Published: 18/12/2006

In Spring 2006 the government of China proposed a Draft Labour Contract Law and invited public comment for a period of 30 days. The American and European Union Chambers of Commerce and the US-China Business Council – representing nearly every significant US- and EU-based investor in China – each responded with a lengthy catalog of objections. The 30 days have long since lapsed, but that hasn’t deterred the associations and their individual members from aggressively lobbying to kill the proposed legislation. In some cases, corporate lobbying has been accompanied by threats to pull out of China should the draft become law. As the American Chamber of Commerce in Shanghai wrote in its public commentary on the law, the legislation would “negatively impact the PRC’s competitiveness and appeal as a destination for foreign investment.” Some individual corporations have reportedly been blunter and more direct.

Workers around the world have long been familiar with companies threatening to outsource or close shop entirely and set up in China. What is prompting these same companies to now threaten disinvestment from China? Global Labor Strategies, the organization which first reported on the corporate offensive, rightly observes that the proposed legislation “Will not provide Chinese workers with the right to independent trade unions with leaders of their own choosing and the right to strike. But foreign corporations are attacking the legislation not because it provides workers too little protection, but because it provides them too much. Indeed, the proposed law may well encourage workers to organize to demand the enforcement of the rights it offers.”

What is in the draft law that has so agitated corporate sensitivities? The proposed legislation threatens to curb – at least on paper – some of the major abuses which have so effectively contributed to maintaining Chinese workers in poverty, i.e. the practices which have served as a magnet for unprecedented levels of foreign direct investment. With the new law, the millions of Chinese workers currently without any kind of employment contract would be deemed to have one, and therefore be entitled to the rights this would entail. The virtually unlimited probationary periods which have been used to maintain workers in a state of permanent precariousness would be replaced by a standard period of no more than 6 months. Workers would no longer be liable for putative “training” costs when changing jobs; severance pay would be introduced for workers whose fixed term contracts are not renewed (the American Chamber of Commerce found this “most unreasonable”); temporary workers recruited through hire agencies would be converted to permanent status after one year; layoffs would be implemented on the basis of seniority (the American Chamber of Commerce attacked this as “discriminative” [sic]). And the draft law stipulates that workplace practices including health and safety, layoffs and firings should be negotiated with a trade union or “employee representative.”

In short, the draft law would establish a modest set of minimum employment standards. Trade unionists have long been wary of language on “employee representation”, which can and does open the way to employer-dominated yellow unions. And while there are no independent unions in China, what has clearly infuriated investors is the possibility of ceding even a fraction of their right to rule the workplace as they please.

While workplace rights are only as strong as the unions which enforce them, the establishment in law of such basic employment standards as the right to a contract or severance pay could give Chinese workers an important lever in organizing to claim these rights. The unprecedented level of worker protest in China, where mass strikes and demonstrations have become a regular occurrence on a weekly and even daily basis, demonstrates the growing self-confidence and organizational capacity of the Chinese working class. This is the context in which transnational capital is lobbying hard to kill the new law.

Unions worldwide have a vital interest in defeating this corporate offensive. Exposing the lobbying campaign was an essential first step. US unions have sounded the alarm, and a group of Congressional representatives has called on President Bush to publicly repudiate the efforts of US corporate and government representatives seeking to weaken or derail the legislation, as well as to officially support stronger minimum legal standards for Chinese workers.

Unions in Europe should similarly work on exposing the lobbying activities of EU-based transnationals, and push for political action at national and EU-level. Politicians – and in particular those in trade and industry ministries – should be publicly challenged to reconcile this sordid lobbying for the maintenance of sweatshop conditions with their ideological claims for the civilizing mission of liberalized trade and investment flows. Following on the US congressional initiative, European unions can demand that national governments and the European Commission repudiate corporate efforts to dilute or kill the legislation. Unions can press transnational employers present in China to make public their stance on – and their activities around – the draft contract law, and demand that the EU Chamber of Commerce renounce its opposition and immediately change course.

Unions may wish to investigate the possibility of action at the OECD against corporations which continue to lobby against the law. Article IV of the OECD Guidelines for Multinational Enterprises, states, among other things, that multinational employers should “observe standards of employment and industrial relations not less favourable than those observed by comparable employers in the host country.” The OECD Guidelines also enjoin employers to abstain from “improper involvement in local political activities.” EU-based corporations are now lobbying the government of China to kill minimum standards which have, for the most part, long been established in European law, beginning with the right to an employment contract. The lobbyists should be challenged in every possible venue.

Chinese legislative procedures are murky at best, but the Draft Labour Contract Law could come into effect in March 2007. Now is the time for action.