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S. HRG. 110–1127 

SWEATSHOP CONDITIONS 

IN THE CHINESE TOY INDUSTRY 

HEARING 

BEFORE THE

SUBCOMMITTEE ON INTERSTATE COMMERCE, 

TRADE, AND TOURISM 

OF THE

COMMITTEE ON COMMERCE, 

SCIENCE, AND TRANSPORTATION 

UNITED STATES SENATE 

ONE HUNDRED TENTH CONGRESS 

FIRST SESSION 

OCTOBER 25, 2007 

Printed for the use of the Committee on Commerce, Science, and Transportation 

( 

(II) 

SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION 

ONE HUNDRED TENTH CONGRESS 

FIRST SESSION 

DANIEL K. INOUYE, Hawaii, Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

JOHN F. KERRY, Massachusetts 

BYRON L. DORGAN, North Dakota 

BARBARA BOXER, California 

BILL NELSON, Florida 

MARIA CANTWELL, Washington 

FRANK R. LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas 

THOMAS R. CARPER, Delaware 

CLAIRE MCCASKILL, Missouri 

AMY KLOBUCHAR, Minnesota 

TED STEVENS, Alaska, Vice Chairman 

JOHN MCCAIN, Arizona 

TRENT LOTT, Mississippi 

KAY BAILEY HUTCHISON, Texas 

OLYMPIA J. SNOWE, Maine 

GORDON H. SMITH, Oregon 

JOHN ENSIGN, Nevada 

JOHN E. SUNUNU, New Hampshire 

JIM DEMINT, South Carolina 

DAVID VITTER, Louisiana 

JOHN THUNE, South Dakota 

MARGARET L. CUMMISKY, Democratic Staff Director and Chief Counsel 

LILA HARPER HELMS, Democratic Deputy Staff Director and Policy Director 

CHRISTINE D. KURTH, Republican Staff Director and General Counsel 

PAUL NAGLE, Republican Chief Counsel 

SUBCOMMITTEE ON INTERSTATE COMMERCE, TRADE, AND TOURISM 

BYRON L. DORGAN, North Dakota, 

Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

JOHN F. KERRY, Massachusetts 

BARBARA BOXER, California 

MARIA CANTWELL, Washington 

MARK PRYOR, Arkansas 

CLAIRE MCCASKILL, Missouri 

JIM DEMINT, South Carolina, Ranking 

JOHN MCCAIN, Arizona 

OLYMPIA J. SNOWE, Maine 

GORDON H. SMITH, Oregon 

JOHN ENSIGN, Nevada 

JOHN E. SUNUNU, New Hampshire 

(III) 

C O N T E N T S 

Page 

Hearing held on October 25, 2007 .......................................................................... 1 

Statement of Senator Dorgan ................................................................................. 1 

Prepared statement .......................................................................................... 3 

WITNESSES

Athreya, Bama, Executive Director, International Labor Rights Forum 

(ILRF) .................................................................................................................... 14 

Prepared statement .......................................................................................... 17 

Eio, Peter, Member, Governance Board, ICTI CARE Foundation ....................... 22 

Prepared statement .......................................................................................... 24 

Kernaghan, Charles, Director, National Labor Committee ................................. 4 

Prepared statement .......................................................................................... 7 

Sanders, Hon. Bernard, U.S. Senator from Vermont ........................................... 30 

Wu, Harry, Executive Director, Laogai Research Foundation ............................. 9 

Prepared statement .......................................................................................... 11 

(1) 

SWEATSHOP CONDITIONS 

IN THE CHINESE TOY INDUSTRY 

THURSDAY, OCTOBER 25, 2007 

U.S. SENATE, SUBCOMMITTEE ON INTERSTATE COMMERCE, TRADE, AND

TOURISM, COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION, Washington, DC. 

The Subcommittee met, pursuant to notice, at 9:38 a.m. in room 

SR–253, Russell Senate Office Building, Hon. Byron L. Dorgan, 

Chairman of the Subcommittee, presiding. 

OPENING STATEMENT OF HON. BYRON L. DORGAN, 

U.S. SENATOR FROM NORTH DAKOTA 

Senator DORGAN. I’m going to call the hearing to order this 

morning. I’m Senator Dorgan. I’ll be joined by colleagues in a bit. 

Today, the Subcommittee here in the Commerce Committee is 

holding the fourth in a series of hearings that relate to international trade. This hearing deals with the issue of sweatshop conditions in the Chinese toy industry. There’s been a great deal of 

discussion and concern about products coming into this country 

that are unsafe. Many of us have seen the reports of toys being 

pulled off the shelf of major American retailers because those toys 

are manufactured in China and come to this country with lead content that is higher than would be safe for children. We read the 

tragic stories of, for example, Jarnell Brown, who ingested a small 

charm that came with a Reebok tennis shoe, and, swallowing that 

charm, which turned out to have been made of 99-percent lead, 

young Jarnell Brown died. He was admitted to the hospital with 

brain swelling, and, when they X-rayed him, they found a heartshaped object in his stomach. It was a charm that came with tennis 

shoes, but no one would have known that it was 99-percent lead. 

Of course, no one would have expected someone would swallow it, 

but a young child swallowed it, and the young child died. 

It’s not an accident that products are containing lead, coming 

from China. Lead is cheap, and the contractors want to lower costs 

without respect to health consequences. And so, we have to be vigilant about these things, and we have to stand up for the interests 

of the consumer with respect to these matters. 

The issue of how a product is produced in China with respect to 

toy manufacturing is one issue; that is, what materials are used in 

its production. That’s one issue. The second issue, that has been 

less discussed, but, I think, is as important, is, what are the conditions under which toy products are manufactured? 

