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76–387 PDF 2012

WORKING CONDITIONS AND WORKER RIGHTS IN 

CHINA: RECENT DEVELOPMENTS 

HEARING 

BEFORE THE

CONGRESSIONAL-EXECUTIVE 

COMMISSION ON CHINA 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

JULY 31, 2012 

Printed for the use of the Congressional-Executive Commission on China 

( 

Available via the World Wide Web: http://www.cecc.gov 
CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA 

LEGISLATIVE BRANCH COMMISSIONERS 

House Senate 

CHRISTOPHER H. SMITH, New Jersey, 

Chairman 

FRANK WOLF, Virginia 

DONALD A. MANZULLO, Illinois 

EDWARD R. ROYCE, California 

TIM WALZ, Minnesota 

MARCY KAPTUR, Ohio 

MICHAEL HONDA, California 

SHERROD BROWN, Ohio, Cochairman 

MAX BAUCUS, Montana 

CARL LEVIN, Michigan 

DIANNE FEINSTEIN, California 

JEFF MERKLEY, Oregon 

SUSAN COLLINS, Maine 

JAMES RISCH, Idaho 

EXECUTIVE BRANCH COMMISSIONERS 

SETH D. HARRIS, Department of Labor 

MARIA OTERO, Department of State 

FRANCISCO J. SA ́ NCHEZ, Department of Commerce 

KURT M. CAMPBELL, Department of State 

NISHA DESAI BISWAL, U.S. Agency for International Development 

PAUL B. PROTIC, Staff Director 

LAWRENCE T. LIU, Deputy Staff Director 

(II) 
(III) 

CO N T E N T S 

STATEMENTS 

Page 

Opening statement of Hon. Christopher Smith, a U.S. Representative from 

New Jersey; Chairman, Congressional-Executive Commission on China ....... 1 

Brown, Hon. Sherrod, a U.S. Senator from Ohio; Cochairman, CongressionalExecutive Commission on China ........................................................................ 3 

Kernaghan, Charles, Executive Director, Institute for Global Labour and 

Human Rights ...................................................................................................... 6 

Li, Qiang, Executive Director and Founder, China Labor Watch ....................... 8 

Wu, Harry, Founder and Executive Director, Laogai Research Foundation 

and Laogai Museum ............................................................................................. 11 

Lee, Thea, Deputy Chief of Staff, AFL–CIO .......................................................... 20 

Gallagher, Mary, Associate Professor of Political Science and Director, Center 

for Chinese Studies, University of Michigan ..................................................... 23 

Brown, Earl, Labor and Employment Law Counsel and China Program Director, Solidarity Center, AFL–CIO ........................................................................ 26 

APPENDIX 

PREPARED STATEMENTS

Kernaghan, Charles ................................................................................................. 36 

Li, Qiang ................................................................................................................... 108 

Wu, Harry ................................................................................................................ 113 

Lee, Thea .................................................................................................................. 116

Gallagher, Mary ....................................................................................................... 119 

Brown, Earl .............................................................................................................. 129 

Smith, Hon. Christopher ......................................................................................... 138 

(1) 

WORKING CONDITIONS AND WORKER RIGHTS 

IN CHINA: RECENT DEVELOPMENTS 

TUESDAY, JULY 31, 2012 

CONGRESSIONAL-EXECUTIVE

COMMISSION ON CHINA, Washington, DC. 

The roundtable was convened, pursuant to notice, at 2:30 p.m., 

in Room 2200, Rayburn House Office Building, Hon. Christopher 

Smith, Chairman, presiding. 

Also present: Senator Sherrod Brown. 

OPENING STATEMENT OF HON. CHRISTOPHER SMITH, A U.S. 

REPRESENTATIVE FROM NEW JERSEY; CHAIRMAN, CONGRESSIONAL–EXECUTIVE COMMISSION ON CHINA 

Chairman SMITH. The Commission will come to order. 

I want to welcome our very distinguished witnesses to this hearing on the important topic of the appalling state of working conditions and worker rights in China, a significant human rights abuse 

that requires greater examination, analysis, and, certainly, bolder 

action. 

Worker rights are systematically violated and are among the 

many human rights abuses committed by Chinese Government officials at all levels. 

Today, the Commission hopes to continue to draw attention to 

these critical issues in order to push the Chinese Government to 

reform and to respond to the legitimate concerns of its own citizens, all of whom are entitled to well established, universally recognized labor rights. 

As a member of the World Trade Organization, China has experienced tremendous economic growth and integration into the global 

economy. But as this Commission’s most recent annual report documents, China continues to violate the basic human rights of its own 

people and seriously undermines the rule of law. 

Workers in China are still not guaranteed, either by law or in 

practice, fundamental worker rights in accordance with international standards. Despite legislative developments that purport 

to ensure some labor protections in China in recent years, abuse 

and exploitation of Chinese workers remains widespread. 

Conditions in Chinese factories continue to be incredibly harsh. 

Workers are routinely exposed to a variety of dangerous working 

conditions that threaten their health and their safety. Low wages, 

long hours and excessive overtime remain the norm. 

Chinese workers have few, if any, options to seek redress and 

voice grievances under these harsh conditions. If workers step out 
2 

of line, they may be fired without payment of back wages. Workers 

have no collective bargaining power, no collective bargaining rights 

whatsoever to negotiate for higher wages and a better working environment. 

The Chinese Government continues to prevent workers from exercising their right to freedom of association, and strictly forbids 

the formation of independent unions. Attempts to organize are met 

with dismissal, harassment, torture, punishment, and incarceration. 

Workers are ‘‘represented’’ by a government-controlled union, 

known as the All-China Federation of Trade Unions [ACFTU], a 

phony, fake, and fraudulent workers organization. 

The recent crackdown on authentic labor, non-governmental organizations in Shenzhen in 2012 and the mysterious death of labor 

activist and 1989 Tiananmen Square demonstrator Li Wangyang in 

June are but a few examples of Chinese authorities’ continued attempts to crush labor activism. 

While touting itself as an economic superpower, China continues 

to violate workers’ rights with impunity. With no institutions capable of protecting their interests, Chinese workers are nevertheless 

taking matters into their own hands. 

In the past few years, there has been a dramatic rise in the number of labor-related protests in China, an estimated 30,000 laborrelated protests in 2009 alone, and there are no signs that this 

positive trend has or will abate. 

The increase in labor-related demonstrations not only represents 

the glaring lack of institutional capacity for fair labor negotiation, 

but also reflects the rise of a new generation of workers in China 

who are better educated, tech-savvy, rights conscious, and more 

willing to protest and endure the consequences. 

The deplorable state of worker rights in China not only means 

that Chinese women, men, and children in the workforce are exploited and put at risk, but it also means that U.S. workers are severely hurt by profoundly unfair labor practices, an advantage that 

goes to those corporations who benefit from China’s heinous labor 

practices. 

As good corporate citizens, multinational corporations such as 

Apple and Microsoft, must ensure that international labor standards are being implemented in their factories and supply chains in 

China. 

In the glaring absence of Chinese Government efforts to bring its 

labor laws and enforcement up to International Labour Organization standards, multinational corporations can and must play a 

unique role in advancing labor rights and industry standards 

throughout their operations in the People’s Republic of China. 

Again, I want to welcome our very distinguished witnesses. 

I yield to my friend and colleague, Cochairman Senator Brown. 

[The prepared statement of Chairman Smith appears in the appendix.] 
3 

STATEMENT OF HON. SHERROD BROWN, A U.S. SENATOR 

FROM OHIO; COCHAIRMAN, CONGRESSIONAL–EXECUTIVE 

COMMISSION ON CHINA 

Senator BROWN. Thank you very much, Chairman Smith, for 

your work in this commission. And thanks especially to the staff 

for the terrific work they do on this commission to prepare the annual report, which they are working on now, which is, in many 

ways, both a guide and sort of a clarion call for what this commission needs to do and what our government needs to do and what 

U.S. businesses ought to be doing. 

Special thanks to both panels. On this first panel, I appreciate 

the work of all three of you and what you have done to advance 

labor rights in China and really all over the world. 

Mr. Kernaghan, Mr. Wu, thank you. And, Mr. Qiang, thank you 

very much. And the second panel, too, thanks very much. 

When Congress debated permanent normal trade relations with 

China more than a decade ago, concerns about human rights and 

labor conditions were met with expert opinion that conditions 

would improve with more unrestricted and unfettered trade. That 

is what we were told by CEOs and editorial writers and pundits 

and economists and so many people in this institution over and 

over as Congressman Smith and I were working on this. 

But we know that any improvement in labor conditions have not 

kept pace—even close to keeping pace with the extraordinary trade 

deficits we have mounted with China. More and more of the goods 

we buy are made by Chinese workers. In 2011, our trade deficit— 

our bilateral trade deficit reached an all-time high of $295 billion. 

The first five months of 2012, the trade deficit was $118 billion, on 

pace to exceed last year’s. 

The trade deficit has cost American workers millions of jobs. Chinese workers are not just making our iPads and our iPhones and 

our laptops, but, also, innovating on the shop floor. 

When the innovation happens here and is outsourced for production somewhere else, the innovation, both in terms of process and 

in terms of the product, happen somewhere else, and we, as a Nation, tend to lose our innovative edge. 

They are making our auto parts, our food, our drugs, even our 

Olympic uniforms. 

We learned a few weeks ago, of course, that the accomplished 

athletes of Team USA would be wearing Chinese-made uniforms at 

the opening ceremonies. Members of both parties, including those 

who had voted for PNTR [permanent normal trade relations], were 

outraged. I was joined by a number of other Members of both 

Houses and sent letters to the U.S. Olympic Committee. I met with 

the CEO, who promised that by 2014, these uniforms will be made 

here. 

These products should be made here. Hugo Boss has a facility in 

Cleveland, Ohio. They make high quality and affordable clothing 

for Americans and for export. 

It is not because American workers cannot compete, but American workers do not often stand a chance against Chinese workers 

who are underpaid and overworked, who are victims of non-enforcement even of Chinese labor law, and workers who have few rights. 
4 

Chinese workers making some of our most popular products— 

cordless phones, iPhones, iPads—toil under the harshest conditions, as Chairman Smith said. They make a little over $1 an hour. 

They stand all day. They work overtime that far exceeds Chinese 

law. Management humiliates them, sometimes forcing them to 

clean toilets as punishment. They live and they work in far too 

squalid and dangerous environments. 

We learned from a labor rights group in Hong Kong that Chinese 

workers making Olympic merchandise worked excessive overtime, 

were docked a half-day’s wage for being a few minutes late, and 

had to bring their own masks to work. 

Fundamentally, why do these injustices continue? Because Chinese workers have no bargaining power. In China, there is no freedom of association; there are no independent trade unions. Instead, 

workers are represented by a state union that, to quote a worker 

from one report, ‘‘everybody knows is controlled by the company.’’ 

Like our workers, Chinese workers are willing to fight for their 

rights. Strikes in China have grown, as Chairman Smith said, to 

an estimated 30,000 a year. The new generation of Chinese workers is better educated, more tech savvy, more willing to stand up 

against injustice. All encouraging developments, of course, but 

imagine how much more Chinese workers could gain if they had 

the right to organize freely and bargain collectively. 

We call on the Chinese Government to abide by international law 

and guarantee freedom of association, including organizing and 

bargaining collectively. We call on China to follow the rule of law 

by strengthening its labor laws and enforcing the laws on the 

books. 

Let us continue to do all we can here to support our workers 

against China’s unfair labor and trade practices. That is why I 

have introduced three bills over the last couple of years—the Wear 

American Act of 2012, the All-American Flag Act, and, the most 

important, of course, the Currency Exchange and Reform Act. 

We have great responsibility in this. We must hold U.S. companies accountable for working conditions in their supply chain, 

something that Mr. Kernaghan has particularly shown a lot of 

leadership in pushing. 

That is why today I sent a letter to Apple regarding factories in 

China. I urged Apple to fulfill the promises it made following that 

New York Times story and, since, following an investigation by the 

Fair Labor Association. 

I have asked Apple to keep us informed, this commission, my office, and the American public informed and updated on its 

progress. I have urged Apple to strengthen its engagement, if you 

will, with the U.S. Department of Labor. 

Companies like Apple are in a unique position to improve working conditions in China, while maintaining their bottom line. I 

hope they will do the right thing. 

Thank you, Mr. Chairman. 

Chairman SMITH. Thank you very much, Senator Brown. 

I would like to now introduce our first panel, beginning with 

Charles Kernaghan, who is the Executive Director of the Institute 

for Global Labour and Human Rights, a prominent anti-sweatshop 

advocate and director of the nonprofit organization. 
5 

He has published a number—or the institute that he heads—a 

number of in-depth investigative reports on labor abuses, including 

a 2006 report on the trafficking of foreign guest workers under the 

U.S.-Jordan Free Trade Agreement, and a 2012 report on factory 

conditions in Microsoft supplier factories in China. 

I welcome back Mr. Kernaghan. He may recall that back in the 

1990s, I had invited him and he did a tremendous job, first, in exposing what was going on with Kathie Lee Gifford’s line of clothing. 

She herself testified at that hearing, but he was the one who really 

got the ball rolling on those sweatshops in Honduran factories for 

Wal-Mart. 

So, welcome. It is great to see you, Mr. Kernaghan, again. 

We will then hear from Li Qiang, who is the labor activist and 

founder of China Labor Watch, a New York-based independent 

nonprofit organization that works to protect factory workers in 

China. 

China Labor Watch provides the international community with 

in-depth information and analysis on the labor situation in China 

through the publication of investigative reports and press releases. 

Working with a network of labor activists in China and the assistance of scholars, lawyers, and others around the world, China 

Labor Watch has published over 80 investigative reports covering 

more than 200 companies. 

Mr. Li has also established labor nongovernmental organizations 

[NGOs] in China that provide free legal advice and offer community training classes to Chinese workers in the Pearl River Delta 

region. These labor NGOs, additionally, cooperate with the multinational companies to ensure implementation of corporate responsibility standards in their supply chains in China. 

Mr. Li has written frequently on Chinese labor issues and has 

been published in major Chinese and international media outlets, 

including China Youth Daily and the New York Times. 

In 2004, Mr. Li was a visiting scholar at the Center for the Study 

of Human Rights at Columbia University. 

Then we will hear from a man who is no stranger to this Commission nor to the Foreign Affairs Committee nor to the Congress, 

and that is Harry Wu, the great Harry Wu, who is the founder and 

Executive Director of the Laogai Research Foundation, a foundation established in 1992 to gather information on and raise public 

awareness about the Chinese laogai system. 

Mr. Wu has firsthand knowledge of the conditions in the laogai 

system. He was imprisoned at the age of 23, in 1960, for criticizing 

the Communist Party, and he subsequently spent almost 20 years 

in the factories, mines, and fields of the laogai system. 

Mr. Wu came to the United States in 1985 after his release in 

1979, but went back a number of times, including getting re-arrested on at least one of those occasions. Harry Wu actually—I will 

never forget, I would say to my friend, Mr. Brown, we had a hearing that Harry helped arrange on the laogai that featured six survivors. 

And I will never forget when he brought in Palden Gyatso, who 

was also a man who had been incarcerated in the laogai system, 

who brought in these cattle prods and the other things that were 
6 

used routinely by the Chinese Government to compel compliance 

inside the prison gates. 

Palden Gyatso, downstairs in this building, could not get through 

security—and that was before 9/11. We had to go down and escort 

him through. And when he held up those instruments of torture 

used in the laogai system, which incarcerates millions of people, 

you could have heard a pin drop in that hearing room. 

So welcome back, Harry Wu, to the Commission. 

Mr. Kernaghan, if you would proceed. 

STATEMENT OF CHARLES KERNAGHAN, EXECUTIVE DIRECTOR, INSTITUTE FOR GLOBAL LABOUR AND HUMAN RIGHTS 

Mr. KERNAGHAN. Thank you for this opportunity to testify on 

this incredibly important issue of worker rights in China. 

As of 2008, phones are no longer made in America. The reason 

is pretty simple. Telecommunication workers in the United States 

earn $16.85 an hour, which is 15.5 times higher than wages at the 

VTech phone factory in China, where workers are paid $1.09 an 

hour, which is a below subsistence wage, and with very few rights 

or any benefits. 

VTech is the world’s largest manufacturer of cordless phones, 

and it controls 51 percent of the market in North America for corded phones and cordless phones. VTech produces for AT&T, Motorola, Philips, German Telekom, and Australia’s Telstra. 

What I want to do now is put a human face on what happens 

with these workers at the VTech factory. Suppose your daughter 

went to work at VTech. She would work from 7:30 in the morning 

until 7:30 or 10:30 at night. She would work 12 to 15 hours a day. 

She would work 6 and 7 days a week. She would be at the factory 

70 to 85 hours each week. And she would be forced to do overtime 

up to 37 hours, which exceeds China’s legal limit by 345 percent. 

Your daughter would be forced to stand all day. Her back would 

hurt. Her legs would ache. 

The production line never stops. Every 11.25 seconds, a circuit 

board goes down the assembly line. The workers have to plug in 

four or five parts into the circuit board. That means they have 2.25 

seconds to 2.8 seconds to do every operation. In one hour, they do 

1,600 operations. In 1 day, in the 11-hour shift, they do 17,600 operations. And in the week, they do 105,000 operations, the same 

over and over again. The pace is relentless, furious, mind-numbing, 

exhausting. 

