[Joint House and Senate Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
   WORKING CONDITIONS AND WORKER RIGHTS IN CHINA: RECENT DEVELOPMENTS

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

                                HEARING

                               before the

              CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 31, 2012

                               __________

 Printed for the use of the Congressional-Executive Commission on China


         Available via the World Wide Web: http://www.cecc.gov




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20402-0001




              CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA

                    LEGISLATIVE BRANCH COMMISSIONERS



House                                     Senate

CHRISTOPHER H. SMITH, New Jersey,    SHERROD BROWN, Ohio, Cochairman
Chairman                             MAX BAUCUS, Montana
FRANK WOLF, Virginia                 CARL LEVIN, Michigan
DONALD A. MANZULLO, Illinois         DIANNE FEINSTEIN, California
EDWARD R. ROYCE, California          JEFF MERKLEY, Oregon
TIM WALZ, Minnesota                  SUSAN COLLINS, Maine
MARCY KAPTUR, Ohio                   JAMES RISCH, Idaho
MICHAEL HONDA, California


                     EXECUTIVE BRANCH COMMISSIONERS

                  SETH D. HARRIS, Department of Labor
                    MARIA OTERO, Department of State
              FRANCISCO J. SANCHEZ, Department of Commerce
                 KURT M. CAMPBELL, Department of State
     NISHA DESAI BISWAL, U.S. Agency for International Development

                     Paul B. Protic, Staff Director

                 Lawrence T. Liu, Deputy Staff Director

                                  (ii)


                             CO N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page
Opening statement of Hon. Christopher Smith, a U.S. 
  Representative from New Jersey; Chairman, Congressional-
  Executive Commission on China..................................     1
Brown, Hon. Sherrod, a U.S. Senator from Ohio; Cochairman, 
  Congressional-Executive Commission on China....................     3
Kernaghan, Charles, Executive Director, Institute for Global 
  Labour and Human Rights........................................     6
Li, Qiang, Executive Director and Founder, China Labor Watch.....     8
Wu, Harry, Founder and Executive Director, Laogai Research 
  Foundation and Laogai Museum...................................    11
Lee, Thea, Deputy Chief of Staff, AFL-CIO........................    20
Gallagher, Mary, Associate Professor of Political Science and 
  Director, Center for Chinese Studies, University of Michigan...    23
Brown, Earl, Labor and Employment Law Counsel and China Program 
  Director, Solidarity Center, AFL-CIO...........................    26

                                APPENDIX
                          Prepared Statements

Kernaghan, Charles...............................................    36
Li, Qiang........................................................   108
Wu, Harry........................................................   113
Lee, Thea........................................................   116
Gallagher, Mary..................................................   119
Brown, Earl......................................................   129

Smith, Hon. Christopher..........................................   138


   WORKING CONDITIONS AND WORKER RIGHTS IN CHINA: RECENT DEVELOPMENTS

                              ----------                              


                         TUESDAY, JULY 31, 2012

                            Congressional-Executive
                                       Commission on China,
                                                    Washington, DC.
    The roundtable was convened, pursuant to notice, at 2:30 
p.m., in Room 2200, Rayburn House Office Building, Hon. 
Christopher Smith, Chairman, presiding.
    Also present: Senator Sherrod Brown.

      OPENING STATEMENT OF HON. CHRISTOPHER SMITH, A U.S. 
    REPRESENTATIVE FROM NEW JERSEY; CHAIRMAN, CONGRESSIONAL-
                 EXECUTIVE COMMISSION ON CHINA

    Chairman Smith. The Commission will come to order.
    I want to welcome our very distinguished witnesses to this 
hearing on the important topic of the appalling state of 
working conditions and worker rights in China, a significant 
human rights abuse that requires greater examination, analysis, 
and, certainly, bolder action.
    Worker rights are systematically violated and are among the 
many human rights abuses committed by Chinese Government 
officials at all levels.
    Today, the Commission hopes to continue to draw attention 
to these critical issues in order to push the Chinese 
Government to reform and to respond to the legitimate concerns 
of its own citizens, all of whom are entitled to well 
established, universally recognized labor rights.
    As a member of the World Trade Organization, China has 
experienced tremendous economic growth and integration into the 
global economy. But as this Commission's most recent annual 
report documents, China continues to violate the basic human 
rights of its own people and seriously undermines the rule of 
law.
    Workers in China are still not guaranteed, either by law or 
in practice, fundamental worker rights in accordance with 
international standards. Despite legislative developments that 
purport to ensure some labor protections in China in recent 
years, abuse and exploitation of Chinese workers remains 
widespread.
    Conditions in Chinese factories continue to be incredibly 
harsh. Workers are routinely exposed to a variety of dangerous 
working conditions that threaten their health and their safety. 
Low wages, long hours and excessive overtime remain the norm.
    Chinese workers have few, if any, options to seek redress 
and voice grievances under these harsh conditions. If workers 
step out of line, they may be fired without payment of back 
wages. Workers have no collective bargaining power, no 
collective bargaining rights whatsoever to negotiate for higher 
wages and a better working environment.
    The Chinese Government continues to prevent workers from 
exercising their right to freedom of association, and strictly 
forbids the formation of independent unions. Attempts to 
organize are met with dismissal, harassment, torture, 
punishment, and incarceration.
    Workers are ``represented'' by a government-controlled 
union, known as the All-China Federation of Trade Unions 
[ACFTU], a phony, fake, and fraudulent workers organization.
    The recent crackdown on authentic labor, non-governmental 
organizations in Shenzhen in 2012 and the mysterious death of 
labor activist and 1989 Tiananmen Square demonstrator Li 
Wangyang in June are but a few examples of Chinese authorities' 
continued attempts to crush labor activism.
    While touting itself as an economic superpower, China 
continues to violate workers' rights with impunity. With no 
institutions capable of protecting their interests, Chinese 
workers are nevertheless taking matters into their own hands.
    In the past few years, there has been a dramatic rise in 
the number of labor-related protests in China, an estimated 
30,000 labor-related protests in 2009 alone, and there are no 
signs that this positive trend has or will abate.
    The increase in labor-related demonstrations not only 
represents the glaring lack of institutional capacity for fair 
labor negotiation, but also reflects the rise of a new 
generation of workers in China who are better educated, tech-
savvy, rights conscious, and more willing to protest and endure 
the consequences.
    The deplorable state of worker rights in China not only 
means that Chinese women, men, and children in the workforce 
are exploited and put at risk, but it also means that U.S. 
workers are severely hurt by profoundly unfair labor practices, 
an advantage that goes to those corporations who benefit from 
China's heinous labor practices.
    As good corporate citizens, multinational corporations such 
as Apple and Microsoft, must ensure that international labor 
standards are being implemented in their factories and supply 
chains in China.
    In the glaring absence of Chinese Government efforts to 
bring its labor laws and enforcement up to International Labour 
Organization standards, multinational corporations can and must 
play a unique role in advancing labor rights and industry 
standards throughout their operations in the People's Republic 
of China.
    Again, I want to welcome our very distinguished witnesses.
    I yield to my friend and colleague, Cochairman Senator 
Brown.
    [The prepared statement of Chairman Smith appears in the 
appendix.]

  STATEMENT OF HON. SHERROD BROWN, A U.S. SENATOR FROM OHIO; 
    COCHAIRMAN, CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA

    Senator Brown. Thank you very much, Chairman Smith, for 
your work in this commission. And thanks especially to the 
staff for the terrific work they do on this commission to 
prepare the annual report, which they are working on now, which 
is, in many ways, both a guide and sort of a clarion call for 
what this commission needs to do and what our government needs 
to do and what U.S. businesses ought to be doing.
    Special thanks to both panels. On this first panel, I 
appreciate the work of all three of you and what you have done 
to advance labor rights in China and really all over the world.
    Mr. Kernaghan, Mr. Wu, thank you. And, Mr. Qiang, thank you 
very much. And the second panel, too, thanks very much.
    When Congress debated permanent normal trade relations with 
China more than a decade ago, concerns about human rights and 
labor conditions were met with expert opinion that conditions 
would improve with more unrestricted and unfettered trade. That 
is what we were told by CEOs and editorial writers and pundits 
and economists and so many people in this institution over and 
over as Congressman Smith and I were working on this.
    But we know that any improvement in labor conditions have 
not kept pace--even close to keeping pace with the 
extraordinary trade deficits we have mounted with China. More 
and more of the goods we buy are made by Chinese workers. In 
2011, our trade deficit--our bilateral trade deficit reached an 
all-time high of $295 billion. The first five months of 2012, 
the trade deficit was $118 billion, on pace to exceed last 
year's.
    The trade deficit has cost American workers millions of 
jobs. Chinese workers are not just making our iPads and our 
iPhones and our laptops, but, also, innovating on the shop 
floor.
    When the innovation happens here and is outsourced for 
production somewhere else, the innovation, both in terms of 
process and in terms of the product, happen somewhere else, and 
we, as a Nation, tend to lose our innovative edge.
    They are making our auto parts, our food, our drugs, even 
our Olympic uniforms.
    We learned a few weeks ago, of course, that the 
accomplished athletes of Team USA would be wearing Chinese-made 
uniforms at the opening ceremonies. Members of both parties, 
including those who had voted for PNTR [permanent normal trade 
relations], were outraged. I was joined by a number of other 
Members of both Houses and sent letters to the U.S. Olympic 
Committee. I met with the CEO, who promised that by 2014, these 
uniforms will be made here.
    These products should be made here. Hugo Boss has a 
facility in Cleveland, Ohio. They make high quality and 
affordable clothing for Americans and for export.
    It is not because American workers cannot compete, but 
American workers do not often stand a chance against Chinese 
workers who are underpaid and overworked, who are victims of 
non-enforcement even of Chinese labor law, and workers who have 
few rights.
    Chinese workers making some of our most popular products--
cordless phones, iPhones, iPads--toil under the harshest 
conditions, as Chairman Smith said. They make a little over $1 
an hour. They stand all day. They work overtime that far 
exceeds Chinese law. Management humiliates them, sometimes 
forcing them to clean toilets as punishment. They live and they 
work in far too squalid and dangerous environments.
    We learned from a labor rights group in Hong Kong that 
Chinese workers making Olympic merchandise worked excessive 
overtime, were docked a half-day's wage for being a few minutes 
late, and had to bring their own masks to work.
    Fundamentally, why do these injustices continue? Because 
Chinese workers have no bargaining power. In China, there is no 
freedom of association; there are no independent trade unions. 
Instead, workers are represented by a state union that, to 
quote a worker from one report, ``everybody knows is controlled 
by the company.''
    Like our workers, Chinese workers are willing to fight for 
their rights. Strikes in China have grown, as Chairman Smith 
said, to an estimated 30,000 a year. The new generation of 
Chinese workers is better educated, more tech savvy, more 
willing to stand up against injustice. All encouraging 
developments, of course, but imagine how much more Chinese 
workers could gain if they had the right to organize freely and 
bargain collectively.
    We call on the Chinese Government to abide by international 
law and guarantee freedom of association, including organizing 
and bargaining collectively. We call on China to follow the 
rule of law by strengthening its labor laws and enforcing the 
laws on the books.
    Let us continue to do all we can here to support our 
workers against China's unfair labor and trade practices. That 
is why I have introduced three bills over the last couple of 
years--the Wear American Act of 2012, the All-American Flag 
Act, and, the most important, of course, the Currency Exchange 
and Reform Act.
    We have great responsibility in this. We must hold U.S. 
companies accountable for working conditions in their supply 
chain, something that Mr. Kernaghan has particularly shown a 
lot of leadership in pushing.
    That is why today I sent a letter to Apple regarding 
factories in China. I urged Apple to fulfill the promises it 
made following that New York Times story and, since, following 
an investigation by the Fair Labor Association.
    I have asked Apple to keep us informed, this commission, my 
office, and the American public informed and updated on its 
progress. I have urged Apple to strengthen its engagement, if 
you will, with the U.S. Department of Labor.
    Companies like Apple are in a unique position to improve 
working conditions in China, while maintaining their bottom 
line. I hope they will do the right thing.
    Thank you, Mr. Chairman.
    Chairman Smith. Thank you very much, Senator Brown.
    I would like to now introduce our first panel, beginning 
with Charles Kernaghan, who is the Executive Director of the 
Institute for Global Labour and Human Rights, a prominent anti-
sweatshop advocate and director of the nonprofit organization.
    He has published a number--or the institute that he heads--
a number of in-depth investigative reports on labor abuses, 
including a 2006 report on the trafficking of foreign guest 
workers under the U.S.-Jordan Free Trade Agreement, and a 2012 
report on factory conditions in Microsoft supplier factories in 
China.
    I welcome back Mr. Kernaghan. He may recall that back in 
the 1990s, I had invited him and he did a tremendous job, 
first, in exposing what was going on with Kathie Lee Gifford's 
line of clothing. She herself testified at that hearing, but he 
was the one who really got the ball rolling on those sweatshops 
in Honduran factories for Wal-Mart.
    So, welcome. It is great to see you, Mr. Kernaghan, again.
    We will then hear from Li Qiang, who is the labor activist 
and founder of China Labor Watch, a New York-based independent 
nonprofit organization that works to protect factory workers in 
China.
    China Labor Watch provides the international community with 
in-depth information and analysis on the labor situation in 
China through the publication of investigative reports and 
press releases.
    Working with a network of labor activists in China and the 
assistance of scholars, lawyers, and others around the world, 
China Labor Watch has published over 80 investigative reports 
covering more than 200 companies.
    Mr. Li has also established labor nongovernmental 
organizations [NGOs] in China that provide free legal advice 
and offer community training classes to Chinese workers in the 
Pearl River Delta region. These labor NGOs, additionally, 
cooperate with the multinational companies to ensure 
implementation of corporate responsibility standards in their 
supply chains in China.
    Mr. Li has written frequently on Chinese labor issues and 
has been published in major Chinese and international media 
outlets, including China Youth Daily and the New York Times.
    In 2004, Mr. Li was a visiting scholar at the Center for 
the Study of Human Rights at Columbia University.
    Then we will hear from a man who is no stranger to this 
Commission nor to the Foreign Affairs Committee nor to the 
Congress, and that is Harry Wu, the great Harry Wu, who is the 
founder and Executive Director of the Laogai Research 
Foundation, a foundation established in 1992 to gather 
information on and raise public awareness about the Chinese 
laogai system.
    Mr. Wu has firsthand knowledge of the conditions in the 
laogai system. He was imprisoned at the age of 23, in 1960, for 
criticizing the Communist Party, and he subsequently spent 
almost 20 years in the factories, mines, and fields of the 
laogai system.
    Mr. Wu came to the United States in 1985 after his release 
in 1979, but went back a number of times, including getting re-
arrested on at least one of those occasions. Harry Wu 
actually--I will never forget, I would say to my friend, Mr. 
Brown, we had a hearing that Harry helped arrange on the laogai 
that featured six survivors.
    And I will never forget when he brought in Palden Gyatso, 
who was also a man who had been incarcerated in the laogai 
system, who brought in these cattle prods and the other things 
that were used routinely by the Chinese Government to compel 
compliance inside the prison gates.
    Palden Gyatso, downstairs in this building, could not get 
through security--and that was before 9/11. We had to go down 
and escort him through. And when he held up those instruments 
of torture used in the laogai system, which incarcerates 
millions of people, you could have heard a pin drop in that 
hearing room.
    So welcome back, Harry Wu, to the Commission.
    Mr. Kernaghan, if you would proceed.

