19 years in China's 
prison camps where I was forced to labor, and from my subsequent work 
as a human rights activist. I am the founder and the Executive Director 
of the Laogai Research Foundation which began in 1992 for the purpose 
of researching and raising awareness about China's vast system of 
prison camps, called the ``Laogai'', and other human rights abuses in 
China.
Chinese Government Labor Theories
    The Chinese word ``Laogai'', meaning ``reform through labor,'' 
refers to a system of forced labor camps that spans China's entire 
territory. Since the inception of the Chinese Communist Party in 1949 
the Chinese government's ideology has been to use its people to fulfill 
its political and economic goals. As a result humans are viewed as 
expendable commodities. Mao Zedong immediately recognized prisoners as 
a huge source of manpower, and in 1951 amended the ``Resolution of the 
Third National Public Security Conference'' to support this idea:

        The large number of people who are serving their sentences is 
        an enormous source of labor. In order to reform them, in order 
        to solve the problems of the prisons, in order that these 
        sentenced counterrevolutionaries will not just sit there and be 
        fed for nothing, we should begin to organize our Laogai work. 
        In the areas where this work already exists, it should be 
        expanded.

    During the 1950s and 1960s Laogai inmates were the primary labor 
force for massive state-run reconstruction projects such as irrigation, 
mining, and dam projects that would have been impossible to undertake 
with regular workers. As China's economy developed and it shifted from 
agriculture to manufacturing, so did the type of work that prisoners 
were forced to endure. During Deng Xiaoping's reform era the goal for 
economic development drove the country to open to foreign investment 
and the importance of forced labor increased. In the 1988 ``Criminal 
Reform Handbook'' Deng reiterated that one of the three major functions 
of the Laogai facilities was to organize ``criminals in labor and 
production, thus creating wealth for society.'' This amount of profit 
cannot be underestimated because prisoners are not compensated for 
their work.
Forced Labor and the Toy Industry
    In our foundation's most recent biannual handbook (Laogai Handbook 
2005-2006) we identified more than 1,100 labor camps by name and 
location (693 prisons and 352 re-education through labor camps). 
According to our research, there are eleven (11) prisons that produce 
toys for domestic and international markets in provinces across China 
and there are likely many more.
    These provinces include Beijing, Shanghai, Gansu, Hunan, Hubei, 
Zhejiang, Shandong, Liaoning, and Henan. In the No. 2 Re-education 
through labor camp in Shandong province female prisoners, many of whom 
are imprisoned for political reasons, are forced to work without pay on 
handicrafts and toys for international export. Former prisoners from 
the camp have described some of their tasks to include applying 
artificial eyelashes and hair to dolls. At the Shiliping re-education 
thorough labor camp in Zhejiang province, where profits equal about 80 
million yuan or almost 11 million U.S. dollars, inmates produce wool 
sweaters, leather products, and toys for international export. Hunan 
province's Chishan Prison forces its inmates to make toys for export to 
South Korea. At a juvenile detention facility in Shanghai youths are 
forced to produce toys, clothes and other products.
    In June 2004, Li Ying a former political prisoner held for 2 years 
at the Shanghai Women's re-education through labor facility talked 
about the toys she was forced to produce--dolls that were eventually 
sold in Italy. She asserted that she and her fellow inmates on ``Team 
No. 3'' made these dolls from June 2002-May 2003 laboring from 7 a.m. 
until 11 p.m., and sometimes even until 1 a.m. The prisoners were 
required to fulfill a quota of 120 dolls per day without pay in 
horrible working conditions.
    The U.S. State Department's Annual Human Rights Report from 2006 
confirms that ``prison labor'' is common in China. The report states 
that throughout last year ``prisoners worked in facilities directly 
connected with penal institutions; in other cases they were contracted 
to nonprison enterprises. . . . Facilities and their management 
profited from inmate labor.'' This fact that companies are using forced 
labor makes it very likely that some of the toys are entering the 
United States.
    Unfortunately, the Memorandum of Understanding on Prison Labor 
(MOU) signed between the United States and China in the United States 
has proven to be completely ineffective in stopping the trade in forced 
labor products. Our own efforts to gather specific evidence are 
hampered significantly by the fact that China has deemed much 
information about these camps to be ``state secrets''. They severely 
punish anyone who reveals it. While we have revealed much information 
about the Laogai over the years, we have also contributed to simply 
forcing the trade to go further underground. The Chinese systematically 
use legitimate trading companies unconnected to the Laogai to sell the 
products abroad.
    A recent civil case involving the importation of forced labor made 
coffee mugs was brought by a U.S. company in Ohio. Detailed evidence of 
the production link to Luzhong Prison was presented. Unfortunately, the 
bringing of such cases is extremely rare, not because forced labor is 
rare, but rather because it is dangerous and difficult to gather the 
information in the first place.
Sweatshops
    Of course, the overwhelming majority of toys made in China are 
produced in private factories, most of which are foreign-owned. Many of 
these can and have been defined as ``sweatshops'' by NGO's, unions, and 
journalists in literally hundreds of reports over the past decade.
    The State Department's investigation also reported the sweatshop 
conditions that exist in factories including those that make toys:

        In July more than 1,000 workers at a plastic toy factory in 
        Dongguan, Guangdong Province, rioted over allegations of 
        inadequate pay and working conditions, particularly excessive 
        overtime, and protesters clashed with police and company 
        security. Dozens of workers were detained after the two-day 
        protest.

    In September of this year, the Hong Kong labor rights organization, 
Students and Scholars against Corporate Misbehaviour (SACOM), exposed 
the conditions at a factory in China making toys for Disney. Workers at 
Haowei Toys in southern China said they were forced to labor for 15 
hours a day for 28 days a month during peak seasons, work 28 days a 
month and up to 15 hours a day using dangerous toxic chemicals.
    The labor conditions in prisons and sweatshops are clearly 
different, but in all too many cases only by degree. If prisoners 
attempt to defend their rights they are quickly stifled by beatings or 
even torture. If workers do, they are either fired or arrested. 
Prisoners labor without remuneration and many factory workers are 
denied the pay that is due them for the hours they work. Forced labor 
and sweatshop conditions in the toy industry like nearly every other 
industry are perpetuated by the Chinese government because economic 
profit and GDP growth are the CCP's number one priority. China still 
refuses to ratify the International Labor Organization's convention 
against forced labor claiming its has a useful purpose in its 
reeducation camps. The government also will not ratify any United 
Nations or ILO conventions that allow workers to create and join 
independent unions and collectively bargain.
    This week The Salt Lake Tribune is running a series of 
investigative reports on working conditions in Guangdong province by 
reporter Loretta Tofani entitled ``American Imports, Chinese Deaths''. 
It represents a 14-month effort and was sponsored by the Pulitzer 
Center for Crisis Reporting. With your permission I am attaching it to 
my testimony for the record. While it does not deal specifically with 
the toy industry, it is the most current expose of the tragic nature of 
work in southern China, the very same region where a majority of toys 
are produced for export to the United States.
China's National Trade Union
    The Chinese government outlaws all independent trade unions, 
forcing workers to join the state-sponsored All China Federation of 
Trade Unions (ACFTU). This organization, run by the CCP, with over 170 
million members, is used to control union activities and workers. The 
ultimate goal of the ACFTU is to ``uphold . . . the leadership of the 
Communist Party'' and to quash any grassroots union movements.
    The government's most recent tactic is to co-opt foreign companies 
into allowing their employees to join the ACFTU under the auspices of 
protecting the workers. In 2006 Wal-Mart--a company that does not allow 
its employees to unionize in any other country--finally capitulated to 
ACFTU demands and currently 77 out of 84 of its stores in China have 
union branches. This tactic has two motives for the government as its 
economy's shifts to privately owned enterprises. First dues paid by 
companies with ACFTU branches help off-set the losses from the 
diminishing state-owned sector, and second, the CCP can better monitor 
and control its private-sector workers.
    There is no evidence that Wal-Mart workers are allowed to bargain 
their own contracts with the company. And, unfortunately some in the 
American labor movement have seen fit to ignore the reality that the 
ACFTU is CCP controlled and an oppressor of workers rather than their 
advocates and have granted them a legitimacy they don't deserve by 
meeting and working with them as equals.
    Sadly, workers who attempt to organize independent unions are 
quickly dealt with, usually by arrest and sentencing to serve terms in 
the Laogai and could end up making the products we are discussing here 
today.
Conclusion
    The labor abuses in the toy industry prove that despite its 
rhetoric China has not progressed in human rights nor does it respect 
international labor standards. The high number of recalled toys made in 
China this year alone should be a sufficient warning for U.S. companies 
and consumers. The Chinese government continues to use forced labor to 
make goods, condones sweatshop conditions in its factories, and refuses 
to allow workers to create independent unions--is it really any wonder 
that low-quality, harmful toys are being exported to the U.S. and into 
the hands of our children? The toy industry in China is a vivid example 
that disproves the commonly mentioned notion that economic development 
and/or capitalism will bring democratic change to China. In contrast, 
more and more U.S. companies are bending to the government's demands 
making the totalitarian regime even stronger.
    The U.S. Government has an obligation to ensure that forced labor 
products and tainted goods do not enter our borders. American companies 
must take responsibility for the Chinese factories that produce their 
goods. They must perform more frequent inspections and audits and 
should not allow phony unions to be set up in their factories and 
workplaces. Profit is the only factor that has the potential to affect 
China's behavior. Worker's rights in China will not improve until 
foreign businesses and governments collectively decide to press China 
to stop using prison and sweatshop labor and to allow their workers to 
independently organize.
    The time has long past to discard meaningless Codes of Conduct.
    The Administration has rejected the AFL-CIO's ``301'' petition on 
worker rights in China. I believe the Congress should itself resubmit 
this petition as well as significantly strengthen inspection at its 
ports of any and all products, including toys, which could endanger the 
health and well-being of American consumers.
    Thank you.
    The information referred, American Imports, Chinese Deaths, by 
Loretta Tofani, can be accessed at http://extras.sltrib.com/china/.

        The Salt Lake Tribune:

                Chinese Workers Lose Their Lives Producing Goods for 
                America--dated October 19, 2007.

                Metal Factories Fail To Protect Against Fatal Lung 
                Diseases--dated October 20, 2007.


                Primitive Machines Take Digits and Limbs--dated October 
                21, 2007.

                Workers Inhale Toxins Up To 70 Hours a Week--dated 
                October 22, 2007.

                Cadmium Dust Causes Kidney Failure, Death--dated 
                October 23, 2007.

