Look For the Union Label

The blossoming labor movement in China, which in September claimed the scalp of the world’s biggest retailer, is a direct result of government concern about rising worker unrest that has sparked hundreds of disturbances a day across the country.

Surprising just about everybody including the All-China Federation of Trade Unions, which pulled it off, Wal-Mart in September signed an agreement to allow workplace union branches at 22 Wal-Mart supercenters in China, despite the fact that the retailer had pulled out of markets in South Korea and Germany because of the pressure to unionize.

The labor federation is hardly an independent union. It is regarded as a lapdog of the Communist Party. And in fact, according to an American labor lawyer who does work in China, it was the party that prodded the union into its confrontation with Wal-Mart. And, he says, it was a reluctant confrontation. Not only is there an inbred caution against confrontation on the part of the federation, there are wider fears of a rising yuan and slowing exports as the US economy begins to flag.

“People say the ACFTU has turned on a dime, but don’t count on it,” the lawyer said.

“I think nothing happens, that the ACFTU doesn’t start the engine until the party authorizes it.”

According to a China scholar who prefers not to be named, most of the impetus stems from President Hu Jintao himself, starting with his May 16 speech to the Fortune Global Forum in Beijing, when he said the government “must put the people first, making the fundamental interests of the broadest masses of people our point of departure and endeavoring to satisfy their growing material and cultural needs to pursue the comprehensive development of man. We must focus on economic development as our central task, making development our top priority and facilitating all-round progress in economic, political and cultural aspects and in the building of a harmonious society.”

The words “the building of a harmonious society” have become as much Hu’s mantra as the slogan “three represents” was Jiang Zemin’s. Hu is seeking to put his own stamp on the party, maintaining the appearance of prosperity and labor tranquility in the run-up to the party conference late next year. There, as he has been doing over recent weeks with the breakup and arrest of members of what has been called the Shanghai Gang – the clique of cadres left behind by Jiang Zemin he will seek to consolidate his power, replacing additional Politburo members left over from Jiang’s reign with his own people and laying the ground for his continuing influence after his second term ends in 2012.

With the Party split into at least two major factions if not more, Hu needs to rally support for his policies, ideas and people. Part of that comes down to showing he has a grip on the country, partly through nationalism such as standing up to foreign investors like Wal-Mart, which is an easy target, and partly by providing the propaganda department with plenty of material while seeming to defend workers' rights in the name of building harmony..

Certainly, today much of China is anything but harmonious. As David Fullbrook points out in a companion article, there were more than 74,000 cases of unrest involving at least 100 people ranging from protests to outright riots reported officially in 2004, rising to 87,000 in 2005 despite China’s feverishly growing economy. These official figures translate to 238 demonstrations a day on average in 2005, up from 158 on an average day in 2003.

Although most end peacefully, labor unrest is a real and growing problem. In the decaying state-owned enterprises, or SOEs, worker rights were guaranteed from the day Mao Zedong set them up.

“Under Mao, workers were the leading classes, highly respected. A worker could simply walk into the director’s office and demand his rights,” says the China scholar. “Remember, in Mao’s time, workers and peasants were the masters of society.”

That began to change dramatically as the SOEs crashed to earth and workers were left high and dry in the tens of millions. The companies that began to replace them had no particular time for worker rights, and few companies have been less careful about worker rights than the Taiwanese and Hong Kong-based firms that flooded into China in the wake of the opening to the west of the 1980s.

“Labor disputes have become very common these days, particularly in the foreign-invested companies,” the China scholar says. “The result is riots, demonstrations. But because these are considered labor disputes, the police can’t just step in unless there is a full-scale riot.”

Consequently, he says, the government set out to co-opt the workers through its tame labor federation, which was reluctant to take on the task. For nearly a decade, labor leaders set yearly quotas to establish union branches in foreign-invested enterprises. When the foreign companies resisted, the union locals folded, at least partly because of a fear that they would scare off foreign investment.

As an indication of how unlikely it is that the labor federation would act on its own, the American labor lawyer says, in 2004 an international conference on corporate social responsibility was set up at the highest levels of the Ministry of Labor and the Chinese Academy of Social Sciences, only to be cancelled abruptly. International labor leaders already in town when the conference was cancelled set out to meet their local labor counterparts – who wouldn’t even return their phone calls after the government ordered the cancellation.

“We wanted to meet on worker compensation issues,” the lawyer said. “They refused to answer the phone all week. They actually shut down their building. They couldn’t even answer the phone without policy direction.”

That began to change with the ascendancy of Hu and Prime Minister Wen Jiabao, albeit slowly. Ordered into the factories to organize workers, the federation didn’t know what to do.

“They were used to taking people to dinner. Now they had to organize for the first time. Hu wants them to function and solve problems. But that doesn’t mean he or they actually know how to solve problems, compete for the loyalty of a worker on the factory floor.”

At the same time, according to Anita Chan, a labor activist writing for an organization called the Organic Consumers Association, “Wal-Mart miscalculated in thinking it could use the same anti-union tactics in China that it does around the world. If, like its main competitor in China, the giant European retailer Carrefour, Wal-Mart had welcomed in the ACFTU to establish union branches in Wal-Mart superstores, those union branches would not have challenged management. The process would have been similar to so many other workplace union branches set up by the ACFTU in foreign-funded enterprises that have sought management approval and cooperation to set up a union branch. Once an agreement was struck, management and the local union would have decided together on a mid-level PRC Chinese manager to serve as the union chair, without a union election.”

When Wal-Mart refused to let the AFCTU into its stores, Chan writes, union leaders were simply stumped. For a long period, she writes, the federation tried to get Wal-Mart to cooperate so that a top-down union branch could be introduced. The local union in Nanjing went to one Wal-Mart superstore 26 times and wasn’t even granted a meeting with a store manager.

Finally, “the ACFTU made a series of unprecedented moves. For the first time the ACFTU openly threatened to take a foreign company to court for violating China's trade union law by barring the union.”

Wal-Mart, the American labor lawyer said, eventually realized it had no choice. Because they had to follow Chinese law, there is no mechanism to oppose the union. The company knuckled under.

At that, it’s difficult to know how much progress a labor federation as tame as the AFCTU will make at Wal-Mart. But one thing is certain. Wal-Mart is only the first of many multinationals that will be signing up. It is what Hu Jintao wants, and it is what he is going to get.

“Hu right now is emphasizing more stability, benefits and the rights of the bottom sector of society,” the China scholar says. “For me, Hu is trying to clean up the mess left by Jiang Zemin.”