Workers who fail to meet the production goal have to remain 

working without pay until they reach the goal. Workers say they 

feel like they are in prison, as security guards roam the lines and 

often beat the workers. 

The workers are fed some horrible food. They call it awful, slop. 

Indeed, we smuggled some pictures out of the factory that showed 

this coarse yellow rice and visibly rotten potatoes, and this is what 

they were being fed. 

Eight workers share each primitive dorm room. They sleep on 

narrow plywood bunk beds, often without mattresses. The workers 

told us, ‘‘It’s filthy, like a pigsty.’’ 

Workers told us that when they want to wash, they have to get 

a small bucket, a plastic bucket, fetch some water, bring it back to 
7 

their dormitory and splash water on themselves. This is how they 

wash. Right now, the temperature would be 96 degrees and it 

would be extremely humid. 

Workers are instructed to spy on each other. According to a manual from the VTech factory, ‘‘Those who report others’ mistakes 

would be rewarded monetarily.’’ 

One young woman told us, ‘‘Sometimes I want to die. I work like 

hell every day for a dull life. I can’t find a reason to live. Given 

that living is so tiring, seeking death might not be a silly thing.’’ 

After just one month of work, back on December 27, 2009, a 20- 

year-old man at VTech jumped to his death from the sixth floor 

dormitory. His supervisor had constantly attacked him and scolded 

him. 

Less than a month later, on January 20, 2010, a young woman 

took an overdose, a fatal overdose of sleeping pills because she was 

constantly badgered and harassed by the management. 

Conditions are so miserable for the 30,000 workers at VTech, at 

VTech’s factories in Dongguan that 80 percent of the workers try 

to flee the factory each year. 

To keep the workers from fleeing, management withholds one 

month’s back wages, including overtime, to try to control the workers and keep them in the factory. 

VTech also cheats their workers on their legal social security 

benefits which are due them. Millions of dollars are going into the 

pocket of management at the cost of the workers. 

There is some small good news in that improvements are beginning to be made at VTech. Under enormous pressure, the corporations like Philips and Motorola, they sent auditors, put them on the 

ground in the factory, and produced some of these studies over the 

last several weeks, and they have just reported back to us that 

they have confirmed many of the violations that the institute had 

documented. 

VTech now is responding to the audits and is saying that it is 

going to come up with a remediation plan to improve conditions. I 

am not sure if we can believe that. 

But one slightly maybe positive action here is the Sustainable 

Trade Initiative’s electronics program, which was funded by the 

government of the Netherlands and by several corporations, such 

as Philips, and they have moved beyond the monitoring, auditing 

of just a factory, and now they are saying that it is only when there 

is a worker-management dialogue in place that a company can possibly improve labor conditions. 

And Philips has asked VTech to join the Sustainable Trade Institute. This may be something that the U.S. Government would like 

to look into or U.S. corporations, for that matter. But even having 

said that, nothing will change in the global economy without enforceable labor rates. 

I want to especially thank the Chairman and the Cochairman for 

your leadership. You do so many bills, maybe you do not remember, 

but for your leadership and commitment back in 2007 when you introduced the Decent Working Conditions and Fair Competition Act, 

which, when it passes, it is not, of course, going to pass now, but 

someday, when that passes, it will amend the Tariff Act of 1930 to 

prohibit the import and export of sweatshop goods to the United 
8 

States—the import, the export, or sale of sweatshop goods in the 

U.S. Nothing will change. 

Multinational corporations have demanded and want all sorts of 

enforceable laws to protect their products, intellectual property 

rights, copyright laws, backed up by sanctions. Microsoft is protected, Apple is protected, VTech is protected, Barbie Doll is protected, the NFL is protected. 

But when we say to these corporations, ‘‘Can’t we have similar 

laws to protect the rights of the human being, as you have to protect your products,’’ the corporations say, ‘‘No, no never.’’ 

The corporations claim that extending protections similar to 

those currently afforded to products to defend the rights of human 

beings would be an impediment to free trade. So we have laws to 

protect Barbie Doll and Apple, but no laws to protect the human 

beings who make them. 

Nothing will change unless there is some change in policy and 

we have enforceable laws. Otherwise, China will keep dumping the 

sweatshop goods in the United States. Right now, $34 million an 

hour are coming in from China products, $810 million a day is coming in in terms of a trade deficit with China. 

I want to end the statement with a remark from an undercover 

labor leader in China, and I will go through this. This is quite 

short. 

He just wrote us yesterday and he said, ‘‘We think opposing the 

current authoritative regime in China and encouraging transformation toward democracy conformed to benefits of Chinese 

workers, all human beings, we call upon all just countries around 

the world, especially the United States to oppose the Chinese Government, a government that suppresses its people’s demand for democracy. Ask the Chinese Government to protect human rights to 

grant these people freedom of association and to let workers organize unions freely.’’ 

In the meantime, the United States should boycott sweatshop 

products from China and broaden support for grassroots organizations in China and American organizations that deal with labor 

issues in China. 

We oppose sacrificing human rights in exchange for short-term 

economic gain. This is not only harmful for the improvement of 

working conditions in China, but also unfavorable in terms of the 

long-term interest of other countries. 

I want to thank you, again, for this incredibly important work 

that you do with this Commission, because some changes have to 

come for the workers in China. 

Thank you. 

Chairman SMITH. Thank you very much, Mr. Kernaghan. 

Mr. Li? 

[The prepared statement of Mr. Kernaghan appears in the appendix.] 

STATEMENT OF LI QIANG, EXECUTIVE DIRECTOR AND 

FOUNDER, CHINA LABOR WATCH 

Mr. LI [through an interpreter]. I would like to take this opportunity to thank the Commission for giving me the opportunity to 

testify here today. 
9 

Back in 2000, when the U.S. Congress was debating whether 

PNTR should be granted to China, I testified, as well, by saying 

that the Chinese workers would be working like machines. 

Charlie just gave you a very vivid description of what was happening in the VTech factory. As a matter of fact, I myself worked 

in factories like that, and conditions were even worse. 

It was because of my experience working in factories like what 

Charlie was describing that I came to this country and founded 

China Labor Watch. The conditions that he described just now do 

exist in most plants and most factories throughout China. 

We did an investigation on 10 supplier plants supplying parts to 

Apple, and we found that most of them would have conditions as 

Charlie was describing. 

The workers have to endure very long work hours, making very 

low wages, and doing very extensive—extraneous work. 

The second topic I would like to touch on today is the audit system employed by multinational corporations. What I would like to 

say here is that the systems, these audit systems are not very effective and they are actually corrupt. 

Third, substantial advances in labor conditions in China are far 

more likely to occur only if two things happen. First, the multinational corporations operating there must push for appropriate 

improvements; and, additionally, the Chinese Government will 

have to take a more aggressive role in enforcing its own labor laws. 

As Charlie was describing, the poor and harmful working conditions in the VTech factories, in our investigation, we found that the 

working conditions exist in factories throughout China, not just in 

Foxconn. 

While we were putting together this report, another accident 

took place, last Friday, at one of the Apple factories in China in 

which one worker died and four were left in a coma. By the same 

token, last year, accidents took place in Apple supplier plants in 

which 4 people died and over 50 workers got injured. 

What I would like to say here is that in the audit report vis-avis working conditions at Apple plants, they did not talk about 

things that were not favorable to them. One factor, for example, 

throughout the supplier plants supplying parts to Apple, they extensively used dispatched labor, and these workers have even 

worse working conditions than regular employees of these plants 

and they work even longer hours. And sometimes they have to put 

in 180 hours in overtime. And when we look at injuries, on-the-job 

injuries, most of the injuries happened to these dispatched laborers. 

In addition to what we found in Apple-supplied plants, bad working conditions exist in supply plants for HP, for Dell, and for 

Samsung. These multinational corporations do have an audit system. However, I think the audit systems are severely flawed. 

According to my very conservative estimate, some 30,000 

plants—over 100,000 audits are conducted for over 30,000 plants. 

Normally, recommendations in the audit reports would require the 

investment of millions of dollars. So the multinationals would, 

more often than not, bribe the auditing companies by giving them, 

like, $3,000 or so, so as to avoid making the investment to make 

the improvements. 
10 

I have a very specific example, and that took place in 2007. The 

toy factories exporting toys containing lead to the United States 

passed the quality audits from the auditing companies. Again, in 

2009, we came across another incident in which the International 

Council of Toy Industries [ICTI] commissioned an auditing company to audit one of the toy manufacturers in China. 

We learned that the toy manufacturer bribed one of the auditors by giving him $3,100, and we reported this incident to ICTI and 

the toy industry association. In response, ICTI did another audit 

and they found that fraudulent deeds did occur. So they canceled 

the certification. 

Well, I can give you an example. For a typical toy manufacturer, 

it may employ 200 workers for the low seasons and the number 

may go up to 500 for high seasons. In order to implement recommendations in audit reports, they may have to spend $20 per 

head, per worker. 

Take this particular manufacturer, for example. If we did not report this incident to ICTI, the manufacturer would have to come 

up with $45,000 to implement the recommendations in the audit 

report. Instead, they bribed the auditor. 

We came across nine incidents like this in our investigations. 

Now, after we reported the dishonest audit result to ICTI, they 

published the identity of our informant in its compliance newsletter. The audit firm is Intertek, a U.K.-based company, and they 

have over 30,000 auditors. 

In order to protect its own interest, Intertek went back on its 

promise to keep the informant anonymous. What I would like to 

point out is that the same company does audit reports—does audit 

inspections for many U.S. companies. Big American firms, such as 

Costco, are their clients. 

In my estimate, about one-third of U.S. corporations are clients 

of this particular auditing firm. And, of course, the auditor reports 

would be made up of facts. However, they ignore some of the facts. 

It is my view that it is the responsibility of the multinational corporations to change the labor, bad working conditions in China, in 

addition to urging the Chinese Government to do something in this 

area. We need to put pressure on multinational corporations, as 

well. 

The very reason for Apple to have hired this auditing firm to do 

audits is that it got bad publicity and it came under pressure. 

We know that Apple’s profits amount to $13.1 billion for the net 

profit for the first quarter of its 2012 fiscal year, and that would 

amount to the annual wages for 300,000 Foxconn workers for 11 

years. And the stock awards worth $380 million Tim Cook received 

when he was appointed as the new CEO amounts to the total 

wages of 300,000 workers. 

Corporations like Apple do have resources to change the conditions, and I think we should start with Apple to really change the 

conditions on the ground. 

Again, I would like to thank the Commission for giving me the 

opportunity to testify today, and I hope that hearings like this will 

make a difference so that the working conditions in China will be 

improved. 

Chairman SMITH. Thank you very much, Mr. Li. 
11 

Mr. Wu? 

[The prepared statement of Mr. Li appears in the appendix.] 

STATEMENT OF HARRY WU, FOUNDER AND EXECUTIVE DIRECTOR, LAOGAI RESEARCH FOUNDATION AND LAOGAI MUSEUM 

Mr. WU. I want to add something to what we are talking about. 

In 1999, when the Motorola CEO, when he went to China, he met 

the Chinese Prime Minister, Zhu Rongji. Here is the dialogue. 

The CEO of Motorola said, ‘‘I want to set up a factory in China 

to produce the iPad.’’ And you know, until today, Motorola, all their 

iPads were made in China. And the CEO said, ‘‘I want to produce 

the iPad in China.’’ And Zhu Rongji said, ‘‘No problem. What do 

you want? ’’ And the CEO said, ‘‘Nothing. I don’t want anything. 

But I care about one thing. I hope the Chinese workers are not 

going to organize a union.’’ And the Chinese Prime Minister said, 

‘‘So do I, no problem.’’ 

You see, that is why China does not have unions. And all the 

iPads right now are produced in China, now all made cheap. And 

every big factory, big company in China, they have a Communist 

Party office, Voice of America reported. 

There is very little cooperation there. So what do you want to do? 

You have a hearing, you want to stop it? I hope so, but I do not 

think so, because China is China, China is not the Soviet Union. 

If this happened in the Soviet Union, they probably would say, ‘‘No, 

we can’t do it. We are not going to share our technology, investment, whatever, with Soviet devil.’’ But the Chinese Communist 

Party supposedly is not a devil, because they are honored guests 

in our White House. 

I do not know. Fidel Castro cannot come to the United States, 

but Fidel Castro can meet Roman Catholic Pope. The Chinese say 

Roman Catholic in China is illegal. This is the environment in 

China. But today, I was very happy to be invited to this Commission to talk about labor rights. But I want to narrow, very narrow, 

only concentrate on maybe 3 million, maybe around this number— 

the prisoners—because if you have a chance to visit Chinese prison 

camps, all the prisoners are forced into labor. 

Laogai, that means forced to labor and forced to reform. That 

means you have to forget your political ideals, religions. No, no 

way. You have to think about you having to support Communism. 

This is so-called reform. And every factory is very busy. 

I was in a camp. I was in a coalmine working two shifts a day, 

12 to 12 hours. I was on a farm, early every morning we get up. 

When the sun is setting down, we return. Are they going to pay? 

Forget it. The forced labor is a way to reform. You become a new 

socialist person. 

And now the Chinese separate so-called enterprises from the 

prison camps. But by Chinese law, in the last 50 years, every prison camp has two different names. One is Judiciary No. 5, Laogai 

Detachment, or No. 7 Prison Camp, and another name is a 

coalmine, is a construction company, is a farm, is a manufacturer 

of machine tools, or is the biggest rubber boots factory. They can 

manufacture 80 million pairs of rubber boots, and you can find 

them in Wal-Mart, in Home Depot. I bought rubber boots on the 
12 

prison camp—exactly the same in the Wal-Mart. But I heard, in 

1985, when I came to the United States, Wal-Mart said, ‘‘Our enterprises order products made in the United States. We are patriotic.’’ 

But today, the report says 91 percent of the Wal-Mart products 

are made in China. 

But do you really care about the products made in China? So far, 

I have heard that in California, there is a company that imports 

brakes. Because the quality is not good, not strong enough, they 

cannot stop the car, they cause an accident. They want to return 

it, stop the contract, and the Chinese know. That is why the Communists say, ‘‘Oh, I want to tell you; this is from No. 3 prison camp 

in Shaanxi Province.’’ So there is a problem. 

Another company from Texas is making mugs. Next to the company, another factory, the Maolong prison camp. Two mugs manufacturers, export the products to the United States. 

But who cares? If this is cheap, we do it. 

So I do not know what should we do. American economy involved 

with China too much. 

On the Dun & Bradstreet, there are 314 enterprises. Actually, it 

is a prison camp. But what should we do? I do not know. 

Thank you. 

Chairman SMITH. Mr. Wu, thank you very much. 

Cochairman Brown? 

[The prepared statement of Mr. Wu appears in the appendix.] 

Senator BROWN. Thank you. Thanks to all three of you for your 

testimony. Mr. Yan, thank you, too. 

Mr. Li talked about the audit systems, called them ineffective, 

corrupt, mentioned bribery, mentioned other—sort of other elements of how all this works. 

Could all three of you just talk to me briefly about—each of you 

give your thoughts on what we can do here with U.S. corporations 

that contract with these auditors, these auditing companies. 

Sometimes companies in the United States contract with them 

for purposes of answering media inquiries and relieving the pressure that they get from stories in the American media. 

Other times, some America companies want to do the right thing 

here. Some American companies, I think, do care that the work 

conditions are perhaps not as good as they could be. 

Starting with Mr. Kernaghan, if you would give me your 

thoughts on what we do to encourage companies, not just Apple, 

but companies like Apple and others to upgrade, if you will, the auditing system to make sure that the auditors are neither bribed or 

do the bribing or that the reports that they get back are legitimate 

and that the conditions that they audit will improve as a result of 

the audit. 

Mr. KERNAGHAN. I think the auditing process is very difficult, especially in a place like China, where workers are very frightened 

to speak truthfully, and they separate the workers. They are all 

from different—these are migrant workers. They are all from different areas. They do not even let them be in the same dormitory 

together. So they put them out, so they are always alone and they 

can never build, like, an organization. 
13 

I think what happened with VTech, they came back to us immediately and they said, ‘‘No, everything is fine.’’ And VTech said, 

‘‘Well, they’re going to sue us and bring a legal suit against us. We 

just kept pounding them with the facts about what is really going 

on in the factory, and it was not until then that the monitors actually took it seriously. 

At the beginning, they said, ‘‘No problems, you’ve got it completely wrong. And then all of a sudden, they started to back away. 

When we did not chicken out, they started to back away a little bit 

from VTech and then they confirmed that they did find these violations. But I do not think they worked very hard to find those violations. They would rather not find the violations. 

So one of the ways to—I am not a believer in monitoring. It is 

much more important, I think, to have the laws, enforceable laws. 

But if the monitoring is to work at all, there is going to have to 

be outside pressure put on the corporations and there is going to 

have to be research coming out of those factories to keep pushing 

and pushing. 

Without these undercover people in China, we would not know 

a single thing. There would be nothing and it would just be the 

monitors going in and talking to management and talking to some 

workers who are already trained to lie. 