                Companies Say They Are Not To Blame; Who Is?--dated 
                October 24, 2007.

    Senator Dorgan. Mr. Wu, thank you very much for your 
testimony. I have some questions but I will wait until the 
others have testified.
    Dr. Bama Athreya, Executive Director of the International 
Labor Rights Forum, your organization has been extensively 
documenting the connection between Chinese toy sweatshops and 
product safety problems. We appreciate very much your 
willingness to be here and to testify today, and you may 
proceed.

 STATEMENT OF BAMA ATHREYA, EXECUTIVE DIRECTOR, INTERNATIONAL 
                   LABOR RIGHTS FORUM (ILRF)

    Dr. Athreya. Thank you very much, Senator Dorgan. Thanks to 
you and the Committee for the opportunity to testify and for 
your leadership on this very important issue.
    We all have read the scandalous news in recent months of 
toys, Thomas the Tank Engines, bibs, even baby clothes that are 
tainted with lead and toxic substances, and we should, rightly, 
be very concerned with the health and safety of our children--
consumers in the United States, and, most importantly, our 
children who trust innocently in these toys.
    We are here today, however, to give voice to others who 
are, frankly, barely more than children themselves, and who are 
also tragic victims of the global toy industry. And these are 
the workers that work and apply these toxic substances to the 
toys, day in and day out, as Mr. Kernaghan has described.
    They operate machinery that produces the plastics for the 
toys. They breathe and touch the toxics, and almost never are 
they given protective gear or masks. In fact, most of the 
workers that we and our friends in China have interviewed would 
not know what protective gear looks like.
    I have documented and included several examples in our 
written submission for the record. Here, I just want to 
summarize some of the facts and figures about the toy industry 
in China, and cite a couple of the very typical examples that 
we found in our research.
    There are approximately 8,000 toy factories in China today, 
and they employ more than 3 million workers. Most of these 
factories and workers are in south China and the Pearl River 
Delta, and virtually every American toy company produces its 
wares in this region. We have seen products for Mattel, Hasbro, 
Fisher-Price, Toys ``R'' Us, and Disney. These are all well 
documented and users of Chinese toy factories. And the value of 
the toy exports to the U.S. market is estimated in excess of 
$15 billion per year.
    By far, the single largest toy retailer and the single 
largest beneficiary of this trade is Wal-Mart. Wal-Mart, alone, 
has toy sales of approximately $7.4 billion a year. Most of 
these toys, like most toys retailed in the U.S., are made in 
China. And Wal-Mart, therefore, bears a lion's share of 
responsibility for pushing the toy industry into a region where 
product safety and worker safety inspection are nonexistent.
    On the subject of workers' health and safety, I'm going to 
focus a bit on that, as Mr. Kernaghan has spoken very 
eloquently about the other worker rights abuses in these 
factories. But on worker health and safety, things are 
particularly grim. Toy factories that we have surveyed, and 
that our partners in China have surveyed, routinely fail to 
provide information or training to workers using chemicals at 
their work posts. Hundreds of workers that were surveyed by our 
allies in China reported that they are subjected to harmful 
chemical substances. These workers may be at risk of lead 
poisoning, plastic poisoning, and welding accidents.
    I am going to just name two examples of two factories that 
we investigated, one toy company, at Yu Bao, would actually ask 
its workers to make a Faustian bargain just to obtain their 
jobs in the first place. The company keeps two contracts for 
each worker. The first contract with the worker is what they 
hand to the labor rights monitors when they come to the 
factories to inspect, but the other is the real contract with 
the worker. The real contract stipulates the following, and I'm 
quoting a translation from a contract that we obtained, 
``During working hours, in case of injuries and/or disabilities 
as a result of not following the machine operating rules,'' 
which the supervisor certifies to be true afterward, ``the 
first party, the factory, without exception, does not grant or 
bear any responsibility, and, without exception, the second 
party, the worker, is, himself, responsible.'' So, just to make 
that clear, workers are signing away any ability to hold the 
company, the factory, accountable if they are injured on the 
job.
    The same contract stipulates that workers must work for 12 
hours, 7 days per week, and if a worker fails to report for 
this entire period of duty for any reason, then, ``without 
exception, the first party, the company, has no relationship 
with the employee, and the second party, the employee, must 
not, for any reason, raise the issue of litigation.'' Again, in 
other words--I want to rephrase this--if a worker is severely 
maimed on the job and must leave her post to obtain medical 
emergency treatment, she is regarded as terminated and has 
signed away her rights to bring a case forward for any damages.
    As if all of this were not enough, Yu Bao also compels 
workers to stay on the job by withholding a portion of their 
regular pay as a security. I'll just name one other typical 
Chinese toy factory, Lee Der Industrial, a supplier to Mattel, 
and now infamous. Lee Der was one of the ones forced to close 
down due to excessive lead in its products. This caused 
immediate unemployment of all of Lee Der's workers, and no 
mention was made by Mattel as to whether the lead poisoning 
they may have suffered would be treated. So, our investigators 
did go to interview the recently fired workers from this 
factory. They interviewed several ex-Lee Der workers. None of 
the workers interviewed knew anything about the materials, 
including lead, that were used during production. They had not 
been told why the factory closed. They had not been told about 
the lead paint issues. Nor had they been given any information 
related to the poisoning they may have suffered on the job as a 
result of applying the toxic to the toys.
    I will just say, my--on behalf of my organization, that we 
do believe these workers need jobs, but we don't believe in 
condoning the rush to profit from the desperation of Chinese 
workers, who are really forced to take these jobs by dire 
economic conditions in their country. We believe there must be 
global regulations in place that keep powerful corporations 
from maximizing the profits they can wring from human misery.
    The name brands that we've mentioned here today--Hasbro, 
Mattel, Fisher-Price, and certainly Wal-Mart--have access to 
the most sophisticated possible information on every aspect of 
China's economy, including comprehensive data on the nature of 
China's desperate labor force, the vast unemployment problem in 
China, and the--the companies are also privy to excellent data 
on the number of China's labor inspectors, which is, frankly, 
vastly inadequate for the workforce, the number of product 
safety inspectors, and the overall current inspection 
capabilities of the Chinese government.
    Despite some of the newspaper statements that you've seen 
recently, these companies were not shocked that there was no 
product safety happening in these factories; they were well 
aware that the Chinese government does not have the capacity to 
conduct systematic investigations of these factories. Indeed, 
multinational corporations, such as the ones we've named, are 
seeking out this production destination precisely because there 
is very little regulation. Let me restate this. Wal-Mart and 
the world's major toy brands and retailers are not producing in 
China despite the lack of meaningful protection for workers or 
product safety, they're there precisely because of it, 
precisely because it lowers their costs not to have to worry 
about regulation.
    Wal-Mart and the world's major toy brands and retailers are 
not producing in China despite the lack of meaningful 
protection for workers or product safety, they're there 
precisely because of it, precisely because it lowers their 
costs not to have to worry about regulation.
    Lest this seem too dramatic a statement, I do want to 
remind us all of an example that came up several months ago of 
the U.S. business lobby's efforts to impede improvements to 
labor law reforms in China. The Chinese government has 
recognized that there is a problem in the fact that most 
private-sector workers in China are not covered by the 
country's basic labor laws. They're not covered, because 
they're not considered to be contracted under--covered by a 
labor contract.
    Several months ago, a new labor contracts law was drafted 
by labor experts within China to provide basic labor law 
coverage to the country's growing private-sector workforce. The 
U.S. Chamber of Commerce in China, on behalf of its corporate 
members, opposed the new draft law and lobbied to weaken the 
protections of the Chinese government that it was seeking to 
instate. China would not be as attractive a production 
destination to U.S. toy retailers if its workers were actually 
provided with the basic protections of China's labor code.
    I will end my comments here. I simply want to reinforce the 
point that Mr. Kernaghan also made, that we cannot rely on the 
voluntary commitments, the voluntary promises made under 
corporate codes of conduct. They are grossly insufficient, 
particularly in a context where, on the one hand, Wal-Mart and 
other retailers and brands are telling you, ``Don't worry, we 
have voluntary codes of conduct. We will protect the workers, 
ourselves,'' and, on the other hand, are vigorously lobbying 
the Chinese government not to strengthen its legal protections 
for workers. We do need legal protection. This is extremely 
important. And we--our organization feels that we cannot wait 
several years for the Chinese government or Chinese laws to 
catch up with the situation--the desperate situation faced by 
these workers.
    That is why it is so important, the legislation, Senator 
Dorgan, Senator Sanders, that you've supported and brought 
forward, to hold U.S. retailers accountable for labor rights 
violations throughout their supply chains around the world. We 
do need binding regulation, and we strongly thank you for your 
efforts in this regard.
    [The prepared statement of Dr. Athreya follows:]

