[Congressional Record (Bound Edition), Volume 150 (2004), Part 2]
[Extensions of Remarks]
[Pages 1580-1581]
[From the U.S. Government Publishing Office, www.gpo.gov]




                 DO WE REALLY WANT A WAL-MART ECONOMY?

                                 ______
                                 

                           HON. DAVID R. OBEY

                              of wisconsin

                    in the house of representatives

                       Tuesday, February 10, 2004

  Mr. OBEY. Mr. Speaker, I am inserting in the Record today an article 
which appeared in the Washington Post on Sunday, February 8, 2004. The 
article is about the price that is paid by Chinese workers for Wal-
Mart's low prices. But, in fact, the article has far broader 
implications for American workers.
  The article makes clear that low prices offered by Wal-Mart are built 
on a foundation of injustice for Chinese workers. But more importantly, 
for American workers the article demonstrates how the race to the 
bottom for workers wages and benefits occurs in this country. By 
implication, it illustrates that if today Wal-Mart and companies like 
it produce lower wages by squeezing their own workers wages and 
benefits, that creates pressure on competitors to do the same thing.
  Every Member of Congress and every American ought to ask whether 
America really wants to follow the Wal-Mart economic model.

        [From the Washington Post Foreign Service, Feb. 8, 2004]

             Chinese Workers Pay for Wal-Mart's Low Prices

                (By Peter S. Goodman and Philip P. Pan)

       Shenzhen, China.--Inside the factory, amid clattering 
     machinery and clouds of sawdust, men without earplugs or 
     protective goggles feed wood into screaming electric saws, 
     making cabinets for stereo speakers. Women hunch over 
     worktables, many hands bandaged and few covered by gloves, 
     pressing transistors into circuit boards.
       Most of the 2,100 workers here are poor migrants from the 
     countryside who have come to this industrial hub in southern 
     China for jobs that pay about $120 a month. A sign on the 
     wall reminds them of their expendability in a nation with 
     hundreds of millions of surplus workers: ``If you don't work 
     hard today, tomorrow you'll have to try hard to look for a 
     job.''
       The calculations driving production here at Shenzhen Baoan 
     Fenda Industrial Co. are no different from those governing 
     global capitalism in general--make more for less--but it is 
     applied with particular vigor on this shop floor. Sixty 
     percent of the stereos coming off the line are for one 
     customer: Wal-Mart Stores Inc., whose mastery at squeezing 
     savings from its supply chain made it the world's largest 
     company.
       ``The profit is really small,'' said Surely Huang, a 
     factory engineer, speaking of the 350,000 stereos that Fenda 
     agreed in March to supply to the retailer for $30 to $40 
     each. Huang said they sell for $50 in the United States. ``We 
     have to constantly cut costs to satisfy Wal-Mart.''
       Yet this factory and thousands of others along China's east 
     coast have decided, with China's leaders, that the deal is 
     worth the price. Wal-Mart provides access to vastly more 
     store shelves than they could ever reach by themselves, a way 
     to build a brand from Fort Worth to Frankfurt. Meeting Wal-
     Mart's strict requirements could improve the factory's 
     efficiency and make it easier to land contracts from other 
     major retailers.
       As capital scours the globe for cheaper and more malleable 
     workers, and as poor countries seek multinational companies 
     to provide jobs, lift production and open export markets, 
     Wal-Mart and China have forged themselves into the ultimate 
     joint venture, their symbiosis influencing the terms of labor 
     and consumption the world over.
       With sales of more than $245 billion a year, Wal-Mart is 
     the largest retailer in the United States, still the ultimate 
     consumer market. China is the most populous country, with 1.3 
     billion people, most still poor enough to willingly move 
     hundreds of miles from home for jobs that would be shunned by 
     anyone with better prospects. The Communist Party government 
     has become perhaps the world's greatest facilitator of 
     capitalist production, beckoning multinational giants with 
     tax-free zones and harsh punishment for anyone with designs 
     on organizing a labor movement.
       More than 80 percent of the 6,000 factories in Wal-Mart's 
     worldwide database of suppliers are in China. Wal-Mart 
     estimates it spent $15 billion on Chinese-made products last 
     year, accounting for nearly one-eighth of all Chinese exports 
     to the United States.