2 

The manufacturing of toys, of course, has migrated substantially. 

I think 80 percent of the toys are now manufactured in China. We 

have a witness today representing the Toy Industry Association. 

And we appreciate that. It’s interesting that the term of ‘‘toy industry,’’ because it used to be ‘‘toy manufacturing.’’ But the term ‘‘toy 

manufacturing’’ would no longer apply appropriately, because we 

don’t manufacture toys to any great extent in this country; they’re 

manufactured elsewhere, mostly in China. 

The example of Etch-a-Sketch is one that I have written about. 

Etch-a-Sketch is a little thing that most of us have played with as 

kids, and Etch-a-Sketch was made in Bryan, Ohio. And they were 

proud of making Etch-a-Sketch. People from that little town—or, 

not so little—but that town of Ohio always referred to their home 

town as the ‘‘Town of Etch-a-Sketch.’’ ‘‘Where are you from?’’ ‘‘Well, 

I’m from the town that makes—where we make Etch-a-Sketch.’’ 

Everybody knew about Etch-a-Sketch. But now Etch-a-Sketch is 

gone from Ohio, it’s made exclusively in China. 

The question that we ask today is under what conditions are 

these toys made? Are there sweatshop conditions in China that are 

existing with respect to the production of toys? And the reason that 

I am interested in that is, I and my colleagues have introduced a 

piece of legislation, S. 367, titled the Decent Working Conditions 

and Fair Competition Act. And it relates to the question of the production of products—not just toys, but products—in sweatshop conditions in other countries. The first question I asked with respect 

to the issue of fair trade is, should we not, at least at the very start 

of this, decide that we will not allow into our country products that 

come from sweatshop labor? That is, persons who are working in 

other countries in gross violation of those other countries’ labor 

laws. That ought to be the first step. Even if we disagree about 

trade strategy, all of us ought to agree that, after what we’ve done 

to pull ourselves up and create a middle class, and the kinds of 

things that represent safe workplaces and standards and dignity 

for American workers, we should at least be able to agree we will 

not allow the product of sweatshop labor to be brought into this 

country and sold on the store shelves in America. 

So, the question today is what is happening in China? What kind 

of assurances do we have that the substantial portion of toys, some 

80 percent of which are produced in China, are being produced 

under conditions that we would condone, under conditions that we 

would not want to prevent coming into this country? What is happening with respect to sweatshops in China? We know they exist. 

Are they proliferating? Is it a substantial problem? What’s being 

done to stop it, to correct it? All of these issues are very important 

in the construct of international trade, and they certainly are important with respect to legislation that a number of us are trying 

to get passed here in the U.S. Senate, S. 367, the Decent Working 

Conditions and Fair Competition Act. 

[The prepared statement of Senator Dorgan follows:] 

3 

PREPARED STATEMENT OF HON. BYRON L. DORGAN, U.S. SENATOR FROM NORTH DAKOTA

Today the Subcommittee is holding the fourth in a series of hearings this year 

that relate to international trade. And the focus of today’s hearing is the prevalence 

of sweatshop conditions in the Chinese toy industry. 

Why is this an important issue? First, because eighty percent of the world’s toys 

are manufactured in China. Open the toy chest of any American child, and odds are 

that over three-fourths of the toys will be Chinese-made. 

Second, because these toys are all too often manufactured under inhuman production conditions that we would never tolerate in this country. 

And third, because these sweatshop practices ultimately have other consequences, 

including unsafe products that pose a health hazard to our children. 

In recent months, there have been countless reports of dangerous products being 

imported from China. For instance, Mattel, the biggest toy company in the United 

States, announced three major product recalls in just a five-week period involving 

Chinese-made products, the latest involving 848,000 Chinese-made Barbie and Fisher-Price toys that contained excessive amounts of lead. 

These safety issues involving Chinese imports should surprise no one. When production is outsourced to Chinese factories infamous for paying their workers pennies 

an hour, for dumping toxic sludge into the environment, and for covering up all 

kinds of health hazards, it should come as no shock that the products turned out 

by those factories pose a danger to our own health. 

Five years ago, the Washington Post ran a story entitled ‘‘Worked Until They 

Drop’’. The Post story described the story of a 19-year-old girl who was literally 

worked to death at a Chinese factory making stuffed toys for the U.S. market. Her 

coworkers said that she had been on her feet for 16 hours running back and forth 

in the factory on the day that she died, and it had been 2 months since she had 

had a day off. The factory food was so bad that she was severely malnourished. She 

woke up in the middle of the night coughing up blood, and died on the floor of the 

dormitory bathroom. 

According to the Post, some Chinese newspapers have a name for what happened 

to Li Chun Mei: it’s called ‘‘guolaosi,’’ which literally means ‘‘worked-to-death.’’ I find 

it incredible that the phenomenon of working young people to death is so common 

in China that they actually have a name for it. 

This story ran on the front page of the Washington Post in 2002, but it was quickly forgotten. While I’m sure that the Post’s readers were shocked by the story, they 

probably didn’t really understand how it affected their own lives. 

Well, here is a story that hits closer to home. It happened in March 2006, when 

a 4-year-old Minnesota boy died of lead poisoning after swallowing a heart-shaped 

metal charm that came as a ‘‘gift with purchase’’ of Reebok shoes. 

The boy’s name was Jarnell Brown. The charm he ingested was found to contain 

99 percent lead. The safety threshold for lead content in jewelry is 0.06 percent. The 

little boy ingested a piece of the charm, and developed severe stomach pains. He 

was admitted to the hospital with brain swelling. X-rays showed that the little boy 

had a heart-shaped object in his stomach. 

