Chinese and American unions shake hands

4 June 2007

The third reading of the draft "labour-contract law" at the National People's Congress (NPC) in Beijing on 5-16 March 2007 has set in motion some important changes. In particular, a law whose goal is further to protect workers' rights will affect the lives of millions upon millions of Chinese employees.

A decade or so ago, the passage of such a law would have been a relatively simple matter. A draft would have been drawn up by legal experts under the direction of the government, which would subsequently have been passed by the NPC; there would have been next to no real debate. Today such lax legislative practice is all but history, after the enactment of laws relating to every class and interest group in society, often accompanied by fierce debate and political infighting.

This change has come about due to China's early departure from the universally state-owned economy. As a result, private-sector, joint-venture and wholly owned foreign enterprises have come to hold a majority stake in the national economy and interest groups of every sort have sprung up. These developments have caused changes to Chinese legislative procedure with the NPC subsequently needing to make compromises with and appease such interest groups.

Li Datong is a Chinese journalist and a former editor of Bingdian (Freezing Point), a weekly supplement of the China Youth Daily newspaper.Also by Li Datong in openDemocracy:

"The story of Freezing Point" (12 September 2006)

"China: a ‘great nation'?" (10 January 2007)

"China's contradictory signals" (24 January 2007)

"Hong Kong's example" (7 February 2007)

"Will China follow Vietnam's lead?" (21 February 2007)

"Chinese political reform: official discourse, real meaning"
(7 March 2007)

"What China's new property law means" (21 March 2007)

"The Chinese ‘nail house': a Chongqing saga" (4 April 2007)

"'Public opinion' and China's Japan policy" (18 April 2007)

"An end to exclusivity" (2 May 2007)

"China's veteran voices of reform" (16 May 2007)

The formulation of the labour-contract law hasn't attracted as much lively media coverage as did the "property-rights law" passed on 16 March 2007. Nevertheless, following the public announcement of the draft, the National People's Congress received more than 190,000 replies. This figure far outnumbered that of the property-rights law. Even more significant is the fact that the formulation of this domestic Chinese law has brought American trade-union organisations and the All-China Federation of Trade Unions to shake hands for the very first time.

A world for workers too

Clearly, increasing and protecting Chinese labour rights could impair the profits of employers in the future. During the debate surrounding the first reading of the draft, the European Union chamber of commerce and the American chamber of commerce in Shanghai (AmCham Shanghai) offered numerous amendments and opinions of the draft law to the standing committee of the NPC. These included suggestions that the new draft had such strict guidelines that it would restrict the free spirit of private enterprise and that in the end the increase of production costs in China would scare off new foreign investors and cause doubts over the continuation of prior investments in China.

On the morning of 24 April 2006, the managers of over twenty American companies were invited by AmCham Shanghai to attend a seminar to attack the labour-contract law, with the threat of withdrawing investment. The opposition to this law by multinational firms caught the attention of the US media, and on 13 October the New York Times ran a front-page story with the headline: "China Drafts Law to Empower Unions and End Labour Abuse".

The proposed law, the article said "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...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 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 reaction to the article in the New York Times surpassed any Chinese expectations: American union organisations publicly began to support the Chinese law and leftwing members of Congress wrote a letter to President Bush on 31 October stating: "We would like to declare our opposition towards the actions of American companies, which are attempting to thwart the drafting of the new Chinese labour contract law that will give workers more rights". They urged President Bush to stand up in support of international workers' rights. In December, this group of congressmen once more submitted a bill to Congress urging President Bush to declare support for those clauses in the draft Chinese labour-contract law that served to bestow and protect labour rights, and to condemn those US companies and their China subsidiaries for their attempts to curb Chinese workers' rights.

On the invitation of the All-China Federation of Trade Unions, a delegation from one of the two largest national American union federations, Change to Win, came to China on 18 May 2007 for a ten-day visit. This association of unions represents around 6 million American workers and includes a number of large trade unions, notably America's largest, the Service Employees International Union. "We're lagging behind. Nixon came in 1972, it's taken us until 2007 to get here", says Greg Tarpinian, the executive director of Change to Win.

The Chinese and American unions, which have for the last few decades had absolutely no contact, have for the first time shaken hands. The symbolic significance of this goes without saying. By western standards, China's unions are undoubtedly still seen as "governmental" subsidiaries that can't really support the interests of workers. This critique is quite true but nevertheless there are a number of historical variables.

When the rice-bowl broke

After the Communist Party came to power in 1949, and especially after the "socialist reforms" of 1956, the Chinese economy began taking shape as a universally state-owned economy. Under the banner of "the working class is the basis of the nation", the political and economic status of the working class was relatively high. Its wages were second only to government officials and it benefited from allocated housing, free healthcare, pensions and other such securities. Acquiring work as an employee of a state-owned factory was an envious profession, known as the "iron rice-bowl", where there was no threat of unemployment. Under such a system of social security the labour unions really were nothing more than ornaments, with no true use.

However, during the economic transformation of the mid-1980s, a huge number of state-owned enterprises went bankrupt or were sold off into private hands. The living conditions of the working class began to deteriorate. With the exception of a few monopolised industries, large swathes of workers' social security was reduced or even wiped out; with workers being laid off at will, the iron rice-bowl was finally broken.

Even more serious is that twenty years later, there are more than 100 million migrant labourers working in the cities for nothing but an extremely low wage with no social security or rights to speak of. And to a considerable degree it is upon such cheap labour costs that China's rapid development depends. Against this background, Chinese workers have begun to feel an unprecedented need to protect their rights, and what originally was nothing but a useless ornament, the All-China Federation of Trade Unions, has begun to feel unprecedented pressure.

Under the premise that the Chinese government is itself an employer, it could clearly not allow for unions to represent workers who were protesting against government authority. Some changes have however taken place. Over half of companies are no longer state-owned and the government has gone from being a major employer to becoming more or less neutral. Large-scale unrest at diminishing workers' rights can however directly threaten the legitimacy of the government's authority and the government's stance towards the unions has shifted, as it now cautiously begins to support the work done by private-enterprise trade unions to protect labour rights. The All-China Federation of Trade Unions also played an important role during the formulation of the labour-contract law.

Meanwhile, American unions have begun to appreciate the strength of China's manufacturing industry. With now roughly a quarter of the world's workers, the salary-levels of China's workers have an influence upon workers throughout the world. This explains the recent "safeguarding" of China's law by American unions and the historic contact they have now initiated. Chinese union organisations will, without doubt, have further contact with unions from developed western nations, including the United States. The Chinese will study the negotiating skills and methods of such unions in relation to the management of business enterprises, and this will in turn provide further important influence and guidance over China's future.


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