        Prepared Statement of Bama Athreya, Executive Director, 
                International Labor Rights Forum (ILRF)
Introduction
    Thank you for the opportunity to present our testimony on the 
plight of China's factory workers. We have all read the scandalous news 
in recent months of the dangers to U.S. consumers of toys made in 
China's factories, with revelations of lead paint and other toxic and 
hazardous substances on Thomas the Tank Engines, baby bibs and even 
children's clothing. We should be very concerned with the health and 
safety of our children, who innocently trust in the safety of their 
pretty toys.
    We are here today to give voice to others who are barely more than 
children and who are also tragic victims of the global toy industry. 
These are China's toy factory workers.
    The International Labor Rights Forum (ILRF) has long fought to give 
voice to the abusive conditions faced by factory workers in China and 
around the world. Over the past decade we have worked closely in 
solidarity with China's factory workers. I have traveled to China's 
industrial centers in Guangdong province many times, have visited many 
factories and spoken directly with many dozens of workers. We have also 
made it possible for Chinese factory workers to speak on their own 
behalf in front of public audiences in the United States, to explain 
first hand the abuses they suffer in the completely unregulated export 
factories of southern China.
    These are the workers who apply the lead paint to the toys and who 
breathe the paint fumes day in and day out. They operate the machinery 
that produces the plastics for the toys, and breathe and touch those 
toxics as well. Almost never are they given protective gear or masks--
most would not know what protective gear looks like. They live and work 
in industrial slums that often resemble the images in Charles Dickens' 
novels, crowded, almost unbearably polluted, and with limited access to 
clean, safe water.
    Here are the hard facts and figures. There are approximately 8,000 
toy factories in China today, employing more than three million 
workers. Most of these factories and workers are in the Pearl River 
Delta area of southern China. Virtually every American toy company 
produces its wares in this region. Mattel, Hasbro, Fisher-Price, Toys R 
Us, and Disney are all well documented end users of China's toy 
factories. The value of China's toy exports to the U.S. market alone is 
estimated in excess of $15 billion per year. As I will explain, 
however, our concern is not simply with the brands, but even more 
principally with the retailers of these toys, who bear the most 
responsibility for the horrific conditions under which they are 
produced. Of these, the single biggest toy retailer by far is Wal-Mart. 
Wal-Mart alone has annual toy sales of approximately $7.4 billion. Most 
of these toys, like most toys retailed in the U.S., are made in China. 
And Wal-Mart bears a lion's share of responsibility for pushing the toy 
industry into a region where product safety and worker safety 
inspection is virtually nonexistent. The Wal-Mart model of doing 
business, as I'll explain, is precisely to push suppliers to produce in 
corners of the world where they can escape the costs that are inherent 
in providing protections for consumers or protections for workers.
    Eric Clark's excellent book ``The Real Toy Story'' documents the 
life story of one typical toy factory worker, and our own allies in 
China have documented many dozens of similar stories. I'd like to quote 
from Clark's moving and detailed description of the 18 year old worker 
he met: ``Li Mei soon had small wounds on her hands and elbows, burn 
marks on her uniform, her shoes, and socks. When they moved her to 
trimming plastic toys with small sharp knives, she often cut herself, 
once so badly that her hand bled heavily but the medical box was 
locked. Rather than pay at the clinic, she bound up the wound in a bit 
of cloth. Much worse things happened: workers in the die-casting and 
moulding department lost fingers and even arms, while hole-making 
workers often had their hands punctured and crushed because they had no 
reinforcing gloves.''
    Our allies in south China have conducted systematic research on the 
area's toy factories throughout 2007. The results to date indicate 
repeated and endemic violations of China's basic labor laws in every 
single factory. Compulsory overtime with inadequate and illegally low 
compensation is prevalent. Workers routinely work 10 to 14 hours per 
day during the busy season. Because of a system of illegal fines and 
fees, workers actually receive well below the region's mandated minimum 
wage. Very few workers are covered by government-mandated medical 
insurance or pension funds. Employees suffer verbal and sometimes 
physical abuse and sexual harassment.
    On the subject of these workers' safety and health, things are 
particularly grim. Toy factories routinely fail to provide information 
or training to workers using chemicals at their work posts. Hundreds of 
workers that surveyed by our Chinese partners reported that they are 
subjected to harmful chemical substances. These workers may be at risk 
of lead poisoning, plastic poisoning or welding accidents.
    To cite the example of one of the factories we surveyed, the 
Duoyuan factory making Hasbro toys: Every day, workers are required to 
move bundles of PVC materials between departments. Each bundle averages 
about 100 lb. and workers describe these jobs as extremely fatiguing 
and not fit for the average workers. Production departments are 
installed with large machines, and workers are denied the necessary 
training to operate these machines. Induction heating machines and 
cutting machines are particularly high-risk. However, the only warning 
notice posted on this machinery reads, ``Careful of high temperature.'' 
Chemicals such as paint and dilutants are used in the silk print 
department. However, the company does not provide any related chemical 
information nor does it distribute any safety equipment.
    Another toy company that we investigated, Yu Bao, would ask workers 
to make a Faustian bargain just to obtain their jobs. The company keeps 
two contracts for each worker. The company's first contract with the 
worker is used to hand to factory inspectors when they visit. The other 
is the real contract with the worker. The real contract stipulates the 
following: ``During working hours, in case of injuries and/or 
disabilities as a result of not following the (machine) operating 
rules, which the supervisor certifies to be true afterward, the first 
party (the factory), without exception, does not grant or bear any 
responsibility, and without exception, the second party (the worker) is 
himself responsible.'' The same contract stipulates that workers must 
work for 12 hours, 7 days per week, and if a worker fails to report for 
this entire period of duty for any reason then ``without exception, the 
first party (the company) has no relationship (with the employee); and 
the second party (the employee) must not for any reason raise the issue 
of litigation.'' In other words, if a worker is severely maimed on the 
job and must leave her post to obtain medical emergency treatment, she 
is regarded as terminated and has signed away her rights to bring a 
case forward for any damages. Why would any manager ask a worker to 
sign such a contract, except that such clauses are actually likely to 
be invoked? As if all of this were not enough, Yu Bao compels workers 
to stay on the job by withholding some of their pay as a `security.'
    Another typical Chinese toy factory is Lee Der Industrial, a 
supplier to Mattel and now infamous. Lee Der was forced to close down 
due to excessive lead in its products. This caused immediate 
unemployment of all Lee Der's workers; no mention was made as to 
whether any lead poisoning they may have suffered would be treated. To 
find out, recently, our Chinese partners traveled to the factory site 
and interviewed some ex-Lee Der workers. None of the workers knew 
anything about the materials (including lead) that they were using 
during production. They had not been informed why the factory closed 
nor given any information related to the poisoning they may have 
suffered.
    Why do workers accept these jobs? The country's enormous and 
desperate population of unemployed have no choice. With well over a 
billion people, of course China has the world's largest labor force. In 
addition, despite the GDP growth rates that appear on paper, there are 
nowhere near enough jobs, so most of those billion plus people are 
barely surviving. In the countryside, where 900 million of those people 
live, the land cannot support the growing population. Even those 
peasants who had been getting by are now faced with competition from 
foreign agricultural markets, a result of expanded trade ties and 
China's recent entry into the WTO, and that will put tens of millions 
more out of work. These tens of millions will flee to urban areas to 
seek work. However, China's cities are also plagued with vast number of 
unemployed. Again as a result of free market pressures, many of China's 
state owned enterprises have gone out of business in recent years, 
creating an even greater pool of unemployed and increasingly desperate 
workers.
    Yes, these workers need jobs. However should we condone the rush to 
profit from this desperation? We believe there must be global 
regulations in place that keep powerful corporations from maximizing 
the profits they can wring from human misery. ILRF is not an 
organization that opposes global trade, per se, but we cannot ignore 
the fact that the reason why virtually every U.S. toy company has 
chosen to produce in China is because of a `race to the bottom.' The 
stories and statistics on China's workers that I have cited here today 
are no secret to Hasbro, Fisher-Price and certainly not to Wal-Mart. 
These name brands and retail giants have access to the most 
sophisticated possible information on every aspect of China's economy, 
including comprehensive data on the nature of China's desperate labor 
force and vast unemployment problem; these companies are also privy to 
excellent data on the number of China's labor inspectors, the number of 
product safety inspectors, and the overall current inspection 
capabilities of the Chinese government. Multinational corporations seek 
out production destinations precisely where there is little or no 
regulation of labor or environmental conditions. Let me restate this: 
Wal-Mart and the world's major toy brands and retailers are not 
producing in China despite the lack of meaningful product or worker 
safety regulation--they are there precisely because of it.
    Lest this seem too dramatic a statement, let me cite the example of 
the U.S. business lobby's efforts to impede improvements to China's 
labor laws. The Chinese government recognizes the problems faced by its 
workers. With the assistance of several labor experts, last year a new 
labor contracts law was drafted to provide basic labor law coverage to 
the country's growing private sector workforce. The U.S. Chamber of 
Commerce in China, on behalf of its corporate members, opposed the new 
draft law and lobbied to weaken the protections the Chinese government 
sought to instate. China would not be as attractive a production 
destination to U.S. toy retailers were its workers actually provided 
with basic legal protections.
    The companies that make up the U.S. Chamber of Commerce, and more 
broadly the companies that consume cheap Chinese goods and hook U.S. 
consumers on the habit of these cheap goods, do not like regulation. 
Typically they prefer their consumers to relay on voluntary measures, 
`codes of conduct.' 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.
    In a new report which ILRF just released yesterday, we document the 
systematic failures of Wal-Mart to enforce its so-called ethical 
standards in its supplier factories around the world. Key findings 
include:

   Decreasing Percentage of Factories Rated Green: The number 
        of factories rated green (as having no or low-risk violations) 
        had been consistent at 21 percent for the first 2 years that 
        data was available, decreased to 10 percent in 2005 and to only 
        6 percent in 2006. Wal-Mart explains the dramatic shift as 
        resulting from increasing standards for factories. However, it 
        is more likely that the factories that actually complied with 
        ethical standards did not meet Wal-Mart's demand for the 
        cheapest possible product, and that Wal-Mart therefore ceased 
        doing business with the more ethical factories.

   Decreasing Number of People Trained by Ethical Standards 
        Staff: The number of suppliers and factory management personnel 
        trained by ethical standards staff increased from 4,644 in 2003 
        to 11,000 in 2005, a significant increase in the number of 
        people being made aware of the Standards for Suppliers. In 
        2006, however, training was cut in half. Only 5,000 suppliers 
        and members of factory management were trained that year.

   Recurring Violations: The 2004, 2005 and 2006 company 
        reports listed some common and repeated violations that are 
        ``related to legally required benefits not being paid,'' 
        ``workers not being paid for all hours worked,'' and ``the use 
        of double books to hide the number of hours worked.'' Wal-Mart 
        describes these common violations as ``Global Challenges and 
        Trends.'' The ``double books'' violation is particularly 
        telling since it reveals that suppliers and factory management 
        officials recognize that they are violating labor rights 
        standards and laws.