 STATEMENT OF CHARLES KERNAGHAN, EXECUTIVE DIRECTOR, INSTITUTE 
               FOR GLOBAL LABOUR AND HUMAN RIGHTS

    Mr. Kernaghan. Thank you for this opportunity to testify on 
this incredibly important issue of worker rights in China.
    As of 2008, phones are no longer made in America. The 
reason is pretty simple. Telecommunication workers in the 
United States earn $16.85 an hour, which is 15.5 times higher 
than wages at the VTech phone factory in China, where workers 
are paid $1.09 an hour, which is a below subsistence wage, and 
with very few rights or any benefits.
    VTech is the world's largest manufacturer of cordless 
phones, and it controls 51 percent of the market in North 
America for corded phones and cordless phones. VTech produces 
for AT&T, Motorola, Philips, German Telekom, and Australia's 
Telstra.
    What I want to do now is put a human face on what happens 
with these workers at the VTech factory. Suppose your daughter 
went to work at VTech. She would work from 7:30 in the morning 
until 7:30 or 10:30 at night. She would work 12 to 15 hours a 
day. She would work 6 and 7 days a week. She would be at the 
factory 70 to 85 hours each week. And she would be forced to do 
overtime up to 37 hours, which exceeds China's legal limit by 
345 percent. Your daughter would be forced to stand all day. 
Her back would hurt. Her legs would ache.
    The production line never stops. Every 11.25 seconds, a 
circuit board goes down the assembly line. The workers have to 
plug in four or five parts into the circuit board. That means 
they have 2.25 seconds to 2.8 seconds to do every operation. In 
one hour, they do 1,600 operations. In 1 day, in the 11-hour 
shift, they do 17,600 operations. And in the week, they do 
105,000 operations, the same over and over again. The pace is 
relentless, furious, mind-numbing, exhausting.
    Workers who fail to meet the production goal have to remain 
working without pay until they reach the goal. Workers say they 
feel like they are in prison, as security guards roam the lines 
and often beat the workers.
    The workers are fed some horrible food. They call it awful, 
slop. Indeed, we smuggled some pictures out of the factory that 
showed this coarse yellow rice and visibly rotten potatoes, and 
this is what they were being fed.
    Eight workers share each primitive dorm room. They sleep on 
narrow plywood bunk beds, often without mattresses. The workers 
told us, ``It's filthy, like a pigsty.''
    Workers told us that when they want to wash, they have to 
get a small bucket, a plastic bucket, fetch some water, bring 
it back to their dormitory and splash water on themselves. This 
is how they wash. Right now, the temperature would be 96 
degrees and it would be extremely humid.
    Workers are instructed to spy on each other. According to a 
manual from the VTech factory, ``Those who report others' 
mistakes would be rewarded monetarily.''
    One young woman told us, ``Sometimes I want to die. I work 
like hell every day for a dull life. I can't find a reason to 
live. Given that living is so tiring, seeking death might not 
be a silly thing.''
    After just one month of work, back on December 27, 2009, a 
20-year-old man at VTech jumped to his death from the sixth 
floor dormitory. His supervisor had constantly attacked him and 
scolded him.
    Less than a month later, on January 20, 2010, a young woman 
took an overdose, a fatal overdose of sleeping pills because 
she was constantly badgered and harassed by the management.
    Conditions are so miserable for the 30,000 workers at 
VTech, at VTech's factories in Dongguan that 80 percent of the 
workers try to flee the factory each year.
    To keep the workers from fleeing, management withholds one 
month's back wages, including overtime, to try to control the 
workers and keep them in the factory.
    VTech also cheats their workers on their legal social 
security benefits which are due them. Millions of dollars are 
going into the pocket of management at the cost of the workers.
    There is some small good news in that improvements are 
beginning to be made at VTech. Under enormous pressure, the 
corporations like Philips and Motorola, they sent auditors, put 
them on the ground in the factory, and produced some of these 
studies over the last several weeks, and they have just 
reported back to us that they have confirmed many of the 
violations that the institute had documented.
    VTech now is responding to the audits and is saying that it 
is going to come up with a remediation plan to improve 
conditions. I am not sure if we can believe that.
    But one slightly maybe positive action here is the 
Sustainable Trade Initiative's electronics program, which was 
funded by the government of the Netherlands and by several 
corporations, such as Philips, and they have moved beyond the 
monitoring, auditing of just a factory, and now they are saying 
that it is only when there is a worker-management dialogue in 
place that a company can possibly improve labor conditions.
    And Philips has asked VTech to join the Sustainable Trade 
Institute. This may be something that the U.S. Government would 
like to look into or U.S. corporations, for that matter. But 
even having said that, nothing will change in the global 
economy without enforceable labor rates.
    I want to especially thank the Chairman and the Cochairman 
for your leadership. You do so many bills, maybe you do not 
remember, but for your leadership and commitment back in 2007 
when you introduced the Decent Working Conditions and Fair 
Competition Act, which, when it passes, it is not, of course, 
going to pass now, but someday, when that passes, it will amend 
the Tariff Act of 1930 to prohibit the import and export of 
sweatshop goods to the United States--the import, the export, 
or sale of sweatshop goods in the U.S. Nothing will change.
    Multinational corporations have demanded and want all sorts 
of enforceable laws to protect their products, intellectual 
property rights, copyright laws, backed up by sanctions. 
Microsoft is protected, Apple is protected, VTech is protected, 
Barbie Doll is protected, the NFL is protected.
    But when we say to these corporations, ``Can't we have 
similar laws to protect the rights of the human being, as you 
have to protect your products,'' the corporations say, ``No, no 
never.''
    The corporations claim that extending protections similar 
to those currently afforded to products to defend the rights of 
human beings would be an impediment to free trade. So we have 
laws to protect Barbie Doll and Apple, but no laws to protect 
the human beings who make them.
    Nothing will change unless there is some change in policy 
and we have enforceable laws. Otherwise, China will keep 
dumping the sweatshop goods in the United States. Right now, 
$34 million an hour are coming in from China products, $810 
million a day is coming in in terms of a trade deficit with 
China.
    I want to end the statement with a remark from an 
undercover labor leader in China, and I will go through this. 
This is quite short.
    He just wrote us yesterday and he said, ``We think opposing 
the current authoritative regime in China and encouraging 
transformation toward democracy conformed to benefits of 
Chinese workers, all human beings, we call upon all just 
countries around the world, especially the United States to 
oppose the Chinese Government, a government that suppresses its 
people's demand for democracy. Ask the Chinese Government to 
protect human rights to grant these people freedom of 
association and to let workers organize unions freely.''
    In the meantime, the United States should boycott sweatshop 
products from China and broaden support for grassroots 
organizations in China and American organizations that deal 
with labor issues in China.
    We oppose sacrificing human rights in exchange for short-
term economic gain. This is not only harmful for the 
improvement of working conditions in China, but also 
unfavorable in terms of the long-term interest of other 
countries.
    I want to thank you, again, for this incredibly important 
work that you do with this Commission, because some changes 
have to come for the workers in China.
    Thank you.
    Chairman Smith. Thank you very much, Mr. Kernaghan.
    Mr. Li?
    [The prepared statement of Mr. Kernaghan appears in the 
appendix.]

 STATEMENT OF LI QIANG, EXECUTIVE DIRECTOR AND FOUNDER, CHINA 
                          LABOR WATCH

    Mr. Li [through an interpreter]. I would like to take this 
opportunity to thank the Commission for giving me the 
opportunity to testify here today.
    Back in 2000, when the U.S. Congress was debating whether 
PNTR should be granted to China, I testified, as well, by 
saying that the Chinese workers would be working like machines.
    Charlie just gave you a very vivid description of what was 
happening in the VTech factory. As a matter of fact, I myself 
worked in factories like that, and conditions were even worse.
    It was because of my experience working in factories like 
what Charlie was describing that I came to this country and 
founded China Labor Watch. The conditions that he described 
just now do exist in most plants and most factories throughout 
China.
    We did an investigation on 10 supplier plants supplying 
parts to Apple, and we found that most of them would have 
conditions as Charlie was describing.
    The workers have to endure very long work hours, making 
very low wages, and doing very extensive--extraneous work.
    The second topic I would like to touch on today is the 
audit system employed by multinational corporations. What I 
would like to say here is that the systems, these audit systems 
are not very effective and they are actually corrupt.
    Third, substantial advances in labor conditions in China 
are far more likely to occur only if two things happen. First, 
the multinational corporations operating there must push for 
appropriate improvements; and, additionally, the Chinese 
Government will have to take a more aggressive role in 
enforcing its own labor laws.
    As Charlie was describing, the poor and harmful working 
conditions in the VTech factories, in our investigation, we 
found that the working conditions exist in factories throughout 
China, not just in Foxconn.
    While we were putting together this report, another 
accident took place, last Friday, at one of the Apple factories 
in China in which one worker died and four were left in a coma. 
By the same token, last year, accidents took place in Apple 
supplier plants in which 4 people died and over 50 workers got 
injured.
    What I would like to say here is that in the audit report 
vis-a-vis working conditions at Apple plants, they did not talk 
about things that were not favorable to them. One factor, for 
example, throughout the supplier plants supplying parts to 
Apple, they extensively used dispatched labor, and these 
workers have even worse working conditions than regular 
employees of these plants and they work even longer hours. And 
sometimes they have to put in 180 hours in overtime. And when 
we look at injuries, on-the-job injuries, most of the injuries 
happened to these dispatched laborers.
    In addition to what we found in Apple-supplied plants, bad 
working conditions exist in supply plants for HP, for Dell, and 
for Samsung. These multinational corporations do have an audit 
system. However, I think the audit systems are severely flawed.
    According to my very conservative estimate, some 30,000 
plants--over 100,000 audits are conducted for over 30,000 
plants. Normally, recommendations in the audit reports would 
require the investment of millions of dollars. So the 
multinationals would, more often than not, bribe the auditing 
companies by giving them, like, $3,000 or so, so as to avoid 
making the investment to make the improvements.
    I have a very specific example, and that took place in 
2007. The toy factories exporting toys containing lead to the 
United States passed the quality audits from the auditing 
companies. Again, in 2009, we came across another incident in 
which the International Council of Toy Industries [ICTI] 
commissioned an auditing company to audit one of the toy 
manufacturers in China.
    We learned that the toy manufacturer bribed one of the 
auditors by giving him $3,100, and we reported this incident to 
ICTI and the toy industry association. In response, ICTI did 
another audit and they found that fraudulent deeds did occur. 
So they canceled the certification.
    Well, I can give you an example. For a typical toy 
manufacturer, it may employ 200 workers for the low seasons and 
the number may go up to 500 for high seasons. In order to 
implement recommendations in audit reports, they may have to 
spend $20 per head, per worker.
    Take this particular manufacturer, for example. If we did 
not report this incident to ICTI, the manufacturer would have 
to come up with $45,000 to implement the recommendations in the 
audit report. Instead, they bribed the auditor.
    We came across nine incidents like this in our 
investigations.
    Now, after we reported the dishonest audit result to ICTI, 
they published the identity of our informant in its compliance 
newsletter. The audit firm is Intertek, a U.K.-based company, 
and they have over 30,000 auditors.
    In order to protect its own interest, Intertek went back on 
its promise to keep the informant anonymous. What I would like 
to point out is that the same company does audit reports--does 
audit inspections for many U.S. companies. Big American firms, 
such as Costco, are their clients.
    In my estimate, about one-third of U.S. corporations are 
clients of this particular auditing firm. And, of course, the 
auditor reports would be made up of facts. However, they ignore 
some of the facts.
    It is my view that it is the responsibility of the 
multinational corporations to change the labor, bad working 
conditions in China, in addition to urging the Chinese 
Government to do something in this area. We need to put 
pressure on multinational corporations, as well.
    The very reason for Apple to have hired this auditing firm 
to do audits is that it got bad publicity and it came under 
pressure.
    We know that Apple's profits amount to $13.1 billion for 
the net profit for the first quarter of its 2012 fiscal year, 
and that would amount to the annual wages for 300,000 Foxconn 
workers for 11 years. And the stock awards worth $380 million 
Tim Cook received when he was appointed as the new CEO amounts 
to the total wages of 300,000 workers.
    Corporations like Apple do have resources to change the 
conditions, and I think we should start with Apple to really 
change the conditions on the ground.
    Again, I would like to thank the Commission for giving me 
the opportunity to testify today, and I hope that hearings like 
this will make a difference so that the working conditions in 
China will be improved.
    Chairman Smith. Thank you very much, Mr. Li.
    Mr. Wu?
    [The prepared statement of Mr. Li appears in the appendix.]