So this is really going to have to be driven by unions in the 

United States, by Members of Congress, by activists, by NGOs. 

If we do not keep pressure up on these companies in China, and 

their buyers, they will do nothing. That is our experience. 

Senator BROWN. Mr. Li? 

Mr. LI. Well, once an audit report is submitted, I think the recommendations would have to be implemented. Otherwise, the 

things will go back to square one. And in the wake of Charlie’s report, VTech, I am sure, did something to make some improvements 

on a temporary basis. However, one or two years down the road, 

it will go back to square one. 

I think one of the ways to alleviate the bad working conditions 

is really to set up hotlines accessible to workers. Groups should be 

allowed to access the workers on the floors to make them aware of 

the labor laws and, also, to set up hotlines so that workers could 

just pick up the phone and dial the number whenever they have 

a complaint. 

Senator BROWN. Will workers believe that their privacy is protected if there is some way of establishing some hotline, their confidentiality and privacy is protected? 

Mr. LI. Well, this is what we did in China last year. We set up 

hotlines in 35 plants in China by which Chinese workers would call 

our China office via those lines. And, in turn, we will talk to the 

supplier plant, to the supplier factory. 

Afterward, we would follow up on their implementation. And I 

think there are organizations other than us in China having hotlines. However, only a fraction of factories in China have hotlines 

like this, because after all, for multinational corporations, this 

would increase their costs. 

For instance, because of the hotlines, maybe the plant would 

have to provide better housing, better food, and would pay more on 
14 

workers’ behalf into the healthcare system, and all these would add 

up. 

However, on the other hand, the companies, the plants, and factories themselves stand to benefit in that better working conditions 

would see lower turnover rates among workers. The workers would 

tend to stay with their jobs. 

And, in turn, the factories and plants would spend less in training, and I think this would be—again, setting up the hotlines in 

these plants and factories would be a very good first step to take, 

and this would be acceptable to the plants. 

This year, the number of our hotlines will increase to 110 in 

China. 

Senator BROWN. Good. Thank you. 

Mr. Chairman, thank you very much. 

Chairman SMITH. Thank you very much. 

Just a few questions. In her testimony, Thea Lee from the AFL– 

CIO will say that she would like to see both the Administration 

and the Congress put protecting workers’ rights at the center of the 

U.S. and Chinese Governments’ dialogue, not as an afterthought 

behind other trade and foreign policy concerns. 

Is that being done? Has that been done? 

Mr. KERNAGHAN. No, not at all. There will have to be tremendous pressure from the United States and from U.S. corporations 

to finally respect the local labor laws in China and the internationally recognized worker rights standards. 

They are in complete 100 percent violation at this point. So the 

pressure has to continue. We are only at the very first step. 

Mr. LI. The problem in China in enforcing and implementing the 

labor law is that there are no advocates. There are a few so-called 

advocates, and these are unions, and unions are controlled by state. 

Chairman SMITH. My question, Mr. Li, is has the United States, 

President Obama, the Secretary of State, the U.S. Congress, they 

are the leads; they are the Executive Branch. Have they done what 

Ms. Lee has asked; have workers’ rights in China been made a priority? 

Mr. LI. There is a lot they can do. For instance, as a first step, 

they can put pressure on companies like Apple and if Apple has 

done something, then probably the other corporations will follow 

suit. 

And that, indirectly, would have some impact on labor law legislation in China. 

Chairman SMITH. But to date, they have not. 

Mr. LI. Right. 

Chairman SMITH. I ask that—it has been my experience—I have 

been in Congress 32 years and when the trading relationship with 

China was emerging in the 1980s and then, certainly, took off in 

the 1990s, we had an opportunity, in my view, to seriously put fundamental human rights, the broad spectrum of human rights, including and especially labor rights, at the core of that relationship. 

President Clinton, when he linked most-favored-nation status 

with human rights, included labor rights. One year after linking it, 

he delinked it in an infamous reversal of policy that happened on 

May 26, 1994. 
15 

Our trade deficit was peanuts then. As, again, Ms. Lee points out in her testimony, in 2011, it was $295 billion. We talk about foreign sourcing as being a problem. It seems to me that there is a 

magnet that is huge and enormous, causing those jobs that used 

to be in the United States to relocate to China. 

Yet, under Clinton, under Bush, and now under Obama, we have 

made workers’ rights a non-priority. Is that correct or do I have 

something wrong here? 

Mr. KERNAGHAN. Correct. 

Chairman SMITH. Thank you. Can any of you tell us why the 

U.S. Trade Representative [USTR] has not initiated the crushing 

of worker rights as an unfair trading practice? Have any of you had 

any ability to pierce that organization’s unwillingness? 

I would point out that a few years ago, again, working with the 

AFL–CIO, a very serious complaint—a request—it was a mere request filled with documentation that was filed with the U.S. Trade 

Representative to launch an investigation of the violation of workers’ rights as an unfair labor practice, and they refused and they 

refuse to this day. 

Do any of you have any thoughts as to why that might be the 

case? Why does the USTR not undertake that initiative? 

Mr. KERNAGHAN. They are much more concerned for their corporations that that comes first and in any way promoting the 

rights of workers, the legal rights of workers, if that would damage 

the economic relationship with China, they will not go near it. 

But on the other hand, just like you said, we are having our 

clocks cleaned as the stuff just flows into the United States made 

under illegal conditions. 

But, no, no one has been able to stand up to that yet within the 

Administration. 

Chairman SMITH. Mr. Li, you bring out a very good point in your 

investigation of 10 of Apple’s suppliers that the auditors appear to 

have corruption issues, and you mentioned that one whistleblower 

was exposed. 

Could you tell us what happened to that whistleblower? 

Mr. LI. Well, they disclosed the name of the informant and death 

threats were made to him. So he was forced to leave his job to go 

back to his hometown. 

Before this, Intertek actually had entered into an agreement 

promising anonymity. However, out of their own interest, they selectively used the information that was favorable to them. 

Chairman SMITH. Could I ask you—Mr. Kernaghan, you might 

want to answer this, or any of you. Chinese companies not only pay 

their workers 10 to 50 cents per hour, but they also do not have 

OSHA protections, occupational health and safety; they ignore or 

have inferior environmental protections. 

What has been the impact? Has anyone ever been able to quantify it? I know it is a dictatorship, so getting information is hard. 

But what has the impact on the workers’ health been? We know 

that, or at least we believe that, according to official numbers, 

something on the order of 125,000 people die in work-related accidents, and that number perhaps has gone up. That was a few years 

ago. The official number usually is a mere shadow of what the real 

number is. 
16 

And I am wondering, has anybody looked at the health consequences attributable to this outrageous worker rights abuse network in the PRC? 

Mr. KERNAGHAN. Just from the little research we did with the 

VTech company, they did not pay social security benefits to the 

workers for at least the first six to eight months. So you are talking 

about $8 to $12 million went into the pocket of the company by not 

paying for social security, which would cover work injury insurance 

and some medical insurance. 

When they force the workers, what they do at VTech is they keep 

one month’s back wages. So, for example, your wages at the end 

of June will not be paid until July 31. Well, that is the way they 

keep the workers in the factory, because the worker tries to leave 

these miserable conditions, they will lose a whole month’s worth of 

wages. 

So they have them, and it is all manipulation. And, no, again, 

just concretely, in VTech, there was absolutely no knowledge of the 

thinners that they were using and what was affecting them. All 

they knew is they got paid an extra, like, 10 cents if they did the 

dangerous work, if they worked at night, and they worked with the 

thinners. But I think the AFL–CIO would know a lot more. 

Chairman SMITH. Mr. Li? 

Mr. LI. I would like to add one thing, and that is most of these 

workers work under very strenuous conditions and a lot of them 

work for only a few years before they have to leave. And when they 

do leave, they are not fairly compensated by their employers. 

Chairman SMITH. Can I ask you, how integrated is the laogai 

system and its use of gulag labor with feeders and supply chains 

in China? 

Right after Tiananmen Square, Congressman Frank Wolf and I 

visited Beijing Prison No. 1, where jelly shoes and socks were being 

made for export. We saw factory workers’ heads shaved, very 

gaunt, and at least 40 Tiananmen Square activists in large vats 

with dye all over their bodies. Obviously, the dye is penetrating 

their skin and being absorbed into their systems. 

And we complained to the Administration that we knew, because 

we brought back the socks and the jelly shoes, that were being 

made by convict labor, including political prisoners, and it was 

showing up on our shores. An import ban was imposed and that 

place shut down, although I am sure they just relocated. 

We have a memorandum of understanding that I believe is not 

worth the paper it is printed on. It is like Swiss cheese—with exceptions, big holes—which says that if we suspect gulag-made 

goods, we tell the Chinese and then they do the investigation and 

tell us what they found. That is like telling the drug dealer that 

you are going to do a drug bust or you are going to be looking at 

a certain location for illegal drugs. 

It is absurd, and yet that is our policy. But my question goes to 

the heart of, how integrated are these feeder parts that end up perhaps in something that is being produced by those 10 factories. Do 

they have any convict labor? 

We know that all throughout Africa, we have grave suspicions 

that convict labor is being exported to build roads and bridges and 

buildings throughout Africa. 
17 

So how integrated is it, Mr. Wu? 

Mr. WU. In the 1990s, American Customs Service issued more 

than 30 of those products for import to the United States, and five 

to six American companies were sued by American Customs and 

went to the court. But you never heard anything from Customs 

Service in 2000 and even today. 

I just do not know why. Have the Chinese really stopped prisonmade products for exportation? Actually, they are very busy. All 

the prisoners are working overtime. For example, in Shandong 

Province, you are working 13 hours a day today. And in Guangdong 

Province, all the prison camps right now are almost—they transferred farming into working indoors making garments. Where are 

the garments, only for domestic? No, they are for export. 

So the national trading companies sell it to Americans or the 

company and they indirectly sell it, that is it. But anyway, if the 

product partially or wholly is made by the prisoners, it is illegal. 

So I want to say these are the kind of things that today, the American Customs Service really cares or does not care. 

For this insurance process and training program and workers’ 

rights, I think basically there is one point. The workers do not have 

the rights for association or for free speech. This is the problem. 

Thank you. 

Chairman SMITH. Mr. Li, in your testimony about the 10 factories that were investigated, you point out that most of the factory 

workers are young females. 

In a hearing here in this room just a few months ago, we heard 

from a woman who had been forcibly aborted because the enforcement of the one-child-per-couple policy is done at the factory level. 

I am wondering if you or perhaps any of our other witnesses 

have looked into U.S. corporations’ complicity in that barbaric policy that relies on forced abortion to implement its one-child-percouple policy. 

Have you looked into that? And before you answer, on one trip 

to Beijing, I met with the U.S. Chamber of Commerce in Beijing 

and asked that question, and only one corporate head or government person who was in that room said they insisted that the language to enforce that barbaric policy was taken out of their contract. 

Do you find that that is the case here? Are these women—this 

woman who testified told us that one of her factory workers noticed 

that she was pregnant and informed on her. And so informants 

who comply with that policy, we are told, are commonplace. 

Did you find this in any of these factories or did you even look 

for it? 

Mr. LI. Well, I did not—we did not come across things like that 

in our investigations. 

Chairman SMITH. But did you look for it? Did you inquire? 

Mr. WU. I got information, in Hunan Province, there is more 

than 1,100 high school teachers fired because of violating the socalled population control. 

Chairman SMITH. In Hunan. 

Mr. WU. 1,100 in Hunan Province, because by law, if you violate 

the population control, you definitely were fired. 

Chairman SMITH. Mr. Li? 
18 

Mr. LI. This would be something that we will be looking into. 

Chairman SMITH. I appreciate that very much. 

We recently had Nicholas Eberstadt testify here from AEI [American Enterprise Institute]—and this will be my next to last question—and he said China has to grapple with a coming implosion 

economically and otherwise, because of its increasingly male population because of the one-child policy—they are missing about 100 

million girls, the numbers vary on both sides of that equation, and 

an increasingly older population, as he said, increasingly male and 

increasingly gray. 

Does that have any impact on the push by these courageous activists who are trying to form labor unions? As I said before—and 

I have met some of them inside of Beijing—they are amazing. They 

want to form labor unions, and they are willing to take the consequences. 

But China will soon face, I believe, a huge economic upheaval directly attributable to the missing girls and the senior population 

that will soon be almost the equivalent of the number of people 

that are working. 

How will that affect labor rights? This is a mega-trend we are 

talking about. 

Mr. WU. China has a national policy, so-called population control. 

That very clearly is the number-one policy. It means above all the 

other policies. So if the local Communist secretary cannot care 

about the policy, he will be fired. 

So this is the number-one policy, and the population control policy until today, they say, ‘‘Well, we reduce probably 400 million 

population.’’ And this is a large number and this number is confirmed by the Chinese Government. And I really hope this serious 

problem is related to the workers’ rights. 

Thank you. 

Chairman SMITH. Mr. Kernaghan, on child labor, do you find 

that China is using more children or less? Is there a trend line that 

is positive at all, because, obviously, worker rights are non-existent 

for everyone else, but they are certainly even worse for them? 

Mr. KERNAGHAN. I think that one thing that is maybe changing 

slightly would be the child labor, because that is the one thing that 

U.S. companies are afraid of. So in some ways, the workers—just 

an hour of experience when we were doing this work, it seems to 

have gone down significantly, but that is just anecdotal information 

from the few factories we have been able to investigate. So they 

may know much more. 

Mr. LI. In our investigations, we did come across child laborers, 

and their products are sold into the United States. And in our latest investigations, we, by the same token, came across child laborers. 

When plants and factories are running shortages of labor, they 

would definitely hire child laborers in order to fill their orders from 

the United States. 

Chairman SMITH. Let me ask the final question, Mr. Li. Did you 

convey your findings to the U.S. Labor Department and U.S. Department of State, with regard to Apple and, if so, what was their 

response? Did they take this and say—as well as the Human 

Rights Bureau at the U.S. Department of State? 
19 

Mr. LI. I have. We had contacted the U.S. Department of Labor, 

U.S. Customs and Border Protection, and U.S. Department of 

Homeland Security. We sent the report to the officials in the Department of Labor, but did not submit an official report according 

to their procedures. 

Chairman SMITH. How long ago was that? 

Mr. LI. Last year. 

Chairman SMITH. What time last year? 

Mr. LI. In the August-September timeframe. 

Chairman SMITH. And still no word a year later. Did they at 

least enter it on an interim basis, get back to you, and say we 

found this to be credible or not credible? Do you know if our mission in Beijing or our embassy is investigating this? 

Mr. LI. No. I have not heard from them. 

Chairman SMITH. That speaks volumes. 

I thank you so very much and appreciate your insights and your 

testimony. We all do, and it gives us a great basis for going forward. It also helps us with the human rights report that the staff 

is working doggedly on. So thank you so very much. 

I would like to now invite to the witness table Thea Lee, the 

Deputy Chief of Staff of the AFL–CIO, who has also served as a 

policy director and chief international economist. 

Previously, she worked as an international trade economist at 

the Economic Policy Institute in Washington and as an editor at 

Dollars & Sense magazine in Boston. She received her BA from 

Smith College and MA in Economics from the University of Michigan. 

Ms. Lee is co-author of ‘‘A Field Guide to the Global Economy.’’ 

Her research projects include reports on the North American Free 

Trade Agreement, the impact of international trade on U.S. wage 

inequality, and the domestic steel and textile industries. 

She has appeared on a number of TV and radio shows, and she 

has been before the House on many occasions to testify. 

She also serves on advisory committees, including the State Department Advisory Committee on International Economic Policy, 

the Export-Import Bank Advisory Committee, and the board of directors of the National Bureau of Economic Research. 

We will then hear from Mary Gallagher, who is an Associate Professor of Political Science at the University of Michigan, where she 

is also the Director of the Center for Chinese Studies. She is also 

a faculty associate at the Center for Comparative Political Studies 

at the Institute for Social Research. 

Professor Gallagher received her Ph.D. in Politics in 2001 from 

Princeton and her BA from Smith College in 1991. She was a foreign student in China in 1989 at Nanjing University. She also 

taught at the Foreign Affairs College in Beijing from 1996 to 1997. 

She was a Fulbright Research Scholar from 2003 to 2004 at East 

China University of Politics and Law, where she worked on her 

current project, ‘‘The Rule of Law in China: If They Build It, Who 

Will Come,’’ which examines the legal immobilization of Chinese 

workers. 

Her book, ‘‘Contagious Capitalism: Globalization and the Politics 

of Labor in China,’’ was published by Princeton University Press in 

2005. She has published articles in World Politics, Law, and Soci-
20 

ety Review, Studies in Comparative International Development, 

and in Asian Survey. 

She is the co-editor of several new volumes of Chinese Law and 

Politics, including Chinese Justice: Civil Dispute Resolution in Contemporary China and From Iron Rice Bowl to Informationalization: 

Markets, Workers, and the State in a Changing China. 

We will then hear from Mr. Earl Brown, who has represented 

trade unions and employees in U.S. labor and civil rights litigation 

since 1976. Mr. Brown is now Labor and Employment Law Counsel 

for the American Center for International Labor Solidarity, and 

International Workers’ Rights, an NGO affiliated with the U.S. 

labor movement. 