    One of the challenges of analyzing Wal-Mart's Ethical Standards 
program, and the extent of violations against workers throughout its 
supply chain, is the lack of accurate information available to the 
public. Information on sourcing policies and practices is conspicuously 
absent from the Ethical Standards Reports. It is not clear how Wal-Mart 
decides which factories to use, and it is not evident that its sourcing 
practices have changed in response to repeated sweatshop exposes. 
Pressures on suppliers to produce goods quickly and at the lowest 
possible cost necessarily lead to excessive overtime and illegally low 
wages due to Wal-Mart's unreasonable deadlines for orders and demands 
for ultra-low prices.
    On health and safety issues, Wal-Mart and other toy brands' codes 
of conduct and auditing systems are particularly inadequate. We have 
worked for several years now with trained occupational health and 
safety experts who led a training program within south China's 
factories. They found an enormous lack of basic information in these 
factories, not only among workers, but also among factory management. 
Neither retailers nor brands bother to provide factory managers with 
information they have on such dangers as lead paint exposure. While 
companies claim to protect workers' safety and health through their 
codes of conduct, most companies do not take even the first steps to 
encode meaningful standards that specifically identify hazardous 
substances and train or even suggest to factory monitors how to inspect 
for occupational illness. I have actually accompanied company monitors 
on their factory inspections so I can attest to the fact that nowhere 
in the standard questionnaire do company auditors ask such questions as 
what are the factory's accident rates, what are the rates of illness 
among workers, what are the systems for hazard communications, what 
procedures are in place to limit exposures to chemicals, etc. Health 
and safety inspectors with whom we work report that many toys are hand-
painted by workers who stand over the toxic fumes applying paint to the 
toys for up to 20 hours per day! If Wal-Mart and other toy retailers 
had been measuring illness rates among their factory employees, might 
we consumers have known much sooner that there were problems here?
    Surely we can do better than to leave these horrific abuses to the 
`free market' to address through such weak and voluntary efforts. None 
of the systems noted above contain any truly meaningful sanction for 
bad behavior. 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.
    Why hasn't Wal-Mart been here before you testifying? They are the 
largest customer for all these brands that have been named, they are 
the ones who have pushed these companies overseas. Let's tell the story 
of Huffy Bikes as an example of how the company's price pressures led 
directly to an unsafe product for consumers, and the flight of a 
company from good factory conditions where labor laws were enforced to 
a place where workers could be exploited. What happened to Huffy is 
also the story of many a toy manufacturer.
    Despite making bikes in the United States for many years, Huffy was 
forced to close three factories and lay off thousands of workers. Huffy 
could not compete with cheap bicycles coming from China. Celina, OH, 
where a large Huffy factory was closed, was hit particularly hard by 
the demand for low cost bicycles. Celina Mayor Paul Arnold said ``. . . 
[Wal-Mart's] demand for cheaper bicycles drove Huffy out of Celina. 
[Mansfield News Journal, 12/8/03]

   After Filing for Bankruptcy, Huffy is Now Partly Owned by 
        the Chinese Government. After Wal-Mart's unfair demands pushed 
        Huffy into bankruptcy, the Chinese government's export credit 
        insurance agency, known as Sinosure, took control of 30 percent 
        of the company's stock options. Sinosure executive vice 
        president Zhidong Liang will be Chairman of the Board and over 
        the next 5 years, Sinosure is expecting to control more than 50 
        percent of the company. As part of the deal, Huffy's pension 
        plan was dismantled and its current and former employees must 
        seek assistance from Pension Benefit Guarantee Corporation. 
        [Daily Deal, 10/18/05; Bicycle Retailer and Industry News, 10/
        1/05]

    According to Gary Gereffi, a Professor of Sociology at Duke 
University, ``Wal-Mart is telling its American suppliers that they have 
to meet lower price standards that Wal-Mart wants to impose. The 
implication of that in many cases is if you're going to be able to 
supply Wal-Mart at the prices Wal-Mart wants, you have to go to China 
or other offshore locations that would permit you to produce at lower 
cost. . . .''
    What do we do, then, to stop this relentless race to the bottom? 
Clearly we cannot rely on voluntary company commitments as the answer. 
Companies will not respect worker rights unless there are prohibitive 
legal sanctions in place. Without the fear of such sanctions, companies 
like Wal-Mart, Mattel and Disney will correctly calculate that it is 
cheaper to suffer a little bad publicity once in awhile than to provide 
systematic and meaningful protections for workers and consumers.
    As I have noted, the Chinese government has taken steps in recent 
years to reform its labor laws, and may over time take more such steps. 
Nevertheless serious challenges to enforcement remain, and may take 
many, many years to address. In the interval, it is highly likely that 
if retailers and manufacturers see enhanced worker protections, they 
will flee to yet more lawless destinations around the globe.
    We at ILRF recognize that enforceable global human rights laws are 
also a dream for a far distant future. We are doing what we can to 
utilize existing U.S. laws to hold U.S. corporations accountable for 
abuses suffered by workers overseas. We have used U.S. laws to bring 
forward cases in U.S. courts on behalf of abused workers in China and 
elsewhere. We have also worked with U.S. Congress to strengthen worker 
rights protections in our trade laws, and to push for adequate 
enforcement of those labor clauses. We applaud 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, the S. 367 bill to 
amend the Tariff Act to prohibit the import, export and sale of goods 
made with sweatshop labor. These are necessary but not sufficient 
initiatives, and are, of course, vigorously opposed by the same U.S. 
business community that claims to be implementing ethical standards in 
its overseas production. We ask why Wal-Mart and the toy brands have 
not been called upon today to answer for the exploitation of their 
factory workers overseas? We look forward to a lively, substantive 
exchange with U.S. corporations on the investments they have made to 
promote voluntary CSR initiatives, while all the while vigorously 
opposing enforceable domestic labor laws and enforceable legislation on 
international labor standards.
    Our grateful thanks to the Committee for the opportunity to present 
this testimony today.

    Senator Dorgan. Dr. Athreya, thank you very much for your 
comments.
    We have been joined by Senator Sanders, who I invited to 
join the panel this morning. And we expect Senator Brown to be 
along, as well.
    Our last--Senator Sanders, if you don't mind, I'll ask Mr. 
Eio to present, and then you may have a statement and then ask 
questions, as well. And we appreciate your being here.
    Mr. Robert Eio--am I pronouncing that correctly?
    Mr. Eio. Mr. Peter Eio, sir.
    Senator Dorgan. OK.
    Mr. Eio. Your--but the ``Eio'' pronunciation is correct.
    Senator Dorgan. First name is Peter.
    Mr. Eio. Yes.
    Senator Dorgan. I apologize. Mr. Peter Eio, former Chairman 
of the Toy Industry Association.
    I should mention that we did invite Mattel to be present at 
the hearing. They chose not to. We wanted someone with the Toy 
Industry Association. Mr. Eio is the former Chairman of that 
association. He chaired the group, as I indicated, when it was 
known as the Toy Manufacturers Association, but I'm guessing, 
Mr. Eio, that, because the manufacturing is largely gone, the 
name has changed to Toy Industry. But you, in any event, are 
welcome to discuss that.
    I thank you very much for being here because we wanted to 
hear the perspective of the toy industry as well. And, as I 
indicated, I had invited Mattel, because Mattel has been the 
subject of some of the testimony. But your presence is 
appreciated, and why don't you proceed.

  STATEMENT OF PETER EIO, MEMBER, GOVERNANCE BOARD, ICTI CARE 
                           FOUNDATION

    Mr. Eio. Thank you, Senator Dorgan and Senator Sanders.
    My name is Peter Eio, and I'm a member of the Governance 
Board of the ICTI CARE Foundation. I retired 5 years ago as 
president of the Lego Toy Company in the Americas, and, as you 
stated, I am a past chair of the Toy Industry Association. And 
you were correct also, in those days it was the Toy 
Manufacturers Association.
    The ICTI CARE Foundation is an independent foundation that 
oversees the ethical manufacturing program of the worldwide toy 
industry. The International Council of Toy Industries, or ICTI, 
is the umbrella industry association of 21 national toy 
associations around the world, of which the U.S. Toy Industry 
Association is the largest member.
    Our Governance Board was founded by such people as Carl 
Bildt, former Prime Minister and current Foreign Minister of 
Sweden; Maria Livanos Cattaui, former Secretary General of the 
International Chamber of Commerce; and Amir Dossal, Executive 
Director of the United Nations Fund for International 
Partnerships.
    As I'm sure you know, many organizations ``talk,'' and some 
``do.'' We are doers. We are the first worldwide industry to 
bring together brands, retailers, government, civil society, 
and manufacturers to achieve a common goal: to help create a 
better life for workers in our supply chain. I have focused my 
remarks on this effort, as I believe that is most of what the 
committee has asked us to cover.
    Our program is called the ICTI CARE Process and has been 
operating in China for about 2 years. It is the worldwide toy 
industry's effort to develop a transparent, independent system 
that will ensure its products are manufactured in safe, 
healthy, and fair work environments. To achieve this, it aims 
to provide a single, fair, thorough, and consistent monitoring 
program for toy factories. We began in China, where more than 
75 percent of the world's toys are made, and expect to expand 
into other countries, beginning next year.
    This process begins with a global code of business 
practices, continues with a monitoring protocol and guidance 
document, and is enforced through the periodic certification 
and recertification of factories that comply. Operations in 
China are managed by an office in Hong Kong, while the actual 
audits are carried out by third-party social compliance 
auditing companies.
    To date, there are more than 1,200 toy factories in China, 
employing more than a million people, that are registered and 
active in this process, with 670 factories currently certified 
as being in compliance. The others are working toward 
compliance. We expect those numbers to grow significantly next 
year as more auditors are trained and more factories used by 
major retailers join the system.
    Senators, clearly, certifying factories is not sufficient 
unless you have toy brands and retailers who are willing, not 
only to accept those certifications, but also to demand them. 
Currently, there are 290 toy brands around the world, 
representing an estimated 75 percent of global toy production, 
that are pledged to order product only from factories certified 
by our program by a date no later than year end 2009. In 
addition, a growing list of major retailers have joined us 
around the world, including Wal-Mart, Target, Sears, K-Mart, 
Carrefour, Tesco, Argus, and the smaller retailers grouped in 
the American Specialty Toy Retailing Association, ASTRA.
    Our toy industry has twice been awarded grants by the U.S. 
Department of State as part of their Partnership to Eliminate 
Sweatshops program, in support of two phases of our ``Toward 
Better Workplace Standards in China's Toy Factories'' program.
    In this program, we brought together toy factory managers, 
Chinese labor inspectors, and social compliance auditors to 
learn international and Chinese labor law and the requirements 
of the ICTI CARE Process, as well as to receive practical 
training in working together to improve labor law enforcement. 
We would welcome the opportunity of further funding, should 
that opportunity present itself.
    The Governance Board, of which I am a member, is a fully 
independent body whose members are drawn from current and 
former toy industry leaders, members of civil society, and 
international civil servants. We oversee the ICTI CARE process, 
raise funds to support it, and, beginning this year, will issue 
annual reports on our activities.
    We believe we were asked here today because we're the most 
advanced global industry organization working towards improving 
labor conditions in our industry's supply chain. In 2 short 
years, we have made great strides forward, but recognize there 
is a great deal still to be done.
    In closing, I would like to thank the other organizations 
testifying here today for continuing to make us more aware of 
all that needs to be done, and also for helping us to come--
become better at doing it. We know that, by working together 
with our partners in China, we will be able to achieve 
continued progress.
    Mr. Chairman and Members of the Committee, thank you for 
this opportunity to address you, and I look forward to 
responding to your questions.
    [The prepared statement of Mr. Eio follows:]

