Cheap China goods, but at what cost?

David Barboza, New York Times Today Online 12 Jan 08;

"At Wal-Mart, Christmas ornaments are cheap, and so are the lives of the young workers in China who make them,"

Factory conditions are much better, but China workers still have it tough

Nearly a decade after some of the most powerful companies in the world — often under considerable criticism and pressure — began an effort to eliminate sweatshop labour in Asia, labour rights groups say that worker abuse is still common in many Chinese factories that supply Western companies.

The groups say some Chinese companies routinely underpay their employees, withhold health benefits and expose them to dangerous machinery and harmful chemicals, including lead, cadmium and mercury.

"If these chemicals are so dangerous for the consumer, then how about the workers?" said Ms Anita Chan, a labour rights advocate who teaches at the Australian National University. "We may be dealing with these things for a short time, but they deal with them every day."

While American and European consumers worry about exposing their children to Chinese-made toys coated in lead, Chinese workers, often as young as 16, face far more serious hazards. In the Pearl River Delta area near Hong Kong, for example, factory workers lose or break about 40,000 fingers every year, according to a study by the Shanghai Academy of Social Sciences.

Pushing to keep big corporations honest, labour groups regularly smuggle photographs, videos, pay stubs, shipping records and other evidence out of factories that they say violate local law and international worker standards.

Last year, factories in China that supplied corporations, including Wal-Mart, Disney and Dell, were accused of using child labour, forcing employees to work 16-hour days and paying workers less than the minimum wage, which is about US$0.55 ($0.79) per hour.

In recent weeks, a flood of reports detailing labour abuse has been released. The timing could not have been worse, as China is still coping with last year's wave of made-in-China product recalls.

No company has come under harsher scrutiny than Wal-Mart. In 2006, it sourced about US$9 billion in goods — from hammers to high-definition televisions — from China.

Last month, two non-governmental organisations (NGOs) documented what they said were abuse and labour violations at 15 factories that supplied goods to Wal-Mart — including the use of child labour at Huanya Gifts, a factory in Guangzhou that makes Christmas tree ornaments. Wal-Mart officials said they were investigating the allegations, which had been published in a report issued three weeks ago by the National Labour Committee, a New York-based NGO.

The report criticised Wal-Mart for not doing more to protect workers. The NGO charged that last July, Huanya Gifts recruited about 500 16-year-old high school students to work seven days a week, often for as long as 15 hours a day, during peak production months.

Some high school students later went on strike to protest the harsh conditions, the report said. The students also told labour officials that at least seven children, as young as 12 years old, worked in the factory.

"At Wal-Mart, Christmas ornaments are cheap, and so are the lives of the young workers in China who make them," the report said.

Disney and Dell have also been criticised by labour rights groups. Company officials declined to comment on specific allegations, but both companies said they monitored factories in China and took action when they found problems or unfair labour practices.

Many multinationals were criticised in the 1990s for using suppliers that maintained sweatshop conditions. Iconic brands including Nike, Mattel and Gap formed corporate social-responsibility operations and worked with contractors to create a system of factory audits and inspections. These changes have won praise in some quarters for improving conditions.

But despite spending millions of dollars and hiring thousands of auditors, some companies admit many of the programmes are flawed.

"The factories have improved immeasurably over the past few years," said Alan Hassenfeld, Hasbro chairman and co-chairman of Care, the ethical-manufacturing programme of the International Council of Toy Industries. "But let me be honest: There are some bad factories. Bribery and corruption occur, but we are doing our best."

Some factories are warned about audits beforehand and some factory owners or managers bribe auditors. Inexperienced inspectors may also be a problem.

Chinese factories regularly outsource to other suppliers, who may in turn outsource to yet another operation, creating a supply chain that is hard to follow — let alone inspect.

Many labour experts say part of the problem is cost: Western companies are constantly pressing their Chinese suppliers for lower prices while also insisting that factory owners spend more to upgrade operations, treat workers properly and improve product quality.

At the same time, rising food, energy and raw material costs in China — and a shortage of labour in the biggest southern manufacturing zones — are eating into factory owners' profits.

The situation may get worse before it improves. The new labour law that took effect on Jan 1 makes it more difficult to dismiss workers and has created new laws that will almost certainly increase labour costs.

Yet, it may become more difficult for human rights groups to investigate abuses. Concerned about the growing threats to their profitability, and embarrassing exposés, factories are heightening security, harassing labour-rights groups and calling the police when journalists show up at their gates.

"China has too many factories. The workers' bargaining position is weak and the government's regulation is slack," said Mr Liu Kaiming, director of the Institute on Contemporary Observation, which aids migrant workers in Shenzhen.

At the root of the problem is a labour system that relies on young migrant workers. Many leave small rural villages for two or three-year stints at factories, where they hope to earn enough to return home to start families.

As long as life in the cities promises more money than rural areas, they will brave the harsh conditions in factories. And as long as China outlaws independent unions and proves unable to enforce its own labour rules, there is little hope for change.