Mr. Brown previously served as General Counsel, International 

Brotherhood of Teamsters, Associate General Counsel, United Mine 

Workers of America, and a partner in a U.S. labor and employment 

law firm. 

He is a fellow of the College of Labor and Employment Lawyers, 

and is union co-chair of the International Labor Law Committee of 

the Labor Law and Employment Law Section of the American Bar 

Association. 

A graduate of Yale University and the University of Virginia 

Law School, Mr. Brown has taught labor, employment, and discrimination law, and labor history at both U.S. and Thai universities, and has published on U.S. and international labor law topics. 

He is a member of the Alabama and District of Columbia Bar Associations and numerous Federal court bars. He served as a law 

clerk to the honorable James C. Turk, Chief Judge, U.S. District 

Court, Western District of Virginia. 

Ms. Lee, if you would proceed. 

STATEMENT OF THEA LEE, DEPUTY CHIEF OF STAFF, AFL–CIO 

Ms. LEE. Thank you, Chairman Smith. I would like to thank you 

and commend you for your leadership on this topic and for holding 

this hearing today. This is an important issue that does not get 

enough attention, in my opinion, both in terms of the economic impact on American workers and American business, and, also, the 

moral issue that is at stake here. 

I will summarize my testimony and go straight to the heart of 

what I think is the issue at hand here, which is how the U.S. Government does or does not use its leverage with respect to the Chinese Government to bring about change. 

The violations of workers’ rights in China are very well documented, including by many of the people who spoke on this panel 

before you just now, as well as the U.S. Government, the State Department, and various nongovernmental organizations. And, yet, so 

little happens, as you say. You and I both have a long history of 

frustration at the inaction on this topic, but I think that change is 

possible. 

As I said in my written testimony, we would like to see our own 

government, both the Administration and the Congress, put protecting workers’ rights at the center of the U.S. and Chinese Government dialogue, not as an afterthought behind other trade and 

foreign policy concerns. 
21 

You asked the first panel whether this has happened or not. 

This, obviously, does not happen. The U.S. Government has several 

formal dialogues with China that happen several times a year, both 

the Strategic and Economic Dialogue and the Joint Commission on 

Commerce and Technology [JCCT]. 

Workers’ rights could easily fall in either one of those areas. 

They are all about trade and they are about the economic relationship between China and the United States. While dialogue is not 

the most powerful way for the U.S. Government to raise the workers’ rights issue, it certainly is the first way. We would think that 

as a starting point, whatever we think about the other stronger 

measures that could and should be taken, the very least that our 

government could do is to shine a spotlight on this issue. 

Yet, when you see the agenda for the Strategic and Economic 

Dialogue, or the JCCT, actually, I think workers’ rights is never 

one of the prime topics. I am often informed by somebody in the 

U.S. Government that, in fact, workers’ rights will be discussed, it 

is just not important enough to actually put on the published agenda. 

The same goes for when many members of the Administration 

visit China and make speeches. There are a lot of issues that come 

to the top, whether it is foreign policy concerns or intellectual property rights concerns or market access concerns. But we very seldom 

hear a top official of the U.S. Government raise workers’ rights, unfortunately, and that goes for both Republican and Democratic administrations. 

Why not? Well, there are a couple of reasons. One is there are 

other priorities, like a burning foreign policy issue or other trade 

issues that are important. The second issue is often that it is irritating to the Chinese Government. That is very likely the case. I 

can believe that it is not welcome to the Chinese Government to 

raise some of these issues around workers’ rights, and, yet, I do not 

believe that that should be the deciding factor for our own government. 

Actually, I think what I would like to say about freedom of association is that, as you heard from the first panel, there are many, 

many, many problems that workers in China face. There is a failure to enforce basic Chinese labor laws, whether it is with respect 

to maximum hours, minimum wage, safety and health, prison 

labor, or child labor. 

But the pivotal worker right is freedom of association and the 

right to organize. And if workers do not have the right to form 

their own associations at the workplace and to bargain for themselves with their employers, free of interference from either their 

government or their employer, nothing else falls into place. And it 

is a cornerstone of democracy and it is a cornerstone of fairness at 

the workplace. 

One of the things that I find interesting and frustrating about 

the way multinational corporations engage in China, and I go into 

this a little bit in my testimony, is that I think you would be hardpressed to find a multinational corporation that would welcome the 

union at the workplace or welcome labor laws that facilitated the 

formation of unions. 
22 

And, yet, many of these multinational corporations are suffering 

in China. They are suffering from a dilemma, and the dilemma is 

that they are in a competitive environment where the labor laws 

are not enforced, unions are illegal, workers are routinely treated 

badly. They cannot get a straight answer from their own auditors 

that they hire, they cannot get a straight answer from their own 

compliance forces that they send out to monitor. They spend millions and millions of dollars monitoring their factories, and, yet, the 

monitors come back with inaccurate, inadequate, lame, untrue reports. 

The answer, actually, is a union. The thing that these multinational corporations are missing is a union, because only a union 

is on the ground every day. It is of the workers, by the workers, 

and for the workers, and that is the only kind of monitor that a 

multinational corporation needs. And, yet, we have this dilemma 

that they resist that with all their might, and I think that is unfortunate. 

The Chinese Government is also facing a dilemma. The dilemma 

that the Chinese Government faces is that it is not a democratic 

government and what it fears above all is loss of political power. 

So giving workers democratic rights at the workplace is contrary 

to the political goal of maintaining power and maintaining autonomy for the Chinese Communist Party. 

So the Chinese Government is also in a bind, because, on the one 

hand, I think the Chinese Government can see that workers need 

more purchasing power, they need more voice. They have a situation which is chaotic right now, where, as you mentioned, there are 

30,000 incidents of labor unrest. You also have worker shortages in 

certain parts of the country, and you also have other governments 

complaining constantly that the Chinese Government runs these 

enormous current account imbalances and that that is taking a toll 

on other countries, it is unfair, and so on and so forth. 

So there is pressure on the Chinese Government to fix these 

issues, and, again, the answer is a union and freedom of association. And, yet, the Chinese Government is not in a position to grant 

freedom of association, because that would threaten its own political power. 

So you have this problem. And how can we solve this problem? 

Well, the U.S. Government could solve this problem because of the 

very trade imbalance that the U.S. Government runs with China, 

which is, as you know, $295 billion a year. 

It is an extraordinary imbalance. It is the source of our weakness. We import much more than we export to China, and that 

costs us jobs and puts us in debt to China, both literally and figuratively. Yet it is also the source of our strength, or it could be if 

the U.S. Government chose to use it, because the truth is that the 

Chinese Government’s economic strategy depends on maintaining 

access to the U.S. market. 

Multinational corporations are very motivated to maintain access 

to the U.S. market from China. And so the U.S. Government has 

something that the multinational corporations and the Chinese 

Government need, which is control over market access. And, yet, 

our government has chosen not to use that. 
23 

So let me just end there, because I am anxious to hear from my 

co-panelists, but to put that on the table as the key thing. You 

raised the issue of the Section 301 workers’ rights case that you cosigned with the AFL–CIO several years ago. This is a tool that is 

in the reach of the U.S. Government, but has been left on the table. 

The tool does not work if you do not use it, if you do not apply 

it. The Bush Administration twice rejected the Section 301 petition 

that the AFL–CIO filed, with your support, and, yet, the U.S. Government could, any day, initiate on its own a Section 301 case to 

bring China to the World Trade Organization, to insist that China 

live up to its own obligations to respect international workers’ 

rights. 

I thank you for your time and attention. I thank you for holding 

the hearing. I look forward to the discussion. 

Chairman SMITH. Thank you. 

Ms. Gallagher? 

[The prepared statement of Ms. Lee appears in the appendix.] 

STATEMENT OF MARY GALLAGHER, ASSOCIATE PROFESSOR 

OF POLITICAL SCIENCE AND DIRECTOR, CENTER FOR CHINESE STUDIES, UNIVERSITY OF MICHIGAN 

Ms. GALLAGHER. Thank you, Chairman Smith. And thank you for 

convening this hearing on this important topic and, also, inviting 

me to participate. 

In the early summer of 2010, more than a dozen workers at 

Foxconn, a Taiwanese-owned electronics conglomerate, committed 

suicide by jumping off the roof of the factory dormitories. 

In the same few months, workers at a Honda automotive parts 

factory went on strike for higher wages and better working conditions. And these events are related, but I want to point out that 

they are also different. 

The Foxconn suicides depict the isolation and alienation that 

young migrant workers feel as they leave their hometowns in rural 

China for industrial or low-level service employment in China’s 

coastal cities. 

The Honda strikers represent a more optimistic trend, the successful collective mobilization of workers and the emergence of 

proto-collective bargaining between labor and management that led 

to significant increases in wages for many automotive workers. 

These events highlight the transformative changes that have occurred in Chinese labor over the past decade, both the negative and 

the positive trends. And while these changes are the result of economic and demographic changes and shifts in China, they are also 

considerable political and legal changes. 

The Chinese state’s motivation for these reforms are grounded 

deeply in its own fear of instability and worker-led political unrest. 

Therefore, these changes are not all in one direction toward greater 

liberalization and rule of law institutionalization. In fact, these 

changes are really more in the other direction. 

Although they include new progressive legal codes to improve 

working conditions, they also include initiatives to strengthen the 

role of the party state to manage labor relations directly. 

In my written testimony, I go through these demographic shifts, 

including the labor shortage that had been mentioned by other 
24 

panelists. China’s working-age population will peak in 2015 and 

fall from 973 million people in 2010 to a predicted 870 million in 

2050. 

The change in China’s demographic trajectory has enlarged the 

political and economic space for Chinese workers as diminishing returns to labor-intensive industrialization and creates domestic political support for changes to China’s economic growth model. 

I think it is important to highlight that in addition to concerns 

about social unrest and inequality, this political shift and greater 

support for labor protection is linked to the government’s economic 

strategy and its long-term economic goals, including increased domestic demand, moving up the production cycle toward higher end 

goods, making China not the workshop of the world, but the laboratory of the world and the R&D center of the world. 

These demographic shifts are then highlighted in the social context of Chinese migrants. The new generation of migrant workers 

is better educated, they come from smaller families, and they desire to become permanent urban citizens. 

Given this generation’s higher levels of education, their better access to technology, the increased integration into urban culture, 

they have a greater potential to articulate collective interests and 

to act collectively to press for their interests and rights. These are 

the employers and the government alike. This was apparent in the 

2010 Honda strikes and has been apparent in strikes since then. 

As I argue in my concluding remarks, however, the government 

has not responded effectively to this new bottom-up push for collective representation. 

In response to these economic and demographic and social 

changes, the Chinese state has moved since 2003 to pass labor laws 

and regulations that strengthen worker rights, enhance employment security, and widen access to social insurance. 

As I show in my written testimony, the law, particularly, the 

Labor Contract Law of 2008, has improved some aspects of employment relations in China. This does not mean that widespread violations do not continue to occur. They do, as other panelists have already attested. 

But there have been some significant shifts in the right direction. 

In the written testimony, I discuss the reduction in informality and 

the increase in access to social insurance, as well as the increasing 

awareness of Chinese workers themselves of their own protections 

and in the labor laws and regulations; and, also, a diminishing gap 

between what a real migrant knows and what an urban worker 

knows. 

Despite these positive changes, one glaring trend is the marked 

increase in labor subcontracting, already discussed by Li Qiang, 

through middlemen employment agencies that then serve as the 

formal employer. This cuts labor costs, allows subcontracted workers to be paid less to receive little or no social insurance, and to 

be dismissed at will. 

The NPC, the National People’s Congress, has announced this 

year that it will revise the Labor Contract Law and focus on abuse 

of labor subcontracting. Labor subcontracting also gets to the issue 

of child labor, since many subcontracted workers are student interns. 
25 

However, successful revision of the Labor Contract Law will not 

be enough to curtail abuse of labor subcontracting. Improved implementation and enforcement of the changes are also required, as 

with all Chinese labor laws. 

Finally, I want to get to the issue—well, it is not quite finally, 

but I first want to get to the issue of labor disputes and talk about 

how these increased expectations by workers at the workplace and 

the new laws has resulted in a massive increase in disputes since 

2008 when the laws went into effect. 

Labor disputes increased by nearly 100 percent nationwide, with 

some localities reporting increases of 300 percent. Disputes tax the 

capability of local arbitration committees and civil courts to settle 

disputes fairly and quickly. 

While the number of strikes is not openly available in China, it 

is safe to say that strike activity has also continued to increase 

since that time. 

In 2010, there were nearly 1.3 million labor disputes overall, 

with 70 percent of the disputes mediated, which shows, also— 

which is my next point—that the government has been successful 

in keeping disputes out of the court and into government-sanctioned mediation. 

Greater reliance on mediation and informal settlement is especially pronounced when labor conflict threatens local, social, or political instability, or when it threatens stability. Those negotiated 

settlements rely on cooperation between intergovernmental departments and Communist Party units, acting as stability preservation 

committees, going directly to the site of the conflict to encourage 

both sides to end the dispute and to compromise. 

Researchers have noted that while individual leaders and activists may be dealt with harshly, striking workers may receive some 

compensation in exchange for ending the strike and returning to 

work. This return to mediation and turn away from the rule of law 

has been roundly criticized by legal scholars and has been discussed at previous hearings held by this Commission. It is not surprising then that we see it also in the labor realm. 

It underscores the Communist Party’s ambivalence toward its recent legal reforms that open up channels for formal legal resolution 

and private disputes. 

While mediation might appear to be more harmonious, it often 

relies on very active government intervention into disputes, violence or the threat of violence to force negotiated settlements, and 

violates the spirit and letter of China’s own procedural codes. 

One challenge revealed that the post-2008 increase in labor conflict that had not been solved by this heavy-handed push of mediation and the new legal protections is the lack of institutional capacity in China for labor capital bargaining around interest disputes. 

The vast majority of the nearly 700,000 labor disputes in 2009 

were rights disputes, violations of Chinese law. However, Chinese 

workers, with their rising expectations, have many disagreements 

and conflicts over their interests, such as wage increases, working 

conditions, and quality of the cafeteria food. 

Interest disputes simmering over a long period of time are likely 

to continue to lead to increased labor conflict in China, because 
26 

there are no institutions in China to handle them preemptively, 

particularly as the government has shown little change in its opposition to freedom of association. 

Reforms to the All-China Federation of Trade Unions, the only 

state-sanctioned trade union, have failed. The trade union remains 

severely constrained in its dual role as representative of labor and 

as the eyes and ears of the local party state at the workplace. 

The failure is a political one. Liberalizing the forums related to 

freedom of association have been rejected. In their place, the government has decided to inject itself more deeply into the dispute 

resolution process through the promotion of government-run mediation and other measures that maintain and even strengthen the 

role of the government in managing labor relations at the expense 

of the rule of law and civil society. 

As with other aspects of China’s political economy since 2008, 

this greater reliance on the state and the empowerment of state actors at the expense of civil society, the market, and the legal system are additional signs of China’s retrenchment and retreatment 

from reform. 

Thank you. I am happy to answer questions. 

Chairman SMITH. Thank you, Professor Gallagher. 

Mr. Brown? 

[The prepared statement of Ms. Gallagher appears in the appendix.] 

STATEMENT OF EARL BROWN, LABOR AND EMPLOYMENT LAW 

COUNSEL AND CHINA PROGRAM DIRECTOR, SOLIDARITY 

CENTER, AFL–CIO 

Mr. BROWN. Thank you, Chairman Smith, for this opportunity. 

I am going to try to be brief and summarize things in my testimony 

and focus on some aspects that have not yet been completely addressed. 

I want to thank the Chair and this Commission for demonstrating continuing interest and attention to Chinese labor law. 

It is a very important topic. We are witnessing right now in Chinese labor law, how Chinese workers have agency. They are becoming actors now in the dialogue about labor policy and labor standards like nowhere else in the world. 

Chinese workers are acting outside an institutional framework 

that works, as Professor Gallagher and others have pointed out, 

outside a true labor relations framework that represents workers, 

addresses grievances, provides for collective bargaining from an 

equal, or at least, a position of some power, and comes up with 

credible solutions that will persuade the workers to go back to 

work. That stable institutional framework is absent. Therefore, 

workers in China, many of them who are, in fact, excluded from 

Chinese labor law, by very crabbed interpretations of Chinese labor 

law, are forging their own direct bargaining relationships with employers. 

Now, I think it is very dangerous to make universal perscriptions 

for any country, particularly a country as huge and diverse as 

China. But, I also do not believe that any industrial country can 

escape the need to have a democratic grassroots voice at the workplace to solve interruptions of production in a vast economy with 
27 

hundreds and hundreds of thousands of employers. No government 

bureaucracy, however adequately funded, could begin to do that. 

These young Chinese workers, completely without the benefit of 

law, in any way, but with a rights-consciousness deriving from 

rights discourse are forging industrial relationships. We can see 

that in the Honda strikes in the summer of 2010. 

So Chinese workers acted and created a collective bargaining relationship. They forced the company to bargain, to throw out the 

stale law books and deal directly face-to-face with grassroots workers to forge solutions. What a novel solution! 

The second aspect I would like to focus on about these workers 

is that the real activists in that strike, about a third of the Honda 

workforce at this particular factory, were interns. Now, in 2008, 

China passed comprehensive labor legislation, not to set up an industrial relations system, but merely to establish some basic rights 

for workers and to cover all workers. 