      Prepared Statement of Peter Eio, Member, Governance Board, 
                          ICTI CARE Foundation
    Good morning, Mr. Chairman and Members of the Subcommittee. My name 
is Peter Eio and I am a member of the Governance Board of the ICTI CARE 
Foundation. This is an independent foundation that oversees the ethical 
manufacturing program of the worldwide toy industry. The International 
Council of Toy Industries (or ICTI) is the umbrella industry 
association for 21 national toy associations around the world (list at 
Appendix I), of which the U.S. Toy Industry Association is the largest 
member. I retired 5 years ago as President of the LEGO toy company in 
the Americas and I am a past chair of the Toy Industry Association.
    As I'm sure you know, many organizations talk and some do. We are 
doers, the first worldwide industry to bring together brands, 
retailers, government, civil society and manufacturers to achieve a 
common goal--to help create a better life for workers in our supply 
chain. I would like to focus my remarks on this effort, believing it 
covers most of the territory I was asked to cover.
    Our program is called the ICTI CARE Process and has been operating 
in China for about 2 years. It is the worldwide toy industry's effort 
to develop a transparent, independent system that will ensure its 
products are manufactured in safe, healthy and fair work environments. 
To achieve this, it aims to provide a single, fair, thorough and 
consistent monitoring program for toy factories. We began in China, 
where more than 75 percent of the world's toys are made, and expect to 
expand into other countries beginning next year.
    This process begins with a global Code of Business Practices, 
continues with a Monitoring Protocol and Guidance Document, and is 
enforced through the periodic certification and recertification of 
factories that comply. Operations in China are managed by an office in 
Hong Kong, while the actual audits are carried out by third-party 
social compliance auditing companies.
    To date there are more than 1,200 toy factories, employing more 
than one million workers, registered and active in this process, with 
670 factories currently certified as being in compliance. (Current 
statistics at Appendix II). We expect that number to grow significantly 
next year, as more auditors are trained and as more factories used by 
major retailers join the system.
    Clearly, certifying factories is not sufficient unless you have toy 
brands and retailers who are willing not only to accept those 
certifications but also to demand them. Currently, there are 290 toy 
brands around the world representing an estimated 75 percent of global 
toy production that are pledged to order product only from factories 
certified by our program by a date no later than year-end 2009. In 
addition, a growing list of major retailers have joined us around the 
world, including Wal-Mart, Target, Sears, K-Mart, Carrefour, Tesco, 
Argus and the smaller retailers grouped in the American Specialty Toy 
Retailers Association (ASTRA).
    Our toy industry has twice been awarded grants by the U.S. 
Department of State (Bureau of Democracy, Human Rights & Labor), as 
part of their ``Partnership to Eliminate Sweatshops'' program, in 
support of two phases of our ``Toward Better Workplace Standards in 
China's Toy Factories'' program. In it, we brought together toy factory 
managers, Chinese labor inspectors and social compliance auditors to 
learn international and Chinese labor law and the requirements of the 
ICTI CARE Process, as well as to receive practical training in working 
together to improve labor law enforcement. We would eagerly accept the 
opportunity for further funding, should that opportunity present 
itself.
    The Governance Board of which I am a member is a fully independent 
body, whose members are drawn from current and former toy industry 
leaders, members of civil society and international civil servants. 
(See Appendix III for current members.) We oversee the ICTI CARE 
Process, raise funds to support it and, beginning this year, will issue 
annual reports of our activities.
    In summary, the ICTI CARE Process is a work in progress, working 
toward improved labor conditions in our industry's supply chain, 
through factory monitoring and worker capacity-building. We are well 
advanced, but recognize there is a great deal still to be done.
    As part of that, in 2008 we will start a new phase of our program, 
which adds education, training and capacity-building to our factory 
certification program.
    You have also asked me to cover a few areas which may not have been 
as specifically answered as you wish in this presentation on our ICTI 
CARE Process program.

   With regard to the toy industry's formal relationship to 
        Chinese factories where toys are made, this is almost always a 
        contract manufacturing relationship. Through the ICTI CARE 
        Process, we have a direct relationship to the qualification of 
        factories to be part of the toy supply chain.

   Regarding working conditions in factories, we have a very 
        strict Code of Business Practices, with specific guidelines, 
        regarding how manufacturers must treat their workers. Our code 
        does not permit child, slave or prison labor; it requires 
        decent living conditions and, with regard to wages and hours, 
        requires compliance with Chinese law--which, by the way, is 
        very strict. We have been working on strict enforcement of 
        those laws with the Chinese government for several years and we 
        can report some good progress in factories that have been 
        audited in accordance with our guidelines.

   With regard to the impact of Chinese toy manufacturing on 
        domestic toy production, the U.S. toy industry began sourcing 
        overseas some 40 years ago, beginning in Japan and later moving 
        to Taiwan, Korea and parts of Southeast Asia. Nearly 75 percent 
        of toys sold in the USA are made in China and the rest are 
        divided among the USA and a variety of other countries in 
        Europe and Asia.

    In closing, we would like to thank the other organizations 
testifying here today for continuing to make us more aware of all that 
needs to be done and also for helping us to become better at doing it. 
We know that by working together with our partners in China, we will be 
able to achieve continued progress. Mr. Chairman and members of the 
committee, thank you for this opportunity to address you. I look 
forward to responding to your questions.
                               Appendix I
                ICTI Members (21 National Associations)
Australia

Austria

Brazil

Canada

China

Chinese Taipei

Denmark

France

Germany

Hong Kong

Hungary

Italy

Japan

Mexico

Netherlands

Russia

Spain

Sweden

Switzerland

United Kingdom

United States

                              Appendix II
                     ICTI CARE Process Statistics 
                       (As of 30 September 2007)
Factory Compliance Monitoring


                                     Current       Target 12/31/07

Toy factories in the system             1,242  1,500
 (registered, applications)

Seals of Compliance issued                669    800
Employees covered 1.1 million
 
``Date Certain'' Program
Toy brands pledged to source only          290 (75 percent of world toy
 from certified factories by the end                market)
 of 2009
 

Major Retailer Commitments to the ICTI CARE Process
    Recognize the ICTI CARE Process Seal of Compliance as a replacement 
for own social compliance audits.
    Wal-Mart
    Target
    Costco
    Kmart Sears
    Dollar General
    ASTRA (American Specialty Toy Retailing Association)
    Carrefour (France)
    Chelsea Stores (UK)
    Tesco (UK)
    Argus (UK)
    Woolworth (UK)
    Colruyt Group (Belgium)
    Top-Toy (Scandinavia)
    Coles-Myer (Australia)
                              Appendix III
           ICTI CARE Foundation Governance Board Membership 
                        (As of 22 October 2007)

 
              Name                              Affiliation
 
Alan Hassenfeld (Co-Chair)        Chairman (non-executive) Hasbro
Maria Livanos Cattaui (Co-Chair)  Former Secretary-General,
                                   International Chamber of Commerce
                                   (ICC)
Thomas A. Debrowski               Executive Vice President, Worldwide
                                   Operations, Mattel
Amir A. Dossal                    Executive Director, United Nations
                                   Fund For International Partnerships
                                   (UNFIP)
Peter Eio                         Former President, Lego Americas
                                   (retired)
Gary Hutchens                     President, International Council of
                                   Toy Industries (ICTI)
Steven Jesseph                    Vice Chairman, President and CEO,
                                   Worldwide Responsible Apparel
                                   Production (WRAP)
Alan E. Munn                      Former President and CEO, TOMY Europe
                                   (retired)
Jane Nelson                       Senior Fellow and Director of the
                                   Corporate Social Responsibility
                                   Initiative, Kennedy School of
                                   Government, Harvard University;
                                   Director, Business Leadership and
                                   Strategy, Prince of Wales
                                   International Business Leaders Forum
                                   (IBLF); Senior Fellow, the Brookings
                                   Institution
William Reese                     President and CEO, International Youth
                                   Foundation (IYF)
Paul Rice                         President and CEO, TransFair USA
T.S. Wong                         Immediate Past President, ICTI;
                                   Managing Director, Jetta Ltd.
Christian Ewert, ex officio       President, ICTI CARE Foundation
 


