Political Economist

October 13, 2006

China Drafts Law to Boost Unions and End Abuse

By DAVID BARBOZA from New York Times

SHANGHAI, Oct. 12 — China is planning to adopt a new law that seeks to crack down on sweatshops and protect workers’ rights by giving labor unions real power for the first time since it introduced market forces in the 1980’s.

The move, which underscores the government’s growing concern about the widening income gap and threats of social unrest, is setting off a battle with American and other foreign corporations that have lobbied against it by hinting that they may build fewer factories here.

The proposed rules are being considered after the Chinese Communist Party endorsed a new doctrine that will put greater emphasis on tackling the severe side effects of the country’s remarkable growth.

Whether the foreign corporations will follow through on their warnings is unclear because of the many advantages of being in China — even with restrictions and higher costs that may stem from the new law. It could go into effect as early as next May.

It would apply to all companies in China, but its emphasis is on foreign-owned companies and the suppliers to those companies.

The conflict with the foreign corporations is significant partly because it comes at a time when labor, energy and land costs are rising in this country, all indications that doing business in China is likely to get much more expensive in the coming years.

But it is not clear how effectively such a new labor law would be carried out through this vast land because local officials have tended to ignore directives from the central government or seek ways around them.

China’s economy has become one of the most robust in the world since the emphasis on free markets in the 80’s encouraged millions of young workers to labor for low wages at companies that made cheap exports. As a result, foreign investment has poured into China.

Some of the world’s big companies have expressed concern that the new rules would revive some aspects of socialism and borrow too heavily from labor laws in union-friendly countries like France and Germany.

The Chinese government proposal, for example, would make it more difficult to lay off workers, a condition that some companies contend would be so onerous that they might slow their investments in China.

“This is really two steps backward after three steps forward,” said Kenneth Tung, Asia-Pacific director of legal affairs at the Goodyear Tire and Rubber Company in Hong Kong and a legal adviser to the American Chamber of Commerce here.

The proposed law is being debated after Wal-Mart Stores, the world’s biggest retailer, was forced to accept unions in its Chinese outlets.

State-controlled unions here have not wielded much power in the past, but after years of reports of worker abuse, the government seems determined to give its union new powers to negotiate worker contracts, safety protection and workplace ground rules.

Hoping to head off some of the rules, representatives of some American companies are waging an intense lobbying campaign to persuade the Chinese government to revise or abandon the proposed law.

The skirmish has pitted the American Chamber of Commerce — which represents corporations including Dell, Ford, General Electric, Microsoft and Nike — against labor activists and the All-China Federation of Trade Unions, the Communist Party’s official union organization.

The workers’ advocates say that the proposed labor rules — and more important, enforcement powers — are long overdue, and they accuse the American businesses of favoring a system that has led to widespread labor abuse.

On Friday, Global Labor Strategies, a group that supports labor rights policies, is expected to release a report in New York and Boston denouncing American corporations for opposing legislation that would give Chinese workers stronger rights.

“You have big corporations opposing basically modest reforms,” said Tim Costello, an official of the group and a longtime labor union advocate. “This flies in the face of the idea that globalization and corporations will raise standards around the world.”

China’s Labor Ministry declined to comment Thursday, saying the law is still in the drafting stages. Several American corporations also declined to comment on the case, saying it was a delicate matter and referring calls to the American Chamber of Commerce.

But Andreas Lauffs, a Hong Kong-based lawyer who runs the China employment-law practice at the international law firm of Baker & McKenzie, said some American companies considered the proposed rules too costly and restrictive.

Mr. Lauffs said the new rules would give unions collective-bargaining power and control over certain factory rules, and they would also make it difficult to fire employees for poor performance.

“You could hire a sales manager, give him a quota and he doesn’t sell anything, and you couldn’t get rid of him,” Mr. Lauffs said. “It’s not easy to get rid of someone now, but under these rules it would be impossible.”

It is not clear what the final law will look like, and only an updated draft is expected soon. But specialists say the trend suggests that there may be new challenges ahead for foreign companies doing business in this country.

Under China’s “iron rice bowl” system of the 1950’s and 60’s, all workers were protected by the government or by state-owned companies, which often supplied housing and local health coverage.