Professor Gallagher has aptly described in a prior book of hers 

the ad hoc nature of Chinese labor law that made it almost impossible to decide who was covered and what was stipulated. At 

Honda, many of the striking workers were interns. The employer 

took the position, vetted by agencies of the Chinese Government, 

that somehow these interns could not be workers because they are 

from technical schools, although they are receiving no particular 

educational training and are not, indeed, acquiring any particular 

educational benefits. They are simply working on the line. Empirically, they are workers. Yet, because they do not fit some ontological Marxist category of worker, they are deemed ontologically to be 

students and, therefore, not covered by labor law. 

These student workers are a lot of the industrial workforce. They 

make up a third of this factory that struck. A third of the workforce 

of this Honda factory that struck in 2010 were interns. That is a 

sizeable proportion of any workforce. The interns are getting less 

than standard wages. They are working right next to other Chinese 

workers who are getting better wages, and Japanese workers who 

are getting even higher wages. 

Anybody with a glancing acquaintance to human relations or 

common sense would tell you that that is a recipe for labor disputes, yet they are excluded. 

So I think that if we look at the broad thrust of Chinese labor 

law, it is an effort to stage Hamlet without the Prince of Denmark, 

without the union. No auditing system works alone. Factory inspection does not work without unions; no one system will ever work 

in that diverse Chinese economy without including all workers in 

a workable system of industrial dispute resolution to secure uninterrupted production. 

So I think the remedy for this is simply, as many Chinese propose and many Chinese recognize, to start off with what the workers at Honda asked for in 2010—let us elect our grassroots leaders. 

I would now like to move to visualize this. I have three pictures 

here today that I want to show some of the deficits of Chinese labor 

law. They are taken from video feeds, so I could not enlarge them 

too much. 

We have heard people talk about Foxconn, and this here is the 

Foxconn factory. Foxconn is a major supplier of Apple. I do not 
28 

know if you can see here some nets, some very close, dense factory 

dorms and some netting [holds up poster]. This netting is Foxconn’s 

answer, to workers so pressed by speed-up, by intolerable production quotas that we heard Mr. Kernaghan talk about, that they are 

diving to their death from dorm balconies. 

So instead of improving wages, hours, and working conditions or 

even talking to the workers, let us set up some nets. 

The next picture is from a PR extravaganza staged by the 

Foxconn company, a Taiwanese corporation, to turn its bad image 

around. When workers dive out of factory dormitories to their 

death, people tend to have a bad view of it. So Foxconn’s answer: 

‘‘Let’s put on a PR extravaganza.’’ 

We have had a big debate at our office whether some of the people in these pictures [holds up poster] are professional actors or actresses. The signs say ‘‘I love Foxconn.’’ 

And, finally, in an era where we want to get away from the culture of personality, here we have the owner of Foxconn, Mr. Gou, 

and people parading around with homemade—perhaps or perhaps 

not—pictures of himself. 

Now, I bring these pictures to show the conditions and to show 

that workers need a net of protection of labor law and not nets to 

prevent suicide. If you want to equalize trade advantages and a 

global economy that works for all workers in every country, we 

have to pay attention to Chinese labor and we have to pay attention to the agency of Chinese workers. 

And I want to make two very brief final comments. One is there 

is a tendency in the United States to look for substitutes to worker 

voice. Just as Mr. Gou of Foxconn is looking for substitutes, setting 

up nets and PR extravaganzas, so too multinational employers and 

governments who do not want to face the issue of workers agency, 

want to put in mediation techniques instead. Mediation between 

unequals is not always a happy process. 

They want to put in these techniques. But, if you compromise 

and mediate a minimum wage law and the worker walks away 

with a third of the minimum, you have just lowered the minimum 

wage of any country by two-thirds. Techniques do not work without 

context. 

So they are using HR resources, corporate social responsibility 

techniques to avoid the obvious need to simply sit down, recognize 

workers, talk to them and bargain with them. 

Finally, Cochairman Brown asked a question which I want to 

just jump in and answer here, and that is what could Congress legislatively do? One contribution would be to really entrench the due 

diligence requirements for compliance with Chinese and international labor law standards in U.S. law and to make that a hard 

enforceable obligation that directors and corporations had to pay 

attention to. 

It worked with civil rights law. We were a segregated country in 

our workplace. The civil rights laws made employers pay attention 

and desegregate. Entrenching these in U.S. law and in U.S. Federal law, and not shying away from them because they involve conditions overseas, would go a long way. 

A second way to do it and a second element would be the vast 

purchasing power of the U.S. Government and requiring that sup-
29 

ply chains be monitored and inspected, and that representations be 

made by people who subcontract in those supply chains. 

Thank you very much, Chairman Smith. 

[The prepared statement of Mr. Brown appears in the appendix.] 

Chairman SMITH. On that last point, Mr. Brown, the new law 

going into effect in California on supply chains, do you think—and 

virtually every large corporation I would say will be swept up in 

that due diligence standard that they have established—do you 

have hope that these Chinese corporations or those multinationals 

that are in China, that this will lead to some positive outcomes? 

Mr. BROWN. I think it will lead to more information, but it is 

largely a law of transparency. I think we need to go a bit further, 

Chairman Smith, if I may say so, to entrench it as an obligation 

with some financial consequences for employers that violate it, not 

to make it too onerous. 

And in this respect, I would say American lawyers in China are 

insisting that their multinational clients obey Chinese labor law, 

which is a very good thing and helps enforce labor standards. 

But I think insisting that all employers, who sometimes may not 

follow their lawyer’s advice, comply with applicable labor law 

standards would be very important. 

Chairman SMITH. Would a code of conduct—but, obviously, calibrated and focused on China, similar to the MacBride principles for 

Ireland and the Sullivan principles—be helpful in advancing worker rights? 

Ms. LEE. I am not sure it would if it is a voluntary code of conduct. There are two problems with a voluntary code of conduct. One 

is that it is self-enforcing, and in many cases, corporations, as I 

think we have heard some testimony here, do not really want to 

know the truth. They want to get off the hook. They want somebody to report to them that everything is fine so that they are no 

longer to blame for it. 

Chairman SMITH. They are as good as your auditors. 

Ms. LEE. The auditors work for you and they do not want to give 

you news that is unwelcome. But I think the other problem is that 

not every company will sign up to the voluntary code of conduct. 

And so you always have the problem of the bottom feeders, the 

companies that do not have a big brand name that they care about. 

These are the folks who are subcontractors and buy things without 

putting their name on it, and they do not particularly care. If they 

get caught violating their own code or the labor law, they can just 

close down and open up the next day under a different name. 

Chairman SMITH. Let me just ask you. Approximately 155 or 

over 155 students come to the United States and study here from 

China every year. As a matter of fact, it is up—it grew 23 percent 

in one year, and that includes undergraduates and, of course, those 

who go for even higher credentials. 

Do they take back any of this? Is there any evidence that it gets 

to the workplace—maybe they are not to the point of forming a 

union, but in terms of treating people with respect. They go to our 

best business schools. Are they learning that it is not just making 

money and profits, it is also how you treat your workers? Is any 

of that being brought back? 
30 

Mr. BROWN. I co-taught a course at Rutgers in your State, sir, 

for at least 20 Chinese master students in industrial relations. And 

we played an NPR [National Public Radio] documentary that took 

China’s history and included Tiananmen. And I watched these students watch film about Tiananmen for the first time in their life 

and listened to the discussion that came out after that. 

I cannot believe that it does not help and that the interchange 

helps us relate to a very complicated country of China and China 

relate to us. I cannot believe it is harmful in any way. 

Chairman SMITH. I would not say it is harmful, but does it have 

a—— 

Mr. BROWN. I think it has to. 

Chairman SMITH [continuing]. Has anybody ever been able to 

quantify any of it? We know that in the health professions, particularly in places like Africa, those who come here and learn public 

health management and bring those skills back. It has an enormous, almost disproportionately positive influence. 

Ms. GALLAGHER. If we take a longer term perspective, I think 

there have been a lot of improvements related to workplace conditions in China and particularly related to public health, because so 

much more research is being done in China on public health and 

workplace safety. 

But you have to take a very longer term perspective and look 

back to the very beginning of the 1990s when conditions were, I 

would argue, worse than they are today. 

But one of the reasons I think why you see both improving conditions and, also, worsening conditions at the same time even now 

is that these benefits are accruing to workers who have education 

and skills and are industries that have the need for workers with 

education and skills. 

When we are talking about labor-intensive manufacturing that 

really requires workers with very low skills, these are the areas 

where we do not see improvement and, in fact, in some cases, we 

see things getting worse as these factories move inland to poorer 

places in China, with lower standards, with lower wages, and with 

just—even if the government officials had the will, they certainly 

do not have the capacity to enforce the central laws. 

Also, at the same time, you have local governments in China that 

see industry moving to other places, either inland in China or to 

other countries, and they have, again, very little incentive to enforce laws that will hurt their local economy and that will hurt 

themselves professionally. 

Ms. LEE. I think that last point is really important. I think international exchanges are a wonderful thing and they have immeasurable benefits to both countries and in both directions. 

I had an intern from China several years ago and he was actually from a very well-off family, with highly placed parents. But I 

like to think that his summer at the AFL–CIO was a good education for him and that maybe he is the next generation of leader 

in China. 

But on the other hand, you also cannot substitute for change in 

the laws and a change in the institutions. And so having a few 

high-minded or well-intentioned individuals, I think, is definitely 

not enough if you have a competitive system where everybody is 
31 

scraping for that last penny, and the accepted norm is to beat down 

your workers and squeeze the last hour or minute out of their 

work. 

So we need a more systematic answer, as valuable as those exchanges are. 

Chairman SMITH. Honda decided to give in and provide additional wages to the Honda workers. Was that under any corporate 

guidance from its main headquarters or was it a China-specific decision, made inside of China by the Chinese? 

Ms. GALLAGHER. My understanding of what happened with the 

bargaining is that it rose to a very high level within Honda in 

China and that the major negotiations were done by the chairman 

of the joint venture, the assembly joint venture between Honda and 

its Chinese joint venture partner, although I would imagine that 

given that its entire production supply in China was shut down, 

that the Japanese—the officials in Japan for Honda would also 

have a large say in what happened. 

But, again, it really underscored—the Honda strikes underscored 

a lot of different aspects of what is happening in China. They underscored, in particular, the complete failure of the union to do 

anything positive during the negotiations, such that they had to 

draw in very high-level management officials, government officials 

in order to manage the strike, which is the mode of these large conflicts—the mode of resolution for these large conflicts, which is incredibly ad hoc and subject to a lot of abuse. 

Chairman SMITH. You mentioned the conflict resolution, the 

groups that meet, stability preservation committees, you named it, 

I think, or maybe that is the name. But do they take sides? Do 

they go with the management or is there a propensity to be on 

management’s side? Because the worker is, unfortunately, subjected to other kinds of coercion in this society, why not here? 

Ms. GALLAGHER. Well, it is because it is an ad hoc process. It depends on the issue at stake, it depends on the level of conflict and 

violence that has already occurred. It depends on the actors involved. 

Certainly, the fact that Honda is a Japanese company had something to do with the fact that it was so widely publicized in China 

and that the strike was allowed to go on for a long period of time. 

So it allows the government—this kind of resolution system allows the government a lot of discretion in how it chooses to handle 

those. So in some cases, it does come down on the side of workers. 

But in most cases, it comes down on the side of companies. 

But it allows the government a discretion that violates a lot of 

the procedural issues related to disputes. 

Mr. BROWN. One major critique that has been heard here is the 

link of the union to the government. But one of the problems with 

that link is that the link is to the local government. You can bet 

employers have an outsized influence in local government. 

So when the union and then the labor institutions, the mediation 

and arbitration committees meet, I would bet, but I do not have the 

empirical data to back it up, but I would bet, as a labor lawyer, 

the universal rule is that the local government is not your friend 

if you are a trade union. For obvious reasons—unions up the costs 

of going in there and set a floor and resist the race to the bottom. 
32 

So these many mediation projects are designed to get rid of these 

disputes. I think, at this point, the Chinese Government has made 

a bet that they can disaggregate and manipulate industrial unrest 

and avoid the need to have autonomous unions, and I think, over 

time, that this will not work. 

Chairman SMITH. Professor Gallagher, you pointed out that the 

Labor Contract Law would be revised this year with a focus on 

labor subcontracting, and you gave that number of 10 to 28 million—estimates, I should say—of workers who are subcontracted. 

Is there any breakout into what industries where that is more 

likely to happen? And do the people who really put together these 

policies at the National People’s Congress, do they take inputs from 

the ILO, do they take it from the United States, do they—I mean, 

how do they form their view of what these reforms should look 

like? 

Ms. GALLAGHER. With the Labor Contract Law, even when it was 

first passed in 2007, there was a wide—there was wide input received from domestic actors, international actors, the ILO [International Labour Organization], certainly, business associations, 

both the American Chamber of Commerce, the U.S.-China Council. 

And in the revisions, the revisions are also relatively public, 

more transparent than they had been in the past, and so these actors are, again, allowed to comment or to submit suggestions to 

how this law should be revised. 

The interesting aspect of labor subcontracting which would make 

it very difficult for the law to be revised successfully is that although we see labor subcontracting of labor-intensive manufacturing, we see student interns in Honda and other places, labor 

subcontracting is used very widely by state-owned enterprises, by 

government units, by hospitals, by universities in China. 

It has simply run amok and the government’s attempt to revise 

it will really threaten some very important interests within the 

government and within the state sector itself. 

Chairman SMITH. Ms. Lee, if I could ask you. Does the AFL–CIO 

contemplate asking the U.S. Trade Representative to initiate an investigation of worker violations, worker rights violations as an unfair trading practice? 

Ms. LEE. Thank you for the question, Mr. Chairman. We actually 

have been contemplating it and we have been working with folks 

to update the Section 301 case that we filed several years ago. 

It has been a little bit slower process than we would have liked. 

We have raised this issue a lot in our dialogue with the U.S. Government, whether it is at the U.S. Trade Representative’s office or 

the State Department or the Labor Department. 

But we have been frustrated by the failure of our own government to raise this issue in a bilateral context, in an effective way, 

and to move forward on it. 

And given that frustration, I think the next step is logically to 

press for some more concrete trade action. 

Chairman SMITH. I appreciate that. Please count on me to support that in any way. And I appreciated you including me as a part 

of that complaint or request, whatever it might be called, last time. 

Do you know if it was raised, worker rights, in the most recent, 

just concluded, U.S.-China dialogue on human rights, commenced 
33 

by Michael Posner, our Assistant Secretary for Democracy, Labor 

and Human Rights? 

Ms. GALLAGHER. I am not sure, but there has been a worker 

rights component and it has been fairly narrow. I think that there 

has been an attempt on the part of the U.S. Government not to put 

on the table issues that are too irritating or challenging to the Chinese Government, and that is how they got agreement to keep 

meeting over and over again. 

So that, for example, they do not talk about freedom of association. They have not really talked about collective bargaining. They 

do talk about hours and I think they certainly do talk about safety 

and health. As you mentioned, the memoranda of understanding 

from several years ago, those are sort of these safer areas of discussion. 

But as I said, the pivotal, the core worker right on freedom of 

association, I think, is a little bit too threatening to the Chinese 

Government. So to my knowledge, it has not been raised yet. 

Chairman SMITH. Would any of you like to make any concluding 

remarks? 

Ms. GALLAGHER. Just in relation to this issue, I think in regard 

to the human rights dialogue, it is my understanding that they do 

raise—at last when I had meetings with them earlier, not for this 

most recent one, but that there was a discussion of collective bargaining and collective negotiations, maybe not directly about freedom of association. 

The Chinese Government has talked a lot about collective bargaining and negotiations and reviving certain practices, but never 

with the intention to allow that to occur with unions that have 

been independently established. 

So most people who study this are quite pessimistic about freedom of association. But, again, I would say that the U.S. Government should not shy away from raising that issue. I think what we 

have seen with this kind of institutional vacuum, this lack of capacity to solve disputes before they become strikes is a sign that 

China’s current situation is not tenable over the long period of 

time, and that some kind of independent organizations—maybe 

they will not be called unions for a while—are necessary in order 

to reduce the degree of conflict that is currently. 

Mr. BROWN. I would only like to sweep in within the embrace of 

freedom of association grassroots worker centers and grassroots 

worker rights advocacy networks that are springing up all over 

China and are being forced under the umbrella of the official trade 

union. Many people fear just for control and suppression. If it is 

important that the U.S. civil society attempt to keep up a discussion with these Chinese grassroots civil society elements that are 

worker voice, as well. 

Chairman SMITH. I do have one final question. Do we have any 

indication that the Obama Administration has picked or raised individual cases of labor union activists who are currently incarcerated, and that means torture, by definition? 

Is it on a list that we are saying we want so-and-so to be released? They should not be in jail simply because they wanted a 

labor union. 

Mr. BROWN. I do not think so. 
34 

Chairman SMITH. I appreciate that. 

Thank you so very much for your very detailed testimony and information. It certainly helps our Commission do a better job, and 

your recommendations will be very helpful going forward. 