    Senator Dorgan. Mr. Eio, thank you very much. We appreciate 
your being here and your testimony.
    Let me begin with you, Mr. Wu. You spent 19 years in a 
Chinese prison. You have come to this country and lived here 
now for some while, have testified previously before this 
Committee, on human rights issues and so on. I believe, in your 
testimony, you indicated that there is toy manufacturing 
occurring in Chinese prisons, and that, by indirect methods, 
toys produced in Chinese prisons find their way to American 
store shelves. Is that what you're suggesting?
    Mr. Wu. Yes. Chinese prison camps right now have signed 
contracts with state-run enterprises, contract by contract. So, 
for example, they produce the toys just by one process to 
another process. That's all. Particularly in Guangdong, 
Shanghai, Zhejiang, Shandong provinces, many prison camps right 
now are working on the processing of cameras, toys, footballs, 
electronical components, every kind of thing, but they are 
indirectly exported----
    Senator Dorgan. Mr. Wu, how do you know that?
    Mr. Wu. Oh, we have people in there. We do have the 
evidence.
    Senator Dorgan. So, you're saying that toys, garments, and 
so on, are produced in prison camps, and, through indirect 
methods, then marketed through Chinese government-owned 
enterprises, and then being sent to the store shelves in our 
country.
    Mr. Wu. Correct.
    Senator Dorgan. Mr. Kernaghan, you have described, in great 
detail, sweatshop conditions, dangerous working conditions, 
workers being cheated, workers being worked long, long hours, 7 
days a week. Tell me how you know that. Can you describe for us 
the research and the investigation you have done that will give 
us confidence that what you are testifying is, indeed, a fact?
    Mr. Kernaghan. Well----
    Mr. Wu. I will give you two examples. The first example is 
Christmas lights. They were assembled by prisoners in a number 
of the prisons, and exported by a Chinese export company. It is 
a different company. The second case is artificial flowers. The 
prisoners sit in a small space and put these leaves and flowers 
on the branches, including the label, ``Made in the United 
States,'' 99 cents, $1.99, each of them.
    Senator Dorgan. The label says, ``Made in the United 
States''?
    Mr. Wu. Yes. They are imported by Ben Franklin. Yes.
    Senator Dorgan. By Ben Franklin stores?
    Mr. Wu. Yes.
    Senator Dorgan. Mr. Kernaghan, tell me your--the results of 
your investigations. You've described to me what you found, but 
tell me how those investigations occurred and how we understand 
that these are firsthand, observable conditions?
    Mr. Kernaghan. Well, some of the research was carried out 
over a year, starting in mid-2006, with another return at 2007. 
Pictures were smuggled out of the factory. Pay stubs were 
smuggled out of the factory. All these pictures of the toys 
were smuggled out of the factory. Dormitory photographs were 
smuggled out of the factory. Plus, we also used shipping 
records, based on U.S. Customs documents, to arrive at the 
pricing of the toys, the landed customs value, which is the 
total production cost.
    I can't go much beyond that, because, like Mr. Wu said, 
anyone involved in this research will be sent away, so it's 
not--there's--it's impossible to do this openly. It was even 
during the overthrow of President Aristide, in Haiti, with the 
Tonton Macoutes running wild, it was easier to research in 
Haiti than it is to research in China. So, this stuff needs to 
be--remain--it comes from the workers.
    Senator Dorgan. I understand. So, in the case that you 
described today, one of them is a Mattel toy. Would you hold 
that up? That is a----
    Mr. Kernaghan. This was an almost exact replica of the 
picture that workers sent us. And we were fortunate enough to 
find the landed customs value, the shipping records. And this 
came in. It was for Target. It came in at a landed customs 
value of $9. And the toy--we purchased it at a Toys ``R'' Us, 
also went to Toys ``R'' Us--for $29.99.
    Senator Dorgan. And there's 19 cents of Chinese labor----
    Mr. Kernaghan. Yes, even----
    Senator Dorgan.--in the product?
    Mr. Kernaghan.--less than that. That's a very, you know, 
liberal estimate as--what they were paid. And, of course, the--
Mattel spends--spent $2 billion in advertising over the last 3 
years, so they're spending 11.5 percent of their revenues in 
advertising, so they spend, you know, 18 times more to 
advertise this toy than they paid the workers to make it.
    Senator Dorgan. Based on your investigation, the company 
that sells that product in the United States, what knowledge do 
they have of the conditions of the factory in which the product 
is produced?
    Mr. Kernaghan. I would say none, because, even Mattel--and 
I have to say this--I heard Mattel say they are a good company 
so often I began to believe it. I always thinking maybe they're 
the Jesuits, and they're traveling around the world to help 
develop poor countries. But then, with the toy recall, Mattel 
actually admitted they have no idea, it's out of control, they 
did not even know where their toys were being made, they 
certainly didn't know where parts of their toys were being 
made, because their contractors were illegally subcontracting 
to subcontractors who, in turn, were subcontracting to other 
factories. It was completely out of control. They've admitted 
it.
    Now, Mattel says it has the best code of conduct 
imaginable. As a matter of fact, in the Xin Yi factory, where 
the workers are held as temporary workers, which means from 
the--from the very beginning, they have absolutely no rights, 
zero rights--the first day they come into the factory, they're 
given a training session, where they teach the workers how to 
lie to Mattel auditors and other corporate auditors; they tell 
them to say, ``The work conditions are great, management's 
fine, we're never forced to work overtime, we're paid 
correctly, our dorms are beautiful.'' The very first day, they 
receive that training.
    On top of that, if you read Mattel's own audits--and I 
was--I--shocked, because I don't believe anybody ever reads 
these things--if you read Mattel's own audits, they read like a 
nightmare: 80-hour work weeks, 7-day work weeks--I mean, it's 
frightening. Fungus growing on the walls of the dormitory, and 
it's--it would--frightening. These are their own audits. This 
audit--and, of course, they don't name the--they don't--won't 
give you the name of the factory. This is factory number 18. 
They won't tell you what factory it is. They worked with this 
factory for 6 years to clean it up, and yet, for 6 years, the 
80-hour work weeks went on.
    And one other thing that blew my mind, personally. Mattel 
apologized to China, their government official in China, for 
the recall. After the Chinese government official said to 
Mattel, ``Don't you realize a large portion of your profits 
come out of our manufacturers in China,'' Mattel then 
apologized to China for the recalls, for making them seem too 
excessive. It turns out that the cooperation that the 
government official was referring to with Mattel--Mattel was 
given waivers, as late as 2005, to pay below the minimum wage. 
So, this is the monitoring operation. They got waivers to pay 
below the pitiful minimum wage in China. To this day, they have 
waivers to allow workers to work excessive amount of overtime. 
In China, the law is 36 hours of overtime a month. Mattel has 
waivers to let the workers work--allow the workers to work up 
to 72 hours a week, which is 295-percent higher than China's 
labor laws. So, this thing is out of control.
    Senator Dorgan. I'm going to ask a couple more questions, 
then I'm going to call on my colleague Senator Sanders.
    Dr. Athreya, same question to you. You are testifying about 
conditions inside of China. Tell me how you know these 
conditions exist.
    Dr. Athreya. I will say I have, myself, traveled to China 
on several occasions, and have traveled extensively in this 
region of south China, where most manufacturing for the U.S. 
market occurs. I have been able to go into factories, to my own 
surprise, openly, with factory--with the sort of folks that are 
hired to do compliance for some of these companies, and have 
been proud to walk me around the factory to show me what their 
labor monitoring looks like. I, therefore, can verify, 
directly, that they are vastly inadequate to uncover the 
tremendous range of problems that these workers suffer. Workers 
are not interviewed confidentially.
    Now, we do also have allies in China, as I have mentioned, 
that we cannot name and we cannot identify, but they are very 
close to workers in these factories, because they are in these 
communities, day in and day out, and have the trust of the 
workers and, therefore, are able to gain information directly 
from factory workers on a routine basis, month in, month out, 
and to verify the nature of what companies report in their 
annual reports, et cetera.
    Senator Dorgan. Mr. Eio, thank you for your work and your 
description of what you're trying to do to develop codes of 
conduct and so on. In your testimony, you indicated 670 
factories currently certified as being in compliance with the 
standards you're developing, but there are 8,000 toy factories 
in China. So, would you agree that the kinds of things that 
have been described by others on the panel can exist--can exist 
quite easily--because you've got close to 7,500 factories not 
in compliance?
    Mr. Eio. Yes. And, certainly, I think the examples we've 
heard of here are very egregious, and they do occur. And that's 
precisely why the ICTI CARE Foundation was set up. We are very 
young. We have been--it took a number of years to put together 
an international code of manufacturing practices, because we 
were working with organizations in 21 different countries. The 
code is now globally accepted code, and the phase we're working 
on now is the implementation and the monitoring. And, as I say, 
we have, so far, signed up with 1,200 companies. I think there 
are 3,500 toy companies that are licensed to export out of 
China, and it obviously is our intention that all of those 
should eventually come under the ICTI code. We have about 1--
just over 1 million workers who are covered by the factories 
that are approved, out of a total of about 3 million, so we 
have a long way to go.
    One of the things we do is, we provide workers with a copy 
of the code, which tells them what their rights are and what 
they are entitled to do. And this is--generally, as has been 
observed, is not known by many of the workers, and this 
educational process is a very important part of what we do.
    Senator Dorgan. I see three issues coming to the same 
intersection.
    One, American workers lost jobs because they couldn't 
compete with somebody that's working 80 hours a week, 7 days a 
week, for 20 or 30 cents an hour, and shouldn't have to try to 
compete with that. No American workers should be told, ``You've 
lost your job because you can't compete with a sweatshop.''
    Second, unsafe products. If you don't know about the 
factory, where the work's being produced, you probably don't 
know what ingredients exist, or you probably look the other 
way. What about the product safety for American consumers?
    And, third, the sweatshop conditions and the abuse of 
workers inside plants in China.
    Our country ought to at least, as a matter of standard, 
say, ``We will not accept, for sale in this country, products 
produced with forced labor or sweatshop labor.'' And that's the 
legislation Senator Sanders and I and Senator Brown and others 
have introduced. And we're going to push to try to get at least 
the U.S. Congress on record to say that we have disagreements 
on trade, but they ought not be a disagreement in this Congress 
about this principle. We should not have the product of 
sweatshop labor coming into this country to be sold. That's 
profiting at the misery of others, and that's not something 
this country should condone.
    Senator Sanders, thank you for joining us. Why don't you 
proceed.