The charm was manufactured in a Chinese factory. Reebok recalled over 500,000 

of these charms, in some 25 countries. The vast majority of the shipments had gone 

to the United States. 

It’s no accident that Chinese products are being found to contain lead. The products contain lead because lead is cheap, and because the Chinese contractors who 

made the products were ultimately trying to lower costs without regard to the 

health consequence of the products. 

To me, these two stories show dual sides of the same coin: if you move production 

to Chinese factories that cut every possible corner to lower costs, you end up with 

young women worked to death in China and products that end up poisoning our 

kids here at home. 

At today’s hearing, we will hear from four witnesses with a variety of perspectives 

on the issue of sweatshop conditions in the Chinese toy industry. 

Charlie Kernaghan is the Executive Director of the National Labor Committee, 

which investigates sweatshop abuses around the world. 

Harry Wu is the best-known Chinese human rights activist in the United States, 

having spent 19 years in Chinese labor camps. He is the Director of the Laogai 

Foundation, and an advocate for human rights in China. 

Bama Athreya is the Executive Director of the International Labor Rights Forum, 

which documents child labor, forced labor, and other abusive labor practices abroad. 

Peter Eio is testifying on behalf of the Toy Industry Association, Inc., of which 

he was recently the chairman. The Toy Industry Association represents the interests 

4 

of the largest companies selling toys in the United States, representing about 85 

percent of the U.S. toy market. Mr. Eio is also a former President of Lego Systems, 

Inc. 

I thank the witnesses for coming. Before turning to their testimony, I would note 

that I have been working with a number of my colleagues on S. 367, the Decent 

Working Conditions and Fair Competition Act. This is a piece of legislation that 

would prohibit the importation of products manufactured in sweatshop conditions. 

We have a growing list of bipartisan cosponsors that now stands at 14 Senators. 

A companion bill in the House of Representatives has 116 cosponsors. I hope this 

hearing will provide additional momentum for that bill. 

We have four witnesses today: first, Mr. Charles Kernaghan, the 

Executive Director of the National Labor Committee, in New York 

City. Mr. Kernaghan has previously testified before this Committee. Second, Mr. Harry Wu, Executive Director of the Laogai 

Research Foundation. Mr. Wu, I hope I have pronounced that correctly. Dr. Bama Athreya, Executive Director, International Labor 

Rights Forum; and Mr. Peter Eio, from the ICTI CARE Governing 

Board, member, past Chair of the Toy Industry Association. 

And let me begin with Mr. Kernaghan. 

Mr. Kernaghan, welcome back to the Committee. Thank you for 

the work that you do at the National Labor Committee, exposing 

sweatshop working conditions around the world. And I know that 

you’ve been working on these issues with respect to China. 

We will take your testimony, from all four of you. Your formal 

written testimony will be made a part of the permanent record, and 

I will ask all four of you to summarize your oral testimony. 

So, let’s begin with you, Mr. Kernaghan. Why don’t you proceed. 

STATEMENT OF CHARLES KERNAGHAN, DIRECTOR, 

NATIONAL LABOR COMMITTEE 

Mr. KERNAGHAN. Thank you, Senator. And thank you for holding 

these critically important hearings. 

Many Americans—many parents in America would be shocked 

and disturbed if they knew the abusive sweatshop conditions under 

which their children’s toys are being made in China. Parents, however, have no way of knowing, as Mattel, the largest toy company 

in the world, hides its 40 or so contract plants in China, just as 

the other companies do, refusing to provide the American people 

with even the names and addresses of those plants. Mattel Barbie 

toys, along with Thomas & Friends toys for RC2 Corporation and 

Wal-Mart, are made at the Xin Yi factory in Shenzhen. The 5,000 

workers there are stripped of their rights, forced to sign mostly 

blank temporary contracts lasting anywhere from just 10 days to 

a maximum of 3 months. At management’s discretion, new temporary contracts could be extended every 2 or 3 months. Workers 

could be at the factory for over a year, working full time, but always held as temporary workers, which means they are stripped of 

their rights—they have no right to paid maternity leave, no right 

to health insurance, no right to sick days, no right to vacation, no 

right to holidays. 

The standard shift at the factory is 14 and a half hours a day, 

from 7:30 in the morning until 10 p.m. at night, 6 days a week. 

Workers are at the factory 87 hours a week, while working 70 

hours, including 30 hours of overtime, which exceeds China’s legal 

limit by 260 percent. In 2006, it was worse. The workers worked 

5 

7 days a week, from 7:30 in the morning until 10:30 at night. They 

were routinely at the factory over 100 hours a week. 

The factory is excessively hot. Everyone’s dripping in their own 

sweat. The workers are prohibited from standing up during working hours and say that, after a few hours of this, their legs go 

numb. The workers say that you can see young women in the factory crying every day as the supervisors scream and yell at the 

workers, push them to go faster. Workers who speak up or speak 

back to a supervisor will be immediately fired. 

The base wage in Shenzhen is 53 cents an hour. But here, the 

factory cheats the workers of their overtime pay; at least 20 percent of their overtime pay every week is confiscated from the workers. This is the equivalent of losing 2 days wages per week. It was, 

again, worse in 2006, when the workers were paid no overtime premium at all, and were cheated of 40 percent of the wages due 

them. 

The workers are housed in primitive dorms, 12 people crowded 

into each room, sleeping on double-level metal bunkbeds and fed 

company food the workers describe as awful. 

It doesn’t have to be this way. This Mattel Barbie toy was made 

in that factory. This Barbie pet doctor toy. We know it entered the 

United States with a landed customs value of just $9. That’s the 

total cost of production. Even on sale, the toy retails for $29.99. 