So thank you so much. The hearing is adjourned. 

[Whereupon, at 4:34 p.m. the meeting was concluded.] 
(35) 

A P P E N D I X 
36 

PREPARED STATEMENTS

PREPARED STATEMENT OF CHARLES KERNAGHAN

JULY 31, 2012

CHINA’S WORKERS STRIPPED OF THEIR RIGHTS AND LOCKED IN A RACE TO THE

BOTTOM

I want to thank you for the opportunity to testify regarding worker rights before 

this important public hearing of the Congressional-Executive Commission on China. 

I. AS OF 2008, PHONES ARE NO LONGER MADE IN AMERICA

The reason is simple. The mean hourly wage for telecommunications workers in 

the U.S. is $16.85 an hour, which is 151/2 times higher than what VTech pays its 

phone workers in China. VTech pays just $1.09 an hour, which is well below subsistence level, and the workers have precious few if any legal rights. 

VTech is the world’s largest manufacturer of cordless phones and is the leading 

supplier of corded and cordless phones in North America. VTech produces goods for 

AT&T, Motorola, Philips, Deutsche Telekom and Telstra in Australia. Vtech, which 

makes 172,800 products a day, posted revenues of $1.785 billion in fiscal year 2012. 

What I hope to do today is to put a human face on the workers at VTech in China. 

Suppose your daughter worked at VTech. She would work 12 to 15 hours a day, 

from 7:30 a.m. to 7:30 or 10:30 p.m., six and seven days a week. She would be at 

the factory 70 to 85 hours a week, while working 63 to 77 hours, including 23 to 

37 hours of mandatory overtime. This would exceed China’s legal limit on permissible overtime by 178 to 345 percent. 

Your daughter would be forced to stand for the entire shift. Her feet would swell 

up. 

The production line never stops. Every 11.25 seconds a circuit board moves down 

the assembly line and each worker must plug in four to five parts. The workers have 

to complete one operation every 2.25 to 2.8 seconds, producing up to 1,600 operations an hour, 17,600 operations during the 11-hour shift and 105,000 operations 

a week. The pace is furious, mind-numbing and exhausting. Workers who fail to 

reach their production goals are forced to keep working without pay until the goal 

is met. 

Workers say they feel like they are in prison, as security guards patrol the lines 

as if they were police, sometime beating the workers. Workers are body-searched on 

the way in and out of the factory. 

Bathroom breaks are strictly monitored. According to the workers, the factory cafeteria food is ‘‘awful.’’ Indeed, pictures smuggled out of the factory show coarse yellow rice and visibly rotten potatoes being served. 

Eight workers are housed in each primitive dorm room. They sleep on narrow plywood bunk beds, often without mattresses. ‘‘It’s filthy, like living in a pigsty,’’ workers told us. To wash, workers must fetch hot water in small plastic buckets to 

splash on themselves. 

Management hands out ‘‘Employee Criminal Records’’ to punish workers who 

make a mistake on the production line, which can lead to 29 hours wages being 

docked from their pay. 

Workers are instructed to spy on one another. ‘‘Those who report others’ mistakes 

would be rewarded monetarily.’’ 

One young woman told us: ‘‘Sometimes I want to die. I work like hell every day 

for such a dull life. I can’t find a reason to live. Given that living is so tiring, seeking 

death might not be a silly thing!’’ 

After just one month of work, on December 27, 2009, a 20-year-old young man 

jumped to his death from his 6th floor dormitory. His supervisor had constantly 

scolded him. 

On January 20, 2010, a young woman took an overdose of sleeping pills, as she 

could no longer stand the abuse. 

Conditions are so miserable for the over 30,000 workers at VTech’s three factories 

in Dongguan, that 80 percent of them try to flee VTech each year. To keep the workers from fleeing, management withholds one month’s back wages, including overtime. Instead of being paid at the end of June, for example, VTech withholds June 

wages until July 31. Workers can leave when they want, but they will lose a full 

month’s wages. 
37 

VTech management also cheats their workers of the legal social security benefits 

due them, and in the process pockets millions of dollars owed the workers. 

Since there is no avenue for the workers to voice their grievances publicly, they 

write down their hatred and anger on the bathroom walls. 

The so-called All-China Federation of Trade Unions is moribund and does nothing 

to represent the workers or lead the workers to fight for their rights. 

II. SOME GOOD NEWS–IMPROVEMENTS ARE BEING MADE AT VTECH

Most of the major customers at VTech—Philips, Motorola, Deutsche Telekom and 

Telstra in Australia—have conducted in-depth on-site audits over the last several 

weeks at VTech and have confirmed many of the serious violations the Institute documented. 

VTech is now responding to the audit recommendations and is working on its remediation plan to improve working conditions at the company’s three plants in 

China. The corporate customers along with VTech are in agreement that concrete, 

positive changes must be made. 

The Sustainable Trade Initiative’s Electronics Program, which is funded by the 

government of the Netherlands, along with private partners Philips, Hewlett-Packard and Dell, is attempting to go beyond traditional audits. Their goal is to build 

worker capacity and involvement so as to improve worker-management communications in China’s factories. Their belief is that only when a worker-management dialogue is in place can a company work on improving labor conditions. Philips has 

asked VTech to join the Sustainable Trade Initiative. 

The United States Government and corporations should consider partnering with 

the Sustainable Trade Initiative. 

III. RIGHT NOW, THROUGHOUT GUANGDONG PROVINCE, LOCAL CHINESE GOVERNMENT

AUTHORITIES AND POLICE HAVE LAUNCHED A WITCH HUNT TO SUPPRESS INDEPENDENT LABOR RIGHTS NGOS

Independent non-governmental labor rights organizations are being spied on. 

Local authorities are shutting down these NGOs, forcing them to leave, tearing up 

rental leases, while cutting off their water and electricity. After local government 

authorities visit the landlords, the NGOs find out they now have no lease and must 

move immediately. 

We have always been aware that the Government of China has its own way of 

operating, which is often outside the margins of international law. But this is an 

ominous development, which will only further weaken and disenfranchise China’s 

workers. 

IV. A HUMAN AND LABOUR RIGHTS LEADER IN CHINA HAS REQUESTED THAT HIS STATEMENT BE INTRODUCED AT THE HEARINGS OF THE CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA

‘‘The deprivation of the freedom of association severely infringes the basic freedom of the Chinese people, making the working class lose its ability to bargain 

with employers. This is beneficial for the government because they make production costs low and retain strong competitiveness in the world. This harms the 

rights of not only Chinese workers but also workers around the world. 

‘‘We think opposing the current autocratic regime in China and encouraging 

transformation toward democracy conform to the benefits of Chinese workers and 

all human beings. This we call upon all justice countries around the world, especially the United States, to oppose the Chinese Government—a government that 

suppresses a demand for democracy from its people. Ask the Chinese Government 

to protect human rights; grant its people freedom of association; let workers organize unions freely. In the meantime, [the U.S. Government] should boycott sweatshop products from China and broaden support for grassroots organizations in 

China and American organizations that deal with labor issues in China. We oppose sacrificing human rights in exchange of short-term economic gains. This is 

not only harmful for the improvements of working conditions in China but also 

unfavorable in terms of long-term interests for these countries. Also, [the U.S. 

Government] should pressure the Chinese Government to grant Chinese workers 

a right to strike, freedom for association and press freedom, letting Chinese 

workers freely express their demands.’’ 
38 

V. ONLY ENFORCEABLE LAWS, BACKED UP BY SANCTIONS, CAN PROTECT WORKERS’ 

LEGAL RIGHTS AND END THE RACE TO THE BOTTOM IN THE GLOBAL ECONOMY

On January 23, 2007, then-Senator Byron Dorgan of North Dakota along with 25 

co-sponsors including Senators Sherrod Brown, Lindsey Graham and then-Senators 

Barak Obama, Joe Biden and Hillary Clinton, introduced the Decent Working Conditions and Fair Competition Act (S. 367) which when passed will amend the Tariff 

Act of 1930 to prohibit the import, export or sale of sweatshop goods in the U.S. 

On April 23, 2007, Representatives Michael Michaud of Maine and Chris Smith 

of New Jersey, along with 175 co-sponsors introduced the companion bill (HR 1992) 

in the House. 

I want to especially thank both the chairman of this Commission, Representative 

Chris Smith, and co-chair, Senator Sherrod Brown, for your leadership and commitment to introduce the Decent Working Conditions and Fair Competition Act in 2007. 

Workers must have at least the same legal protections as are currently afforded 

to corporate products. 

Seventy-five percent of Americans agree, according to a Harris Poll in June 2006. 

‘‘We keep hearing now, from just about everywhere, ‘monitoring doesn’t work,’ 

said U.N. expert John Ruggie. ‘Just about everybody, at least off the record, will 

tell you that monitoring of suppliers factories doesn’t work because people 

cheat.’ ’’ 

—Women’s Wear Daily, June 4, 2009 

Multinational corporations have demanded and won all sorts of laws in the global 

economy—intellectual property and copyright laws, backed up by sanctions—to defend their corporate trademarks and products. But there are no similar laws to protect the rights of the human beings who made the product. Indeed, corporations 

claim that extending protections similar to those currently afforded products to defend the rights of human beings would be an impediment to free trade! So, as things 

stand now in the global economy, the corporate trademark is protected, but not the 

rights of the worker. 

The Decent Working Conditions and Fair Competition Act is largely based on the 

Dog and Cat Protection Act of 2000, which prohibits the import, export or sale of 

dog and cat fur in the U.S. The Dog and Cat Protection Act was passed in response 

to public outcry over the fact that the Burlington Coat Factory jackets were being 

made in China with dog and cat fur on the collars. The bill was passed by the House 

by an overwhelming 411 votes and was approved unanimously in the Senate. Congress has shown their commitment to animal rights with the passage of the Dog 

and Cat Protection Act. It is time for us to let our Congress members know that 

we expect them to show equal commitment to human rights with the passage of the 

Decent Working Conditions and Fair Competition Act. 

SUPPLEMENTARY MATERIALS (SEE BELOW)

(1.) ‘‘VTech Sweatshop in China’’; AT&T, Motorola and Wal-Mart and others Endorse the China Model,’’ Institute, June 20, 2012 

(2.) Update/Response: ‘‘VTech is Not ‘A Responsible and Caring Employer’,’’ Institute, July 12, 2012 

(3.) Independent Worker Rights NGO’s under Attack in China, Institute, July 28, 

2012 

(4.) ‘‘Decent Working Conditions and Fair Competition Act’’ to legally protect local 

and internationally recognized worker rights standards. (House Bill HR 1992; Senate Bill S.367) 
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PREPARED STATEMENT OF LI QIANG

JULY 31, 2012

I appreciate the opportunity to speak before the commission today. My testimony 

is informed by 20 years of experience with advancing labor rights for Chinese workers, first as a worker and activist in China and since 2000 as director of China 

Labor Watch. Over the past dozen years, China Labor Watch has conducted a series 

of comprehensive assessments of a wide range of factories in China, relying on researchers based there as well as in the United States. In May 2000, the U.S. Congress debated giving China permanent normal trade relations (PNTR) status. I testified before Congress then and said that Chinese workers work like machines and 

that trade cannot be viewed simply in its own right, but that it is intimately linked 

to issues of human rights. So initiatives that facilitate trade need to be accompanied 

by efforts that advance worker rights. Clearly, voices like mine did not win out at 

that time. Let us hope that this hearing helps lead to the right approach. 

Today, I will cover three major issues. 
109 

First, today, a full 11 years since China joined the WTO, labor conditions in Chinese factories remain unacceptably harsh, with long hours, low pay, and severe conditions in the norm. Here I will highlight the findings of our new report on 10 of 

Apple’s suppliers in China. 

Second, the main response from multinational corporations to these severe working conditions has been the establishment of supplier auditing systems. These systems, however, contain serious defects, including what is apparently rampant corruption, thereby leading at best to marginal improvements in working conditions. 

Third, substantial advances in labor conditions in China are far more likely to 

occur only if two things happen: the multinational corporations operating there 

must push for appropriate improvements and, additionally, the Chinese government 

will have to take a more aggressive role in enforcing its own labor laws. Companies 

such as Apple have the resources and influence to assure that necessary changes 

are made. Consequently, it is imperative, to encourage these companies to act as 

responsible corporate citizens. 

I. THE LABOR CONDITIONS

Over this past year the worldwide media has directed particular attention to the 

working conditions at the Apple supplier Foxconn. This attention, culminating in 

high-profile stories in major papers, has its basis in reports about abusive working 

conditions dating back to 2006 as well as in the tragic events of 2010, when 13 

workers committed suicide by jumping to their death out of Foxconn dormitories in 

China. My organization has just released a 135-page analysis of working conditions 

at Foxconn and nine other Apple suppliers in China. We found that Foxconn is 

hardly an exception, as deplorable working conditions characterize all the factories 

examined, with conditions often even worse than those uncovered at Foxconn. 

Specifically, the report found the following problems to be common in the ten factories: 

1. Excessive Overtime: The average overtime in most of the factories was between 100 and 130 hours per month, and rising to as high as 150 to 180 hours 

per month during peak production season. These figures are well above China’s 

legal limits. 

2. In most factories, workers generally work 11 hours every day, including 

weekends and holidays during peak seasons. Frequently they are permitted to 

take just one day off every month, while in the peak seasons employees may 

go as long as several months without even one day of rest. (Under China’s labor 

law, the official working hours are 8 hours/day and 36 hours/month for overtime 

hours, but the workers in the factories examined now typically work as much 

as a shocking 150–180 hours overtime each month.) 

3. Low wages compel workers to accept long overtime hours. Most of the factories pay a basic salary equal to the minimum wage stipulated by the local law 

(around $200/month), a rate that is so low that workers have to work long hours 

simply in order to support a bare livelihood for themselves. 

4. Workers are exposed to a variety of dangerous working conditions. Workers 

in all the factories reported safety concerns such as metal dust and hazardous 

working environments. 

5. All too often, workers find the food offered in the factory cafeterias unsanitary. Besides that, their housing conditions are frequently overcrowded, dirty, 

and lacking in facilities. 

6. Most factory workers are young females who are not familiar with unions 

and their functions. Nor are they aware of their legal rights under Chinese 

labor laws. They have little ability to push for reasonable working conditions. 

7. Some factories do not pay for workers’ social insurance, work injury insurance, and other insurance required by law. 

The Riteng factory stands out for its particularly poor working conditions, even 

in comparison to Foxconn. On average the 20,000 Riteng workers are on the job 

nearly 12 hours a day, compared to 10 hours a day at the Foxconn factory. The 

Riteng workers get only about one day of rest each month. Their overtime hours 

dwarf those of the Foxconn workers, which themselves are well above the legal limit 

set in China. For Riteng workers, the average hourly wage is 8.2 RMB or $1.30, 

well below the still-meager average hourly wage of Foxconn workers of 10.2 RMB 

or $1.62. A full half of Riteng workers rated its safety and health as ‘bad’ compared 

to just 2% of workers giving this rating to the Foxconn factory. 

Serious problem of Labor Dispatching has been overlooked by Apple 

Labor dispatch companies are employment intermediaries similar to temporary 

employment agencies in the United States. Whereas workers typically enter into a 
110 

contractual relationship directly with their employer, labor dispatching introduces 

a third-party into the arrangement. Workers are contractually obligated to their dispatching company, and the company sends its workers to work in factories on an 

as-needed basis. Factories have no formal relationship with the dispatched workers 

and can send them back to their dispatch companies at any time. 

Our research revealed that Apple’s Social Responsibility Reports have entirely neglected the fundamental problems caused by the prevalent use of dispatched labor 

in Apple’s supply chain. Except for Foxconn in its Shenzhen operations, which 

transferred all dispatched workers to direct-hire status in 2011, all of the other factories investigated overused dispatched labor, including the Jabil factory in 

Shenzhen where dispatched labor made up almost 70% of the workforce. The use 

of dispatched labor creates a series of problems for workers, as listed below: 

1. Factories can use dispatched labor to employ people short-term without 

having to pay severance compensation. 

2. Factories can use dispatched labor to shift responsibility for worker injuries 

onto another party. 

3. Factories can use dispatched labor to prevent workers from organizing into 

unions or establishing democratic management systems. 

4. Factories can reduce other forms of worker compensation, and thus their 

labor costs, by hiring dispatched labor. For instance, when companies do contribute to social insurance programs for dispatched workers, they pay a smaller 

percentage of the wage bill to insurance companies or sometimes do not sign 

workers up at all. Such practices mean that employers’ labor costs can be reduced by 10% to 15%. 

5. Dispatched workers have no limitation on the amount of overtime that they 

work. Some have to work more than 150 hours of overtime every month, exceeding the 36 hours per month allowed under Chinese law. 

6. Dispatched workers often have to pay sizable fees to the dispatching agency. 

In short, our study shows that 11 years after China joined the WTO, labor right 

violations are rampant in the factories supplying one of the largest companies of the 

world. Beyond this study, the available evidence indicates that labor rights violations are also common in Chinese factories that supply companies like HP, Dell, and 

Samsung, where the conditions may be even worse than they are at Apple’s suppliers. 