              STATEMENT OF HON. BERNARD SANDERS, 
                   U.S. SENATOR FROM VERMONT

    Senator Sanders. Well, Mr. Chairman, thank you for holding 
this hearing. And, most especially, I want to thank all of the 
panelists for being here. The issue that we're dealing with 
today is an issue that should be dealt with in virtually every 
Committee of the U.S. Senate. Too often, it is swept under the 
rug.
    The bottom line here, to my mind, is that these unfettered 
so-called ``free trade'' agreements that have been pushed on us 
by large multinational corporations are certainly hurting 
American workers. The middle class is shrinking, poverty is 
increasing. They are certainly hurting the health of our 
people; in this case, our children. Where products are coming 
into this country that can make our kids sick is unacceptable. 
And, last but certainly not least, as people who care about 
working folks in other countries, these policies are doing 
horrendous harm to people in China, in other developing 
countries, who are working 70 or 80 hours a week in horrendous 
working conditions.
    So, I think what you are telling us is that the time is 
long overdue for this Congress to begin rethinking these 
unfettered free trade policies which are hurting so many people 
in America and all over the world. And I want to thank you very 
much for doing that.
    In my view, if, to the degree that the people of our 
country know what is happening in countries like China, where 
people are being exploited so ruthlessly, where their lives are 
endangered by horrendous working conditions and exposure to 
harmful chemicals, to the degree that the American people 
understand that--and they are understanding it more and more--
they will say, ``No more. We need to rethink these entire 
policies.''
    The bad news is that what you have described this morning 
is going on. That is the very bad news. The good news, I should 
tell you, is that, in this country and around the world, there 
is growing discontent with these unfettered free trade 
policies. Some of you may have seen, recently, just a couple of 
weeks ago, on the front-page Wall Street Journal, almost two-
thirds of Republicans, by a two-to-one vote--two-thirds of 
Republicans--are beginning to doubt whether unfettered free 
trade is good for this country. And I think the polls for 
Democrats are even higher.
    The one last point that I want to make--and I think Senator 
Dorgan touched on it--or maybe Mr. Wu did, I can't remember 
who--is the incredible situation when you have the United 
States Chamber of Commerce telling the Chinese government, an 
authoritarian government, that they are going too far in giving 
workers more rights. Can you imagine that? This is a country 
which is supposed to believe in freedom and democracy, and you 
have the Chamber of Commerce of this country, representing 
corporate America, telling an authoritarian government that 
they've got to ease back, they're giving workers too many 
rights. Can you believe that? I mean, it is really quite 
unbelievable and quite a national disgrace.
    Senator Dorgan. Senator Sanders, might I observe, on that 
point, exactly the same thing happened it the Philippines. 
President Arroyo, of the Philippines, at one point said, ``We 
really need--given the miserable poverty and wage rates, we 
really need to consider increasing the minimum wage.'' The U.S. 
Chamber of Commerce folks and--particularly, the very next day, 
one American company doing business in the Philippines, said, 
``You do that, we leave.'' It is the same story virtually all 
over the world.
    Senator Sanders. The last point that I want to make is, I 
believe we are making progress in raising consciousness. And a 
lot of that has to do with the work that all of you are doing. 
And we appreciate that very much. You keep up the fight out 
there at the grassroots level. We'll do what we can inside here 
in the Senate. And thank you.
    And, Senator Dorgan, again, thank you for being the leader 
in raising consciousness on this issue. I wish more of 
subcommittee chairmen were holding the same type of hearings 
within their jurisdictions.
    Thank you.
    Senator Dorgan. Mr. Kernaghan, you heard Mr. Wu describe 
garments and toys made in Chinese prisons, and then, through 
indirect marketing, go to the central government of China and 
then marketed back so that those products come into this 
country. I'm going to ask, in several different ways, that that 
be investigated. But I'd like to have your assessment of that. 
Do you believe that is happening in China?
    Mr. Kernaghan. Yes. Mr. Wu has documented it thoroughly. 
We've been following your work for years. It's been very well 
documented. There is no question that prison labor is 
especially involved in making parts of toys, Christmas 
ornaments, and so on.
    If I could just say one thing----
    Senator Dorgan. Yes.
    Mr. Kernaghan.--because I feel your legislation, the Decent 
Working Conditions and Fair Competition Act, is so critical 
that if you look at this Barbie doll, Mattel has won all sorts 
of enforceable laws to protect this doll, backed up by 
sanctions. In fact, Mattel sues, on the average of once a 
month, to protect Barbie. And they've been doing this for the 
last 10 years, just as the other companies have. But when you 
go to Mattel and say, ``Can't the workers who make the Barbie 
doll--the young women in China--can't they also be legally 
protected--their rights be legally protected?'' Mattel and the 
other corporations say, ``No, that would be an impediment to 
free trade.'' So, we live in a society where Barbie is 
protected, but not children in the United States--they're not 
protected legally from toxic toys--and the workers in China are 
not legally protected, because their corporations won't allow 
it. And that's why I think your legislation is the critical 
legislation to finally level the playing field.
    Senator Dorgan. Mr. Kernaghan, you're talking about Mattel. 
We, in fact, invited them to this hearing. But I assume you're 
using that company because that company's been in the news 
because of substantial recalls. But this issue is much, much 
broader than a company, is it not?
    Mr. Kernaghan. Yes, of course. Yes. Yes, exactly. It's--
Mattel--just like--I like to be concrete, because 
abstractions--it's hard to judge. But----
    Senator Dorgan. Dr. Athreya, in your testimony, you 
mentioned Huffy bicycles, which is a story close to my heart, 
because I've talked to workers from Huffy bicycle factories in 
Ohio. One of them told me a very plaintive story about, to the 
last day at work at Huffy bicycles. I believe they were 
produced for 100 years in our country. Over a century, Huffy 
bicycles were produced in this country, most--not all, but most 
in Ohio by people that appreciated their jobs, average about 
$11 an hour, plus benefits. On the last day of work after they 
were all fired, as they left their parking space--parking lot 
where their cars had rested while they worked, the workers at 
Huffy bicycle left a pair of empty shoes in the space where 
they parked their cars. And it was a way for the workers, after 
that parking lot had emptied, and now had a pair empty shoes in 
the parking space--it was the only way the workers had to say 
to that company, ``You can move our jobs to China, but, by God, 
you're not going to fill our shoes.'' What a poignant, 
plaintive way for workers to send a message to a company.
    That story--the story of Huffies--the story of Huffy 
bicycles is an almost unbelievable story. They actually pawned 
off on this government the pension responsibilities for the 
workers that were displaced at Huffy. But those bicycles, I 
believe, are now made in Shenzhen, China, and, I believe, made 
for 20 to 30 cents an hour labor by people working 7 days a 
week. Do you have any knowledge about the conditions of 
manufacture for Huffy bicycles in China?
    Dr. Athreya. Yes, thank you, Senator Dorgan. That is a case 
that you know very well, and, you know, I certainly agree with 
all the--what you've just said.
    We don't--I'm not going to answer the question about 
conditions within the factory, because our researchers didn't 
look at that factory recently, and so, I don't want to be 
speaking out of turn about current conditions in that factory.
    One thing I would like to emphasize related to your remarks 
is, in our written submission for the record we did make a 
point of really discussing the role of Wal-Mart in driving 
production into these very tragic factories in China. And the 
Huffy bicycle case was simply an example of that, but we've 
seen it over and over, and we've seen it in the toy industry, 
in the garment industry, we've seen it in virtually every 
light-manufacturing industry. And the nature of the 
contradiction, the hypocrisy, is that you have, on the one 
hand, Wal-Mart claiming that it has a code of conduct to 
protect worker rights, and that it insists that all its 
suppliers enforce this code; on the other hand, Wal-Mart, known 
very--you know, sort of, infamous for going back to the 
suppliers of the bicycles, the dolls, the baby clothes, year 
after year, and systematically pushing down the prices and 
saying, ``You must give us this product for 5-percent less this 
year than you did last year.'' And manufacturers in the U.S., 
one after another, so many stories that are so similar to the 
Huffy bike story, if a manufacturer is saying, ``The only way I 
can get it to Wal-Mart for 5-percent cheaper, 10-percent 
cheaper, 15-percent cheaper, is to close down this factory and 
move overseas to the cheapest possible place I can find.''
    And now that these companies have been in China for a 
number of years, what we're seeing happen within the Chinese 
factories--and I've actually talked to factory managers who 
have been so outraged at what they themselves are facing that 
they've confessed this to me--that they have the--you know, the 
Wal-Mart buyers come in and say, ``OK, you know, you gave us 
this whatever-it-is product for this much last year, we want it 
for this much less this year,'' and the factory manager is 
saying, ``The only way I can get it to them for that much less 
is to stop paying myself.'' I mean, there's nowhere else to cut 
the costs.
    Senator Dorgan. Dr. Athreya, in your testimony you talk 
about the new report by the International Labor Rights group, 
and it describes the percentage of factories--the decreasing 
percentage of factories rated, ``green,''--the number of 
factories rated green or having no risk or low-risk violations 
had been consistent at 21 percent--I'm quoting you--for the 
first 2 years that data was available, decreased to 10 percent 
in 2005, and only 6 percent in 2006. I don't understand that. I 
mean, that is completely at odds with what we hear publicly 
from many companies who have said, ``Look, we understand 
there's a serious problem here, and we're hiring lots of 
contractors. We haven't been able to figure out what they're 
doing, but we've got projects going on. We're going to get to 
the bottom of it. We don't want workers abused.'' You know, the 
material they put out in press statements from these companies 
is, ``We're going to get a handle on this. We're working hard 
to do it.'' And yet, the number of factories rated as having 
low risk or no risk has dropped dramatically. What is your 
assessment of that?
    Dr. Athreya. This is precisely--and this--by the way, this 
report was based on--you know, as Mr. Kernaghan said earlier, 
it's too bad more of us don't read what the companies 
themselves say; you can find this information in their own 
reports on their ethical sourcing--but this precisely points 
out the hypocrisy, on the one hand, of their saying, ``Oh, 
we've got this code, and we want the factories to implement the 
code,'' on the other hand, it being really clear that those 
factories that actually meet the code aren't giving them the 
stuff at the cheap prices that they want. And so, if they have 
to make a choice between the worst factory with the worker 
rights violations that's giving them the lower price and the 
factory with the better conditions for workers, they--they'll 
go with the worst factory.
    Senator Dorgan. Mr. Eio, do you think that, if we do 
nothing here in the United States Congress--for example, we 
don't pass the sweatshop bill that I've introduced with my 
colleagues--if we just do nothing but hold a hearing once a 
year, lament what's going on--is this something that will be 
corrected in the private sector, or will we still see this 
aggressive approach to saying, ``We're going to drive down 
prices and we're going to circle the globe in our corporate 
plane, looking for the lowest possible labor rate, the cheapest 
conditions of production, the least environmental standards, 
and so on, and that's what we're going to produce''?
    Mr. Eio. I think one of the things that I--one of the 
points I'd like to make is--and I'd to leave as evidence a copy 
of our code of manufacturing.
    Senator Dorgan. Without objection.
    [The information previously referred to follows:]
    
    
    