That’s an astonishing markup of $20.99 on this toy. In other words, 

it’s marked up 233 percent. 

There’s enough money here to make toys safe and to treat the 

workers in China with dignity and respect, and at least adhere to 

China’s labor laws. In fact, Mattel spent $3.45 to advertise this toy, 

which is 18 times more than the 19 cents they paid the workers 

to make it. It doesn’t have to be this way. 

At the Guangzhou Vanguard Water Sports Products factory in 

China, they make goods for Speedo, such as this Condor mask— 

swim mask. Speedo may be the best-known and the best-selling 

swimwear brand in the world, and an Olympic sponsor, but the 400 

workers at the factory are drowning in abuse. At the Guangzhou 

factory, the workers are forced to work 14-and-a-half hours a day, 

from 8 o’clock in the morning—8:30 a.m. in the morning until 11 

p.m., 7 days a week. There are 15-and-a-half hour shifts, 17-anda-half hour shifts, and even 24-hour shifts. The workers are at the 

factory over 100 hours a week, they’re working overtime hours that 

exceed the legal limit in China by 430 percent. Workers are routinely cheated out of 40 percent of their wages. It’s an—they’re losing, really, 2 weeks’ wages every month they’re being shortchanged. 

Despite the fact that they’re not paid overtime, if the workers 

miss a single shift—a single overtime shift, they are docked nearly 

2 weeks’ wages, despite the fact, again, that they’re being routinely 

cheated of their wages. Supervisors constantly scream and yell and 

harass their workers, calling them ‘‘idiots,’’ ‘‘garbage.’’ Talking back 

to management is strictly prohibited. One worker who tried to defend himself by answering back to his supervisor was attacked, 

choked, beaten, fired. 

The pace of production is grueling. Workers in this factory are 

allowed a minute and a half to assemble this toy, this mask, this 

6 

Condor mask, for which they are paid less than 2 cents. Workers 

are so exhausted when they return to their dormitories that they 

frequently just climb into bed with their clothing and shoes on, collapse, and go to sleep. 

The dormitories—the bathrooms are filthy, the workers have no 

hot water. They have to make their own hot water by fashioning 

a wood-burning stove out of an oil drum. They heat their own 

water in a little plastic bucket, they take it back to their room, and 

they take a sponge bath. 

I don’t think that there is a single Olympic athlete, no matter 

how committed, who could endure what China’s sweatshop workers 

endure day in and day out. 

And, finally, Thomas & Friends went to China, stumbled, and, 

of course, was recalled. At the factory where the Thomas & Friend 

trains were recalled, the factory, called Hansheng Wood Products 

factory in Dongguan, the workers are suffering right up to the last 

minute, and being cheated right up to the last minute. That factory 

had 1,500 workers. Every single worker has now been laid off, and 

they have not received their full severance pay. They are suffering 

right up to the end. I don’t think there’s been one single medical 

examination provided to any of the workers who handled the lead 

paint, which is required by law in China, to see whether or not 

they’re suffering any effects of lead paint. 

The workers at the Thomas & Friends factory or contractor were 

working 14-and-a-half to 15 hours, sometimes 16 hours, from 8 

o’clock in the morning until 10:30 at night. During the peak seasons, they also worked 7 days a week and went for months without 

a single day off. They also were cheated of 16 percent of their overtime pay which was legally due them. 

At the Li Cheng industrial complex in Dongguan, where RC2 

Corporation has its headquarters and makes toys for Thomas & 

Friends, Disney, NASCAR, under licensing agreements, conditions 

are also brutal. At the Yong Yi factory, RC2 workers are forced to 

toil all-night shifts, 21 to 23 hours, every single Saturday, from 8 

o’clock until 5 a.m. or 7 o’clock in the morning the following morning. This is the only way the workers will receive Sunday off. 

At the Ri Sheng factory, the RC2 workers are systematically 

cheated their legal overtime wages. They’re not paid overtime 

wages. They’re cheated of 42 percent of the overtime wages legally 

due them. 

At the Pinghu factory, the largest in the zone, all they hire is 

temporary workers all of the time, full time. The workers—this is 

an illegal scam to strip the workers of their rights. 

The companies say that, ‘‘We don’t need laws.’’ Corporations tell 

us, ‘‘We don’t need laws to protect our children against toxic or 

sweatshop toys,’’ as they can regulate themselves through voluntary codes of conduct and private monitoring schemes. However, 

this summer’s recall—massive recall of toxic and hazardous toys 

made under sweatshop conditions in China clearly demonstrates 

that corporate self-regulation is not enough. Toxic and sweatshop 

toys are two sides of the same coin and need to be regulated by enforceable laws, such as the law that you introduced, Senator Dorgan, which I think is absolutely essential to ending sweatshop 

abuse, not only in China, but across the world. 

7 

Thank you very much. 

[The prepared statement of Mr. Kernaghan follows:] 

PREPARED STATEMENT OF CHARLES KERNAGHAN, DIRECTOR, NATIONAL LABOR COMMITTEE

Senator Dorgan, I want to thank you for holding this very important hearing investigating illegal sweatshop conditions under which our children’s toys are made. 

In 2006, the American people spent $22.3 billion purchasing over three billion toys 

and sporting goods. Last year, China accounted for over 86 percent of all toy imports 

into the U.S., and to day in 2007, China’s toy imports have surged another 16 percent. The timing of your hearings could not have been more appropriate, as the last 

3 months of the year typically account for almost 80 percent of all toy sales. Last 

year, holiday sales in the U.S. reached a total of $457.4 billion. This year, each consumer is expected to spend $791 on holiday purchases, including toys and sporting 

goods. 