 STATEMENT OF HARRY WU, FOUNDER AND EXECUTIVE DIRECTOR, LAOGAI 
             RESEARCH FOUNDATION AND LAOGAI MUSEUM

    Mr. Wu. I want to add something to what we are talking 
about. In 1999, when the Motorola CEO, when he went to China, 
he met the Chinese Prime Minister, Zhu Rongji. Here is the 
dialogue.
    The CEO of Motorola said, ``I want to set up a factory in 
China to produce the iPad.'' And you know, until today, 
Motorola, all their iPads were made in China. And the CEO said, 
``I want to produce the iPad in China.'' And Zhu Rongji said, 
``No problem. What do you want? '' And the CEO said, ``Nothing. 
I don't want anything. But I care about one thing. I hope the 
Chinese workers are not going to organize a union.'' And the 
Chinese Prime Minister said, ``So do I, no problem.''
    You see, that is why China does not have unions. And all 
the iPads right now are produced in China, now all made cheap. 
And every big factory, big company in China, they have a 
Communist Party office, Voice of America reported.
    There is very little cooperation there. So what do you want 
to do? You have a hearing, you want to stop it? I hope so, but 
I do not think so, because China is China, China is not the 
Soviet Union. If this happened in the Soviet Union, they 
probably would say, ``No, we can't do it. We are not going to 
share our technology, investment, whatever, with Soviet 
devil.'' But the Chinese Communist Party supposedly is not a 
devil, because they are honored guests in our White House.
    I do not know. Fidel Castro cannot come to the United 
States, but Fidel Castro can meet Roman Catholic Pope. The 
Chinese say Roman Catholic in China is illegal. This is the 
environment in China. But today, I was very happy to be invited 
to this Commission to talk about labor rights. But I want to 
narrow, very narrow, only concentrate on maybe 3 million, maybe 
around this number--the prisoners--because if you have a chance 
to visit Chinese prison camps, all the prisoners are forced 
into labor.
    Laogai, that means forced to labor and forced to reform. 
That means you have to forget your political ideals, religions. 
No, no way. You have to think about you having to support 
Communism. This is so-called reform. And every factory is very 
busy.
    I was in a camp. I was in a coalmine working two shifts a 
day, 12 to 12 hours. I was on a farm, early every morning we 
get up. When the sun is setting down, we return. Are they going 
to pay? Forget it. The forced labor is a way to reform. You 
become a new socialist person.
    And now the Chinese separate so-called enterprises from the 
prison camps. But by Chinese law, in the last 50 years, every 
prison camp has two different names. One is Judiciary No. 5, 
Laogai Detachment, or No. 7 Prison Camp, and another name is a 
coalmine, is a construction company, is a farm, is a 
manufacturer of machine tools, or is the biggest rubber boots 
factory. They can manufacture 80 million pairs of rubber boots, 
and you can find them in Wal-Mart, in Home Depot. I bought 
rubber boots on the prison camp--exactly the same in the Wal-
Mart. But I heard, in 1985, when I came to the United States, 
Wal-Mart said, ``Our enterprises order products made in the 
United States. We are patriotic.''
    But today, the report says 91 percent of the Wal-Mart 
products are made in China.
    But do you really care about the products made in China? So 
far, I have heard that in California, there is a company that 
imports brakes. Because the quality is not good, not strong 
enough, they cannot stop the car, they cause an accident. They 
want to return it, stop the contract, and the Chinese know. 
That is why the Communists say, ``Oh, I want to tell you; this 
is from No. 3 prison camp in Shaanxi Province.'' So there is a 
problem.
    Another company from Texas is making mugs. Next to the 
company, another factory, the Maolong prison camp. Two mugs 
manufacturers, export the products to the United States.
    But who cares? If this is cheap, we do it.
    So I do not know what should we do. American economy 
involved with China too much.
    On the Dun & Bradstreet, there are 314 enterprises. 
Actually, it is a prison camp. But what should we do? I do not 
know.
    Thank you.
    Chairman Smith. Mr. Wu, thank you very much.
    Cochairman Brown?
    [The prepared statement of Mr. Wu appears in the appendix.]
    Senator Brown. Thank you. Thanks to all three of you for 
your testimony. Mr. Yan, thank you, too.
    Mr. Li talked about the audit systems, called them 
ineffective, corrupt, mentioned bribery, mentioned other--sort 
of other elements of how all this works.
    Could all three of you just talk to me briefly about--each 
of you give your thoughts on what we can do here with U.S. 
corporations that contract with these auditors, these auditing 
companies.
    Sometimes companies in the United States contract with them 
for purposes of answering media inquiries and relieving the 
pressure that they get from stories in the American media.
    Other times, some America companies want to do the right 
thing here. Some American companies, I think, do care that the 
work conditions are perhaps not as good as they could be.
    Starting with Mr. Kernaghan, if you would give me your 
thoughts on what we do to encourage companies, not just Apple, 
but companies like Apple and others to upgrade, if you will, 
the auditing system to make sure that the auditors are neither 
bribed or do the bribing or that the reports that they get back 
are legitimate and that the conditions that they audit will 
improve as a result of the audit.
    Mr. Kernaghan. I think the auditing process is very 
difficult, especially in a place like China, where workers are 
very frightened to speak truthfully, and they separate the 
workers. They are all from different--these are migrant 
workers. They are all from different areas. They do not even 
let them be in the same dormitory together. So they put them 
out, so they are always alone and they can never build, like, 
an organization.
    I think what happened with VTech, they came back to us 
immediately and they said, ``No, everything is fine.'' And 
VTech said, ``Well, they're going to sue us and bring a legal 
suit against us. We just kept pounding them with the facts 
about what is really going on in the factory, and it was not 
until then that the monitors actually took it seriously.
    At the beginning, they said, ``No problems, you've got it 
completely wrong. And then all of a sudden, they started to 
back away. When we did not chicken out, they started to back 
away a little bit from VTech and then they confirmed that they 
did find these violations. But I do not think they worked very 
hard to find those violations. They would rather not find the 
violations.
    So one of the ways to--I am not a believer in monitoring. 
It is much more important, I think, to have the laws, 
enforceable laws. But if the monitoring is to work at all, 
there is going to have to be outside pressure put on the 
corporations and there is going to have to be research coming 
out of those factories to keep pushing and pushing.
    Without these undercover people in China, we would not know 
a single thing. There would be nothing and it would just be the 
monitors going in and talking to management and talking to some 
workers who are already trained to lie.
    So this is really going to have to be driven by unions in 
the United States, by Members of Congress, by activists, by 
NGOs.
    If we do not keep pressure up on these companies in China, 
and their buyers, they will do nothing. That is our experience.
    Senator Brown. Mr. Li?
    Mr. Li. Well, once an audit report is submitted, I think 
the recommendations would have to be implemented. Otherwise, 
the things will go back to square one. And in the wake of 
Charlie's report, VTech, I am sure, did something to make some 
improvements on a temporary basis. However, one or two years 
down the road, it will go back to square one.
    I think one of the ways to alleviate the bad working 
conditions is really to set up hotlines accessible to workers. 
Groups should be allowed to access the workers on the floors to 
make them aware of the labor laws and, also, to set up hotlines 
so that workers could just pick up the phone and dial the 
number whenever they have a complaint.
    Senator Brown. Will workers believe that their privacy is 
protected if there is some way of establishing some hotline, 
their confidentiality and privacy is protected?
    Mr. Li. Well, this is what we did in China last year. We 
set up hotlines in 35 plants in China by which Chinese workers 
would call our China office via those lines. And, in turn, we 
will talk to the supplier plant, to the supplier factory.
    Afterward, we would follow up on their implementation. And 
I think there are organizations other than us in China having 
hotlines. However, only a fraction of factories in China have 
hotlines like this, because after all, for multinational 
corporations, this would increase their costs.
    For instance, because of the hotlines, maybe the plant 
would have to provide better housing, better food, and would 
pay more on workers' behalf into the healthcare system, and all 
these would add up.
    However, on the other hand, the companies, the plants, and 
factories themselves stand to benefit in that better working 
conditions would see lower turnover rates among workers. The 
workers would tend to stay with their jobs.
    And, in turn, the factories and plants would spend less in 
training, and I think this would be--again, setting up the 
hotlines in these plants and factories would be a very good 
first step to take, and this would be acceptable to the plants.
    This year, the number of our hotlines will increase to 110 
in China.
    Senator Brown. Good. Thank you.
    Mr. Chairman, thank you very much.
    Chairman Smith. Thank you very much.
    Just a few questions. In her testimony, Thea Lee from the 
AFL-CIO will say that she would like to see both the 
Administration and the Congress put protecting workers' rights 
at the center of the U.S. and Chinese Governments' dialogue, 
not as an afterthought behind other trade and foreign policy 
concerns.
    Is that being done? Has that been done?
    Mr. Kernaghan. No, not at all. There will have to be 
tremendous pressure from the United States and from U.S. 
corporations to finally respect the local labor laws in China 
and the internationally recognized worker rights standards.
    They are in complete 100 percent violation at this point. 
So the pressure has to continue. We are only at the very first 
step.
    Mr. Li. The problem in China in enforcing and implementing 
the labor law is that there are no advocates. There are a few 
so-called advocates, and these are unions, and unions are 
controlled by state.
    Chairman Smith. My question, Mr. Li, is has the United 
States, President Obama, the Secretary of State, the U.S. 
Congress, they are the leads; they are the Executive Branch. 
Have they done what Ms. Lee has asked; have workers' rights in 
China been made a priority?
    Mr. Li. There is a lot they can do. For instance, as a 
first step, they can put pressure on companies like Apple and 
if Apple has done something, then probably the other 
corporations will follow suit.
    And that, indirectly, would have some impact on labor law 
legislation in China.
    Chairman Smith. But to date, they have not.
    Mr. Li. Right.
    Chairman Smith. I ask that--it has been my experience--I 
have been in Congress 32 years and when the trading 
relationship with China was emerging in the 1980s and then, 
certainly, took off in the 1990s, we had an opportunity, in my 
view, to seriously put fundamental human rights, the broad 
spectrum of human rights, including and especially labor 
rights, at the core of that relationship.
    President Clinton, when he linked most-favored-nation 
status with human rights, included labor rights. One year after 
linking it, he delinked it in an infamous reversal of policy 
that happened on May 26, 1994.
    Our trade deficit was peanuts then. As, again, Ms. Lee 
points out in her testimony, in 2011, it was $295 billion. We 
talk about foreign sourcing as being a problem. It seems to me 
that there is a magnet that is huge and enormous, causing those 
jobs that used to be in the United States to relocate to China.
    Yet, under Clinton, under Bush, and now under Obama, we 
have made workers' rights a non-priority. Is that correct or do 
I have something wrong here?
    Mr. Kernaghan. Correct.
    Chairman Smith. Thank you. Can any of you tell us why the 
U.S. Trade Representative [USTR] has not initiated the crushing 
of worker rights as an unfair trading practice? Have any of you 
had any ability to pierce that organization's unwillingness?
    I would point out that a few years ago, again, working with 
the AFL-CIO, a very serious complaint--a request--it was a mere 
request filled with documentation that was filed with the U.S. 
Trade Representative to launch an investigation of the 
violation of workers' rights as an unfair labor practice, and 
they refused and they refuse to this day.
    Do any of you have any thoughts as to why that might be the 
case? Why does the USTR not undertake that initiative?
    Mr. Kernaghan. They are much more concerned for their 
corporations that that comes first and in any way promoting the 
rights of workers, the legal rights of workers, if that would 
damage the economic relationship with China, they will not go 
near it.
    But on the other hand, just like you said, we are having 
our clocks cleaned as the stuff just flows into the United 
States made under illegal conditions.
    But, no, no one has been able to stand up to that yet 
within the Administration.
    Chairman Smith. Mr. Li, you bring out a very good point in 
your investigation of 10 of Apple's suppliers that the auditors 
appear to have corruption issues, and you mentioned that one 
whistleblower was exposed.
    Could you tell us what happened to that whistleblower?
    Mr. Li. Well, they disclosed the name of the informant and 
death threats were made to him. So he was forced to leave his 
job to go back to his hometown.
    Before this, Intertek actually had entered into an 
agreement promising anonymity. However, out of their own 
interest, they selectively used the information that was 
favorable to them.
    Chairman Smith. Could I ask you--Mr. Kernaghan, you might 
want to answer this, or any of you. Chinese companies not only 
pay their workers 10 to 50 cents per hour, but they also do not 
have OSHA protections, occupational health and safety; they 
ignore or have inferior environmental protections.
    What has been the impact? Has anyone ever been able to 
quantify it? I know it is a dictatorship, so getting 
information is hard. But what has the impact on the workers' 
health been? We know that, or at least we believe that, 
according to official numbers, something on the order of 
125,000 people die in work-related accidents, and that number 
perhaps has gone up. That was a few years ago. The official 
number usually is a mere shadow of what the real number is.
    And I am wondering, has anybody looked at the health 
consequences attributable to this outrageous worker rights 
abuse network in the PRC?
    Mr. Kernaghan. Just from the little research we did with 
the VTech company, they did not pay social security benefits to 
the workers for at least the first six to eight months. So you 
are talking about $8 to $12 million went into the pocket of the 
company by not paying for social security, which would cover 
work injury insurance and some medical insurance.
    When they force the workers, what they do at VTech is they 
keep one month's back wages. So, for example, your wages at the 
end of June will not be paid until July 31. Well, that is the 
way they keep the workers in the factory, because the worker 
tries to leave these miserable conditions, they will lose a 
whole month's worth of wages.
    So they have them, and it is all manipulation. And, no, 
again, just concretely, in VTech, there was absolutely no 
knowledge of the thinners that they were using and what was 
affecting them. All they knew is they got paid an extra, like, 
10 cents if they did the dangerous work, if they worked at 
night, and they worked with the thinners. But I think the AFL-
CIO would know a lot more.
    Chairman Smith. Mr. Li?
    Mr. Li. I would like to add one thing, and that is most of 
these workers work under very strenuous conditions and a lot of 
them work for only a few years before they have to leave. And 
when they do leave, they are not fairly compensated by their 
employers.
    Chairman Smith. Can I ask you, how integrated is the laogai 
system and its use of gulag labor with feeders and supply 
chains in China?
    Right after Tiananmen Square, Congressman Frank Wolf and I 
visited Beijing Prison No. 1, where jelly shoes and socks were 
being made for export. We saw factory workers' heads shaved, 
very gaunt, and at least 40 Tiananmen Square activists in large 
vats with dye all over their bodies. Obviously, the dye is 
penetrating their skin and being absorbed into their systems.
    And we complained to the Administration that we knew, 
because we brought back the socks and the jelly shoes, that 
were being made by convict labor, including political 
prisoners, and it was showing up on our shores. An import ban 
was imposed and that place shut down, although I am sure they 
just relocated.
    We have a memorandum of understanding that I believe is not 
worth the paper it is printed on. It is like Swiss cheese--with 
exceptions, big holes--which says that if we suspect gulag-made 
goods, we tell the Chinese and then they do the investigation 
and tell us what they found. That is like telling the drug 
dealer that you are going to do a drug bust or you are going to 
be looking at a certain location for illegal drugs.
    It is absurd, and yet that is our policy. But my question 
goes to the heart of, how integrated are these feeder parts 
that end up perhaps in something that is being produced by 
those 10 factories. Do they have any convict labor?
    We know that all throughout Africa, we have grave 
suspicions that convict labor is being exported to build roads 
and bridges and buildings throughout Africa.
    So how integrated is it, Mr. Wu?
    Mr. Wu. In the 1990s, American Customs Service issued more 
than 30 of those products for import to the United States, and 
five to six American companies were sued by American Customs 
and went to the court. But you never heard anything from 
Customs Service in 2000 and even today.
    I just do not know why. Have the Chinese really stopped 
prison-made products for exportation? Actually, they are very 
busy. All the prisoners are working overtime. For example, in 
Shandong Province, you are working 13 hours a day today. And in 
Guangdong Province, all the prison camps right now are almost--
they transferred farming into working indoors making garments. 
Where are the garments, only for domestic? No, they are for 
export.
    So the national trading companies sell it to Americans or 
the company and they indirectly sell it, that is it. But 
anyway, if the product partially or wholly is made by the 
prisoners, it is illegal. So I want to say these are the kind 
of things that today, the American Customs Service really cares 
or does not care.
    For this insurance process and training program and 
workers' rights, I think basically there is one point. The 
workers do not have the rights for association or for free 
speech. This is the problem.
    Thank you.
    Chairman Smith. Mr. Li, in your testimony about the 10 
factories that were investigated, you point out that most of 
the factory workers are young females.
    In a hearing here in this room just a few months ago, we 
heard from a woman who had been forcibly aborted because the 
enforcement of the one-child-per-couple policy is done at the 
factory level.
    I am wondering if you or perhaps any of our other witnesses 
have looked into U.S. corporations' complicity in that barbaric 
policy that relies on forced abortion to implement its one-
child-per-couple policy.
    Have you looked into that? And before you answer, on one 
trip to Beijing, I met with the U.S. Chamber of Commerce in 
Beijing and asked that question, and only one corporate head or 
government person who was in that room said they insisted that 
the language to enforce that barbaric policy was taken out of 
their contract.
    Do you find that that is the case here? Are these women--
this woman who testified told us that one of her factory 
workers noticed that she was pregnant and informed on her. And 
so informants who comply with that policy, we are told, are 
commonplace.
    Did you find this in any of these factories or did you even 
look for it?
    Mr. Li. Well, I did not--we did not come across things like 
that in our investigations.
    Chairman Smith. But did you look for it? Did you inquire?
    Mr. Wu. I got information, in Hunan Province, there is more 
than 1,100 high school teachers fired because of violating the 
so-called population control.
    Chairman Smith. In Hunan.
    Mr. Wu. 1,100 in Hunan Province, because by law, if you 
violate the population control, you definitely were fired.
    Chairman Smith. Mr. Li?
    Mr. Li. This would be something that we will be looking 
into.
    Chairman Smith. I appreciate that very much.
    We recently had Nicholas Eberstadt testify here from AEI 
[American Enterprise Institute]--and this will be my next to 
last question--and he said China has to grapple with a coming 
implosion economically and otherwise, because of its 
increasingly male population because of the one-child policy--
they are missing about 100 million girls, the numbers vary on 
both sides of that equation, and an increasingly older 
population, as he said, increasingly male and increasingly 
gray.
    Does that have any impact on the push by these courageous 
activists who are trying to form labor unions? As I said 
before--and I have met some of them inside of Beijing--they are 
amazing. They want to form labor unions, and they are willing 
to take the consequences.
    But China will soon face, I believe, a huge economic 
upheaval directly attributable to the missing girls and the 
senior population that will soon be almost the equivalent of 
the number of people that are working.
    How will that affect labor rights? This is a mega-trend we 
are talking about.
    Mr. Wu. China has a national policy, so-called population 
control. That very clearly is the number-one policy. It means 
above all the other policies. So if the local Communist 
secretary cannot care about the policy, he will be fired.
    So this is the number-one policy, and the population 
control policy until today, they say, ``Well, we reduce 
probably 400 million population.'' And this is a large number 
and this number is confirmed by the Chinese Government. And I 
really hope this serious problem is related to the workers' 
rights.
    Thank you.
    Chairman Smith. Mr. Kernaghan, on child labor, do you find 
that China is using more children or less? Is there a trend 
line that is positive at all, because, obviously, worker rights 
are non-existent for everyone else, but they are certainly even 
worse for them?
    Mr. Kernaghan. I think that one thing that is maybe 
changing slightly would be the child labor, because that is the 
one thing that U.S. companies are afraid of. So in some ways, 
the workers--just an hour of experience when we were doing this 
work, it seems to have gone down significantly, but that is 
just anecdotal information from the few factories we have been 
able to investigate. So they may know much more.
    Mr. Li. In our investigations, we did come across child 
laborers, and their products are sold into the United States. 
And in our latest investigations, we, by the same token, came 
across child laborers.
    When plants and factories are running shortages of labor, 
they would definitely hire child laborers in order to fill 
their orders from the United States.
    Chairman Smith. Let me ask the final question, Mr. Li. Did 
you convey your findings to the U.S. Labor Department and U.S. 
Department of State, with regard to Apple and, if so, what was 
their response? Did they take this and say--as well as the 
Human Rights Bureau at the U.S. Department of State?
    Mr. Li. I have. We had contacted the U.S. Department of 
Labor, U.S. Customs and Border Protection, and U.S. Department 
of Homeland Security. We sent the report to the officials in 
the Department of Labor, but did not submit an official report 
according to their procedures.
    Chairman Smith. How long ago was that?
    Mr. Li. Last year.
    Chairman Smith. What time last year?
    Mr. Li. In the August-September timeframe.
    Chairman Smith. And still no word a year later. Did they at 
least enter it on an interim basis, get back to you, and say we 
found this to be credible or not credible? Do you know if our 
mission in Beijing or our embassy is investigating this?
    Mr. Li. No. I have not heard from them.
    Chairman Smith. That speaks volumes.
    I thank you so very much and appreciate your insights and 
your testimony. We all do, and it gives us a great basis for 
going forward. It also helps us with the human rights report 
that the staff is working doggedly on. So thank you so very 
much.
    I would like to now invite to the witness table Thea Lee, 
the Deputy Chief of Staff of the AFL-CIO, who has also served 
as a policy director and chief international economist.
    Previously, she worked as an international trade economist 
at the Economic Policy Institute in Washington and as an editor 
at Dollars & Sense magazine in Boston. She received her BA from 
Smith College and MA in Economics from the University of 
Michigan.
    Ms. Lee is co-author of ``A Field Guide to the Global 
Economy.'' Her research projects include reports on the North 
American Free Trade Agreement, the impact of international 
trade on U.S. wage inequality, and the domestic steel and 
textile industries.
    She has appeared on a number of TV and radio shows, and she 
has been before the House on many occasions to testify.
    She also serves on advisory committees, including the State 
Department Advisory Committee on International Economic Policy, 
the Export-Import Bank Advisory Committee, and the board of 
directors of the National Bureau of Economic Research.
    We will then hear from Mary Gallagher, who is an Associate 
Professor of Political Science at the University of Michigan, 
where she is also the Director of the Center for Chinese 
Studies. She is also a faculty associate at the Center for 
Comparative Political Studies at the Institute for Social 
Research.
    Professor Gallagher received her Ph.D. in Politics in 2001 
from Princeton and her BA from Smith College in 1991. She was a 
foreign student in China in 1989 at Nanjing University. She 
also taught at the Foreign Affairs College in Beijing from 1996 
to 1997.
    She was a Fulbright Research Scholar from 2003 to 2004 at 
East China University of Politics and Law, where she worked on 
her current project, ``The Rule of Law in China: If They Build 
It, Who Will Come,'' which examines the legal immobilization of 
Chinese workers.
    Her book, ``Contagious Capitalism: Globalization and the 
Politics of Labor in China,'' was published by Princeton 
University Press in 2005. She has published articles in World 
Politics, Law, and Society Review, Studies in Comparative 
International Development, and in Asian Survey.
    She is the co-editor of several new volumes of Chinese Law 
and Politics, including Chinese Justice: Civil Dispute 
Resolution in Contemporary China and From Iron Rice Bowl to 
Informationalization: Markets, Workers, and the State in a 
Changing China.
    We will then hear from Mr. Earl Brown, who has represented 
trade unions and employees in U.S. labor and civil rights 
litigation since 1976. Mr. Brown is now Labor and Employment 
Law Counsel for the American Center for International Labor 
Solidarity, and International Workers' Rights, an NGO 
affiliated with the U.S. labor movement.
    Mr. Brown previously served as General Counsel, 
International Brotherhood of Teamsters, Associate General 
Counsel, United Mine Workers of America, and a partner in a 
U.S. labor and employment law firm.
    He is a fellow of the College of Labor and Employment 
Lawyers, and is union co-chair of the International Labor Law 
Committee of the Labor Law and Employment Law Section of the 
American Bar Association.
    A graduate of Yale University and the University of 
Virginia Law School, Mr. Brown has taught labor, employment, 
and discrimination law, and labor history at both U.S. and Thai 
universities, and has published on U.S. and international labor 
law topics.
    He is a member of the Alabama and District of Columbia Bar 
Associations and numerous Federal court bars. He served as a 
law clerk to the honorable James C. Turk, Chief Judge, U.S. 
District Court, Western District of Virginia.
    Ms. Lee, if you would proceed.