II. THE PROBLEMATIC AUDITING SYSTEM

To improve labor rights in China, beyond exerting pressure on the Chinese government, it is appropriate and critical to demand change from the multinational corporations themselves, a method that has borne fruit in the past. For instance, under 

pressure from negative media coverage, Apple requested that the Fair Labor Association investigate Foxconn, and subsequently said it would implement the report’s 

recommendations (the verdict is out on whether Apple will fulfill this promise). 

Nonetheless, the central mechanism currently deployed by multinational corporations to advance labor rights is fundamentally flawed. Corporations will usually 

audit a factory, then call for the factory to meet its social responsibility standard, 

before placing an order there. In China, there were more than 100,000 audits of at 

least 30,000 factories last year. When labor rights organizations criticize the supplier factories of those multinational corporations, the corporations typically respond 

that they are addressing any deficient conditions through their auditing process. Yet 

over the past ten years the audits have produced little if any changes or improvements in labor conditions. 

There are efficacy issues in those doing the auditing, and even serious corruption 

in the execution of audits. For example, an accurate audit could require a factory 

to spend tens of thousands of dollars to increase its workers’ wages or to buy safe 

equipment, in order to satisfy the social responsibility standard of multinational corporations. However, bribing an auditor to give the factory high marks may cost only 

a few thousand dollars. After the bribe yields an excellent report on that factory, 

a corporation could satisfy its public critics, and the Chinese factory would get its 

usual orders. 

China Labor Watch has itself found strong evidence of corruption in the auditing 

process, a discovery that led to positive results. After one of our reports about corruption in the auditing system, in 2010 an auditing company laid off two thirds of 

its auditors of social responsibility Department (around 300) in China. Also, the 

problem that toys manufactured in China too often contain lead in part reflects defi-
111 

1This piece of news mentioned how rampant corruption is undermining safety standards in 

mainland China’s toy factories.http://www.asianews.it/news-en/Chinese-toys-tainted-by-lead-ormade-by-child-labour-18907.html 2The ICTI program is primarily for the toy industry and a cancelled certification precludes 

purchases in the toy industry, but it does not preclude other retailers from purchasing from the 

factory. 

cient auditing of the safety of toy factories,1 as those toys were exported to the U.S. 

after they passed the quality audits from the auditing companies. 

The experience of China Labor Watch in fighting against audit corruption in 

China illustrates the problems with the audit process. 

In 2009, the International Council of Toy Industries authorized Intertek to audit 

the Hang Fat factories in Dongguan. ICTI CARE PROCESS, as its name suggests, 

is a toy industry association. More than 75% of the exported toys produced in China 

have to pass its social responsibility audit. The international corporations will only 

place orders from factories passing their audit. 

Intertek is a large multinational corporation with more than 30,000 employees 

around the world. It helps other multinational corporations conduct social responsibility and safety audits in industries like toys, electronics, garment, sporting and 

automobiles. It has branches and offices in the United States, China and Hong 

Kong. Intertek’s clients include ConocoPhillips, Costco Wholesale, the Gap and 

many others. 

According to China Labor Watch’s informant, the Hang Fat factory paid Intertek’s 

auditor $3,100 so that that plant could pass the audit. We reported the bribery to 

Intertek and ICTI CARE PROCESS. ICTI CARE PROCESS rechecked the audit result and found that the factory had in fact fraudulently reported its working hours 

and salaries. ICTI CARE PROCESS then cancelled the certification of the factory.2

The factory employed about 200 workers during the low season and 500 workers 

during the peak season. ICTI CARE PROCESS’s own study found that every worker 

lost $20 per month due to the defective audit of Intertek. If we use the number of 

workers in the low season, the monthly salary loss for the 200 workers is $4,000 

and the yearly loss is $48,000. It cost the factory a mere $3,100 to pass the audit 

by bribing the auditor. So if the factory had not been caught it would have saved 

at least $45,000 by bribing the auditor. 

We found nine questionable audits like the Hang Fat factory audit. Given that 

we are only a small NGO that can investigate just a modest number of factories, 

we believe there are many more questionable audits conducted by Intertek. 

After we reported the dishonest audit result to the ICTI CARE PROCESS, 

Intertek published the identity of our informant in its Compliance Newsletter. He 

and his family subsequently received a death threat. 

As a famous international audit company, Intertek claims that integrity, transparency, and accountability are its core values. However, its description of the case 

is troublesome. Everything in the Newsletter was technically true, but the story 

given there omitted some key facts. It did not mention that its audit was voided 

by ICTI CARE PROCESS. Intertek also concealed the fact that its auditors violated 

the confidentiality agreement with our informant and put his life in danger. 

Intertek’s version of the events The Truth 

Intertek omitted that CLW reported the 

corruption case to ICTI CARE PROCESS.

March 4th, 2010, CLW reported the 

audit corruption to ICTI CARE 

PROCESS. 

Intertek omitted the salary and working 

hours fraud at the Hang Fat factory.

On March 16th, ICTI CARE PROCESS discovered that there was fraud 

in the salary and work hour records 

at Hang Fat. ICTI CARE PROCESS 

later notified Intertek. 

In its report, Intertek published Yuan 

Chaowen’s name and his relationship 

with CLW.

Intertek agreed that it would not reveal Yuan Chaowen’s name and his 

relationship with CLW. 
112 

3http://www.epi.org/blog/apples-executive-pay-profits-cash-balance/ 

By using information selectively, Intertek drew a different picture of the whole 

story. This selective use of information for this company’s own interest is consistent 

with its issuing biased and even blatantly false audit reports. 

III. THE RESPONSIBILITY OF MULTINATIONAL CORPORATIONS TO TAKE ACTION

Currently in China, there is no independent labor union to monitor labor conditions and implementation of labor laws. We hope that the Chinese government will 

change its policies in favor of advancing labor rights, including encouraging legal 

construction and the reform of the one, official labor union. However, we know it 

is very difficult to influence China’s government directly. Therefore, to be effective, 

and reflecting the shared responsibility of the corporations operating in China, the 

best approach to advancing labor rights would be to focus on the multinational corporations themselves. 

The multinational corporations obtain extra profits through the use of low-wage 

labor in China; they also often squeeze the profits of their suppliers, which in turn 

leads them to squeeze the wages of workers. These factors help explain why those 

corporations may choose factories in China over those in other countries, where 

workers’ rights are more respected, labor standards are stronger, and where there 

may be the freedom to organize independent labor unions. In other words, the large 

profits of multinational corporations reflect their exploitation of Chinese workers. 

At the same time, the investment from multinational corporations in China is a 

form of support to China’s current political system; that is, the economy can grow 

even though China refrains from undertaking essential reforms in its political economy. Because Chinese workers do not have the rights to organize independent labor 

unions and have no channels to fight for their interests, China’s government acquiesces in transferring workers’ rewards to the extra profits of the multinational corporations, with the aim of attracting foreign investment. 

In addition, there is no law in the United States to restrain the purchasing systems of the multinational corporations, especially their overseas components, from 

violating human labor rights. The absence of involvement by both of the governments leads to the severe working conditions of the Chinese workers. 

Corporations have the responsibility to change and improve workers’ rights; this 

solution should be accepted by both China’s factories and the government. Further, 

if multinational corporations demand and advance improvements in their supplier 

factories in China, this may influence the policy-making in China’s government. 

In our opinion, truly improving the working conditions in Chinese factories could 

be achieved by multinational corporations simply raising the prices they pay to their 

suppliers and demanding needed improvements in labor conditions in return. Multinational corporations have both the power and the resources to take these steps. 

Take the example of Apple, the world’s leading company, which is in possession 

of enormous resources. In the first quarter of its 2012 fiscal year, Apple had $46.3 

billion in revenue and made a net profit of $13.1 billion, its largest profit ever and 

one of the largest quarterly profits of any American company in history. And Tim 

Cook, current CEO of Apple, personally received stock awards worth $380 million 

just before the start of the quarter. Let’s do some simple math. The $13.1 billion 

net profit Apple made in one single quarter is equal to the combined salary of 

300,000 workers at Foxconn’s assembly line over the course of eleven years. And the 

value of Cook’s options alone could pay for those 300,000 workers’ salaries for that 

extremely profitable quarter. Experts from the Economic Policy Institute have made 

similar calculations and arrived at similar results.3

So part of the broad answer is that companies like Apple have ample resources 

to ensure that workers at their supplier factories in China receive better treatment. 

There are also creative, simple steps multinational corporations can take to improve 

labor conditions. For instance, as the labor unions in China can function only in a 

severely limited way, we suggest opening worker hotlines in the supplier factories 

of multinational corporations. The hotlines could go from the workers to the multinational corporations and perhaps to neutral monitors. Such hotlines may not be 

able to change labor rights fundamentally, but if hotlines could be installed that 

were safe for the workers to use without retribution from the supplier factories, they 

could increase the transparency of the factories and potentially relieve some of the 

harsh situations. The hotlines could attend to every worker’s complaints as the receptors on the other end could try to solve the workers’ practical problems with 

some dispatch. In return, the establishment of the hotlines benefits the factories in 

terms of staff turnover rate. If the hotlines satisfy the workers’ expectations, there 
113 

will be smaller number of employees leaving the factory. I think this is a solution 

that both the corporation and factories could accept and put into practice. 

In addition, the redundant audits performed on many factories should be reduced, 

as they are not effective in monitoring the conditions in the factories. Other ways 

such as the hotlines, or allowing for truly independent and corruption-free audits, 

may be more reliable and more effective. 

In closing, I express my gratitude to the Committee for holding this important 

hearing. The deplorable working conditions faced by workers in China continue. A 

key ‘response’ that is currently being used by the multinational corporations—the 

audit system is failing. All of us need to think more creatively, and multinational 

corporations must take much more responsibility, to ensure that labor conditions in 

China rise to reasonable levels. 

PREPARED STATEMENT OF HARRY WU

JULY 31, 2012

LAOGAI PRISONERS, THE SLAVES OF THE COMMUNIST REGIME

I. INTRODUCTORY REMARK

Thank you for inviting me to speak today before the Commission. Over these 

years, I have testified for many times before the congress about China’s Laogai and 

its derivative abuses. But today it is the first time, I’m testifying at a hearing about 

China’s worker rights. With the Laogai system deeply rooted into the state’s economic structure, China’s working class is different from that of the modern democratic countries. It includes not only ‘‘workers’’ at the ordinary sense, but also ‘‘workers’’ of the prison enterprises. So when we talk about worker rights in China, it will 

be definitely incomplete if we ignore the millions of workers in Laogai camps. I am 

very glad that the Commission clearly realized this difference and invited me to testify about the slave labor of China’s prison enterprises. For this, I’d like express my 

special appreciation to the Commission’s ongoing concern and insights on human 

rights in China. 

II. PRISONERS IN LAOGAI, MORE LIKE STATE SLAVES THAN ENTERPRISE WORKERS

Prisoners in Laogai provide the state with an endless source of cheap or payless 

labor force, so the Laogai enterprises develop basically at the same pace with the 

economy. During the Mao’s era when economy was sluggish and food and basic material were in urgent need, Laogai prisoners were forced to do works of farming, 

mining and infrastructure constructions. 

When Deng led the country into frenzy economic pursuits, authorities began to 

establish more and more industrial and commercial enterprises where Laogai prisoners are forced to labor solely for the sake of profit. Partly as an effort to remedy 

increasing enterprise deficit from the mid-1990s, and partly as a response to international criticism, the central government attempted to implement the policy of separation of prisons and enterprises since 2003. Till 2010, it is said the ‘‘separation’’ 

had basically been completed. However, according to our findings, the separation is 

more nominal than real. Prisoners all across the country are still toiling in the prison enterprises under sever working conditions with insufficient health protections 

or safety measures. 

Below I give a description of the conditions of the Laogai prisoners in terms of 

basic worker rights: 

1. Health, safety and work environment 

China’s communist regime first installed the Laogai system out of three considerations: (a) for the reform of the prisoners, (b) for the settlement of the problems of 

the prisons, and (c) for the prohibition of counterrevolutionaries living in leisure 

without doing anything. 

This is clearly stated in the decision of the Third National Public Security Conference in 1951. Although 60 years have passed, this doctrine remains strong in the 

mind of the communist authorities. 

Therefore the prisoners are essentially considered as state slaves whose labor 

force can be exploited while his health, safety and work environment can be completely ignored. 

I personally worked as a miner for many years in a Laogai coalmine in Shanxi. 

During these years I witness many accidents, injuries and deaths. And in a couple 

of occasions I almost lost my own life due to the poor work protection. 
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1 Xi Luo, ‘‘Exploration of the causes of prisoners’ hypokalemic flaccid paralysis’’, Science and 

Technology in Tibet, 2005 (11). 

During the 1990s I visited China for several times to gather information about 

the conditions in the Laogai enterprises. I found although the country was becoming 

richer, the work conditions of the prisoners almost remain the same. I saw workers 

standing nakedly in harmful chemical solutions; I saw miners digging in the mine 

without adequate facilities to prevent caving in and I saw juvenile prisoners working in magnetite dust without mask. 

I had been prohibited to go back to China over the past 15 years after I was deported in 1995 and the information regarding China’s labor camps has become increasingly sensitive. However we can still learn something of this sort between lines 

of other reports. In 2005, an article about an illness of prisoners in Tibet was published in a medical journal,1 which indicates that hypokalemic flaccid paralysis is 

a very common illness among prisoners. In the study group, 16 of the patients are 

found to be rock miners, so the illness and high labor intensity are positively correlated. This case shows that right till this day, the Laogai prisoners’ basic work 

rights are still denied by the authorities and they are treated nothing more than 

cattle. 

2. Work time 

Though China’s Law of Prison as well as regulations issued by the Department 

of Justice both specified the working hours, rest breaks and holiday entitlements for 

prisoners, the authorities routinely place priority on work quota. When there are 

more orders for their products, the authorities will make the prisoners work around 

the clock, and even force them to work seven days a week. It is learned recently 

that Liu Xianbin, a pro-democracy activist who was put into prison for the third 

time, has been forced to work 13 hours per day in Chuanzhong Prison. 

Regulations also specified the portion of time to be used for study. 

But when enterprise profit is taken as the most important, the authorities even 

change the time for study into time for labor. 

3. Payment 

The Laogai prisoners work long hours in severe work conditions, but they basically have no payment. In very rare cases they may be given some ‘‘payment’’, but 

in terms of policy this is called ‘‘symbolic payment’’ or simply ‘‘compensation’’ or ‘‘stipend’’. Since it is ‘‘symbolic’’, the payment may not match the value of labor that 

the prisoners have given. With the completion of enterprise-prison separation, it is 

said Laogai prisoners will get a better payment from the ‘‘separated’’ enterprise, but 

the fact will be very discouraging. 

For one thing, even if the enterprise is taken apart from the prison, as long as 

the prisoners’ basic rights are not respected, no one will pay more for their labor 

while they could pay less. 

4. Unemployment 

As a special kind of workers, laogai prisoners never need to worry about unemployment. As long as they are able to work, their labor force will be exploited. In 

fact, just decades ago, the communist regime practiced the measure of ‘‘Forced Job 

Placement’’—when prisoners fulfilled their sentence and are ready to get rid of the 

labor camp and endless exploitation, authorities would find some job vacancies in 

the laogai camps and arbitrarily order them to work there instead of going back to 

their old home or old job. This is not because the authorities concern about the inmates’ employment, but because they want to keep these prisoners as their working 

cattle all their lives. Personally, I know many people who committed suicide after 

they were put into ‘‘Forced Job Placement’’, because they were completely desperate 

of their fate and future. 

On the other hand, after the prisoners are released and return to society, most 

of them, especially the political prisoners, will face the problem of job hunting. Because of political discrimination and possible police harassment, many of the employers would not or dare not accept the application of former prisoners. The fact 

is recently demonstrated by Tibetan political prisoners at the international conference entitled ‘‘Laogai in Tibet.’’ 

Above, I talked about prisoner-workers’ situations in terms of worker rights. However, prisoner-workers are not exactly workers; they have some more characteristics: 

1. Paying for their own imprisonment 

In modern democratic countries, prions are run and funded by the government. 

But in China, ever since the CCP took power in 1949, it has never spent enough 
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money on the operation of prisons. As a result, the prisons have to do production 

or business to earn money to sustain themselves, and the prisoners, consequently, 

have to toil for their own imprisonment. 

From 1949 to 1989 the government’s yearly spending on prison system has never 

exceeded 2 billion RMB, while the laogai enterprise earnings gradually rose up from 

zero to 10 billion RMB.2 At present the yearly budget for both laogai and laojiao 

is about 15 billion RMB, but the government can only allocate 30% to 60% of the 

total. The rest can only be earned by the Laogai enterprise, or most exactly eked 

out from the flesh of the prisoners. 

2. Torture and other types of punishment 

For ordinary workers, salary is leverage over the quality or quantity of work. But 

for the laogai prisoners, torture and other types of punishment are routine ways to 

control product quality and quantity as well as obedience to production regulations. 

There are various ways to punish prisoner-workers who dare to violate the production regulations or who failed to meet the production quota. 

These include but not limited to (1) deprivation of sleep, (2) deduction or deprivation of food, (3) stress position, (4) beating up and so on. 

Liu Xianbin who is now imprisoned in Chuanzhong Prison is forced to work 13 

hours to do ornament processing. Since he is near-sighted and can’t work well, he 

is always deprived of sleep and food. 