Many parents in America would be shocked and disturbed if they knew of the 

abusive sweatshop conditions under which their children’s toys are being made in 

China. Parents, however, have no way of knowing, as toy companies like Mattel 

(which is the largest in the world) hide their 40 or so contract plants in China, refusing to provide the American people with even the names and addresses of their 

plants. 

Mattel’s Barbie toys, along with Thomas & Friends toys for the RC2 Corporation 

and Wal-Mart are made at the large Xin Yi factory in Shenzhen. The 5,000 workers 

there are stripped of their rights, forced to sign mostly-blank temporary contracts 

lasting anywhere from just 10 days to a maximum of 3 months. At management’s 

discretion, ‘‘new’’ temporary contracts can be renewed every two to 3 months. Workers can be employed full time for a year or more, but always remain temporary 

workers with no legal rights. Temporary workers can be easily fired for being ‘‘inattentive’’ at work, or for ‘‘speaking during working hours.’’ Temporary workers have 

no right to participate in the mandatory national Social Security program which 

provides health care, no right to paid holidays, vacation, sick days, maternity leave, 

or severance pay. 

The routine shift is 141⁄2 hours a day, from 7:30 a.m. to 10 p.m., 6 days a week. 

Workers are typically at the factory 87 hours a week, while toiling 70 hours, including 30 hours of forced overtime, which exceeds China’s legal limit by 260 percent! 

In 2006, it was even worse, as the young toy workers were routinely kept at the 

factory 15 hours a day, from 7:30 a.m. to 10:30 p.m., 7 days a week, going for 

months without a single day off. The workers were typically at the factory 105 hours 

a week, while forced to work 50 overtime hours a week, which exceeds China’s legal 

limit by 530 percent! 

The factory is excessively hot and everyone is drenched in their own sweat. Workers are prohibited from standing up during working hours, and cannot leave their 

hard wooden benches, which do not have back rests. The workers say that after several hours, their legs become numb. It is routine for the supervisors to yell and 

curse at the workers and every day, the workers, say, you can see young women 

crying. Workers have but two choices: to bow their heads and remain silent despite 

the humiliation, or speak up and be immediately fired without receiving their back 

wages. Independent unions are, of course, prohibited in China, leaving the workers 

with no voice. Workers who fall behind in their assigned production goal are docked 

5 hour’s wages. 

The base wage in Shenzhen is just 53 cents an hour, $4.27 a day, and $21.34 a 

week. Despite being forced to work a 70-hour week, workers report being routinely 

cheated of nearly 20 percent ($8.31) in overtime wages legally due them each week. 

This is the equivalent of being cheated out of 2 day’s wages each week. For working 

70 hours, the workers earn just $39.79 while they should have been paid $48.60. 

In 2006, this too was even worse, since the Xin Yi factory illegally paid no overtime 

premium at all, robbing the workers of 40 percent of the wages legally due them! 

Workers are housed in primitive dorms, 12 people crowded into each room, sleeping on double-level metal bunk beds and fed company food the workers describe as 

‘‘awful.’’ Every morning workers have to cue up to wait their turn to brush their 

teeth and use the toilet. After deductions for room and board, the workers’ takehome pay drops to just 46 cents an hour. 

It does not have to be this way! As an example, Mattel’s ‘‘Barbie Hug ‘N Heal 

Pet Doctor’’ set costs just $9.00 to make in China, yet—even on sale—it retails for 

$29.99 in the U.S. This means that the price of the Mattel toy is being marked up 

an astonishing $20.99—or 233 percent. 

8 

So there is clearly sufficient money around both to make safe toys and to treat 

the toy workers as human beings, respecting their most basic legal rights. 

Mattel spent nearly $2 billion in advertising over the last 3 years, which amounts 

to 111⁄2 percent of its revenues. This means that Mattel spent $3.45 to advertise the 

Barbie Pet Doctor toy—more than 18 times the 19 cents they paid the workers in 

China to make it! 

There is absolutely no need for toxic and hazardous toys, as one industry estimate 

puts the price of thoroughly screening toys at just 10 cents per toy. Further, with 

a 233 percent ($20.99) mark-up on each toy, it is clear that Mattel could afford to 

assure respect for worker rights in China and pay the workers a fair wage so they 

could climb out of misery and at least into poverty. After all, Mattel’s CEO paid 

himself $7.3 million last year, 6,533 times more than he paid his toy workers in 

China. 

It is important to note that while Mattel’s Barbie brand is fiercely protected by 

all sorts of enforceable laws backed up by sanctions—(Mattel sues an average of 

once a month to protect Barbie and its other toys)—there are no similar laws to prevent toxic toys from reaching our children, and certainly no laws to protect the fundamental human and worker rights of the young toy worker who makes Barbie. To 

legally protect the rights of the human being—according to Mattel and the other 

corporations—would be ‘‘an impediment to free trade.’’ So Barbie is fiercely protected, but not the human being who made Barbie. 

Like many Americans, I was embarrassed and angered when Mattel’s vice president apologized to a Chinese government official for the massive toxic toy recalls. 

Mattel apologized after the official pointed out that Mattel makes a large proportion 

of its profits from its Chinese manufacturers and that Mattel ought to appreciate 

China’s ‘‘cooperation.’’ 

This is the sort of cooperation they meant: As late as 2005, Mattel sought and 

won special ‘‘waivers’’ so they could pay their workers less than the already-belowsubsistence legal minimum wage. And to this day, Mattel has additional special 

‘‘waivers’’ allowing its toy workers to toil 77 hours a week—including 32 hours of 

forced overtime—which just happens to exceed China’s legal limit by 295 percent! 