[[Page 1581]]

     If the company that Sam Walton built with his ``Made in 
     America'' ad campaign were itself a separate nation, it would 
     rank as China's fifth-largest export market, ahead of Germany 
     and Britain.
       Back in its home market, Wal-Mart's vast appetite for 
     Chinese imports has placed it at the center of a sharp debate 
     over whether the influx of low-cost products from China is 
     good for Americans.
       Domestic manufacturers, labor groups and some politicians 
     point to China's record trade surplus with the United States, 
     estimated to have totaled $120 billion last year, and accuse 
     Beijing of manipulating its currency, condoning the 
     exploitation of its workers and competing unfairly, resulting 
     in the loss of U.S. manufacturing jobs.
       But Chinese officials counter that nearly two-thirds of the 
     country's exports are shipped from factories wholly or 
     jointly owned by foreign investors, with Wal-Mart often cited 
     as the prime example, supplying Americans with a steady flow 
     of low-cost, high-quality goods.
       With its near-religious devotion to the pursuit of 
     ``everyday low prices,'' Wal-Mart illustrates why U.S.-based 
     multinationals with operations here have not joined in the 
     chorus for protectionism.
       ``For the benefit of the consumer, we should buy 
     merchandise where we get the best value,'' said Andrew Tsuei, 
     managing director of Wal-Mart's global procurement center in 
     Shenzhen.
       Joe Hatfield, president of Wal-Mart's Asia operations, 
     noted that many of the goods his company buys in China--toys, 
     furniture, textiles and holiday ornaments--have mostly not 
     been made in the United States for years. The Bush 
     administration has pressed China to increase the value of its 
     currency, which some argue makes China's goods unfairly cheap 
     on world markets. Hatfield rolled his eyes.
       ``That would be a travesty to do to the consumer in the 
     United States,'' he said. ``You do that and the cost of 
     living is going to go up.''
       For Wal-Mart and other multinational companies doing 
     business in China, a stable currency, political peace and a 
     compliant workforce are nearly as important as low costs.
       ``There might be places in other parts of the world where 
     you can buy cheaper, but can you get [the product] on the 
     ship?'' Tsuei said. ``If we have to look at a country that's 
     not politically stable, you might not get your order on time. 
     If you deal in a country where the currency fluctuates, 
     everyday there is a lot of risk. China happens to have the 
     right mix.''
       Labor activists in China and abroad say that mix includes 
     the ruling party's ban on independent trade unions--workers 
     may join only the party-run union--as well as courts and 
     regulatory agencies controlled by local party officials who 
     are often willing to overlook labor violations to appease 
     businesses that can be milked for taxes, fees and bribes.
       The activists argue that as Wal-Mart pits suppliers against 
     one another and squeezes them for the lowest price, the 
     workers suffer.
       ``Wal-Mart pressures the factory to cut its price, and the 
     factory responds with longer hours or lower pay,'' said a 
     Chinese labor official, who declined to be named for fear of 
     punishment. ``And the workers have no options.''
       In the city of Dongguan in southern Guangdong province, 
     where Wal-Mart suppliers are concentrated, a 27-year-old 
     worker who gave her name as Miss Qin complained that she can 
     rarely afford meat with her $75-per-month wages at Kaida Toy 
     Co. ``Every day we eat vegetables, mostly we eat 
     vegetables,'' she said, leaning over a plate of fried carrots 
     in a dingy restaurant.
       Qin helps make plastic toy trains for Wal-Mart, but says 
     she cannot afford to buy toys for her 9-year-old son. ``In 
     four years, they haven't increased the salary,'' she said.
       Kong Xianghong, the No. 2 official for the party-run union 
     in Guangdong province, acknowledged that low wages, long 
     hours and poor conditions are common in factories that supply 
     Wal-Mart and other U.S.-based corporations. ``It's better 
     than nothing,'' he said. ``Labor protections, working 
     conditions and wages are related to a country's level of 
     economic development. Of course, we want better labor 
     protections, but we can't afford it. We need the jobs. We 
     need to guarantee people can eat.''
       Still, Kong said, the party-controlled union has been 
     frustrated that Wal-Mart has refused for three years to allow 
     it to set up branches in the 31 Wal-Mart stores in China--