But by the 1980’s, when the old Maoist model had given way to economic restructuring and the beginning of an emphasis on market forces, China began eliminating many of those protections — giving rise to mass layoffs, unemployment, huge gaps in income and pervasive labor abuse.

The worst off have been migrant workers, most of them exiles from the poorest provinces who travel far from home to live in cramped company dormitories while working long hours under poor conditions.

Migrant workers in virtually every city complain about abuses like having their pay withheld or being forced to work without a contract.

“I don’t know about the labor law,” said Zhang Yin, an 18-year-old migrant who washes dishes in Shanghai. “During the three months I’ve been here, my boss has delayed the salary payment twice. I want to quit.”

Having grown increasingly concerned about the nation’s widening income gap and fearing social unrest, officials in Beijing now seem determined to improve worker protection. In recent years, more and more factory workers have gone to court or taken to the streets to protest poor working conditions and overdue pay.

“The government is concerned because social turmoil can happen at any moment,” says Liu Cheng, a professor of law at Shanghai Normal University and an adviser to the authorities on drafting the proposed law. “The government stresses social stability, so it needs to solve existing problems in the society.”

In a surprisingly democratic move, China asked for public comment on the draft law last spring and received more than 190,000 responses, mostly from labor activists. The American Chamber of Commerce sent in a lengthy response with objections to the proposals. The European Chamber of Commerce also responded.

The law would impose heavy fines on companies that do not comply. And the state-controlled union — the only legal union in China — would gain greater power through new collective-bargaining rights or pursuing worker grievances and establishing work rules. One provision in the proposed law reads, “Labor unions or employee representatives have the right, following bargaining conducted on an equal basis, to execute with employers collective contracts on such matters as labor compensation, working hours, rest, leave, work safety and hygiene, insurance, benefits, etc.”

If approved and strictly enforced, specialists say the new laws would strikingly alter the country’s vast labor market and significantly push up the wages of everyday workers.

“If you really abide by the Chinese labor laws,” said Anita Chan, an expert on labor issues in this country and a visiting fellow at the Australian National University, “migrant-worker wages would go up by 50 percent or more.”

Until now, though, existing Chinese labor laws have gone largely unenforced, which has further complicated the debate here. Opponents of the proposed law argue that enforcing existing labor laws would be enough to solve the country’s nagging problems. Advocates respond that adopting new laws would set the stage for stricter enforcement.

Even lawyers working for multinational corporations seem to agree that there is an epidemic of cheating.

Mr. Liu, the Shanghai lawyer who advised the government on the draft proposal, says many companies avoid existing laws by using employment agencies to hire workers. He says the new law will do more to protect workers from such abuse by holding companies accountable.

“The principle is not to raise the labor standard dramatically,” he said, “but to raise the cost of violating the law. The current labor 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.”

October 14, 2006

U.S. Hits Obstacle in Getting a Vote on North Korea

By WARREN HOGE from New York Times

UNITED NATIONS, Oct. 13 — The United States pressed for a Saturday vote on a Security Council resolution that would impose sanctions on North Korea for its reported nuclear test, but questions from China and Russia on Friday evening cast the timing and possibly the content of the document into doubt.

The terms of the resolution had already been softened three times this week to meet objections from China and Russia, and earlier Friday there appeared to be agreement on holding a vote Saturday morning.

John R. Bolton, the American ambassador to the United Nations, said the new problems appeared “technical” rather than “substantial,” but said they would require another conference of Japan and the five permanent Council members, Britain, China, France, Russia and the United States, Saturday before the full 15-member panel met later in the day.

While the wording of the resolution was still being worked out, American intelligence officials said on Friday evening that they had found radioactive material in air samples taken over the region, providing more evidence that North Korea did indeed detonate a nuclear bomb.

The new draft resolution dropped or softened several provisions to placate China and Russia. It eliminated explicit mention of military enforcement of the sanctions; placed more limits on the kinds of cargo that could be inspected going in and out of North Korea; and dropped a blanket embargo on conventional weapons.