     STATEMENT OF THEA LEE, DEPUTY CHIEF OF STAFF, AFL-CIO

    Ms. Lee. Thank you, Chairman Smith. I would like to thank 
you and commend you for your leadership on this topic and for 
holding this hearing today. This is an important issue that 
does not get enough attention, in my opinion, both in terms of 
the economic impact on American workers and American business, 
and, also, the moral issue that is at stake here.
    I will summarize my testimony and go straight to the heart 
of what I think is the issue at hand here, which is how the 
U.S. Government does or does not use its leverage with respect 
to the Chinese Government to bring about change.
    The violations of workers' rights in China are very well 
documented, including by many of the people who spoke on this 
panel before you just now, as well as the U.S. Government, the 
State Department, and various nongovernmental organizations. 
And, yet, so little happens, as you say. You and I both have a 
long history of frustration at the inaction on this topic, but 
I think that change is possible.
    As I said in my written testimony, we would like to see our 
own government, both the Administration and the Congress, put 
protecting workers' rights at the center of the U.S. and 
Chinese Government dialogue, not as an afterthought behind 
other trade and foreign policy concerns.
    You asked the first panel whether this has happened or not. 
This, obviously, does not happen. The U.S. Government has 
several formal dialogues with China that happen several times a 
year, both the Strategic and Economic Dialogue and the Joint 
Commission on Commerce and Technology [JCCT].
    Workers' rights could easily fall in either one of those 
areas. They are all about trade and they are about the economic 
relationship between China and the United States. While 
dialogue is not the most powerful way for the U.S. Government 
to raise the workers' rights issue, it certainly is the first 
way. We would think that as a starting point, whatever we think 
about the other stronger measures that could and should be 
taken, the very least that our government could do is to shine 
a spotlight on this issue.
    Yet, when you see the agenda for the Strategic and Economic 
Dialogue, or the JCCT, actually, I think workers' rights is 
never one of the prime topics. I am often informed by somebody 
in the U.S. Government that, in fact, workers' rights will be 
discussed, it is just not important enough to actually put on 
the published agenda.
    The same goes for when many members of the Administration 
visit China and make speeches. There are a lot of issues that 
come to the top, whether it is foreign policy concerns or 
intellectual property rights concerns or market access 
concerns. But we very seldom hear a top official of the U.S. 
Government raise workers' rights, unfortunately, and that goes 
for both Republican and Democratic administrations.
    Why not? Well, there are a couple of reasons. One is there 
are other priorities, like a burning foreign policy issue or 
other trade issues that are important. The second issue is 
often that it is irritating to the Chinese Government. That is 
very likely the case. I can believe that it is not welcome to 
the Chinese Government to raise some of these issues around 
workers' rights, and, yet, I do not believe that that should be 
the deciding factor for our own government.
    Actually, I think what I would like to say about freedom of 
association is that, as you heard from the first panel, there 
are many, many, many problems that workers in China face. There 
is a failure to enforce basic Chinese labor laws, whether it is 
with respect to maximum hours, minimum wage, safety and health, 
prison labor, or child labor.
    But the pivotal worker right is freedom of association and 
the right to organize. And if workers do not have the right to 
form their own associations at the workplace and to bargain for 
themselves with their employers, free of interference from 
either their government or their employer, nothing else falls 
into place. And it is a cornerstone of democracy and it is a 
cornerstone of fairness at the workplace.
    One of the things that I find interesting and frustrating 
about the way multinational corporations engage in China, and I 
go into this a little bit in my testimony, is that I think you 
would be hard-pressed to find a multinational corporation that 
would welcome the union at the workplace or welcome labor laws 
that facilitated the formation of unions.
    And, yet, many of these multinational corporations are 
suffering in China. They are suffering from a dilemma, and the 
dilemma is that they are in a competitive environment where the 
labor laws are not enforced, unions are illegal, workers are 
routinely treated badly. They cannot get a straight answer from 
their own auditors that they hire, they cannot get a straight 
answer from their own compliance forces that they send out to 
monitor. They spend millions and millions of dollars monitoring 
their factories, and, yet, the monitors come back with 
inaccurate, inadequate, lame, untrue reports.
    The answer, actually, is a union. The thing that these 
multinational corporations are missing is a union, because only 
a union is on the ground every day. It is of the workers, by 
the workers, and for the workers, and that is the only kind of 
monitor that a multinational corporation needs. And, yet, we 
have this dilemma that they resist that with all their might, 
and I think that is unfortunate.
    The Chinese Government is also facing a dilemma. The 
dilemma that the Chinese Government faces is that it is not a 
democratic government and what it fears above all is loss of 
political power. So giving workers democratic rights at the 
workplace is contrary to the political goal of maintaining 
power and maintaining autonomy for the Chinese Communist Party.
    So the Chinese Government is also in a bind, because, on 
the one hand, I think the Chinese Government can see that 
workers need more purchasing power, they need more voice. They 
have a situation which is chaotic right now, where, as you 
mentioned, there are 30,000 incidents of labor unrest. You also 
have worker shortages in certain parts of the country, and you 
also have other governments complaining constantly that the 
Chinese Government runs these enormous current account 
imbalances and that that is taking a toll on other countries, 
it is unfair, and so on and so forth.
    So there is pressure on the Chinese Government to fix these 
issues, and, again, the answer is a union and freedom of 
association. And, yet, the Chinese Government is not in a 
position to grant freedom of association, because that would 
threaten its own political power.
    So you have this problem. And how can we solve this 
problem? Well, the U.S. Government could solve this problem 
because of the very trade imbalance that the U.S. Government 
runs with China, which is, as you know, $295 billion a year.
    It is an extraordinary imbalance. It is the source of our 
weakness. We import much more than we export to China, and that 
costs us jobs and puts us in debt to China, both literally and 
figuratively. Yet it is also the source of our strength, or it 
could be if the U.S. Government chose to use it, because the 
truth is that the Chinese Government's economic strategy 
depends on maintaining access to the U.S. market.
    Multinational corporations are very motivated to maintain 
access to the U.S. market from China. And so the U.S. 
Government has something that the multinational corporations 
and the Chinese Government need, which is control over market 
access. And, yet, our government has chosen not to use that.
    So let me just end there, because I am anxious to hear from 
my co-panelists, but to put that on the table as the key thing. 
You raised the issue of the Section 301 workers' rights case 
that you cosigned with the AFL-CIO several years ago. This is a 
tool that is in the reach of the U.S. Government, but has been 
left on the table.
    The tool does not work if you do not use it, if you do not 
apply it. The Bush Administration twice rejected the Section 
301 petition that the AFL-CIO filed, with your support, and, 
yet, the U.S. Government could, any day, initiate on its own a 
Section 301 case to bring China to the World Trade 
Organization, to insist that China live up to its own 
obligations to respect international workers' rights.
    I thank you for your time and attention. I thank you for 
holding the hearing. I look forward to the discussion.
    Chairman Smith. Thank you.
    Ms. Gallagher?
    [The prepared statement of Ms. Lee appears in the 
appendix.]

 STATEMENT OF MARY GALLAGHER, ASSOCIATE PROFESSOR OF POLITICAL 
SCIENCE AND DIRECTOR, CENTER FOR CHINESE STUDIES, UNIVERSITY OF 
                            MICHIGAN

    Ms. Gallagher. Thank you, Chairman Smith. And thank you for 
convening this hearing on this important topic and, also, 
inviting me to participate.
    In the early summer of 2010, more than a dozen workers at 
Foxconn, a Taiwanese-owned electronics conglomerate, committed 
suicide by jumping off the roof of the factory dormitories.
    In the same few months, workers at a Honda automotive parts 
factory went on strike for higher wages and better working 
conditions. And these events are related, but I want to point 
out that they are also different.
    The Foxconn suicides depict the isolation and alienation 
that young migrant workers feel as they leave their hometowns 
in rural China for industrial or low-level service employment 
in China's coastal cities.
    The Honda strikers represent a more optimistic trend, the 
successful collective mobilization of workers and the emergence 
of proto-collective bargaining between labor and management 
that led to significant increases in wages for many automotive 
workers.
    These events highlight the transformative changes that have 
occurred in Chinese labor over the past decade, both the 
negative and the positive trends. And while these changes are 
the result of economic and demographic changes and shifts in 
China, they are also considerable political and legal changes.
    The Chinese state's motivation for these reforms are 
grounded deeply in its own fear of instability and worker-led 
political unrest. Therefore, these changes are not all in one 
direction toward greater liberalization and rule of law 
institutionalization. In fact, these changes are really more in 
the other direction.
    Although they include new progressive legal codes to 
improve working conditions, they also include initiatives to 
strengthen the role of the party state to manage labor 
relations directly.
    In my written testimony, I go through these demographic 
shifts, including the labor shortage that had been mentioned by 
other panelists. China's working-age population will peak in 
2015 and fall from 973 million people in 2010 to a predicted 
870 million in 2050.
    The change in China's demographic trajectory has enlarged 
the political and economic space for Chinese workers as 
diminishing returns to labor-intensive industrialization and 
creates domestic political support for changes to China's 
economic growth model.
    I think it is important to highlight that in addition to 
concerns about social unrest and inequality, this political 
shift and greater support for labor protection is linked to the 
government's economic strategy and its long-term economic 
goals, including increased domestic demand, moving up the 
production cycle toward higher end goods, making China not the 
workshop of the world, but the laboratory of the world and the 
R&D center of the world.
    These demographic shifts are then highlighted in the social 
context of Chinese migrants. The new generation of migrant 
workers is better educated, they come from smaller families, 
and they desire to become permanent urban citizens.
    Given this generation's higher levels of education, their 
better access to technology, the increased integration into 
urban culture, they have a greater potential to articulate 
collective interests and to act collectively to press for their 
interests and rights. These are the employers and the 
government alike. This was apparent in the 2010 Honda strikes 
and has been apparent in strikes since then.
    As I argue in my concluding remarks, however, the 
government has not responded effectively to this new bottom-up 
push for collective representation.
    In response to these economic and demographic and social 
changes, the Chinese state has moved since 2003 to pass labor 
laws and regulations that strengthen worker rights, enhance 
employment security, and widen access to social insurance.
    As I show in my written testimony, the law, particularly, 
the Labor Contract Law of 2008, has improved some aspects of 
employment relations in China. This does not mean that 
widespread violations do not continue to occur. They do, as 
other panelists have already attested.
    But there have been some significant shifts in the right 
direction. In the written testimony, I discuss the reduction in 
informality and the increase in access to social insurance, as 
well as the increasing awareness of Chinese workers themselves 
of their own protections and in the labor laws and regulations; 
and, also, a diminishing gap between what a real migrant knows 
and what an urban worker knows.
    Despite these positive changes, one glaring trend is the 
marked increase in labor subcontracting, already discussed by 
Li Qiang, through middlemen employment agencies that then serve 
as the formal employer. This cuts labor costs, allows 
subcontracted workers to be paid less to receive little or no 
social insurance, and to be dismissed at will.
    The NPC, the National People's Congress, has announced this 
year that it will revise the Labor Contract Law and focus on 
abuse of labor subcontracting. Labor subcontracting also gets 
to the issue of child labor, since many subcontracted workers 
are student interns.
    However, successful revision of the Labor Contract Law will 
not be enough to curtail abuse of labor subcontracting. 
Improved implementation and enforcement of the changes are also 
required, as with all Chinese labor laws.
    Finally, I want to get to the issue--well, it is not quite 
finally, but I first want to get to the issue of labor disputes 
and talk about how these increased expectations by workers at 
the workplace and the new laws has resulted in a massive 
increase in disputes since 2008 when the laws went into effect.
    Labor disputes increased by nearly 100 percent nationwide, 
with some localities reporting increases of 300 percent. 
Disputes tax the capability of local arbitration committees and 
civil courts to settle disputes fairly and quickly.
    While the number of strikes is not openly available in 
China, it is safe to say that strike activity has also 
continued to increase since that time.
    In 2010, there were nearly 1.3 million labor disputes 
overall, with 70 percent of the disputes mediated, which shows, 
also--which is my next point--that the government has been 
successful in keeping disputes out of the court and into 
government-sanctioned mediation.
    Greater reliance on mediation and informal settlement is 
especially pronounced when labor conflict threatens local, 
social, or political instability, or when it threatens 
stability. Those negotiated settlements rely on cooperation 
between intergovernmental departments and Communist Party 
units, acting as stability preservation committees, going 
directly to the site of the conflict to encourage both sides to 
end the dispute and to compromise.
    Researchers have noted that while individual leaders and 
activists may be dealt with harshly, striking workers may 
receive some compensation in exchange for ending the strike and 
returning to work. This return to mediation and turn away from 
the rule of law has been roundly criticized by legal scholars 
and has been discussed at previous hearings held by this 
Commission. It is not surprising then that we see it also in 
the labor realm.
    It underscores the Communist Party's ambivalence toward its 
recent legal reforms that open up channels for formal legal 
resolution and private disputes.
    While mediation might appear to be more harmonious, it 
often relies on very active government intervention into 
disputes, violence or the threat of violence to force 
negotiated settlements, and violates the spirit and letter of 
China's own procedural codes.
    One challenge revealed that the post-2008 increase in labor 
conflict that had not been solved by this heavy-handed push of 
mediation and the new legal protections is the lack of 
institutional capacity in China for labor capital bargaining 
around interest disputes.
    The vast majority of the nearly 700,000 labor disputes in 
2009 were rights disputes, violations of Chinese law. However, 
Chinese workers, with their rising expectations, have many 
disagreements and conflicts over their interests, such as wage 
increases, working conditions, and quality of the cafeteria 
food.
    Interest disputes simmering over a long period of time are 
likely to continue to lead to increased labor conflict in 
China, because there are no institutions in China to handle 
them preemptively, particularly as the government has shown 
little change in its opposition to freedom of association.
    Reforms to the All-China Federation of Trade Unions, the 
only state-sanctioned trade union, have failed. The trade union 
remains severely constrained in its dual role as representative 
of labor and as the eyes and ears of the local party state at 
the workplace.
    The failure is a political one. Liberalizing the forums 
related to freedom of association have been rejected. In their 
place, the government has decided to inject itself more deeply 
into the dispute resolution process through the promotion of 
government-run mediation and other measures that maintain and 
even strengthen the role of the government in managing labor 
relations at the expense of the rule of law and civil society.
    As with other aspects of China's political economy since 
2008, this greater reliance on the state and the empowerment of 
state actors at the expense of civil society, the market, and 
the legal system are additional signs of China's retrenchment 
and retreatment from reform.
    Thank you. I am happy to answer questions.
    Chairman Smith. Thank you, Professor Gallagher.
    Mr. Brown?
    [The prepared statement of Ms. Gallagher appears in the 
appendix.]