     even though he has assured the company that the union 
     wouldn't help workers struggle for better pay. Wal-Mart has 
     also fought efforts to unionize its U.S. stores.
       Wal-Mart's China headquarters is a monument to its 
     frugality--a low building covered in white tile. The linoleum 
     conference table is pockmarked with gaps where the plywood 
     shows through. Tea is served in plastic cups. In Hatfield's 
     office, where he presides over Wal-Mart's Asia operations, 
     the rusty window frame is open, the sound of car horns 
     washing in from the street.
       Wal-Mart portrays itself as a force for good in China. The 
     company says it enforces labor standards for its suppliers 
     and insists that they comply with Chinese law.
       ``We look at safety. We look at health, and this comes with 
     a cost. We ensure people get paid above minimum wage. They 
     have to have fire extinguishers, fire exits,'' Tsuei said. 
     ``There are people out there who cannot have those things and 
     offer a lower price. We do not do business with those 
     people.''
       Wal-Mart employs 100 auditors who annually inspect every 
     supplier's factory. Last year, the company suspended deals 
     with about 400 suppliers, primarily for exceeding limits on 
     overtime, Tsuei said. Another 72 factories were blacklisted 
     permanently last year, he said, almost all for employing 
     children under China's legal working age of 16.
       But Wal-Mart does not conduct regular inspections of 
     smaller factories that sell goods to the company through 
     middlemen. Nor does it inspect all its suppliers' 
     subcontractors or the Chinese manufacturing operations of 
     U.S. suppliers such as Mattel Inc. and Dell Inc.
       ``The inspection system is not effective,'' said Li Qiang, 
     a labor organizer who has been in contact with workers at 
     more than a dozen factories that supply Wal-Mart, and who 
     worked in one himself before leaving China three years ago. 
     ``The factories are usually notified in advance, and they 
     often prepare by cleaning up, creating fake time sheets and 
     briefing workers on what to say.''
       Li said these factories often require employees to work as 
     many as 80 hours per week during the busy season for $75 to 
     $110 per month, violating Chinese labor laws. If Wal-Mart 
     really wanted to monitor conditions among its suppliers, Li 
     said, it could do so with surprise visits, longer inspections 
     and independent auditors. ``But if they did that, prices 
     would definitely go up,'' he said.
       Wal-Mart is such a big player in China that it does not 
     have to go looking for suppliers; the suppliers come to them, 
     jamming a reception area at the procurement center.
       Yu Xiaoma of Guangzhou Kangaroo Leathers Co., which makes 
     handbags and wallets for Wal-Mart and other multinationals, 
     said: ``You can't make much money from Wal-Mart. They demand 
     the lowest, lowest price.''
       Amy Gu, vice manager for exports for Goodbaby Corp., which 
     makes baby strollers near Shanghai, said the company 
     sometimes takes orders to supply Wal-Mart at or below cost 
     through a partnership with a Canadian distributor, Dorel 
     Industries Inc. ``Dorel will tell us, 'Well, Wal-Mart has 
     given us this price, we need a factory cost of this much,' `` 
     Gu said. ``And we have to find a way to deliver it.''
       Wal-Mart says such arrangements benefit both sides. 
     Hatfield said the company has made distribution more 
     efficient and fair by cutting out middlemen and resisting 
     corruption. In a country where transportation remains 
     unreliable, WalMart's distribution network has given 
     manufacturers access to customers around the country and the 
     world.
       He touted the case of a Guangdong factory that began 
     supplying Wal-Mart stores in Shenzhen with a drink made of 
     milk and egg yolk, delivering 25,000 units the first month. 
     It proved popular. By September, Wal-Mart was shipping 1 
     million units a month across southern China.
       ``They can just drop it at our distribution center and we 
     take care of the rest,'' Hatfield said. ``Now it's a national 
     brand.''
       Yet those who run the factory that produces the drink, 
     Weijiasi Food & Beverage Co., say they haven't yet shared in 
     the success.
       ``In the beginning, we made money,'' said a manager reached 
     by telephone, who gave his name as Mr. Li.
       ``But when Wal-Mart started to launch nationwide 
     distribution, they pressured us for a special price at below 
     our cost. Now, we're losing money on every box, while Wal-
     Mart is making more money.''

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