Corporations say there is no need for laws to protect our children against toxic 

or sweatshop toys, as they can regulate themselves through voluntary codes of conduct and private monitoring schemes. However, this summer’s massive recall of 

toxic and hazardous toys—made under abusive sweatshop conditions in China— 

clearly demonstrates that corporate self-regulation is not enough. Toxic and sweatshop toys are two sides of the same coin, and need to be regulated by enforceable 

laws. 

The Guangzhou Vanguard Water Sports Products factory in China manufactures 

swimming gear and sporting goods for Speedo, their major client, as well as Toys 

‘‘R’’ Us, the giant French retailer Carrefour, which is second only to Wal-Mart—and 

others. 

Speedo may be the top-selling and best-known swimwear brand in the world, and 

an official sponsor of the upcoming 2008 Olympic Games in China, but the 400 

workers producing Speedo goods at the Guangzhou Vanguard factory are drowning 

in abuse. 

One worker told us, ‘‘What lies in front of us is a blanket of darkness. We have 

no hope.’’ Another worker shed tears as he described being forced to work a grueling 

all-night 23-hour shift on a dangerous compression molding machine, explaining 

how exhausted he was, and terrified that his hands would be crushed by the relentless motion of the machine if he slowed down even for a second. 

The routine shift at the Guangzhou factory is 141⁄2 hours a day, from 8:30 a.m. 

to 11 p.m., 7 days a week. There are also frequent 151⁄2 hour shifts to midnight and 

171⁄2 hour shifts to 2 a.m., which is common with Speedo production. There are even 

grueling 24-hour, all-night shifts. Workers report toiling for months at a time without receiving a single day off. Workers are routinely at the factory over 100 hours 

a week, including at least 44 hours of mandatory overtime each week, exceeding 

China’s legal limit on overtime by 430 percent! 

Workers are also routinely cheated out of 40 percent of the wages legally due them. 

The minimum wage in Guangzhou is just 60 cents an hour, $4.77 a day and $23.87 

a week. All weekday overtime must be paid at a 50 percent premium, or 90 cents 

an hour, while weekend overtime must be compensated at a 100 percent premium, 

at $1.19. Factory management refuses to pay any overtime premium at all. So instead of earning $70.43 a week, the Guangzhou factory pays just $41.32 for 84 hours 

of work, meaning that the workers are being cheated of $29.11 in wages legally due 

them each week. This is an enormous loss for these poor workers, whose regular 

weekly pay is just $23.87. The workers are earning on average just 49 cents an 

9 

hour—including all the grueling overtime hours—while the legal minimum wage is 

60 cents an hour. 

Despite the fact that the workers are illegally not paid any overtime premium, 

if they fail to show up for even a single overtime shift, 2 days’ wages will be deducted 

from their pay as punishment. 

Supervisors constantly abuse and harass the workers, calling them ‘‘idiots’’ and 

‘‘garbage’’ and screaming at them to work faster. Talking back to management is 

strictly prohibited. One worker who tried to defend himself by answering back to 

a supervisor was attacked, choked, beaten and fired. Workers have no voice or 

rights. Workers have no choice but to bow their heads and remain silent. 

The pace of production is also grueling. For example, someone working on a compression molding machine—which forms the swim masks—must complete one operation every nine to 12 seconds, 310 to 410 per hour, and 3,720 to 4,920 operations 

in the standard 12-hour shift. Production line workers are allowed just 11⁄2 minutes 

to assemble each Speedo ‘‘Condor’’ swim mask, for which they are paid less than two 

cents. 

Workers are so exhausted by the long hours and grueling production goals 7 days 

a week that they often return to their dorms after work only to collapse into bed, 

falling asleep with their clothes and shoes still on—despite the fact that the dorm 

rooms are stiflingly hot. Workers are drenched in their own sweat all day, but on 

the shop floor and in their dorms. 

Workers report handling potentially dangerous chemicals, oil paint, thinners and 

solvents including benzene. Yet they do not know the names of the chemicals, let 

alone their health hazards or how to respond in case of an emergency. In the silk 

screening department, workers say they are working with a solvent which, if even 

one drop touches their body, their skin begins to burn and fester. 

In another direct violation of China’s laws, management has refused to inscribe 

its workers in the mandatory national Social Security program, leaving the workers 

without health insurance, including for work injuries. There is no paid maternity 

leave, no paid holidays and no paid sick days. 

Eight workers are crowded into primitive 14-by-19-foot dorm rooms, sleeping on 

double-level metal bunk beds that line the walls. There is no other furniture, not 

even a chair. The rooms reek of perspiration due to the stifling heat, leading the 

workers to refer to their dorm room, sarcastically, as a ‘‘sauna.’’ The shared bathrooms are filthy, and due to a shortage of hot water, workers wishing to wash must 

heat their own water on a makeshift wood stove they set us using an old oil drum. 

Workers carry small plastic buckets of hot water back to their rooms where they 

take a sponge bath. The workers can afford to spend only $1.52 a day on food. 

The Guangzhou Speedo workers are in a trap, with no voice, no rights, and no 

exit. 

It is unlikely that any Olympic athlete—no matter how committed—could endure 

what China’s sweatshop workers suffer day in and day out. 

Speedo and the others must clean up this factory and guarantee that the workers’ 

legal human and worker rights will finally be respected. 

Senator DORGAN. Mr. Kernaghan, thank you very much. I have 

a good number of questions for you, but I’m going to wait and have 

the other witnesses testify first. 

Mr. Wu, thank you for being with us. You, I believe, have testified before this Committee on a previous occasion, some many 

years ago. I know that you have been incarcerated in China for 

many years. You’ve spoken out aggressively on Chinese policies. 