    
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    Mr. Eio. Right. This is--recently, Wal-Mart has announced 
that they will not accept toys from any supplier that is not 
certified under the ICTI Code of Practices. And that is our 
aim, to have all retailers, on a worldwide basis, agree to 
that. We audit those factories on a regular basis. We do 
surprise audits, unannounced audits. And we feel that we're 
making good progress, and, within the next 2 to 3 years, will 
cover the majority of the industry, not only in China, but also 
in South America, in the Czech Republic, in Hungary, and places 
like that.
    Senator Dorgan. Mr. Eio, though, I have read extensively 
about this subject, and what I have read tells me that auditors 
have come in to a number of these plants, are treated to a 
ruse, and the ruse is double sets of books, workers being told, 
``You dare not speak to the auditor. If you speak to the 
auditor, here's what you must say.'' And we know of many 
examples in which inspectors have come into the plants, have 
left the plants, believing that the information they have seen 
would tell them that plant is in compliance, when, in fact, 
that plant is aggressively abusing workers rights. In this 
case, how do your investigators know that you're getting the 
right story, the straight information?
    Mr. Eio. We have, obviously, encountered those ruses, as 
well, double bookkeeping and many practices like that. But I 
would emphasize that we're using professional outside auditor--
audit companies, many of them global, and our auditors are 
trained to look for issues precisely like that. Currently, we 
have about 250, and our aim is to build up to 600.
    Senator Dorgan. How have you been financed?
    Mr. Eio. Initially, we have been financed entirely by 
donations from within the industry, of about $5 million, and 
our aim is ultimately to make this a self-financing exercise, 
in that the factories pay for the audits, and they also pay for 
the seal of approval once they have been approved.
    Senator Dorgan. The BusinessWeek magazine that I have used 
on the floor of the Senate in some presentations, the cover of 
BusinessWeek--I don't have the date on that--but it says, 
``Secrets, Lies, and Sweatshops: How the Chinese Supplies Hide 
the Truth from U.S. Companies.'' And the article inside that 
BusinessWeek is quite illuminating, describing the deception 
that occurs that allows plants to abuse workers, effectively 
create nearly sweatshop conditions and yet pass inspection. I'm 
not suggesting that your inspectors aren't good. You, of 
course, with 8,000 toy manufacturers just in China alone, with 
only a couple of hundred--250 or so investigators, much more 
needs to be done.
    But, having said that, I applaud your work. I want you to 
be successful. I think it's a step in the right direction to be 
concerned about this, to care about it, and to take action to 
try to represent change, even if it is small, incremental 
change.
    Mr. Wu, let me come back to you for just a moment. As I 
indicated, I've long admired you and your steadfastness in 
support of human rights. You've spent 19 years of your life in 
a prison. You've spent a substantial portion of your life in a 
prison for, in my judgment, speaking truth to power. And we in 
this country know that China will be a significant part of our 
future. China is a big player on the world scene, and becoming 
an even bigger player.
    The question is what set of policies can we implement in 
this country to continue to try to move China, or persuade or 
coax or push China in the right direction toward greater human 
rights, greater engagements on the issues that matter to 
people, to workers, and so on? You come here this morning and 
you testify that Chinese government sanctions, production of 
goods in their prisons, then, through indirect methods, gets 
them to a government-owned company and markets them in our 
country--there's no consumer in this country that should ever 
want to buy goods that are made by forced labor from prisons. 
No one should want to do that. And yet, if this is happening--
and you say it is--if this is happening, it's a real abridgment 
of any sort of common sense or moral values or human dignity. 
So, the question is, what kinds of steps do you think can be 
taken that will, not only more commonly expose this, but, 
second, force the Government of China to discontinue these 
practices?
    Mr. Wu. Well, I am very touched by your talking about the 
story very close to your heart about the bicycle workers. I 
want to share with you my experience.
    I was in a prison camp, working in a coal mine--12 hours a 
day, 7 days a week. We were pulling the coal out. And it's just 
like an animal, doing that.
    But who cares about these things? Our coal mine produced 
million of tons of coal for the market. Not really--some people 
care. Everything matters to people who lost their legs, lost 
their arms, even lost their lives. It is quite normal. I was in 
an accident, and I almost lost my life. The police prepared a 
coffin for me. Finally, I survived. I only--you know, my neck, 
my back was broken, I lost consciousness. I don't want to go 
back to that situation.
    And I am very happy that Americans are talking about 
Chinese prison labor and sweatshops. But the problem you 
raise--you raise two questions, the first question is, American 
workers lost their jobs to whom? To Chinese workers. But 
Chinese workers are under a Communist regime. Would you be 
willing to see American workers lose jobs to the Soviet 
workers? You would not. You said, ``No, we will not go over 
there.''
    And the second question is, Americans today, so 
enthusiastic, go to China and they want to invest, want to buy, 
want to sell, and they stay in Beijing, in a hotel. They just 
see the products. They don't see the producers, they don't see 
how the products are produced. They don't care. Wal-Mart, they 
have a contract with the Chinese, saying, OK, the seller has to 
agree that none of the products are made by prisoners. So, 
there's a protection. They don't do anything about it. And the 
Chinese contractor says, ``OK, I will do it, I will give you 
the product, I will sign a subcontract with other people. 
That's our side of the story.''
    I think the problem is--now related to a security problem. 
You see the Chinese, what they are doing in Sudan today. 
They're doing something in North Korea, whatever. This is a 
Communist regime. It has kind of come to the stage that causes 
security problems for America. I think this is a very big 
issue, not only BusinessWeek talking about slave labor. 
Actually in China the workers' conditions are horrible. Child 
labor, I never mentioned anything about that. Prison labor, 
very normal. Today there are 3 million, 4 million people there, 
and every day they are forced to labor. So, who cares?
    I just don't know how to answer your question, but I do 
think, when Americans are in church on Sunday morning, they 
pray to God. They have to think about who makes these products 
and under what kind of conditions. They really have to care 
about it.
    Thank you.
    Senator Dorgan. Mr. Wu, thank you very much.
    There are, I think--and I don't know that you would agree 
with this--there are some signs in China of some movement in 
ways that are hopeful. But there are many areas in which there 
must be additional movement in order to come into the 
mainstream of what we expect, of how countries treat their 
workers and so on. But this issue--we're talking now about 
China. We could talk about Sri Lanka or Bangladesh or Indonesia 
or other countries, as well, where Mr. Kernaghan has visited--
Honduras, as an example, we held a hearing about that. We 
talked about China, because the migration of so many American 
jobs to a low-cost manufacturing platform has moved in many 
directions, but most prominently it has moved to China. And 
then, therefore, the spotlight of worker abuse that exists 
properly shines on where most of those jobs have gone. And so, 
that's the reason we speak of China at this point.
    As you mentioned, Mr. Wu, there are many other issues with 
respect to China, larger geopolitical issues that might cause 
our State Department to look the other way, or our policymakers 
to ignore--to be content to not see some other things that are 
happening, and to engage in other ways. But this issue of 
international trade, worker abuse, sweatshops, and so on, is a 
very important issue.
    And I want to ask Mr. Kernaghan, if I might--the work that 
you are doing--you've done this work for some long while--do 
you see progress? And, if so, where does that progress exist? 
You work in many countries. Where do you see progress?
    Mr. Kernaghan. Well, there has been some progress, I--in 
terms of the most egregious violations. For example, in Central 
America, back in the early 1990s, there was enormous amounts of 
child labor. In fact, the girls used to tell us--these are, 
like, 11-, 12-year-old kids, and 13-year-old kids--that if they 
let the boss fondle them--these were young girls--they would 
get a few extra pennies at the end of the week. There were 
actually even brothels on--in some of these free trade zones. 
Workers could be shot and killed for trying to organize. There 
have been some positive changes. However, when it comes to 
wages and hours and the right to organize, there have been 
minimal improvements. And, sad to say, in China, as Mr. Wu 
said, workers simply have no human rights freedoms or religious 
freedoms or free-press freedoms or labor freedoms, and so, you 
have workers really stripped of their rights. That situation 
has not improved.
    Senator Dorgan. There are countries, in which you have done 
investigations, where workers, who have attempted to organize 
fellow workers for better conditions, are imprisoned, and, in 
some cases, worse. Is that correct?
    Mr. Kernaghan. Yes. Yes. Yes. I mean, it's--imprisoned on 
trumped-up charges--I mean, very horrible things that the 
American people would be shocked--it just doesn't get out to 
the general public enough.
    Senator Dorgan. I am Co-Chairman of a commission here in 
the Congress that works on a number of these issues, including 
developing and retaining--and maintaining, I should say, a list 
of those who are imprisoned for human rights violations in 
China. And it is the case that there are some very courageous 
people, who stand up for the rights of workers, who find that 
they end up in a Chinese prison cell.
    At any rate, let me say to all four of you that I 
appreciate your willingness to be here. I think this work must 
continue, and must continue aggressively.
    I'm going to do a couple of things as a result of this 
hearing. We have legislation on sweatshop abuse that this 
Congress needs to address. We might disagree about a lot of 
things in this Congress. We have a trade agreement with Peru 
that they say might come to the floor of the Senate very soon. 
We have a trade agreement with Colombia that's done, a free 
trade agreement with South Korea that is completed, a free 
trade agreement with Panama that is done. We're going to have 
free trade agreements come to the floor of the U.S. Senate. 
And, of course, they, I believe, were all completed under what 
is called ``fast track authority,'' which means no one can 
offer any amendments of any kind to the trade agreement. It's a 
kind of self-restraint or a straightjacket that Congress has 
decided to put itself in. We have now eliminated that 
condition, so future trade agreements cannot be negotiated 
under those conditions. And we have sufficient votes, I 
believe, in the Senate, to prevent a restoration of fast track.
    But, nonetheless, we have trade agreements coming to the 
floor of the Senate at some point in the future. It seems to me 
that those who care about trade, those who assert that trade is 
very important--and I believe it is, I support trade, and 
plenty of it, but I demand it be fair, and I demand that it not 
be trade conditioned under sweatshop labor and so on--those who 
really believe in trade ought to be the first to sign as 
cosponsors to a piece of legislation that would end sweatshop 
labor--products from sweatshop labor coming to this country and 
being sold in this country. That would be the surest way to 
require that standards rise in other countries, in order for 
them to be able to produce and to ship their products to this 
country.
    So, I and my colleagues intend to push very, very hard, in 
the coming weeks, on S. 367, the Decent Working Conditions and 
Fair Competition Act. It's, effectively, an anti-sweatshop 
labor bill, is really what it is, trying to give workers around 
the world some rights.
    And I think your willingness to come here today and be a 
part of a hearing, and to testify publicly about what you see 
is happening, is very, very important.
    Let me also just, finally, say this. It is, it seems to me, 
a lonely job, to be working for organizations that do these 
things. It's not so lonely if you're part of a big association 
of manufacturers and employers who have common cause in seeking 
workers around the world who will work for the least cost and 
produce your product for the highest profits. But it is a 
lonely job to investigate these issues and to support workers 
in the farthest regions of the world, and to insist on 
standards in this country, when we do trade, that would require 
that those standards abroad be lifted rather than diminished.
    So, I appreciate it, and on behalf of the U.S. Senate, I 
hope you will continue your work, and be even more vigilant, 
and continue to be willing to contribute in open hearings.
    Mr. Eio, you represent an industry that's come under--you 
previously, in fact, headed an industry that's come under very 
severe attack and very severe criticism, and, in my judgment, 
for justifiable reasons. I think many of them have done almost 
nothing, and many of them have not cared at all--produce where 
it's cheap, sell where they can get a good price, and fatten 
the checkbook. I appreciate the fact that you've come here 
today, and I appreciate that you're working for organizations 
that are hiring investigators to try to see if you can develop 
some standards--some standards that address these issues. I 
think that's good news. I appreciate it. I think you would 
agree with me that you've made a step, albeit, perhaps, a small 
step, in the right direction, and we commend that step and hope 
that you'll reach a full gallop pretty soon.
    To Mr. Wu, thank you for your courage. Thank you for 
continuing to speak out against what you believe are, and what 
are, human rights abuses.
    And, Dr. Athreya, thanks for the work of your organization. 
Please continue it.
    Mr. Kernaghan, I expect that we will call you before the 
Congress once again, because your organization has done some 
really groundbreaking work, and we appreciate it.
    This hearing is adjourned.
    [Whereupon, at 11 a.m., the hearing was adjourned.]

                                  
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