 STATEMENT OF EARL BROWN, LABOR AND EMPLOYMENT LAW COUNSEL AND 
       CHINA PROGRAM DIRECTOR, SOLIDARITY CENTER, AFL-CIO

    Mr. Brown. Thank you, Chairman Smith, for this opportunity. 
I am going to try to be brief and summarize things in my 
testimony and focus on some aspects that have not yet been 
completely addressed.
    I want to thank the Chair and this Commission for 
demonstrating continuing interest and attention to Chinese 
labor law. It is a very important topic. We are witnessing 
right now in Chinese labor law, how Chinese workers have 
agency. They are becoming actors now in the dialogue about 
labor policy and labor standards like nowhere else in the 
world.
    Chinese workers are acting outside an institutional 
framework that works, as Professor Gallagher and others have 
pointed out, outside a true labor relations framework that 
represents workers, addresses grievances, provides for 
collective bargaining from an equal, or at least, a position of 
some power, and comes up with credible solutions that will 
persuade the workers to go back to work. That stable 
institutional framework is absent. Therefore, workers in China, 
many of them who are, in fact, excluded from Chinese labor law, 
by very crabbed interpretations of Chinese labor law, are 
forging their own direct bargaining relationships with 
employers.
    Now, I think it is very dangerous to make universal 
perscriptions for any country, particularly a country as huge 
and diverse as China. But, I also do not believe that any 
industrial country can escape the need to have a democratic 
grassroots voice at the workplace to solve interruptions of 
production in a vast economy with hundreds and hundreds of 
thousands of employers. No government bureaucracy, however 
adequately funded, could begin to do that.
    These young Chinese workers, completely without the benefit 
of law, in any way, but with a rights-consciousness deriving 
from rights discourse are forging industrial relationships. We 
can see that in the Honda strikes in the summer of 2010.
    So Chinese workers acted and created a collective 
bargaining relationship. They forced the company to bargain, to 
throw out the stale law books and deal directly face-to-face 
with grassroots workers to forge solutions. What a novel 
solution!
    The second aspect I would like to focus on about these 
workers is that the real activists in that strike, about a 
third of the Honda workforce at this particular factory, were 
interns. Now, in 2008, China passed comprehensive labor 
legislation, not to set up an industrial relations system, but 
merely to establish some basic rights for workers and to cover 
all workers.
    Professor Gallagher has aptly described in a prior book of 
hers the ad hoc nature of Chinese labor law that made it almost 
impossible to decide who was covered and what was stipulated. 
At Honda, many of the striking workers were interns. The 
employer took the position, vetted by agencies of the Chinese 
Government, that somehow these interns could not be workers 
because they are from technical schools, although they are 
receiving no particular educational training and are not, 
indeed, acquiring any particular educational benefits. They are 
simply working on the line. Empirically, they are workers. Yet, 
because they do not fit some ontological Marxist category of 
worker, they are deemed ontologically to be students and, 
therefore, not covered by labor law.
    These student workers are a lot of the industrial 
workforce. They make up a third of this factory that struck. A 
third of the workforce of this Honda factory that struck in 
2010 were interns. That is a sizeable proportion of any 
workforce. The interns are getting less than standard wages. 
They are working right next to other Chinese workers who are 
getting better wages, and Japanese workers who are getting even 
higher wages.
    Anybody with a glancing acquaintance to human relations or 
common sense would tell you that that is a recipe for labor 
disputes, yet they are excluded.
    So I think that if we look at the broad thrust of Chinese 
labor law, it is an effort to stage Hamlet without the Prince 
of Denmark, without the union. No auditing system works alone. 
Factory inspection does not work without unions; no one system 
will ever work in that diverse Chinese economy without 
including all workers in a workable system of industrial 
dispute resolution to secure uninterrupted production.
    So I think the remedy for this is simply, as many Chinese 
propose and many Chinese recognize, to start off with what the 
workers at Honda asked for in 2010--let us elect our grassroots 
leaders.
    I would now like to move to visualize this. I have three 
pictures here today that I want to show some of the deficits of 
Chinese labor law. They are taken from video feeds, so I could 
not enlarge them too much.
    We have heard people talk about Foxconn, and this here is 
the Foxconn factory. Foxconn is a major supplier of Apple. I do 
not know if you can see here some nets, some very close, dense 
factory dorms and some netting [holds up poster]. This netting 
is Foxconn's answer, to workers so pressed by speed-up, by 
intolerable production quotas that we heard Mr. Kernaghan talk 
about, that they are diving to their death from dorm balconies.
    So instead of improving wages, hours, and working 
conditions or even talking to the workers, let us set up some 
nets.
    The next picture is from a PR extravaganza staged by the 
Foxconn company, a Taiwanese corporation, to turn its bad image 
around. When workers dive out of factory dormitories to their 
death, people tend to have a bad view of it. So Foxconn's 
answer: ``Let's put on a PR extravaganza.''
    We have had a big debate at our office whether some of the 
people in these pictures [holds up poster] are professional 
actors or actresses. The signs say ``I love Foxconn.''
    And, finally, in an era where we want to get away from the 
culture of personality, here we have the owner of Foxconn, Mr. 
Gou, and people parading around with homemade--perhaps or 
perhaps not--pictures of himself.
    Now, I bring these pictures to show the conditions and to 
show that workers need a net of protection of labor law and not 
nets to prevent suicide. If you want to equalize trade 
advantages and a global economy that works for all workers in 
every country, we have to pay attention to Chinese labor and we 
have to pay attention to the agency of Chinese workers.
    And I want to make two very brief final comments. One is 
there is a tendency in the United States to look for 
substitutes to worker voice. Just as Mr. Gou of Foxconn is 
looking for substitutes, setting up nets and PR extravaganzas, 
so too multinational employers and governments who do not want 
to face the issue of workers agency, want to put in mediation 
techniques instead. Mediation between unequals is not always a 
happy process.
    They want to put in these techniques. But, if you 
compromise and mediate a minimum wage law and the worker walks 
away with a third of the minimum, you have just lowered the 
minimum wage of any country by two-thirds. Techniques do not 
work without context.
    So they are using HR resources, corporate social 
responsibility techniques to avoid the obvious need to simply 
sit down, recognize workers, talk to them and bargain with 
them.
    Finally, Cochairman Brown asked a question which I want to 
just jump in and answer here, and that is what could Congress 
legislatively do? One contribution would be to really entrench 
the due diligence requirements for compliance with Chinese and 
international labor law standards in U.S. law and to make that 
a hard enforceable obligation that directors and corporations 
had to pay attention to.
    It worked with civil rights law. We were a segregated 
country in our workplace. The civil rights laws made employers 
pay attention and desegregate. Entrenching these in U.S. law 
and in U.S. Federal law, and not shying away from them because 
they involve conditions overseas, would go a long way.
    A second way to do it and a second element would be the 
vast purchasing power of the U.S. Government and requiring that 
supply chains be monitored and inspected, and that 
representations be made by people who subcontract in those 
supply chains.
    Thank you very much, Chairman Smith.
    [The prepared statement of Mr. Brown appears in the 
appendix.]
    Chairman Smith. On that last point, Mr. Brown, the new law 
going into effect in California on supply chains, do you 
think--and virtually every large corporation I would say will 
be swept up in that due diligence standard that they have 
established--do you have hope that these Chinese corporations 
or those multinationals that are in China, that this will lead 
to some positive outcomes?
    Mr. Brown. I think it will lead to more information, but it 
is largely a law of transparency. I think we need to go a bit 
further, Chairman Smith, if I may say so, to entrench it as an 
obligation with some financial consequences for employers that 
violate it, not to make it too onerous.
    And in this respect, I would say American lawyers in China 
are insisting that their multinational clients obey Chinese 
labor law, which is a very good thing and helps enforce labor 
standards.
    But I think insisting that all employers, who sometimes may 
not follow their lawyer's advice, comply with applicable labor 
law standards would be very important.
    Chairman Smith. Would a code of conduct--but, obviously, 
calibrated and focused on China, similar to the MacBride 
principles for Ireland and the Sullivan principles--be helpful 
in advancing worker rights?
    Ms. Lee. I am not sure it would if it is a voluntary code 
of conduct. There are two problems with a voluntary code of 
conduct. One is that it is self-enforcing, and in many cases, 
corporations, as I think we have heard some testimony here, do 
not really want to know the truth. They want to get off the 
hook. They want somebody to report to them that everything is 
fine so that they are no longer to blame for it.
    Chairman Smith. They are as good as your auditors.
    Ms. Lee. The auditors work for you and they do not want to 
give you news that is unwelcome. But I think the other problem 
is that not every company will sign up to the voluntary code of 
conduct. And so you always have the problem of the bottom 
feeders, the companies that do not have a big brand name that 
they care about. These are the folks who are subcontractors and 
buy things without putting their name on it, and they do not 
particularly care. If they get caught violating their own code 
or the labor law, they can just close down and open up the next 
day under a different name.
    Chairman Smith. Let me just ask you. Approximately 155 or 
over 155 students come to the United States and study here from 
China every year. As a matter of fact, it is up--it grew 23 
percent in one year, and that includes undergraduates and, of 
course, those who go for even higher credentials.
    Do they take back any of this? Is there any evidence that 
it gets to the workplace--maybe they are not to the point of 
forming a union, but in terms of treating people with respect. 
They go to our best business schools. Are they learning that it 
is not just making money and profits, it is also how you treat 
your workers? Is any of that being brought back?
    Mr. Brown. I co-taught a course at Rutgers in your State, 
sir, for at least 20 Chinese master students in industrial 
relations. And we played an NPR [National Public Radio] 
documentary that took China's history and included Tiananmen. 
And I watched these students watch film about Tiananmen for the 
first time in their life and listened to the discussion that 
came out after that.
    I cannot believe that it does not help and that the 
interchange helps us relate to a very complicated country of 
China and China relate to us. I cannot believe it is harmful in 
any way.
    Chairman Smith. I would not say it is harmful, but does it 
have a----
    Mr. Brown. I think it has to.
    Chairman Smith [continuing]. Has anybody ever been able to 
quantify any of it? We know that in the health professions, 
particularly in places like Africa, those who come here and 
learn public health management and bring those skills back. It 
has an enormous, almost disproportionately positive influence.
    Ms. Gallagher. If we take a longer term perspective, I 
think there have been a lot of improvements related to 
workplace conditions in China and particularly related to 
public health, because so much more research is being done in 
China on public health and workplace safety.
    But you have to take a very longer term perspective and 
look back to the very beginning of the 1990s when conditions 
were, I would argue, worse than they are today.
    But one of the reasons I think why you see both improving 
conditions and, also, worsening conditions at the same time 
even now is that these benefits are accruing to workers who 
have education and skills and are industries that have the need 
for workers with education and skills.
    When we are talking about labor-intensive manufacturing 
that really requires workers with very low skills, these are 
the areas where we do not see improvement and, in fact, in some 
cases, we see things getting worse as these factories move 
inland to poorer places in China, with lower standards, with 
lower wages, and with just--even if the government officials 
had the will, they certainly do not have the capacity to 
enforce the central laws.
    Also, at the same time, you have local governments in China 
that see industry moving to other places, either inland in 
China or to other countries, and they have, again, very little 
incentive to enforce laws that will hurt their local economy 
and that will hurt themselves professionally.
    Ms. Lee. I think that last point is really important. I 
think international exchanges are a wonderful thing and they 
have immeasurable benefits to both countries and in both 
directions.
    I had an intern from China several years ago and he was 
actually from a very well-off family, with highly placed 
parents. But I like to think that his summer at the AFL-CIO was 
a good education for him and that maybe he is the next 
generation of leader in China.
    But on the other hand, you also cannot substitute for 
change in the laws and a change in the institutions. And so 
having a few high-minded or well-intentioned individuals, I 
think, is definitely not enough if you have a competitive 
system where everybody is scraping for that last penny, and the 
accepted norm is to beat down your workers and squeeze the last 
hour or minute out of their work.
    So we need a more systematic answer, as valuable as those 
exchanges are.
    Chairman Smith. Honda decided to give in and provide 
additional wages to the Honda workers. Was that under any 
corporate guidance from its main headquarters or was it a 
China-specific decision, made inside of China by the Chinese?
    Ms. Gallagher. My understanding of what happened with the 
bargaining is that it rose to a very high level within Honda in 
China and that the major negotiations were done by the chairman 
of the joint venture, the assembly joint venture between Honda 
and its Chinese joint venture partner, although I would imagine 
that given that its entire production supply in China was shut 
down, that the Japanese--the officials in Japan for Honda would 
also have a large say in what happened.
    But, again, it really underscored--the Honda strikes 
underscored a lot of different aspects of what is happening in 
China. They underscored, in particular, the complete failure of 
the union to do anything positive during the negotiations, such 
that they had to draw in very high-level management officials, 
government officials in order to manage the strike, which is 
the mode of these large conflicts--the mode of resolution for 
these large conflicts, which is incredibly ad hoc and subject 
to a lot of abuse.
    Chairman Smith. You mentioned the conflict resolution, the 
groups that meet, stability preservation committees, you named 
it, I think, or maybe that is the name. But do they take sides? 
Do they go with the management or is there a propensity to be 
on management's side? Because the worker is, unfortunately, 
subjected to other kinds of coercion in this society, why not 
here?
    Ms. Gallagher. Well, it is because it is an ad hoc process. 
It depends on the issue at stake, it depends on the level of 
conflict and violence that has already occurred. It depends on 
the actors involved.
    Certainly, the fact that Honda is a Japanese company had 
something to do with the fact that it was so widely publicized 
in China and that the strike was allowed to go on for a long 
period of time.
    So it allows the government--this kind of resolution system 
allows the government a lot of discretion in how it chooses to 
handle those. So in some cases, it does come down on the side 
of workers. But in most cases, it comes down on the side of 
companies.
    But it allows the government a discretion that violates a 
lot of the procedural issues related to disputes.
    Mr. Brown. One major critique that has been heard here is 
the link of the union to the government. But one of the 
problems with that link is that the link is to the local 
government. You can bet employers have an outsized influence in 
local government.
    So when the union and then the labor institutions, the 
mediation and arbitration committees meet, I would bet, but I 
do not have the empirical data to back it up, but I would bet, 
as a labor lawyer, the universal rule is that the local 
government is not your friend if you are a trade union. For 
obvious reasons--unions up the costs of going in there and set 
a floor and resist the race to the bottom.
    So these many mediation projects are designed to get rid of 
these disputes. I think, at this point, the Chinese Government 
has made a bet that they can disaggregate and manipulate 
industrial unrest and avoid the need to have autonomous unions, 
and I think, over time, that this will not work.
    Chairman Smith. Professor Gallagher, you pointed out that 
the Labor Contract Law would be revised this year with a focus 
on labor subcontracting, and you gave that number of 10 to 28 
million--estimates, I should say--of workers who are 
subcontracted.
    Is there any breakout into what industries where that is 
more likely to happen? And do the people who really put 
together these policies at the National People's Congress, do 
they take inputs from the ILO, do they take it from the United 
States, do they--I mean, how do they form their view of what 
these reforms should look like?
    Ms. Gallagher. With the Labor Contract Law, even when it 
was first passed in 2007, there was a wide--there was wide 
input received from domestic actors, international actors, the 
ILO [International Labour Organization], certainly, business 
associations, both the American Chamber of Commerce, the U.S.-
China Council.
    And in the revisions, the revisions are also relatively 
public, more transparent than they had been in the past, and so 
these actors are, again, allowed to comment or to submit 
suggestions to how this law should be revised.
    The interesting aspect of labor subcontracting which would 
make it very difficult for the law to be revised successfully 
is that although we see labor subcontracting of labor-intensive 
manufacturing, we see student interns in Honda and other 
places, labor subcontracting is used very widely by state-owned 
enterprises, by government units, by hospitals, by universities 
in China.
    It has simply run amok and the government's attempt to 
revise it will really threaten some very important interests 
within the government and within the state sector itself.
    Chairman Smith. Ms. Lee, if I could ask you. Does the AFL-
CIO contemplate asking the U.S. Trade Representative to 
initiate an investigation of worker violations, worker rights 
violations as an unfair trading practice?
    Ms. Lee. Thank you for the question, Mr. Chairman. We 
actually have been contemplating it and we have been working 
with folks to update the Section 301 case that we filed several 
years ago.
    It has been a little bit slower process than we would have 
liked. We have raised this issue a lot in our dialogue with the 
U.S. Government, whether it is at the U.S. Trade 
Representative's office or the State Department or the Labor 
Department.
    But we have been frustrated by the failure of our own 
government to raise this issue in a bilateral context, in an 
effective way, and to move forward on it.
    And given that frustration, I think the next step is 
logically to press for some more concrete trade action.
    Chairman Smith. I appreciate that. Please count on me to 
support that in any way. And I appreciated you including me as 
a part of that complaint or request, whatever it might be 
called, last time.
    Do you know if it was raised, worker rights, in the most 
recent, just concluded, U.S.-China dialogue on human rights, 
commenced by Michael Posner, our Assistant Secretary for 
Democracy, Labor and Human Rights?
    Ms. Gallagher. I am not sure, but there has been a worker 
rights component and it has been fairly narrow. I think that 
there has been an attempt on the part of the U.S. Government 
not to put on the table issues that are too irritating or 
challenging to the Chinese Government, and that is how they got 
agreement to keep meeting over and over again.
    So that, for example, they do not talk about freedom of 
association. They have not really talked about collective 
bargaining. They do talk about hours and I think they certainly 
do talk about safety and health. As you mentioned, the 
memoranda of understanding from several years ago, those are 
sort of these safer areas of discussion.
    But as I said, the pivotal, the core worker right on 
freedom of association, I think, is a little bit too 
threatening to the Chinese Government. So to my knowledge, it 
has not been raised yet.
    Chairman Smith. Would any of you like to make any 
concluding remarks?
    Ms. Gallagher. Just in relation to this issue, I think in 
regard to the human rights dialogue, it is my understanding 
that they do raise--at last when I had meetings with them 
earlier, not for this most recent one, but that there was a 
discussion of collective bargaining and collective 
negotiations, maybe not directly about freedom of association.
    The Chinese Government has talked a lot about collective 
bargaining and negotiations and reviving certain practices, but 
never with the intention to allow that to occur with unions 
that have been independently established.
    So most people who study this are quite pessimistic about 
freedom of association. But, again, I would say that the U.S. 
Government should not shy away from raising that issue. I think 
what we have seen with this kind of institutional vacuum, this 
lack of capacity to solve disputes before they become strikes 
is a sign that China's current situation is not tenable over 
the long period of time, and that some kind of independent 
organizations--maybe they will not be called unions for a 
while--are necessary in order to reduce the degree of conflict 
that is currently.
    Mr. Brown. I would only like to sweep in within the embrace 
of freedom of association grassroots worker centers and 
grassroots worker rights advocacy networks that are springing 
up all over China and are being forced under the umbrella of 
the official trade union. Many people fear just for control and 
suppression. If it is important that the U.S. civil society 
attempt to keep up a discussion with these Chinese grassroots 
civil society elements that are worker voice, as well.
    Chairman Smith. I do have one final question. Do we have 
any indication that the Obama Administration has picked or 
raised individual cases of labor union activists who are 
currently incarcerated, and that means torture, by definition?
    Is it on a list that we are saying we want so-and-so to be 
released? They should not be in jail simply because they wanted 
a labor union.
    Mr. Brown. I do not think so.
    Chairman Smith. I appreciate that.
    Thank you so very much for your very detailed testimony and 
information. It certainly helps our Commission do a better job, 
and your recommendations will be very helpful going forward.
    So thank you so much. The hearing is adjourned.
    [Whereupon, at 4:34 p.m. the meeting was concluded.]
                            A P P E N D I X