Mr. Bolton indicated that one area of dispute remained the methods and legalities of how to inspect cargo. The new draft resolution limits the weapons ban to large-size arms, military systems and unconventional weapons.

The measure, drafted by the United States, still requires all countries to prevent the sale or transfer of material related to North Korea’s nuclear, ballistic missile and unconventional weapons programs, and maintains a ban on travel by persons associated with those programs.

It also bars North Korea from exporting such weapons, a provision aimed at the international concern over the possibility of unconventional arms from North Korea ending up with terrorist groups or rogue states.

Kenzo Oshima, the Japanese ambassador to the United Nations and president of the Security Council, announced the Council would gather at noon, but could not say whether there would be a vote.

“An overwhelming majority of the Council members want to vote as soon as possible,” Mr. Bolton said. “They still think it is important to send a swift and strong signal, and I’m confident we’re going to be able to do that.”

Wang Guangya, the Chinese ambassador, said, “It all depends on the final text, because we are not at the final text yet.”

The United States and Japan, the driving forces behind the resolution, had earlier thought they had surmounted the Chinese and Russian objections to the resolution when they submitted a revision Thursday night that softened some of the earlier provisions.

Mr. Bolton said the United States was “very satisfied” with the document as it stood Friday morning and was prepared to vote for it immediately.

But Mr. Wang, while asserting his country was happy with the progress that had been made, said his country was still studying the text before officially pronouncing on it. “With progress we are always satisfied, but if we work harder, we might make more progress,” he said.

Vitaly I. Churkin, the Russian ambassador, said, “I think we are on the right track, but we are not there yet.”

In Washington, officials, apparently confident of the imminent passage of the measure, announced that Secretary of State Condoleezza Rice would travel to Asia next week to discuss how to implement the resolution, as well as to discuss other efforts to deter North Korean proliferation of a nuclear bomb or bomb-making materials. Sean McCormack, the State Department spokesman, said Ms. Rice would travel to Tokyo, Seoul and Beijing.

The trip, he said, is “an opportunity for her in the region to reaffirm and talk about the strength of our existing alliances there, and also to have a bit more of a wider conversation with others in the region about the current situation, about the security situation, and also to talk broadly about nonproliferation efforts.”

Senior State Department officials portrayed the United Nations momentum toward a resolution as evidence of a united, multilateral front agreeing to punish North Korea.

“So the first issue we need to do is to make clear that the sense of outrage and condemnation by the international community to have a resolution in the Security Council, which will not only be a resolution condemning North Korea, but actually a resolution with some teeth to it,” said Christopher Hill, the assistant secretary of state for east Asian and Pacific affairs.

“North Korea needs to understand that this is indeed a very, very costly decision that will leave North Korea far worse off and far more isolated than ever before,” said Mr. Hill, speaking at a conference in Washington. “We need to give that message very clearly and make sure that North Korea cannot find any differences in our views. So I think so far, so good.”

The resolution condemns the test on Oct. 9 as a “flagrant disregard” of Security Council warnings, orders it not to conduct nuclear or missile tests, and urges the North to return to six-nation talks with South Korea, China, Japan, Russia and the United States.

It freezes funds overseas of people or businesses connected to the unconventional weapons programs and bans the sale of luxury goods to North Korea.

“I think the North Korean population has been losing height and weight over the years,” Mr. Bolton said. “Maybe this will be a little diet for Kim Jong-il,” he said, referring to the North Korean dictator.

Under the resolution, member states are to report to the Security Council within 30 days on steps they have taken to comply with the its demands.

The resolution still invokes Chapter VII of the United Nations Charter, which makes mandatory economic and diplomatic sanctions. China and Russia customarily resist the Chapter VII provision on the grounds that it sets a pretext for the use of military force, as many countries believe it did in Iraq.

But in a formulation used in July to obtain a unanimous vote on the resolution condemning the North Korean missile launches, the text added a reference to Article 41 of the chapter, which permits only “means not involving the use of military force.”

In another change designed to gain Chinese and Russian support, the resolution now says the inspection process will be “cooperative” with local authorities. Both countries were sensitive to such interdiction being done near their coasts and borders, but Mr. Bolton said that though the inspections covered air, sea and land shipments, he expected most actions would be performed in port.