We appreciate very much your courage in doing so. 

Why don’t you proceed to give us your testimony. 

STATEMENT OF HARRY WU, EXECUTIVE DIRECTOR, 

LAOGAI RESEARCH FOUNDATION 

Mr. WU. Thank you, Mr. Dorgan. 

I want to ask that you put my written testimony in the record, 

and I will also say something not in my written testimony. 

First of all, I feel a kind of difference that we, today, are talking 

about the toy industry. Number one, the Chinese have set up their 

10 

prison system to manufacture things from 1949 until today. And 

the Laogai system is still effective today. 

Fifty years ago, I made some comments. One was about the Hungarian Revolution in 1956. Second, I criticized the government for 

dividing people into different classes. That is a kind of violation of 

human rights. And I was sentenced to life in a prison camp. I spent 

19 years over there. Has there been a change or not? 

Unfortunately, today there are many people who just for writing 

an article on a website or saying something that criticizes the government, are still in jail. So, whatever the economic development 

is like today in China, the political system has not changed. The 

Laogai system plays a very important role—it is meant to quiet the 

people, to quiet those who criticize the government. It’s to assist in 

that. But the Chinese stopped using the word ‘‘Laogai.’’ ‘‘Laogai’’ is 

a regular name, it is a government issue. But, later, they stopped 

using it, using ‘‘prison system’’ instead—they tried to say, ‘‘Well, we 

have prisons, the same as in America.’’ But in the Chinese prison 

system, there’s a lot of prisoners who are there because they disagree with the government. 

And since 1990, America has had a big problem with MFN, mostfavored nation trading status, and it is related to the prison labor— 

forced labor. And America has had a law since the 1930s forbidding 

any product made from forced-labor to be imported into the United 

States. And there were five to six American companies that were 

publicized by American customers, but, unfortunately, those cases 

were dismissed. 

And there are two customs representatives today in Beijing. They 

spend money and do nothing. For example, this is their report. 

There’s a court paper. Shandong province—a prison, they produce 

8 million to 10 million mugs which they export to the United 

States. And now they have won the case. The Chinese company 

was published—was punished, and—unfortunately, that customs 

representative had no response on this issue. 

And—a prison, using a small company in front of the prison, and 

using the police family and policemen to export instead of the prisoners. It means the present prison—the prison can force the products to be indirectly exported to the United States. This indirect exporting is much larger than ever before. Many prison camps today 

have stopped the production in the agricultural and construction 

areas and are working in the processing of products, particularly 

in garments, toys, electronical components, footballs, crafts, all 

kinds of things, which are processed by prison labor, and exported 

to the United States. 

The second problem is in the so-called sweatshops. Unfortunately, I received this newspaper just recently, from Salt Lake 

City. An importer reported on what’s happening inside China. The 

total (I have 2 days reports from newspapers that tally the Chinese) how long they work, just as he described, and how much 

they’re paid, and, particularly, that people have lost their arms, 

lost their fingers, lost their legs, and nobody cares about it. And I 

want to share with you about this newspaper. 

And, finally, I want to say, in China there’s a union, so-called— 

let me explain the name, because we don’t care about this name. 

Chinese National Trade Union. It is a government union. It is a 

11 

Communist union. That’s the only union in China. And no one accepted it. But today, Wal-Mart accepts it. Wal-Mart does not allow 

any of its American workers to organize unions in America, but 

they accept the Chinese union, and cooperate with the Chinese 

union. 

When I was here 20 years ago, I heard that Wal-Mart was very 

proud that of all its products, maybe 70 percent, 80 percent, were 

made in America. But today, probably the reverse, 70 percent, 80 

percent come from China. 

This can be combined into one story about our relationship with 

the Chinese. It is a Communist regime. And we are so enthusiastic 

to trade with them, do business, and we say that capitalism can 

destroy socialism. That is true. The ideological crisis is serious in 

China today. But the profit from the trade not only benefits America, but it also benefits the Chinese Communist system. That’s why 

you see the Chinese Communist system doing something in Sudan, 

Burma, and North Korea. And you will see that the Chinese government is going to do more. 

Thank you. 

[The prepared statement of Mr. Wu follows:] 

PREPARED STATEMENT OF HARRY WU, EXECUTIVE DIRECTOR, 

LAOGAI RESEARCH FOUNDATION

Good morning, I would first like to thank the Senate Commerce Subcommittee on 

Interstate Commerce and Trade and especially Chairman Dorgan and his staff for 

inviting me here today. This issue is extremely timely in light of recent toy recalls, 

and I am pleased that the U.S. Senate is concerned about labor conditions in China’s toy industry. 

I have been asked to focus on the Chinese labor system and the working conditions in toy factories in China. For many years human rights organizations have 

raised awareness about the atrocious conditions in Chinese sweatshops where workers make most of the clothes we are wearing right now, and most of the toys our 

children play with. Today my testimony will confirm that Chinese and foreignowned companies operating in China consistently violate international labor standards in the toy industry and the Chinese Communist Party (CCP) ignores these violations in order to maintain economic growth and foreign investment. The Chinese 

government placates the international community by agreeing to promote labor 

rights in multi-lateral meetings while continuing to allow the abuse of its workers 

at home. 

First, I will cover a subject less discussed in the international arena—forced labor. 

I will begin with early CCP theories on forcing prisoners to work, and will provide 

current examples of forced labor being used in the toy industry specifically. Next, 

I will discuss China’s so-called national trade union, the All China Federation of 

Trade Unions (ACFTU), and its role as one of the Party’s many tools to repress its 

people. I will conclude with what actions the U.S. Government and American companies should take. 