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


                          Prepared Statements

                              ----------                              


                Prepared Statement of Charles Kernaghan

                             july 31, 2012

 China's Workers Stripped of Their Rights and Locked in a Race to the 
                                 Bottom

    I want to thank you for the opportunity to testify regarding worker 
rights before this important public hearing of the Congressional-
Executive Commission on China.
          i. as of 2008, phones are no longer made in america
    The reason is simple. The mean hourly wage for telecommunications 
workers in the U.S. is $16.85 an hour, which is 151/2 times higher than 
what VTech pays its phone workers in China. VTech pays just $1.09 an 
hour, which is well below subsistence level, and the workers have 
precious few if any legal rights.
    VTech is the world's largest manufacturer of cordless phones and is 
the leading supplier of corded and cordless phones in North America. 
VTech produces goods for AT&T, Motorola, Philips, Deutsche Telekom and 
Telstra in Australia. Vtech, which makes 172,800 products a day, posted 
revenues of $1.785 billion in fiscal year 2012.
    What I hope to do today is to put a human face on the workers at 
VTech in China.
    Suppose your daughter worked at VTech. She would work 12 to 15 
hours a day, from 7:30 a.m. to 7:30 or 10:30 p.m., six and seven days a 
week. She would be at the factory 70 to 85 hours a week, while working 
63 to 77 hours, including 23 to 37 hours of mandatory overtime. This 
would exceed China's legal limit on permissible overtime by 178 to 345 
percent.
    Your daughter would be forced to stand for the entire shift. Her 
feet would swell up.
    The production line never stops. Every 11.25 seconds a circuit 
board moves down the assembly line and each worker must plug in four to 
five parts. The workers have to complete one operation every 2.25 to 
2.8 seconds, producing up to 1,600 operations an hour, 17,600 
operations during the 11-hour shift and 105,000 operations a week. The 
pace is furious, mind-numbing and exhausting. Workers who fail to reach 
their production goals are forced to keep working without pay until the 
goal is met.
    Workers say they feel like they are in prison, as security guards 
patrol the lines as if they were police, sometime beating the workers. 
Workers are body-searched on the way in and out of the factory.
    Bathroom breaks are strictly monitored. According to the workers, 
the factory cafeteria food is ``awful.'' Indeed, pictures smuggled out 
of the factory show coarse yellow rice and visibly rotten potatoes 
being served.
    Eight workers are housed in each primitive dorm room. They sleep on 
narrow plywood bunk beds, often without mattresses. ``It's filthy, like 
living in a pigsty,'' workers told us. To wash, workers must fetch hot 
water in small plastic buckets to splash on themselves.
    Management hands out ``Employee Criminal Records'' to punish 
workers who make a mistake on the production line, which can lead to 29 
hours wages being docked from their pay.
    Workers are instructed to spy on one another. ``Those who report 
others' mistakes would be rewarded monetarily.''
    One young woman told us: ``Sometimes I want to die. I work like 
hell every day for such a dull life. I can't find a reason to live. 
Given that living is so tiring, seeking death might not be a silly 
thing!''
    After just one month of work, on December 27, 2009, a 20-year-old 
young man jumped to his death from his 6th floor dormitory. His 
supervisor had constantly scolded him.
    On January 20, 2010, a young woman took an overdose of sleeping 
pills, as she could no longer stand the abuse.
    Conditions are so miserable for the over 30,000 workers at VTech's 
three factories in Dongguan, that 80 percent of them try to flee VTech 
each year. To keep the workers from fleeing, management withholds one 
month's back wages, including overtime. Instead of being paid at the 
end of June, for example, VTech withholds June wages until July 31. 
Workers can leave when they want, but they will lose a full month's 
wages.
    VTech management also cheats their workers of the legal social 
security benefits due them, and in the process pockets millions of 
dollars owed the workers.
    Since there is no avenue for the workers to voice their grievances 
publicly, they write down their hatred and anger on the bathroom walls.
    The so-called All-China Federation of Trade Unions is moribund and 
does nothing to represent the workers or lead the workers to fight for 
their rights.
        ii. some good news-improvements are being made at vtech
    Most of the major customers at VTech--Philips, Motorola, Deutsche 
Telekom and Telstra in Australia--have conducted in-depth on-site 
audits over the last several weeks at VTech and have confirmed many of 
the serious violations the Institute documented.
    VTech is now responding to the audit recommendations and is working 
on its remediation plan to improve working conditions at the company's 
three plants in China. The corporate customers along with VTech are in 
agreement that concrete, positive changes must be made.
    The Sustainable Trade Initiative's Electronics Program, which is 
funded by the government of the Netherlands, along with private 
partners Philips, Hewlett-Packard and Dell, is attempting to go beyond 
traditional audits. Their goal is to build worker capacity and 
involvement so as to improve worker-management communications in 
China's factories. Their belief is that only when a worker-management 
dialogue is in place can a company work on improving labor conditions. 
Philips has asked VTech to join the Sustainable Trade Initiative.
    The United States Government and corporations should consider 
partnering with the Sustainable Trade Initiative.
iii. right now, throughout guangdong province, local chinese government 
     authorities and police have launched a witch hunt to suppress 
                     independent labor rights ngos
    Independent non-governmental labor rights organizations are being 
spied on. Local authorities are shutting down these NGOs, forcing them 
to leave, tearing up rental leases, while cutting off their water and 
electricity. After local government authorities visit the landlords, 
the NGOs find out they now have no lease and must move immediately.
    We have always been aware that the Government of China has its own 
way of operating, which is often outside the margins of international 
law. But this is an ominous development, which will only further weaken 
and disenfranchise China's workers.
 iv. a human and labour rights leader in china has requested that his 
statement be introduced at the hearings of the congressional-executive 
                          commission on china
        ``The deprivation of the freedom of association severely 
        infringes the basic freedom of the Chinese people, making the 
        working class lose its ability to bargain with employers. This 
        is beneficial for the government because they make production 
        costs low and retain strong competitiveness in the world. This 
        harms the rights of not only Chinese workers but also workers 
        around the world.
        ``We think opposing the current autocratic regime in China and 
        encouraging transformation toward democracy conform to the 
        benefits of Chinese workers and all human beings. This we call 
        upon all justice countries around the world, especially the 
        United States, to oppose the Chinese Government--a government 
        that suppresses a demand for democracy from its people. Ask the 
        Chinese Government to protect human rights; grant its people 
        freedom of association; let workers organize unions freely. In 
        the meantime, [the U.S. Government] should boycott sweatshop 
        products from China and broaden support for grassroots 
        organizations in China and American organizations that deal 
        with labor issues in China. We oppose sacrificing human rights 
        in exchange of short-term economic gains. This is not only 
        harmful for the improvements of working conditions in China but 
        also unfavorable in terms of long-term interests for these 
        countries. Also, [the U.S. Government] should pressure the 
        Chinese Government to grant Chinese workers a right to strike, 
        freedom for association and press freedom, letting Chinese 
        workers freely express their demands.''
v. only enforceable laws, backed up by sanctions, can protect workers' 
   legal rights and end the race to the bottom in the global economy
    On January 23, 2007, then-Senator Byron Dorgan of North Dakota 
along with 25 co-sponsors including Senators Sherrod Brown, Lindsey 
Graham and then-Senators Barak Obama, Joe Biden and Hillary Clinton, 
introduced the Decent Working Conditions and Fair Competition Act (S. 
367) which when passed will amend the Tariff Act of 1930 to prohibit 
the import, export or sale of sweatshop goods in the U.S.
    On April 23, 2007, Representatives Michael Michaud of Maine and 
Chris Smith of New Jersey, along with 175 co-sponsors introduced the 
companion bill (HR 1992) in the House.
    I want to especially thank both the chairman of this Commission, 
Representative Chris Smith, and co-chair, Senator Sherrod Brown, for 
your leadership and commitment to introduce the Decent Working 
Conditions and Fair Competition Act in 2007.
    Workers must have at least the same legal protections as are 
currently afforded to corporate products.
    Seventy-five percent of Americans agree, according to a Harris Poll 
in June 2006.

        ``We keep hearing now, from just about everywhere, `monitoring 
        doesn't work,' said U.N. expert John Ruggie. `Just about 
        everybody, at least off the record, will tell you that 
        monitoring of suppliers factories doesn't work because people 
        cheat.' ''
        --Women's Wear Daily, June 4, 2009

    Multinational corporations have demanded and won all sorts of laws 
in the global economy--intellectual property and copyright laws, backed 
up by sanctions--to defend their corporate trademarks and products. But 
there are no similar laws to protect the rights of the human beings who 
made the product. Indeed, corporations claim that extending protections 
similar to those currently afforded products to defend the rights of 
human beings would be an impediment to free trade! So, as things stand 
now in the global economy, the corporate trademark is protected, but 
not the rights of the worker.
    The Decent Working Conditions and Fair Competition Act is largely 
based on the Dog and Cat Protection Act of 2000, which prohibits the 
import, export or sale of dog and cat fur in the U.S. The Dog and Cat 
Protection Act was passed in response to public outcry over the fact 
that the Burlington Coat Factory jackets were being made in China with 
dog and cat fur on the collars. The bill was passed by the House by an 
overwhelming 411 votes and was approved unanimously in the Senate. 
Congress has shown their commitment to animal rights with the passage 
of the Dog and Cat Protection Act. It is time for us to let our 
Congress members know that we expect them to show equal commitment to 
human rights with the passage of the Decent Working Conditions and Fair 
Competition Act.
                  supplementary materials (see below)
    (1.) ``VTech Sweatshop in China''; AT&T, Motorola and Wal-Mart and 
others Endorse the China Model,'' Institute, June 20, 2012
    (2.) Update/Response: ``VTech is Not `A Responsible and Caring 
Employer','' Institute, July 12, 2012
    (3.) Independent Worker Rights NGO's under Attack in China, 
Institute, July 28, 2012
    (4.) ``Decent Working Conditions and Fair Competition Act'' to 
legally protect local and internationally recognized worker rights 
standards. (House Bill HR 1992; Senate Bill S.367)
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                                 ______
                                 

                     Prepared Statement of Li Qiang

                             july 31, 2012
    I appreciate the opportunity to speak before the commission today. 
My testimony is informed by 20 years of experience with advancing labor 
rights for Chinese workers, first as a worker and activist in China and 
since 2000 as director of China Labor Watch. Over the past dozen years, 
China Labor Watch has conducted a series of comprehensive assessments 
of a wide range of factories in China, relying on researchers based 
there as well as in the United States. In May 2000, the U.S. Congress 
debated giving China permanent normal trade relations (PNTR) status. I 
testified before Congress then and said that Chinese workers work like 
machines and that trade cannot be viewed simply in its own right, but 
that it is intimately linked to issues of human rights. So initiatives 
that facilitate trade need to be accompanied by efforts that advance 
worker rights. Clearly, voices like mine did not win out at that time. 
Let us hope that this hearing helps lead to the right approach.
    Today, I will cover three major issues.
    First, today, a full 11 years since China joined the WTO, labor 
conditions in Chinese factories remain unacceptably harsh, with long 
hours, low pay, and severe conditions in the norm. Here I will 
highlight the findings of our new report on 10 of Apple's suppliers in 
China.
    Second, the main response from multinational corporations to these 
severe working conditions has been the establishment of supplier 
auditing systems. These systems, however, contain serious defects, 
including what is apparently rampant corruption, thereby leading at 
best to marginal improvements in working conditions.
    Third, substantial advances in labor conditions in China are far 
more likely to occur only if two things happen: the multinational 
corporations operating there must push for appropriate improvements 
and, additionally, the Chinese government will have to take a more 
aggressive role in enforcing its own labor laws. Companies such as 
Apple have the resources and influence to assure that necessary changes 
are made. Consequently, it is imperative, to encourage these companies 
to act as responsible corporate citizens.
                        i. the labor conditions
    Over this past year the worldwide media has directed particular 
attention to the working conditions at the Apple supplier Foxconn. This 
attention, culminating in high-profile stories in major papers, has its 
basis in reports about abusive working conditions dating back to 2006 
as well as in the tragic events of 2010, when 13 workers committed 
suicide by jumping to their death out of Foxconn dormitories in China. 
My organization has just released a 135-page analysis of working 
conditions at Foxconn and nine other Apple suppliers in China. We found 
that Foxconn is hardly an exception, as deplorable working conditions 
characterize all the factories examined, with conditions often even 
worse than those uncovered at Foxconn.
    Specifically, the report found the following problems to be common 
in the ten factories:

          1. Excessive Overtime: The average overtime in most of the 
        factories was between 100 and 130 hours per month, and rising 
        to as high as 150 to 180 hours per month during peak production 
        season. These figures are well above China's legal limits.
          2. In most factories, workers generally work 11 hours every 
        day, including weekends and holidays during peak seasons. 
        Frequently they are permitted to take just one day off every 
        month, while in the peak seasons employees may go as long as 
        several months without even one day of rest. (Under China's 
        labor law, the official working hours are 8 hours/day and 36 
        hours/month for overtime hours, but the workers in the 
        factories examined now typically work as much as a shocking 
        150-180 hours overtime each month.)
          3. Low wages compel workers to accept long overtime hours. 
        Most of the factories pay a basic salary equal to the minimum 
        wage stipulated by the local law (around $200/month), a rate 
        that is so low that workers have to work long hours simply in 
        order to support a bare livelihood for themselves.
          4. Workers are exposed to a variety of dangerous working 
        conditions. Workers in all the factories reported safety 
        concerns such as metal dust and hazardous working environments.
          5. All too often, workers find the food offered in the 
        factory cafeterias unsanitary. Besides that, their housing 
        conditions are frequently overcrowded, dirty, and lacking in 
        facilities.
          6. Most factory workers are young females who are not 
        familiar with unions and their functions. Nor are they aware of 
        their legal rights under Chinese labor laws. They have little 
        ability to push for reasonable working conditions.
          7. Some factories do not pay for workers' social insurance, 
        work injury insurance, and other insurance required by law.

    The Riteng factory stands out for its particularly poor working 
conditions, even in comparison to Foxconn. On average the 20,000 Riteng 
workers are on the job nearly 12 hours a day, compared to 10 hours a 
day at the Foxconn factory. The Riteng workers get only about one day 
of rest each month. Their overtime hours dwarf those of the Foxconn 
workers, which themselves are well above the legal limit set in China. 
For Riteng workers, the average hourly wage is 8.2 RMB or $1.30, well 
below the still-meager average hourly wage of Foxconn workers of 10.2 
RMB or $1.62. A full half of Riteng workers rated its safety and health 
as `bad' compared to just 2% of workers giving this rating to the 
Foxconn factory.
Serious problem of Labor Dispatching has been overlooked by Apple
    Labor dispatch companies are employment intermediaries similar to 
temporary employment agencies in the United States. Whereas workers 
typically enter into a contractual relationship directly with their 
employer, labor dispatching introduces a third-party into the 
arrangement. Workers are contractually obligated to their dispatching 
company, and the company sends its workers to work in factories on an 
as-needed basis. Factories have no formal relationship with the 
dispatched workers and can send them back to their dispatch companies 
at any time.
    Our research revealed that Apple's Social Responsibility Reports 
have entirely neglected the fundamental problems caused by the 
prevalent use of dispatched labor in Apple's supply chain. Except for 
Foxconn in its Shenzhen operations, which transferred all dispatched 
workers to direct-hire status in 2011, all of the other factories 
investigated overused dispatched labor, including the Jabil factory in 
Shenzhen where dispatched labor made up almost 70% of the workforce. 
The use of dispatched labor creates a series of problems for workers, 
as listed below:

          1. Factories can use dispatched labor to employ people short-
        term without having to pay severance compensation.
          2. Factories can use dispatched labor to shift responsibility 
        for worker injuries onto another party.
          3. Factories can use dispatched labor to prevent workers from 
        organizing into unions or establishing democratic management 
        systems.
          4. Factories can reduce other forms of worker compensation, 
        and thus their labor costs, by hiring dispatched labor. For 
        instance, when companies do contribute to social insurance 
        programs for dispatched workers, they pay a smaller percentage 
        of the wage bill to insurance companies or sometimes do not 
        sign workers up at all. Such practices mean that employers' 
        labor costs can be reduced by 10% to 15%.
          5. Dispatched workers have no limitation on the amount of 
        overtime that they work. Some have to work more than 150 hours 
        of overtime every month, exceeding the 36 hours per month 
        allowed under Chinese law.
          6. Dispatched workers often have to pay sizable fees to the 
        dispatching agency.