As for the agreement struck to limit the arms embargo to specific weapons like missiles, tanks, attack helicopters, artillery systems, warships and combat aircraft, Mr. Bolton said, “That would place under embargo the most dangerous, most sophisticated, most lethal weapons, so that’s a substantial step forward, and, as I say, we’re happy to accept that as a compromise.”

For those who are interested in the history of the US labor party, the following article will be of help.

Labor Party Tenth Anniversary

Mark Dudzic, National Organizer

June 2006 exert from www.thelaborparty.org

Ten years ago this month, 1,400 delegates came together in Cleveland, Ohio to found the Labor Party. Fed up with four years of the Clinton administration and inspired by significant changes in the labor movement, we made history by calling for a decisive break with the two parties of the corporations. When we left Cleveland, many of us felt that finally the tide had shifted and working people were poised to regain the offensive.

Of course we all know today that 1996 was not the start of labor's great revival. And no one can claim that the Labor Party has achieved its full promise. But we all understand that an expansive project such as ours could not and cannot thrive while the labor movement is in broad retreat.

While there are many reasons for this retreat, the labor movement as a whole has yet to confront the consequences of its lock-step relationship with the Democratic Party. After the debacle of the 2004 elections, for a brief moment, the labor movement began to debate its future. The sheer volume as well as the passionate nature of the proposals and counter-proposals was encouraging. In this spirit, the Labor Party challenged the movement to embrace a new vision of politics. We do not have an effective labor party today, we asserted, because the labor movement has yet to take up the task of building one.

Unfortunately those debates only paid lip service to the issue of political independence. We now have two major labor federations whose most radical "new" political ideas range from endorsing the occasional Republican to cross-endorsing the same old party hacks on some minor party label. And still the fact remains: without a real party of our own, working people continue to be at the mercy of the two corporate parties.

As we reflect on the events of the past ten years, we have much to be proud of. We've understood that you can't just wish a party such as ours into existence; it must develop within a web of working class institutions and an expansive movement. We've stood by the position that electoral politics must be conducted from a position of strength and not out of desperation. And we've been a firm voice against the never-ending schemes to repackage the Democratic Party and its corporate agenda with some fake progressive window dressing.

We can also be proud of the depth of commitment and support of our core members and affiliate unions. Our activists and organizers have little interest in preserving the Labor Party as a nostalgic museum piece. Rather, we are all committed to building the kind of power that will allow working people to confront the corporations that rule our world.

With those principles in mind, and with the support of key labor and community leaders (including the state AFL-CIO and the Charleston local of the International Longshore Association) last December the Labor Party embarked on an exciting new project in South Carolina. Today, we are well on our way to certifying the first state Labor Party with the right to run candidates on our own ballot line.

We took up this challenge convinced that the Labor Party's message would resonate with the people of South Carolina. And now, six months later, after thousands of one-on-one conversations in union halls, public gatherings, people's homes and at the numerous flea markets where working people gather to buy life's necessities, we are proud to report that 15,000 South Carolinians have affirmed that it's time for another choice at the ballot box.

We are beginning to lay the plans for our statewide founding convention, aiming to create a state party which, from the very start, represents the working class in all its diversity. Consistent with the national party's values and principles, we expect this convention to plot a course towards running strategic electoral campaigns. As our Electoral Policy puts it, our candidates "will be accountable to the party membership and required to follow the positions outlined in the party platform." This is what distinguishes our effort from all other political organizing projects that claim to speak for working people.

We are confident that South Carolina will be the first state where we will field serious candidates who can promote a new vision of working class politics. That we can do so in a state like South Carolina shows what can happen when the labor movement and other activists make a serious commitment to political independence. This effort could well be the first concrete step out of the political wilderness.

It is that potential that spurred the Labor Party's Interim National Council to commit to our supporters in the state that we would raise the funds necessary to firmly establish a viable South Carolina Labor Party. This is not an insurmountable task. If we could raise as much as the labor movement will waste on re-electing just one of the many pro-CAFTA, pro-war Democratic senators in "safe" seats, we could transform the politics of South Carolina.

