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Fall/Winter 2000

Why Labor made the right decision
by Mark Levinson and Thea Lee

The campaign against Permanent Normal Trade Relations (PNTR) for China was a principled fight for labor rights and environmental protections in the global economy and a natural outgrowth of the labor movement's commitment to work for global fairness. This broad-based campaign was led by the AFL-CIO and its affiliated unions but also supported by environmental organizations like the Sierra Club and Friends of the Earth and by religious organizations like the U.S. Catholic Conference and the Southern Baptist Convention. The campaign was motivated by several factors: a rejection of the World Trade Organization's one-sided rules that protect corporate rights, but not human rights; moral outrage at the brutal repression of independent trade unions and political dissent by the Chinese government; and concern about the economic impact on workers (American workers, Chinese workers, all workers), of trying to survive in a global economy characterized by lopsided rules and rapacious corporations.

The United States is not only China's most important trading partner but also the only country willing to tolerate a massively imbalanced trade relationship. In 1999, the United States imported $82 billion worth of goods from China and exported only $13 billion worth, for a ratio of more than six to one-by far the most asymmetrical trade relationship the United States has with any major trading partner. Major U.S. companies, ranging from Wal-Mart to General Motors to Boeing, have shifted production from the United States to China, where they profit from employing a workforce that cannot form independent unions, cannot vote its government out of office, and is not protected even by Chinese labor laws, which are routinely flouted.

According to China labor expert Anita Chan, despite increased foreign investment in China, labor standards in China have gotten worse. In the state sector, workers are losing their jobs, so labor standards are almost as bad as with foreign-funded or private sector factories in inland provinces. As for foreign-funded factories, exploitation and abuses did not diminish in the 1990s; if anything, they have gotten worse because of the Asian economic crisis. Citing deplorable conditions either in Special Economic Zones or on the outskirts of large cities, the editors of China Labor Bulletin in Hong Kong have warned that for the Chinese working class the situation looks grim. That is why most Chinese dissidents who are free to speak supported the campaign against PNTR. Wei Jingsheng, for example, argued that giving China PNTR would send the message to Chinese government officials that they could do whatever they wanted, however they wanted. Han Dongfang, who was jailed for his role in forming the Autonomous Workers' Union, said, "PNTR will encourage foreign investors to keep exploiting Chinese workers without any pressure. . . . It is only when Chinese workers can organize unions on the factory level . . . that China should get PNTR." Given this situation, the congressional vote on granting PNTR to China became an opportunity for the labor movement and its progressive allies to send a strong signal to the U.S. government and the business community that the status quo was unacceptable, and that continued access to the U.S. consumer market would be conditioned on adherence to international labor rights and environmental standards-not just corporate-friendly investment rules and intellectual property rights protection.

Repercussions of China's New Trading Status
China's entry into the WTO and the terms of the bilateral U.S.-China trade relationship have important repercussions outside the United States and China as well. Other developing countries will find themselves more directly in competition with China. They will also find it harder to compete on high-road terms, rather than labor-sweating ones, now that China has been granted unfettered access to the U.S. market and freedom from sanctions against human rights and workers' rights violations.

China's accession to the WTO and Congress' vote on PNTR were extremely important to the business community and to supporters of a corporate-friendly trade and investment regime, and corporations spent tens of millions of dollars to make sure China's PNTR passed. Businesses can now move production to China and not worry about facing possible trade actions for their abuses of human rights, since WTO rules have no minimum standards for human or workers' rights. Passing PNTR also demonstrated that business had regained momentum on trade issues-despite the defeat of Fast Track, the Seattle protests, the scuttling of the Multilateral Agreement on Investment, and polls showing that well over 70 percent of the U.S. public favors linking trade to workers' rights and environmental protections.

