China is now finalizing a new “Labor Contract Law” to protect workers in the global economy’s “biggest factory floor,” but the proposal is hitting a wall of opposition from transnational corporations who are threatening to move their operations to other parts of Asia. Since China “sets the bar” for working conditions in the world economy, the outcome of this debate will have a significant impact on international workplace health and safety.

Since the re-establishment of capitalism in China 25 years ago, the government has slowly promulgated a series of laws to protect — on paper — the rights of workers in its exploding economy. These laws, enacted in a ten-year period starting in 1994, include the Labor Law, the Trade Union Law, the Occupational Diseases Act, and the Safe Production Act. The new Labor Contract Law is designed to establish a minimum set of regulations between individual workers — including the 200 million vulnerable and super-exploited migrant workers — and the country’s domestic and foreign employers.

During China’s ten-year run of ten-percent annual growth, workers have had to endure low wages, very long hours, and employers who simply refuse to sign any contract, who withhold their pay for weeks or months, who deny them severance pay and charge them “training expenses.” Violations of workplace health and safety laws also have been rampant throughout all economic sectors, including foreign-invested enterprises.

Labor reforms

The 23-page Labor Contract Law, if finally promulgated this spring, has 65 articles that would:

  • apply of a set of minimum contract rights, even if an employer refuses to sign a worker’s contract;
  • end virtually unlimited “probationary periods” with a standard of no more than six-months probation;
  • convert all “temporary” workers to permanent status after one year;
  • provide severance pay for workers whose contracts are not renewed;
  • end the practice of charging workers for on-the-job training;
  • implement layoffs by seniority; and
  • establish that workplace rules, including health and safety, should be negotiated with a union or “employee representatives.”

Replacing a “paper tiger”

A government lawyer told theNew York Timeslast fall “the principle is not to raise the labor standard dramatically, but to raise the cost of violating the law. The current law is a paper tiger and is a disadvantage to those who obey it. If you don’t obey the law, you won’t be punished.”

Nonetheless, since April 2006, transnational corporations in China have raised a howl of protest. The law has been opposed by the American Chamber of Commerce in Shanghai (representing more than 1,300 corporations, including 150 Fortune 500 companies), the U.S.-China Business Council (representing 250 U.S. companies), and the European Union Chamber of Commerce (with 860 member companies).

Common threat

The American Chamber has even threatened that the law “would negatively impact the PRC’s (People’s Republic of China) competitiveness and appeal as a destination for foreign investment,” and “reduce employment opportunities for PRC workers.” This kind of economic blackmail has long been practiced in the U.S. with corporate threats to move jobs first to the non-union U.S. South, then to Mexico and Central America, later to China, and now to some even lower-wage, low-regulation country in Asia.

Last fall, 27 members of Congress wrote to President Bush, including California Congresswoman Lynn Woolsey, who stated, “We are appalled that the American Chamber of Commerce in China and some of America’s most prestigious, brand-name corporations are leading efforts inside China to weaken, if not block altogether, significant worker rights and protection provisions in the proposed Chinese labor law. This shameful lobbying campaign is totally inconsistent with our country’s long-standing commitment to promote respect for fundamental workers rights in law and practice everywhere. It is challenging enough for hard-working Americans to compete in the new global economy without having U.S. corporate leaders seeking to play them off against the least-protected and lowest-wage workers in the world.”

Moreover, the U.S.-supported Organization for Economic Cooperation and Development (OECD) has long-standing “Guidelines for Multinational Enterprises” that call on multinational employers to “observe standards of employment and industrial relations not less favourable than those observed by comparable employers in the host country.”

Moment of truth

So a moment of truth has arrived for transnational corporations in the debate over the Chinese law. Promoters of corporate globalization have repeatedly claimed that they are “benevolent giants” raising labor standards and generating a “rising tide that raises all ships.”

But the corporate intervention against China’s proposed law calls the bluff of multinationals that have roamed the world during the past 25 years looking for the most compliant governments and most vulnerable workers. If all the pretty promises made in corporate codes of conduct and glossy corporate social responsibility reports were true, then this kind of lobbying would not be happening. Instead there would be an “upward harmonization” of regulations and practices establishing a higher “level playing field” in China.

But, in fact, there has been no ebb of the steady flow of reports on terrible factory conditions in China, in both domestic and foreign-owned plants, documenting widespread violations of wage and hour, worker treatment, and health and safety laws. Recent reports by independent monitoring organizations have shown that ten years worth of corporate codes of conduct and CSR departments have produced only marginal changes in actual factory conditions.

Grassroots revolts

On the ground in China, the government reported last year that there were 87,000 “mass incidents” involving protests of 100 or more people — that averages 238 “incidents” a day, involving a total of more than four million people. Rising social inequality, environmental and occupational health issues, and abuse of workers are the largest source of these grassroots revolts.

Simple passage of the Labor Contract Laws is no guarantee, of course, that it will be enforced any more than are current workplace safety regulations. But workers with a legal contract and recognized rights are in a much stronger position to demand implementation of all workplace regulations, including the Occupational Disease and Safe Production Acts. What happens in Chinese factories sets the pace in workplaces around the world, including in the United States.

Obviously, more than just the Labor Contract Law is needed — there still are no rights to organize independent unions, to bargain collectively or to strike — but this proposal is an important step along the way. In the end, an informed, empowered and active workforce able to speak and act in its own defense is the only real guarantee of meaningful regulatory enforcement. The only ones who have a permanent, unmovable commitment to safe and healthy workplaces in China are the workers themselves.

For this reason, everyone seeking safer workplaces in China should support the passage and enforcement of the Labor Contract Law, and demand that the transnational corporations drop their lobbying campaign to kill the proposal and actually implement the promises of their “corporate good citizen” public relations campaigns.

SIDEBAR: Further reading

“Labor Rights in China;” Tim Costello, Brendan Smith and Jeremy Brecher; International Relations Center, Foreign Policy in Focus, December 21, 2006;

“Secrets, Lies and Sweatshops; How Chinese suppliers hide the truth from U.S. companies;” Dexter Roberts and Pete Engardio; Business Week, November 27, 2006.

“The ETI code of labour practice: Do workers really benefit?”; Stephanie Barrientos and Sally Smith; Institute of Development Studies, University of Sussex (UK), November 2006;

“Getting smarter at auditing; Tackling the growing crisis in ethical trade auditing;” Ethical Trade Initiative; November 2006;

“Falling Through The Floor; Migrant Women Workers’ Quest for Decent Work in Dongguan, China;” China Labour Bulletin, CLB Research Series, No. 2, September 2006;

“Looking for a Quick Fix: How weak social auditing is keeping workers in sweatshops;” Clean Clothes Campaign; November 2005;