The condition in Laojiao camps is as bad, if not worse. LRF learned that in 

Shayang Laojiao Camp, Hubei Province, various measures are taken to punish those 

who failed to fulfill the quota. So every night the Laojiao inmates would bring their 

work to the public restroom to go on, because they are not allowed to stay in the 

workshop during the night but they are not allowed to fail the quota. 

III. CHINA FLOODS THE WORLD MARKET WITH INHUMAN AND UNETHICAL LABOR

PRODUCTS

Laogai enterprise is an indispensable part of China’s economy. The official-recognized number of such enterprises varies from time to time, for example, 4671 in 

1953 and 1280 in 2005, but its importance in China’s economy remains unchanged. 

Today’s laogai enterprises engage in many types of production and processing, from 

mining, farming, to the making of products as big as fire engines and as small as 

ladies’ brooches. 

Under Section 307 of the Smoot Hawley Tariff Act of 1930 (19 U.S.C. §1307) goods 

‘‘mined, produced, or manufactured wholly or in part . . . by convict labor or/and 

forced labor . . . shall not be entitled entry at any of the ports of the United States, 

and the importation thereof is . . . prohibited.’’ Furthermore, Section 1761 of Title 

18 of U.S. Code makes it a criminal offense to knowingly import goods made with 

prison labor. Additionally, in 1992 the U.S. and China signed a Memorandum of Understanding which stated that China will ‘‘investigate companies, enterprises or 

units suspected of violating relevant regulations’’ and report back its findings and 

furnish available evidence to the U.S. regarding the suspected violations. Most importantly, the Memorandum states that China will ‘‘arrange and facilitate visits’’ by 

U.S. officials to ‘‘respective enterprises or units,’’ within 60 days of a request. Such 

agreement coincides with Chinese law which prohibits the export of Laogai products. But despite these laws and regulations, China’s prison enterprises never cease 

attempting to enter U.S. market. 

Our findings indicate that the situation of laogai products in U.S is still serious. 

1. China’s various tricks to erase the marks of Laogai 

To escape from international condemnation and legal punishment, China’s laogai 

enterprises tried many types of tricks to erase the marks of Laogai of their products. 

The common ones include but not limited to (1) using different names for the same 

Laogai camp(s), for example, Nanchang Fire Engine Factory and Nanchang Auto 

Factor are commercial names for Jiangxi Prison Enterprise Group, and the later 

combines several smaller prison enterprises; (2) reorganizing prison enterprises, for 

example, Shandong Lineng Group Co. Ltd is a combination of several well-known 

laogai enterprises in Shandong Province, and this kind of one name for multiple 

prisons enterprises has the function to cover the nature of Laogai for each individual enterprise; (3) engaging mainly in ‘‘processing’’ rather than ‘‘manufacturing’’, 

for example, in recent years many laogai enterprises shift their business from production to processing. There may be other reasons for this change, but the most evident reason is to get rid of the hints of Laogai for a certain type of products. The 

Laogai enterprises only do a part of the whole processing, so their names will not 

be listed as processors or manufacturers. 
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3LRF, Laogai forced labor camps listed in Dun and Bradstreet databases, June 19, 2008. 

2. Findings in D&B databases 

In 2008, LRF researchers explored the two databases of Dun & Bradstreet 

(‘‘D&B’’): Duns Worldbase (Lexis-Nexis) and Duns Records Plus (Westlaw),3 and 

found China’s Laogai products have found many ways to enter U.S. market. 

We found in the databases that a total of 314 separate entries were Laogai related, which represent 256 different laogai camps, almost 25% of the total known 

camps as of 2006. The 314 entries cover laogai enterprises in 28 of 31 provincial 

level divisions (including provinces, municipalities, and autonomous regions). 

The findings indicate that U.S. business and business services do not have the 

adequate awareness of the threat of China’s Laogai products. 

It’s true that many Laogai camps have different business names but in the B&D 

databases, 65 of the 314 entries directly contain the word ‘‘Prison’’, such as ‘‘Sichuan 

Qiaowo Prison Machinery Factory’’, or more directly ‘‘Shandong Prison’’ and 

‘‘Sichuan Deyang Prison’’. Therefore D&B have ample reason not to list these enterprises in their databases. 

IV. CONCLUSION AND SUGGESTIONS

1. China’s prisoner-workers in the laogai enterprise are a special kind of workers 

who are vulnerable to worker rights abuses. Therefore special attention should be 

paid to this group of people when we talk about China’s worker rights and more 

so when we talk about China’s Laogai or judicial system; 

2. Although U.S. Congress had passed a resolution to condemn China’s laogai system, there are still more to be done to give enough pressure to China’s authorities 

to consider abolishing the Laogai system; 

3. Although there are U.S. laws and regulations, as well as memorandum signed 

between U.S. and China to ban the Laogai products, the products never ceases its 

infiltration into U.S. markets. Therefore more solid measures, including drafting of 

new regulations and strengthening of the law enforcement, should be taken to keep 

the Laogai products away from our market. 

4. To promote the public awareness of China’s Laogai and Laogai products, so 

that they would have the right choice to buy products which are made in an ethical 

manner rather than products which are low in price. 

PREPARED STATEMENT OF THEA M. LEE

JULY 31, 2012

Mr. Chairman, Mr. Co-Chairman, distinguished members of the Commission, 

thank you for the opportunity to speak to you today on behalf of the twelve million 

working men and women of the AFL–CIO on this very important topic. 

The U.S. trade relationship with China is enormously imbalanced and problematic. In 2011, the United States ran a goods trade deficit with China of $295 billion—up from $273 billion the previous year. This is the largest bilateral trade deficit between any two countries in the history of the world, and it is long past time 

for the U.S. government to rebalance this trade relationship, including by addressing several key sources of unfair and illegal competitive advantage. 

As this commission has documented thoroughly, the Chinese government has violated its international obligations with respect to currency manipulation, export subsidies, and intellectual property rights, among other things, contributing to the loss 

of millions of American jobs, mainly in the manufacturing sector. 

However, there is an additional issue that does not receive adequate attention, 

from our own government or from the media, and that is the subject of today’s hearing: the ongoing and systematic repression of internationally recognized workers’ 

rights in China. This involves both labor laws that deny Chinese workers fundamental freedoms, including most notably freedom of association, and the Chinese 

government’s egregious failure to enforce its own laws in a number of crucial 

areas—including maximum hours, minimum wage, child labor, forced labor, and occupational safety and health. For the American labor movement (and for unions 

globally), addressing the Chinese government’s massive violations of human rights 

and workers’ rights is a top priority. 

This is both a moral and an economic issue, impacting the daily lives and wellbeing of Chinese workers, the quality and composition of American jobs and the 

health of the U.S. economy, as well as trade and investment flows for many developing countries. 
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We would like to see our own government, both the Administration and the Congress, put protecting workers’ rights at the center of the U.S. and Chinese governments’ dialogue—not as an afterthought behind other trade and foreign policy concerns. Protecting workers’ rights is an essential cornerstone of any democracy, and 

without democratic freedoms, it is impossible to imagine Chinese workers and citizens building a healthy, robust, sustainable, responsible future. Independent and 

democratic unions in China, together with more consistent and aggressive enforcement of Chinese labor laws, would rebalance the economy in a way that most economists agree is long overdue—towards building a strong middle class and strengthening domestic consumption and away from over-reliance on export-led growth and 

a weak, disenfranchised and politically unstable work force. 

VIOLATIONS OF WORKERS’ RIGHTS

The Chinese government’s systematic and sometimes brutal repression of fundamental workers’ rights is a key contributor to the unfair advantage Chinese exports 

enjoy in the U.S. market and in third-country markets. Chinese workers’ most basic 

rights are routinely repressed, and they do not enjoy the political freedom to criticize, let alone change, their government. 

Chinese workers do not enjoy freedom of association or the right to organize. According to the State Department’s 2011 Human Rights Report, ‘‘workers are not free 

to organize or join unions of their own choosing. Independent unions are illegal, and 

the right to strike is not protected in law.’’ The single labor organization in China, 

the All-China Federation of Trade Unions (ACFTU), is legally subordinate to the 

government and the Chinese Communist Party (CCP), not accountable to its members. It is chaired by a member of the Politburo. 

While Chinese labor law now allows for election of some trade union officers, the 

2011 State Department Human Rights Report says that: 

Most factory-level officers were appointed by ACFTU-affiliated unions, often in 

coordination with employers, and were drawn largely from the ranks of management. Direct election by workers of union leaders continued to be rare, occurred 

only at the enterprise level, and was subject to supervision by higher levels of 

the union or CCP. In enterprises where direct election of union officers took 

place, regional ACFTU offices and local CCP authorities retained control over 

the selection and approval of candidates. 

The Chinese government also fails to enforce its own laws with respect to minimum wages, maximum hours, child labor, forced labor and health and safety rules, 

as recent high-profile media accounts have amply demonstrated—much to the chagrin of some marquee U.S. brand names. 

Migrant workers face particularly harsh and precarious conditions, often facing 

deportation if they complain to authorities about abuses by employers. Child labor 

is becoming more common, as labor shortages increase turnover in some regions. 

Forced labor remains a significant, if difficult to measure, problem. 

Chinese government policies amount to a deliberate and artificial suppression of 

wages below what a freely bargained wage would be, and even below what would 

be efficient in the Chinese context. This exploitation artificially lowers the price of 

Chinese exports in the U.S. market—harming American workers and American 

businesses competing with Chinese exports domestically or in third markets. It also 

harms workers and businesses around the world, in both industrialized and developing countries. 

These abuses allow producers in China, including many multinational and U.S. 

corporations, to operate in an environment free of independent unions, to pay illegally low wages, and to profit from the widespread violation of workers’ basic 

human rights. 

The Chinese government’s poor enforcement record is not simply a result of a lack 

of resources, but rather reflects a conscious economic strategy chosen by the Chinese 

government, silently supported by multinational corporations, and ignored by the 

U.S. government. Voluntary corporate codes of conduct are structurally incapable of 

remedying this problem and wildly inadequate to the scale of the problem. 

As we have seen, in the wake of the FoxConn scandal that revealed worker suicides, unacceptably long hours, unsafe working conditions, and low pay—even with 

top corporate attention to the problem, remedies are slow and incomplete. One company, no matter how well-intentioned and high-profile, simply cannot fix a problem 

that is systemic to the economy. 

The Chinese government has made an implicit bargain with multinational corporations: they bring much-needed jobs to China, and agree to export the bulk of 

their output and to transfer technology where possible. In exchange they enjoy access to a large and relatively inexpensive workforce with no independent union rep-
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resentation and little effective protection under the law. Consumer and environmental protections are also enforced erratically, contributing to artificially low 

prices and long-term human costs, both in China and elsewhere. 

On the face of it, the current situation in China may appear to be extremely favorable to the corporations operating there, as well as to the leadership of the Chinese 

Communist Party, which has successfully achieved extraordinarily rapid aggregate 

economic growth over several decades without significant challenges to its political 

dominance. Many argue as well that workers in China have benefited from the 

rapid economic growth, job creation, and market access achieved by the current economic and political model. 

However, in many ways, China’s economic model is showing signs of stress—even 

for those often considered its chief beneficiaries—and I believe it is very much in 

the interest of the U.S. government to press for improvement in China’s worker 

rights sooner rather than later. 

For the Chinese government, widespread worker unrest and regional labor shortages are signs that as the country grows and develops, workers will naturally demand more voice, better wages and working conditions, and more freedom. These 

demands will not be satisfied for long by cosmetic changes or rhetorical sops. And 

in the international arena, including at the G–20 meetings, the Chinese government 

will come under increasing pressure to reduce ‘‘external imbalances,’’ that is to say, 

to reduce its current account surplus. Allowing workers more economic and political 

power is the surest way to boost domestic consumption in a sustainable way. 

For multinational corporations, producing in China is not a bargain if their international reputation is tarnished by bad publicity around abuse of workers. Many 

companies reflexively resist union organizing or labor law changes that would facilitate the formation of unions. The irony, however, is that allowing workers the freedom to form their own unions, without interference from the government or management, might actually be the only way for companies to produce in China without 

the constant and justified fear that unsavory production conditions are occurring 

and could be revealed. Thousands of corporate monitors who jet in and out of a factory cannot possibly replace a union on the ground, made up of workers, with democratically elected leadership. 

And Chinese workers deserve to have their internationally recognized human 

rights respected. They deserve the right to form their own organizations at their 

workplaces—free of interference from their government or employer, free to set their 

own priorities at the bargaining table, free to demand consistent enforcement of 

labor laws from their government. 

American workers are not ambivalent on this matter. We want to see the rights 

and dignity of our Chinese brothers and sisters respected. We want to see American 

corporations held accountable for their actions in China, as well as in the United 

States. We want our own government to fight hard to protect our jobs and our 

rights—including by insisting that one of our largest trade partners live up to its 

international obligations with respect to worker rights, among others. And we want 

to see China fulfill its promise as a great nation, but one that achieves its success 

through hard work and ingenuity, not by repressing the voice, the rights, and the 

democratic aspirations of its own citizens. 

TIME TO ACT

The AFL–CIO calls on the Obama administration to raise the profile of workers’ 

rights in its bilateral dialogues with the Chinese government; to insist on achieving 

concrete progress on the full range of workers’ rights issues, including freedom of 

association; and to keep open the option of using every tool available, including a 

self-initiated Section 301 workers’ rights case, to pressure the Chinese government 

to act in a timely way. Congress can provide welcome and needed pressure to move 

forward, including by supporting a 301 petition, as has been done in the past. 

We simply cannot afford more years of inaction and empty promises. We cannot 

afford another year of watching working conditions in China worsen, as good jobs 

continue to leave the United States. 

The AFL–CIO remains committed to fighting for America’s working families and 

America’s manufacturing industries. 

Thank you for having me here today and thank you for the important work you 

do. I look forward to your questions. 
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PREPARED STATEMENT OF CHRISTOPHER SMITH, A U.S. REPRESENTATIVE FROM NEW

JERSEY; CHAIRMAN, CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA

JULY 31, 2012

Welcome to our distinguished witnesses to this hearing on the important topic of 

the appalling state of working conditions and worker rights in China—a significant 

human rights abuse that requires greater examination, analysis and bolder action. 

Worker rights are systematically violated and are among the many human rights 

abuses committed by Chinese government officials at all levels. Today, the Commission hopes to continue to draw attention to these critical issues in order to push the 

Chinese government to reform and respond to the legitimate concerns of its’ own 

citizens all of whom are entitled to well-established, universally recognized labor 

rights. 

As a member of the World Trade Organization, China has experienced tremendous economic growth and integration into the global economy, but as this Commission’s most recent Annual Report documents, China continues to violate the basic 

human rights of its own people and seriously undermines the rule of law. Workers 

in China are still not guaranteed, either by law or in practice, fundamental worker 

rights in accordance with international standards. Despite legislative developments 

that purport to ensure some labor protections in China in recent years, abuse and 

exploitation of Chinese workers remain widespread. Conditions in Chinese factories 

continue to be incredibly harsh. Workers are routinely exposed to a variety of dangerous working conditions that threaten their health and safety. Low wages, long 

hours and excessive overtime remain the norm. 

Chinese workers have few if any options to seek redress and voice grievances 

under these harsh conditions. If workers step out of line they may be fired without 

payment of back wages. Workers have no collective bargaining power to negotiate 

for higher wages and a better working environment. The Chinese government continues to prevent workers from exercising their right to freedom of association and 

strictly forbids the formation of independent unions. Attempts to organize are met 

with dismissal, harassment, torture, punishment, and incarceration. Workers are 

‘‘represented’’ by a government-controlled union, the All-China Federation of Trade 

Unions—a phony, fake and fraudulent ‘‘workers organization.’’ The recent crackdown on authentic labor non-governmental organizations in Shenzhen in 2012 and 

the mysterious death of labor activist and 1989 Tiananmen Square demonstrator Li 

Wangyang in June are but a few examples of Chinese authorities continued attempts to crush labor activism. 

While touting itself as an economic superpower, China continues to violate worker 

rights with impunity. With no institutions capable of protecting their interests, Chinese workers are nevertheless taking matters into their own hands. In the past few 

years, there has been a dramatic rise in the number of labor-related protests in 

China—an estimated 30,000 labor related protests in 2009 alone and there are no 

signs that this positive trend has abated. The increase in labor-related demonstrations not only represents a glaring lack of institutional capacity for fair labor negotiation, but also reflects the rise of a new generation of workers in China who are 
139 

better-educated, tech savvy, rights-conscious, and more willing to protest and endure the consequences. 

The deplorable state of workers’ rights in the PRC not only means that Chinese 

women, men and children in the work force are exploited and put at risk, but also 

means that U.S. workers are severely hurt, as well, by profoundly unfair advantages 

that go to those corporations who benefit from China’s heinous labor practices. As 

good corporate citizens, multinational corporations, such as Apple and Microsoft, 

must ensure that international labor standards are being implemented in their factories and supply chains in China. In the glaring absence of Chinese government 

efforts to bring its’ labor laws and enforcement up to International Labour Organization (ILO) standard—multinational companies can and must play a unique role 

in advancing labor rights and industry standards through their operations in China. 

Æ