The case that the president and his Republican supporters made for China's PNTR was strikingly similar to that used to sell the North American Free Trade Agreement. Just as with NAFTA, PNTR supporters argued that passing PNTR would boost U.S. exports to China, because of cuts in tariffs and other trade barriers. Both NAFTA and PNTR supporters also argued that increased trade would improve labor rights and environmental conditions. But as with NAFTA, the most important part of the agreement provides for the opening up of China to further U.S. investment. And just as with NAFTA, multinational corporations will use their new protections to invest in China to run away from regulations and weaken labor unions. As the NAFTA experience has shown, Mexico is far more important as a high-productivity, low-wage export platform than as a market for U.S.-produced goods. While U.S. shipments to Mexico have more than doubled since NAFTA passed, more than 60 percent of these are parts that stay in Mexico just long enough to be assembled into televisions, computers, and automobiles that are then sold in the United States. The small pre-NAFTA U.S. trade surplus with Mexico has ballooned into a deficit of almost $23 billion. And what about the promised labor and environmental reforms in Mexico? Employment in the maquiladoras has more than doubled to 1.2 million workers, but there are still no independent unions. This repression of labor rights has contributed to the 17 percent decline in real Mexican wages since 1993, depressing the purchasing power of Mexican workers and, ironically, the market for U.S. exports. China is likely to face similar trends of growing inequality as it opens its economy to foreign trade and investment.1

The PNTR campaign involved much debate about whether PNTR would actually help workers in China. Caterpillar's William Lane argued that American companies would promote political freedom, the rule of law, and respect for human rights and that granting PNTR would further promote those values.

However, the U.S. State Department's human rights report on China concluded that the Chinese government's poor human rights record had deteriorated markedly throughout the year, as the government intensified efforts to suppress dissent, particularly organized dissent-despite a rapidly growing trade and investment relationship. In fact, American companies have not proven to be a force for progressive change in China. China's rulers regard American companies not as agents of democracy but simply as tools for preservation of their power. The increased foreign investment and earnings that result from PNTR will sustain one of the world's more repressive regimes. American business leaders know this all too well. What is surprising is how their self-serving rhetoric has convinced so many who should know better.

An interesting anecdote: In 1999, three of the more enlightened U.S. business leaders-Robert Haas of Levi Strauss, Bruce Klatsky of Phillips-Van Heusen and Paul Fireman of Reebok-already under pressure for producing in sweatshops, wrote China's president, Jiang Zemin, to request an urgent meeting. The CEOs warned Jiang that they were facing tough questions about staying in China. They offered to work together to improve labor rights. After a year of phone calls and meetings with Chinese diplomats, the CEOs finally got a letter from China's ambassador in Washington. They summarized his response as, "Jiang is busy for the rest of his life. Mind your own business." If China spurns these three powerful companies-ones that, together, generate $500 million in annual exports and tens of thousands of jobs- what does that say about the ability of U. S. companies to have any progressive effect inside China? In reality, American companies may be effecting negative changes. For example, a white paper distributed this year by the American Chamber of Commerce to Chinese government officials advised the Chinese government to cut the high labor costs in certain coastal areas because these costs had already discouraged some potential investors.

And while there is much talk about how a new middle class in China will be a force for democratization, there is precious little evidence of such change. In fact, Margaret Pearson, (the author of China's New Business Elite: The Political Consequences of Economic Reform) has argued that China's new business elite neither constitutes a political force independent of the Chinese state nor acts as an effective force for democratization. On the contrary, the new elite is politically controlled and guided by state officials. In the wake of the WTO meeting in Seattle, a global dialogue has begun over how to incorporate enforceable workers' rights into WTO rules. Multinational corporations and Third World governments are opposing these efforts, while almost all independent unions around the world are supporting them. WTO supporters argue that the demonstrations in Seattle and the campaign against PNTR were really about denying opportunity to Third World workers. This claim is as wrong as it is pernicious. The two major critics of the system-workers in industrialized countries and workers in developing countries-must not allow themselves to be pitted against one another, and anyone else serious about developing an alternative to the WTO must avoid being party to such efforts.

The AFL-CIO has committed itself to a campaign for global fairness. The goal is to create rules for the international economy that empower workers, protect the environment and consumers, and make the global economy work for the many, not just the few. This ambitious internationalist project is based on an understanding that it is in the self-interest of American workers to redesign international economic institutions to benefit workers in all countries. The effort to change the WTO will not be easy. Allowing China to join the WTO and passing PNTR have made it even more difficult.

Notes
1. John Pomfret, "China's Poor Fear Cost of Free Trade," Washington Post, September 24, 2000.
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