To that end, hundreds of individuals and numerous affiliate unions generously answered our call for funds. Committed Labor Party activists have opened their homes and union halls for fundraisers in Philadelphia, Chicago, Detroit, New Haven, San Francisco, Edison, Amherst, New York and Washington – with others scheduled for this Summer and Fall. In May, the International Longshore and Warehouse Union (ILWU) endorsed and pledged financial support to our South Carolina campaign. For more information on how you can help, click here.

When our founding brother Tony Mazzocchi traveled the country in the early 1990s to promote the idea of a labor party, he called it an investment in our future. It still is. If anything, the events of the past ten years reinforce a hundred-fold the need for a labor party.

Tony also had an abiding faith in the unpredictability of powerful social movements. No one, he told us, could have predicted the rise of the CIO out of the depths of the Great Depression. One year ago, no one was predicting that millions of immigrant workers would take to the streets this spring. And ten years ago no one would have predicted that the first statewide Labor Party electoral effort would be in South Carolina.

Social progress might be unpredictable. But, as long as we live in a world which ignores the needs and aspirations of the vast majority of people who work for a living, it is inevitable.

'Banker' who lends to the poor wins Nobel Peace Prize

By Philippe Naughton

Comment: a truly inspiring choice

 The inspirational economist Muhammad Yunus was awarded the Nobel Peace Prize today for helping lift millions of his fellow Bangladeshis from poverty through a pioneering scheme that lends tiny amounts of money to the very poorest of borrowers.

Professor Yunus shares the prize, and the cheque for 10 million Swedish Kronor (£730,000) that accompanies it, with the Grameen Bank, which he founded after the Bangladeshi famine of 1974 and whose micro-credit model has since been copied in dozens of countries around the world.

The bank, which is owned almost entirely by its own borrowers, has lent out some £2.9 billion to more than 6 million Bangladeshis, 96 per cent of them women. Even though its borrowers are not asked for collateral, more than 98 per cent of the money is repaid.

The Norwegian Nobel Committee, which awards the Peace Prize, cited the economist and his bank for their efforts in helping to "create economic and social development from below".

It added: "Lasting peace can not be achieved unless large population groups find ways in which to break out of poverty. Micro-credit is one such means. Development from below also serves to advance democracy and human rights.

"Muhammad Yunus has shown himself to be a leader who has managed to translate visions into practical action for the benefit of millions of people, not only in Bangladesh, but also in many other countries.

"Loans to poor people without any financial security had appeared to be an impossible idea. From modest beginnings three decades ago, Yunus has, first and foremost through Grameen Bank, developed micro-credit into an ever more important instrument in the struggle against poverty. Grameen Bank has been a source of ideas and models for the many institutions in the field of micro-credit that have sprung up around the world.

"Every single individual on earth has both the potential and the right to live a decent life. Across cultures and civilizations, Yunus and Grameen Bank have shown that even the poorest of the poor can work to bring about their own development."

Muhammad Yunus was borning in Chittagong in 1940 and studied economics at Dhaka University before taking his PHD at Vanderbilt University in Tennessee, where he went as a Fulbright scholar.

He returned to Bangladesh to become an economics professor at Chittagong University, where he first experimented with micro-credit after the 1974 famine.

The first loan he made came from his own pocket when he $27 to a group of women who made bamboo furniture in a village near Chittagong. That allowed the women - who borrowed money at usurious rates to buy the bamboo - to break out of a cycle of debt and create a profitable business that could support their families.

The Nobel Committtee particularly praised them for having focused on female borrowers, which was also a pioneering concept.

"Micro-credit has proved to be an important liberating force in societies where women in particular have to struggle against repressive social and economic conditions," it said.

"Economic growth and political democracy can not achieve their full potential unless the female half of humanity participates on an equal footing with the male."

The citation concluded: "Yunus's long-term vision is to eliminate poverty in the world. That vision can not be realised by means of micro-credit alone. But Muhammad Yunus and Grameen Bank have shown that, in the continuing efforts to achieve it, micro-credit must play a major part."

The Nobel Peace Prize was first awarded in 1901. It was won last year by the International Atomic Energy Agency and its Egyptian head, Mohammed ElBaradei.