    In short, our study shows that 11 years after China joined the WTO, 
labor right violations are rampant in the factories supplying one of 
the largest companies of the world. Beyond this study, the available 
evidence indicates that labor rights violations are also common in 
Chinese factories that supply companies like HP, Dell, and Samsung, 
where the conditions may be even worse than they are at Apple's 
suppliers.
                  ii. the problematic auditing system
    To improve labor rights in China, beyond exerting pressure on the 
Chinese government, it is appropriate and critical to demand change 
from the multinational corporations themselves, a method that has borne 
fruit in the past. For instance, under pressure from negative media 
coverage, Apple requested that the Fair Labor Association investigate 
Foxconn, and subsequently said it would implement the report's 
recommendations (the verdict is out on whether Apple will fulfill this 
promise).
    Nonetheless, the central mechanism currently deployed by 
multinational corporations to advance labor rights is fundamentally 
flawed. Corporations will usually audit a factory, then call for the 
factory to meet its social responsibility standard, before placing an 
order there. In China, there were more than 100,000 audits of at least 
30,000 factories last year. When labor rights organizations criticize 
the supplier factories of those multinational corporations, the 
corporations typically respond that they are addressing any deficient 
conditions through their auditing process. Yet over the past ten years 
the audits have produced little if any changes or improvements in labor 
conditions.
    There are efficacy issues in those doing the auditing, and even 
serious corruption in the execution of audits. For example, an accurate 
audit could require a factory to spend tens of thousands of dollars to 
increase its workers' wages or to buy safe equipment, in order to 
satisfy the social responsibility standard of multinational 
corporations. However, bribing an auditor to give the factory high 
marks may cost only a few thousand dollars. After the bribe yields an 
excellent report on that factory, a corporation could satisfy its 
public critics, and the Chinese factory would get its usual orders.
    China Labor Watch has itself found strong evidence of corruption in 
the auditing process, a discovery that led to positive results. After 
one of our reports about corruption in the auditing system, in 2010 an 
auditing company laid off two thirds of its auditors of social 
responsibility Department (around 300) in China. Also, the problem that 
toys manufactured in China too often contain lead in part reflects 
deficient auditing of the safety of toy factories,\1\ as those toys 
were exported to the U.S. after they passed the quality audits from the 
auditing companies.
---------------------------------------------------------------------------
    \1\ This piece of news mentioned how rampant corruption is 
undermining safety standards in mainland China's toy factories.http://
www.asianews.it/news-en/Chinese-toys-tainted-by-lead-or-made-by-child-
labour-18907.html
---------------------------------------------------------------------------
    The experience of China Labor Watch in fighting against audit 
corruption in China illustrates the problems with the audit process.
    In 2009, the International Council of Toy Industries authorized 
Intertek to audit the Hang Fat factories in Dongguan. ICTI CARE 
PROCESS, as its name suggests, is a toy industry association. More than 
75% of the exported toys produced in China have to pass its social 
responsibility audit. The international corporations will only place 
orders from factories passing their audit.
    Intertek is a large multinational corporation with more than 30,000 
employees around the world. It helps other multinational corporations 
conduct social responsibility and safety audits in industries like 
toys, electronics, garment, sporting and automobiles. It has branches 
and offices in the United States, China and Hong Kong. Intertek's 
clients include ConocoPhillips, Costco Wholesale, the Gap and many 
others.
    According to China Labor Watch's informant, the Hang Fat factory 
paid Intertek's auditor $3,100 so that that plant could pass the audit. 
We reported the bribery to Intertek and ICTI CARE PROCESS. ICTI CARE 
PROCESS rechecked the audit result and found that the factory had in 
fact fraudulently reported its working hours and salaries. ICTI CARE 
PROCESS then cancelled the certification of the factory.\2\
---------------------------------------------------------------------------
    \2\ The ICTI program is primarily for the toy industry and a 
cancelled certification precludes purchases in the toy industry, but it 
does not preclude other retailers from purchasing from the factory.
---------------------------------------------------------------------------
    The factory employed about 200 workers during the low season and 
500 workers during the peak season. ICTI CARE PROCESS's own study found 
that every worker lost $20 per month due to the defective audit of 
Intertek. If we use the number of workers in the low season, the 
monthly salary loss for the 200 workers is $4,000 and the yearly loss 
is $48,000. It cost the factory a mere $3,100 to pass the audit by 
bribing the auditor. So if the factory had not been caught it would 
have saved at least $45,000 by bribing the auditor.
    We found nine questionable audits like the Hang Fat factory audit. 
Given that we are only a small NGO that can investigate just a modest 
number of factories, we believe there are many more questionable audits 
conducted by Intertek.
    After we reported the dishonest audit result to the ICTI CARE 
PROCESS, Intertek published the identity of our informant in its 
Compliance Newsletter. He and his family subsequently received a death 
threat.
    As a famous international audit company, Intertek claims that 
integrity, transparency, and accountability are its core values. 
However, its description of the case is troublesome. Everything in the 
Newsletter was technically true, but the story given there omitted some 
key facts. It did not mention that its audit was voided by ICTI CARE 
PROCESS. Intertek also concealed the fact that its auditors violated 
the confidentiality agreement with our informant and put his life in 
danger.



     Intertek's version of the events                 The Truth

Intertek omitted that CLW reported the
 corruption case to ICTI CARE PROCESS.
                                            March 4th, 2010, CLW

Intertek omitted the salary and working
 hours fraud at the Hang Fat factory.
                                            On March 16th, ICTI CARE

In its report, Intertek published Yuan
 Chaowen's name and his relationship with
 CLW.
                                            Intertek agreed that it



    By using information selectively, Intertek drew a different picture 
of the whole story. This selective use of information for this 
company's own interest is consistent with its issuing biased and even 
blatantly false audit reports.
  iii. the responsibility of multinational corporations to take action
    Currently in China, there is no independent labor union to monitor 
labor conditions and implementation of labor laws. We hope that the 
Chinese government will change its policies in favor of advancing labor 
rights, including encouraging legal construction and the reform of the 
one, official labor union. However, we know it is very difficult to 
influence China's government directly. Therefore, to be effective, and 
reflecting the shared responsibility of the corporations operating in 
China, the best approach to advancing labor rights would be to focus on 
the multinational corporations themselves.
    The multinational corporations obtain extra profits through the use 
of low-wage labor in China; they also often squeeze the profits of 
their suppliers, which in turn leads them to squeeze the wages of 
workers. These factors help explain why those corporations may choose 
factories in China over those in other countries, where workers' rights 
are more respected, labor standards are stronger, and where there may 
be the freedom to organize independent labor unions. In other words, 
the large profits of multinational corporations reflect their 
exploitation of Chinese workers.
    At the same time, the investment from multinational corporations in 
China is a form of support to China's current political system; that 
is, the economy can grow even though China refrains from undertaking 
essential reforms in its political economy. Because Chinese workers do 
not have the rights to organize independent labor unions and have no 
channels to fight for their interests, China's government acquiesces in 
transferring workers' rewards to the extra profits of the multinational 
corporations, with the aim of attracting foreign investment.
    In addition, there is no law in the United States to restrain the 
purchasing systems of the multinational corporations, especially their 
overseas components, from violating human labor rights. The absence of 
involvement by both of the governments leads to the severe working 
conditions of the Chinese workers.
    Corporations have the responsibility to change and improve workers' 
rights; this solution should be accepted by both China's factories and 
the government. Further, if multinational corporations demand and 
advance improvements in their supplier factories in China, this may 
influence the policy-making in China's government.
    In our opinion, truly improving the working conditions in Chinese 
factories could be achieved by multinational corporations simply 
raising the prices they pay to their suppliers and demanding needed 
improvements in labor conditions in return. Multinational corporations 
have both the power and the resources to take these steps.
    Take the example of Apple, the world's leading company, which is in 
possession of enormous resources. In the first quarter of its 2012 
fiscal year, Apple had $46.3 billion in revenue and made a net profit 
of $13.1 billion, its largest profit ever and one of the largest 
quarterly profits of any American company in history. And Tim Cook, 
current CEO of Apple, personally received stock awards worth $380 
million just before the start of the quarter. Let's do some simple 
math. The $13.1 billion net profit Apple made in one single quarter is 
equal to the combined salary of 300,000 workers at Foxconn's assembly 
line over the course of eleven years. And the value of Cook's options 
alone could pay for those 300,000 workers' salaries for that extremely 
profitable quarter. Experts from the Economic Policy Institute have 
made similar calculations and arrived at similar results.\3\
---------------------------------------------------------------------------
    \3\ http://www.epi.org/blog/apples-executive-pay-profits-cash-
balance/
---------------------------------------------------------------------------
    So part of the broad answer is that companies like Apple have ample 
resources to ensure that workers at their supplier factories in China 
receive better treatment. There are also creative, simple steps 
multinational corporations can take to improve labor conditions. For 
instance, as the labor unions in China can function only in a severely 
limited way, we suggest opening worker hotlines in the supplier 
factories of multinational corporations. The hotlines could go from the 
workers to the multinational corporations and perhaps to neutral 
monitors. Such hotlines may not be able to change labor rights 
fundamentally, but if hotlines could be installed that were safe for 
the workers to use without retribution from the supplier factories, 
they could increase the transparency of the factories and potentially 
relieve some of the harsh situations. The hotlines could attend to 
every worker's complaints as the receptors on the other end could try 
to solve the workers' practical problems with some dispatch. In return, 
the establishment of the hotlines benefits the factories in terms of 
staff turnover rate. If the hotlines satisfy the workers' expectations, 
there will be smaller number of employees leaving the factory. I think 
this is a solution that both the corporation and factories could accept 
and put into practice.
    In addition, the redundant audits performed on many factories 
should be reduced, as they are not effective in monitoring the 
conditions in the factories. Other ways such as the hotlines, or 
allowing for truly independent and corruption-free audits, may be more 
reliable and more effective.
    In closing, I express my gratitude to the Committee for holding 
this important hearing. The deplorable working conditions faced by 
workers in China continue. A key `response' that is currently being 
used by the multinational corporations--the audit system is failing. 
All of us need to think more creatively, and multinational corporations 
must take much more responsibility, to ensure that labor conditions in 
China rise to reasonable levels.
                                 ______
                                 

                     Prepared Statement of Harry Wu

                             july 31, 2012

          Laogai Prisoners, the Slaves of the Communist Regime

                         i. introductory remark
    Thank you for inviting me to speak today before the Commission. 
Over these years, I have testified for many times before the congress 
about China's Laogai and its derivative abuses. But today it is the 
first time, I'm testifying at a hearing about China's worker rights. 
With the Laogai system deeply rooted into the state's economic 
structure, China's working class is different from that of the modern 
democratic countries. It includes not only ``workers'' at the ordinary 
sense, but also ``workers'' of the prison enterprises. So when we talk 
about worker rights in China, it will be definitely incomplete if we 
ignore the millions of workers in Laogai camps. I am very glad that the 
Commission clearly realized this difference and invited me to testify 
about the slave labor of China's prison enterprises. For this, I'd like 
express my special appreciation to the Commission's ongoing concern and 
insights on human rights in China.
ii. prisoners in laogai, more like state slaves than enterprise workers
    Prisoners in Laogai provide the state with an endless source of 
cheap or payless labor force, so the Laogai enterprises develop 
basically at the same pace with the economy. During the Mao's era when 
economy was sluggish and food and basic material were in urgent need, 
Laogai prisoners were forced to do works of farming, mining and 
infrastructure constructions.
    When Deng led the country into frenzy economic pursuits, 
authorities began to establish more and more industrial and commercial 
enterprises where Laogai prisoners are forced to labor solely for the 
sake of profit. Partly as an effort to remedy increasing enterprise 
deficit from the mid-1990s, and partly as a response to international 
criticism, the central government attempted to implement the policy of 
separation of prisons and enterprises since 2003. Till 2010, it is said 
the ``separation'' had basically been completed. However, according to 
our findings, the separation is more nominal than real. Prisoners all 
across the country are still toiling in the prison enterprises under 
sever working conditions with insufficient health protections or safety 
measures.
    Below I give a description of the conditions of the Laogai 
prisoners in terms of basic worker rights:
1. Health, safety and work environment
    China's communist regime first installed the Laogai system out of 
three considerations: (a) for the reform of the prisoners, (b) for the 
settlement of the problems of the prisons, and (c) for the prohibition 
of counterrevolutionaries living in leisure without doing anything.
    This is clearly stated in the decision of the Third National Public 
Security Conference in 1951. Although 60 years have passed, this 
doctrine remains strong in the mind of the communist authorities.
    Therefore the prisoners are essentially considered as state slaves 
whose labor force can be exploited while his health, safety and work 
environment can be completely ignored.
    I personally worked as a miner for many years in a Laogai coalmine 
in Shanxi. During these years I witness many accidents, injuries and 
deaths. And in a couple of occasions I almost lost my own life due to 
the poor work protection.
    During the 1990s I visited China for several times to gather 
information about the conditions in the Laogai enterprises. I found 
although the country was becoming richer, the work conditions of the 
prisoners almost remain the same. I saw workers standing nakedly in 
harmful chemical solutions; I saw miners digging in the mine without 
adequate facilities to prevent caving in and I saw juvenile prisoners 
working in magnetite dust without mask.
    I had been prohibited to go back to China over the past 15 years 
after I was deported in 1995 and the information regarding China's 
labor camps has become increasingly sensitive. However we can still 
learn something of this sort between lines of other reports. In 2005, 
an article about an illness of prisoners in Tibet was published in a 
medical journal,\1\ which indicates that hypokalemic flaccid paralysis 
is a very common illness among prisoners. In the study group, 16 of the 
patients are found to be rock miners, so the illness and high labor 
intensity are positively correlated. This case shows that right till 
this day, the Laogai prisoners' basic work rights are still denied by 
the authorities and they are treated nothing more than cattle.
---------------------------------------------------------------------------
    \1\ Xi Luo, ``Exploration of the causes of prisoners' hypokalemic 
flaccid paralysis'', Science and Technology in Tibet, 2005 (11).
---------------------------------------------------------------------------
2. Work time
    Though China's Law of Prison as well as regulations issued by the 
Department of Justice both specified the working hours, rest breaks and 
holiday entitlements for prisoners, the authorities routinely place 
priority on work quota. When there are more orders for their products, 
the authorities will make the prisoners work around the clock, and even 
force them to work seven days a week. It is learned recently that Liu 
Xianbin, a pro-democracy activist who was put into prison for the third 
time, has been forced to work 13 hours per day in Chuanzhong Prison.
    Regulations also specified the portion of time to be used for 
study.
    But when enterprise profit is taken as the most important, the 
authorities even change the time for study into time for labor.
3. Payment
    The Laogai prisoners work long hours in severe work conditions, but 
they basically have no payment. In very rare cases they may be given 
some ``payment'', but in terms of policy this is called ``symbolic 
payment'' or simply ``compensation'' or ``stipend''. Since it is 
``symbolic'', the payment may not match the value of labor that the 
prisoners have given. With the completion of enterprise-prison 
separation, it is said Laogai prisoners will get a better payment from 
the ``separated'' enterprise, but the fact will be very discouraging.
    For one thing, even if the enterprise is taken apart from the 
prison, as long as the prisoners' basic rights are not respected, no 
one will pay more for their labor while they could pay less.
4. Unemployment
    As a special kind of workers, laogai prisoners never need to worry 
about unemployment. As long as they are able to work, their labor force 
will be exploited. In fact, just decades ago, the communist regime 
practiced the measure of ``Forced Job Placement''--when prisoners 
fulfilled their sentence and are ready to get rid of the labor camp and 
endless exploitation, authorities would find some job vacancies in the 
laogai camps and arbitrarily order them to work there instead of going 
back to their old home or old job. This is not because the authorities 
concern about the inmates' employment, but because they want to keep 
these prisoners as their working cattle all their lives. Personally, I 
know many people who committed suicide after they were put into 
``Forced Job Placement'', because they were completely desperate of 
their fate and future.
    On the other hand, after the prisoners are released and return to 
society, most of them, especially the political prisoners, will face 
the problem of job hunting. Because of political discrimination and 
possible police harassment, many of the employers would not or dare not 
accept the application of former prisoners. The fact is recently 
demonstrated by Tibetan political prisoners at the international 
conference entitled ``Laogai in Tibet.''
    Above, I talked about prisoner-workers' situations in terms of 
worker rights. However, prisoner-workers are not exactly workers; they 
have some more characteristics:

1. Paying for their own imprisonment
    In modern democratic countries, prions are run and funded by the 
government. But in China, ever since the CCP took power in 1949, it has 
never spent enough money on the operation of prisons. As a result, the 
prisons have to do production or business to earn money to sustain 
themselves, and the prisoners, consequently, have to toil for their own 
imprisonment.
    From 1949 to 1989 the government's yearly spending on prison system 
has never exceeded 2 billion RMB, while the laogai enterprise earnings 
gradually rose up from zero to 10 billion RMB.2 At present the yearly 
budget for both laogai and laojiao is about 15 billion RMB, but the 
government can only allocate 30% to 60% of the total. The rest can only 
be earned by the Laogai enterprise, or most exactly eked out from the 
flesh of the prisoners.
2. Torture and other types of punishment
    For ordinary workers, salary is leverage over the quality or 
quantity of work. But for the laogai prisoners, torture and other types 
of punishment are routine ways to control product quality and quantity 
as well as obedience to production regulations.
    There are various ways to punish prisoner-workers who dare to 
violate the production regulations or who failed to meet the production 
quota.
    These include but not limited to (1) deprivation of sleep, (2) 
deduction or deprivation of food, (3) stress position, (4) beating up 
and so on.
    Liu Xianbin who is now imprisoned in Chuanzhong Prison is forced to 
work 13 hours to do ornament processing. Since he is near-sighted and 
can't work well, he is always deprived of sleep and food.
    The condition in Laojiao camps is as bad, if not worse. LRF learned 
that in Shayang Laojiao Camp, Hubei Province, various measures are 
taken to punish those who failed to fulfill the quota. So every night 
the Laojiao inmates would bring their work to the public restroom to go 
on, because they are not allowed to stay in the workshop during the 
night but they are not allowed to fail the quota.
  iii. china floods the world market with inhuman and unethical labor 
                                products
    Laogai enterprise is an indispensable part of China's economy. The 
official-recognized number of such enterprises varies from time to 
time, for example, 4671 in 1953 and 1280 in 2005, but its importance in 
China's economy remains unchanged. Today's laogai enterprises engage in 
many types of production and processing, from mining, farming, to the 
making of products as big as fire engines and as small as ladies' 
brooches.
    Under Section 307 of the Smoot Hawley Tariff Act of 1930 (19 U.S.C. 
Sec. 1307) goods ``mined, produced, or manufactured wholly or in part . 
. . by convict labor or/and forced labor . . . shall not be entitled 
entry at any of the ports of the United States, and the importation 
thereof is . . . prohibited.'' Furthermore, Section 1761 of Title 18 of 
U.S. Code makes it a criminal offense to knowingly import goods made 
with prison labor. Additionally, in 1992 the U.S. and China signed a 
Memorandum of Understanding which stated that China will ``investigate 
companies, enterprises or units suspected of violating relevant 
regulations'' and report back its findings and furnish available 
evidence to the U.S. regarding the suspected violations. Most 
importantly, the Memorandum states that China will ``arrange and 
facilitate visits'' by U.S. officials to ``respective enterprises or 
units,'' within 60 days of a request. Such agreement coincides with 
Chinese law which prohibits the export of Laogai products. But despite 
these laws and regulations, China's prison enterprises never cease 
attempting to enter U.S. market.
    Our findings indicate that the situation of laogai products in U.S 
is still serious.
1. China's various tricks to erase the marks of Laogai
    To escape from international condemnation and legal punishment, 
China's laogai enterprises tried many types of tricks to erase the 
marks of Laogai of their products. The common ones include but not 
limited to (1) using different names for the same Laogai camp(s), for 
example, Nanchang Fire Engine Factory and Nanchang Auto Factor are 
commercial names for Jiangxi Prison Enterprise Group, and the later 
combines several smaller prison enterprises; (2) reorganizing prison 
enterprises, for example, Shandong Lineng Group Co. Ltd is a 
combination of several well-known laogai enterprises in Shandong 
Province, and this kind of one name for multiple prisons enterprises 
has the function to cover the nature of Laogai for each individual 
enterprise; (3) engaging mainly in ``processing'' rather than 
``manufacturing'', for example, in recent years many laogai enterprises 
shift their business from production to processing. There may be other 
reasons for this change, but the most evident reason is to get rid of 
the hints of Laogai for a certain type of products. The Laogai 
enterprises only do a part of the whole processing, so their names will 
not be listed as processors or manufacturers.
2. Findings in D&B databases
    In 2008, LRF researchers explored the two databases of Dun & 
Bradstreet (``D&B''): Duns Worldbase (Lexis-Nexis) and Duns Records 
Plus (Westlaw),\3\ and found China's Laogai products have found many 
ways to enter U.S. market.
---------------------------------------------------------------------------
    \3\ LRF, Laogai forced labor camps listed in Dun and Bradstreet 
databases, June 19, 2008.
---------------------------------------------------------------------------
    We found in the databases that a total of 314 separate entries were 
Laogai related, which represent 256 different laogai camps, almost 25% 
of the total known camps as of 2006. The 314 entries cover laogai 
enterprises in 28 of 31 provincial level divisions (including 
provinces, municipalities, and autonomous regions).
    The findings indicate that U.S. business and business services do 
not have the adequate awareness of the threat of China's Laogai 
products.
    It's true that many Laogai camps have different business names but 
in the B&D databases, 65 of the 314 entries directly contain the word 
``Prison'', such as ``Sichuan Qiaowo Prison Machinery Factory'', or 
more directly ``Shandong Prison'' and ``Sichuan Deyang Prison''. 
Therefore D&B have ample reason not to list these enterprises in their 
databases.
                     iv. conclusion and suggestions
    1. China's prisoner-workers in the laogai enterprise are a special 
kind of workers who are vulnerable to worker rights abuses. Therefore 
special attention should be paid to this group of people when we talk 
about China's worker rights and more so when we talk about China's 
Laogai or judicial system;
    2. Although U.S. Congress had passed a resolution to condemn 
China's laogai system, there are still more to be done to give enough 
pressure to China's authorities to consider abolishing the Laogai 
system;
    3. Although there are U.S. laws and regulations, as well as 
memorandum signed between U.S. and China to ban the Laogai products, 
the products never ceases its infiltration into U.S. markets. Therefore 
more solid measures, including drafting of new regulations and 
strengthening of the law enforcement, should be taken to keep the 
Laogai products away from our market.
    4. To promote the public awareness of China's Laogai and Laogai 
products, so that they would have the right choice to buy products 
which are made in an ethical manner rather than products which are low 
in price.
                                 ______
                                 

                    Prepared Statement of Thea M. Lee

                             july 31, 2012
    Mr. Chairman, Mr. Co-Chairman, distinguished members of the 
Commission, thank you for the opportunity to speak to you today on 
behalf of the twelve million working men and women of the AFL-CIO on 
this very important topic.
    The U.S. trade relationship with China is enormously imbalanced and 
problematic. In 2011, the United States ran a goods trade deficit with 
China of $295 billion--up from $273 billion the previous year. This is 
the largest bilateral trade deficit between any two countries in the 
history of the world, and it is long past time for the U.S. government 
to rebalance this trade relationship, including by addressing several 
key sources of unfair and illegal competitive advantage.
    As this commission has documented thoroughly, the Chinese 
government has violated its international obligations with respect to 
currency manipulation, export subsidies, and intellectual property 
rights, among other things, contributing to the loss of millions of 
American jobs, mainly in the manufacturing sector.
    However, there is an additional issue that does not receive 
adequate attention, from our own government or from the media, and that 
is the subject of today's hearing: the ongoing and systematic 
repression of internationally recognized workers' rights in China. This 
involves both labor laws that deny Chinese workers fundamental 
freedoms, including most notably freedom of association, and the 
Chinese government's egregious failure to enforce its own laws in a 
number of crucial areas--including maximum hours, minimum wage, child 
labor, forced labor, and occupational safety and health. For the 
American labor movement (and for unions globally), addressing the 
Chinese government's massive violations of human rights and workers' 
rights is a top priority.
    This is both a moral and an economic issue, impacting the daily 
lives and well-being of Chinese workers, the quality and composition of 
American jobs and the health of the U.S. economy, as well as trade and 
investment flows for many developing countries.
    We would like to see our own government, both the Administration 
and the Congress, put protecting workers' rights at the center of the 
U.S. and Chinese governments' dialogue--not as an afterthought behind 
other trade and foreign policy concerns. Protecting workers' rights is 
an essential cornerstone of any democracy, and without democratic 
freedoms, it is impossible to imagine Chinese workers and citizens 
building a healthy, robust, sustainable, responsible future. 
Independent and democratic unions in China, together with more 
consistent and aggressive enforcement of Chinese labor laws, would 
rebalance the economy in a way that most economists agree is long 
overdue--towards building a strong middle class and strengthening 
domestic consumption and away from over-reliance on export-led growth 
and a weak, disenfranchised and politically unstable work force.
                     violations of workers' rights
    The Chinese government's systematic and sometimes brutal repression 
of fundamental workers' rights is a key contributor to the unfair 
advantage Chinese exports enjoy in the U.S. market and in third-country 
markets. Chinese workers' most basic rights are routinely repressed, 
and they do not enjoy the political freedom to criticize, let alone 
change, their government.
    Chinese workers do not enjoy freedom of association or the right to 
organize. According to the State Department's 2011 Human Rights Report, 
``workers are not free to organize or join unions of their own 
choosing. Independent unions are illegal, and the right to strike is 
not protected in law.'' The single labor organization in China, the 
All-China Federation of Trade Unions (ACFTU), is legally subordinate to 
the government and the Chinese Communist Party (CCP), not accountable 
to its members. It is chaired by a member of the Politburo.
    While Chinese labor law now allows for election of some trade union 
officers, the 2011 State Department Human Rights Report says that:

        Most factory-level officers were appointed by ACFTU-affiliated 
        unions, often in coordination with employers, and were drawn 
        largely from the ranks of management. Direct election by 
        workers of union leaders continued to be rare, occurred only at 
        the enterprise level, and was subject to supervision by higher 
        levels of the union or CCP. In enterprises where direct 
        election of union officers took place, regional ACFTU offices 
        and local CCP authorities retained control over the selection 
        and approval of candidates.

    The Chinese government also fails to enforce its own laws with 
respect to minimum wages, maximum hours, child labor, forced labor and 
health and safety rules, as recent high-profile media accounts have 
amply demonstrated--much to the chagrin of some marquee U.S. brand 
names.
    Migrant workers face particularly harsh and precarious conditions, 
often facing deportation if they complain to authorities about abuses 
by employers. Child labor is becoming more common, as labor shortages 
increase turnover in some regions. Forced labor remains a significant, 
if difficult to measure, problem.
    Chinese government policies amount to a deliberate and artificial 
suppression of wages below what a freely bargained wage would be, and 
even below what would be efficient in the Chinese context. This 
exploitation artificially lowers the price of Chinese exports in the 
U.S. market--harming American workers and American businesses competing 
with Chinese exports domestically or in third markets. It also harms 
workers and businesses around the world, in both industrialized and 
developing countries.
    These abuses allow producers in China, including many multinational 
and U.S. corporations, to operate in an environment free of independent 
unions, to pay illegally low wages, and to profit from the widespread 
violation of workers' basic human rights.
    The Chinese government's poor enforcement record is not simply a 
result of a lack of resources, but rather reflects a conscious economic 
strategy chosen by the Chinese government, silently supported by 
multinational corporations, and ignored by the U.S. government. 
Voluntary corporate codes of conduct are structurally incapable of 
remedying this problem and wildly inadequate to the scale of the 
problem.
    As we have seen, in the wake of the FoxConn scandal that revealed 
worker suicides, unacceptably long hours, unsafe working conditions, 
and low pay--even with top corporate attention to the problem, remedies 
are slow and incomplete. One company, no matter how well-intentioned 
and high-profile, simply cannot fix a problem that is systemic to the 
economy.
    The Chinese government has made an implicit bargain with 
multinational corporations: they bring much-needed jobs to China, and 
agree to export the bulk of their output and to transfer technology 
where possible. In exchange they enjoy access to a large and relatively 
inexpensive workforce with no independent union representation and 
little effective protection under the law. Consumer and environmental 
protections are also enforced erratically, contributing to artificially 
low prices and long-term human costs, both in China and elsewhere.
    On the face of it, the current situation in China may appear to be 
extremely favorable to the corporations operating there, as well as to 
the leadership of the Chinese Communist Party, which has successfully 
achieved extraordinarily rapid aggregate economic growth over several 
decades without significant challenges to its political dominance. Many 
argue as well that workers in China have benefited from the rapid 
economic growth, job creation, and market access achieved by the 
current economic and political model.
    However, in many ways, China's economic model is showing signs of 
stress--even for those often considered its chief beneficiaries--and I 
believe it is very much in the interest of the U.S. government to press 
for improvement in China's worker rights sooner rather than later.
    For the Chinese government, widespread worker unrest and regional 
labor shortages are signs that as the country grows and develops, 
workers will naturally demand more voice, better wages and working 
conditions, and more freedom. These demands will not be satisfied for 
long by cosmetic changes or rhetorical sops. And in the international 
arena, including at the G-20 meetings, the Chinese government will come 
under increasing pressure to reduce ``external imbalances,'' that is to 
say, to reduce its current account surplus. Allowing workers more 
economic and political power is the surest way to boost domestic 
consumption in a sustainable way.
    For multinational corporations, producing in China is not a bargain 
if their international reputation is tarnished by bad publicity around 
abuse of workers. Many companies reflexively resist union organizing or 
labor law changes that would facilitate the formation of unions. The 
irony, however, is that allowing workers the freedom to form their own 
unions, without interference from the government or management, might 
actually be the only way for companies to produce in China without the 
constant and justified fear that unsavory production conditions are 
occurring and could be revealed. Thousands of corporate monitors who 
jet in and out of a factory cannot possibly replace a union on the 
ground, made up of workers, with democratically elected leadership.
    And Chinese workers deserve to have their internationally 
recognized human rights respected. They deserve the right to form their 
own organizations at their workplaces--free of interference from their 
government or employer, free to set their own priorities at the 
bargaining table, free to demand consistent enforcement of labor laws 
from their government.
    American workers are not ambivalent on this matter. We want to see 
the rights and dignity of our Chinese brothers and sisters respected. 
We want to see American corporations held accountable for their actions 
in China, as well as in the United States. We want our own government 
to fight hard to protect our jobs and our rights--including by 
insisting that one of our largest trade partners live up to its 
international obligations with respect to worker rights, among others. 
And we want to see China fulfill its promise as a great nation, but one 
that achieves its success through hard work and ingenuity, not by 
repressing the voice, the rights, and the democratic aspirations of its 
own citizens.
                              time to act
    The AFL-CIO calls on the Obama administration to raise the profile 
of workers' rights in its bilateral dialogues with the Chinese 
government; to insist on achieving concrete progress on the full range 
of workers' rights issues, including freedom of association; and to 
keep open the option of using every tool available, including a self-
initiated Section 301 workers' rights case, to pressure the Chinese 
government to act in a timely way. Congress can provide welcome and 
needed pressure to move forward, including by supporting a 301 
petition, as has been done in the past.
    We simply cannot afford more years of inaction and empty promises. 
We cannot afford another year of watching working conditions in China 
worsen, as good jobs continue to leave the United States.
    The AFL-CIO remains committed to fighting for America's working 
families and America's manufacturing industries.
    Thank you for having me here today and thank you for the important 
work you do. I look forward to your questions.
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Prepared Statement of Christopher Smith, a U.S. Representative From New 
     Jersey; Chairman, Congressional-Executive Commission on China

                             july 31, 2012
    Welcome to our distinguished witnesses to this hearing on the 
important topic of the appalling state of working conditions and worker 
rights in China--a significant human rights abuse that requires greater 
examination, analysis and bolder action. Worker rights are 
systematically violated and are among the many human rights abuses 
committed by Chinese government officials at all levels. Today, the 
Commission hopes to continue to draw attention to these critical issues 
in order to push the Chinese government to reform and respond to the 
legitimate concerns of its' own citizens all of whom are entitled to 
well-established, universally recognized labor rights.
    As a member of the World Trade Organization, China has experienced 
tremendous economic growth and integration into the global economy, but 
as this Commission's most recent Annual Report documents, China 
continues to violate the basic human rights of its own people and 
seriously undermines the rule of law. Workers in China are still not 
guaranteed, either by law or in practice, fundamental worker rights in 
accordance with international standards. Despite legislative 
developments that purport to ensure some labor protections in China in 
recent years, abuse and exploitation of Chinese workers remain 
widespread. Conditions in Chinese factories continue to be incredibly 
harsh. Workers are routinely exposed to a variety of dangerous working 
conditions that threaten their health and safety. Low wages, long hours 
and excessive overtime remain the norm.
    Chinese workers have few if any options to seek redress and voice 
grievances under these harsh conditions. If workers step out of line 
they may be fired without payment of back wages. Workers have no 
collective bargaining power to negotiate for higher wages and a better 
working environment. The Chinese government continues to prevent 
workers from exercising their right to freedom of association and 
strictly forbids the formation of independent unions. Attempts to 
organize are met with dismissal, harassment, torture, punishment, and 
incarceration. Workers are ``represented'' by a government-controlled 
union, the All-China Federation of Trade Unions--a phony, fake and 
fraudulent ``workers organization.'' The recent crackdown on authentic 
labor non-governmental organizations in Shenzhen in 2012 and the 
mysterious death of labor activist and 1989 Tiananmen Square 
demonstrator Li Wangyang in June are but a few examples of Chinese 
authorities continued attempts to crush labor activism.
    While touting itself as an economic superpower, China continues to 
violate worker rights with impunity. With no institutions capable of 
protecting their interests, Chinese workers are nevertheless taking 
matters into their own hands. In the past few years, there has been a 
dramatic rise in the number of labor-related protests in China--an 
estimated 30,000 labor related protests in 2009 alone and there are no 
signs that this positive trend has abated. The increase in labor-
related demonstrations not only represents a glaring lack of 
institutional capacity for fair labor negotiation, but also reflects 
the rise of a new generation of workers in China who are better-
educated, tech savvy, rights-conscious, and more willing to protest and 
endure the consequences.
    The deplorable state of workers' rights in the PRC not only means 
that Chinese women, men and children in the work force are exploited 
and put at risk, but also means that U.S. workers are severely hurt, as 
well, by profoundly unfair advantages that go to those corporations who 
benefit from China's heinous labor practices. As good corporate 
citizens, multinational corporations, such as Apple and Microsoft, must 
ensure that international labor standards are being implemented in 
their factories and supply chains in China. In the glaring absence of 
Chinese government efforts to bring its' labor laws and enforcement up 
to International Labour Organization (ILO) standard--multinational 
companies can and must play a unique role in advancing labor rights and 
industry standards through their operations in China.

                                 
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