My knowledge of this subject originates from my 19 years in China’s prison camps 

where I was forced to labor, and from my subsequent work as a human rights activist. I am the founder and the Executive Director of the Laogai Research Foundation 

which began in 1992 for the purpose of researching and raising awareness about 

China’s vast system of prison camps, called the ‘‘Laogai’’, and other human rights 

abuses in China. 

Chinese Government Labor Theories 

The Chinese word ‘‘Laogai’’, meaning ‘‘reform through labor,’’ refers to a system 

of forced labor camps that spans China’s entire territory. Since the inception of the 

Chinese Communist Party in 1949 the Chinese government’s ideology has been to 

use its people to fulfill its political and economic goals. As a result humans are 

viewed as expendable commodities. Mao Zedong immediately recognized prisoners 

as a huge source of manpower, and in 1951 amended the ‘‘Resolution of the Third 

National Public Security Conference’’ to support this idea: 

12 

The large number of people who are serving their sentences is an enormous 

source of labor. In order to reform them, in order to solve the problems of the 

prisons, in order that these sentenced counterrevolutionaries will not just sit 

there and be fed for nothing, we should begin to organize our Laogai work. In 

the areas where this work already exists, it should be expanded. 

During the 1950s and 1960s Laogai inmates were the primary labor force for massive state-run reconstruction projects such as irrigation, mining, and dam projects 

that would have been impossible to undertake with regular workers. As China’s 

economy developed and it shifted from agriculture to manufacturing, so did the type 

of work that prisoners were forced to endure. During Deng Xiaoping’s reform era 

the goal for economic development drove the country to open to foreign investment 

and the importance of forced labor increased. In the 1988 ‘‘Criminal Reform Handbook’’ Deng reiterated that one of the three major functions of the Laogai facilities 

was to organize ‘‘criminals in labor and production, thus creating wealth for society.’’ 

This amount of profit cannot be underestimated because prisoners are not compensated for their work. 

Forced Labor and the Toy Industry 

In our foundation’s most recent biannual handbook (Laogai Handbook 2005–2006) 

we identified more than 1,100 labor camps by name and location (693 prisons and 

352 re-education through labor camps). According to our research, there are eleven 

(11) prisons that produce toys for domestic and international markets in provinces 

across China and there are likely many more. 

These provinces include Beijing, Shanghai, Gansu, Hunan, Hubei, Zhejiang, 

Shandong, Liaoning, and Henan. In the No. 2 Re-education through labor camp in 

Shandong province female prisoners, many of whom are imprisoned for political reasons, are forced to work without pay on handicrafts and toys for international export. Former prisoners from the camp have described some of their tasks to include 

applying artificial eyelashes and hair to dolls. At the Shiliping re-education thorough labor camp in Zhejiang province, where profits equal about 80 million yuan 

or almost 11 million U.S. dollars, inmates produce wool sweaters, leather products, 

and toys for international export. Hunan province’s Chishan Prison forces its inmates to make toys for export to South Korea. At a juvenile detention facility in 

Shanghai youths are forced to produce toys, clothes and other products. 

In June 2004, Li Ying a former political prisoner held for 2 years at the Shanghai 

Women’s re-education through labor facility talked about the toys she was forced to 

produce—dolls that were eventually sold in Italy. She asserted that she and her fellow inmates on ‘‘Team No. 3’’ made these dolls from June 2002–May 2003 laboring 

from 7 a.m. until 11 p.m., and sometimes even until 1 a.m. The prisoners were required to fulfill a quota of 120 dolls per day without pay in horrible working conditions. 

The U.S. State Department’s Annual Human Rights Report from 2006 confirms 

that ‘‘prison labor’’ is common in China. The report states that throughout last year 

‘‘prisoners worked in facilities directly connected with penal institutions; in other 

cases they were contracted to nonprison enterprises. . . . Facilities and their management profited from inmate labor.’’ This fact that companies are using forced 

labor makes it very likely that some of the toys are entering the United States. 

Unfortunately, the Memorandum of Understanding on Prison Labor (MOU) signed 

between the United States and China in the United States has proven to be completely ineffective in stopping the trade in forced labor products. Our own efforts to 

gather specific evidence are hampered significantly by the fact that China has 

deemed much information about these camps to be ‘‘state secrets’’. They severely 

punish anyone who reveals it. While we have revealed much information about the 

Laogai over the years, we have also contributed to simply forcing the trade to go 

further underground. The Chinese systematically use legitimate trading companies 

unconnected to the Laogai to sell the products abroad. 

A recent civil case involving the importation of forced labor made coffee mugs was 

brought by a U.S. company in Ohio. Detailed evidence of the production link to 

Luzhong Prison was presented. Unfortunately, the bringing of such cases is extremely rare, not because forced labor is rare, but rather because it is dangerous 

and difficult to gather the information in the first place. 

Sweatshops 

Of course, the overwhelming majority of toys made in China are produced in private factories, most of which are foreign-owned. Many of these can and have been 

defined as ‘‘sweatshops’’ by NGO’s, unions, and journalists in literally hundreds of 

reports over the past decade. 

13 

The State Department’s investigation also reported the sweatshop conditions that 

exist in factories including those that make toys: 

In July more than 1,000 workers at a plastic toy factory in Dongguan, 

Guangdong Province, rioted over allegations of inadequate pay and working conditions, particularly excessive overtime, and protesters clashed with police and 

company security. Dozens of workers were detained after the two-day protest. 

In September of this year, the Hong Kong labor rights organization, Students and 

Scholars against Corporate Misbehaviour (SACOM), exposed the conditions at a factory in China making toys for Disney. Workers at Haowei Toys in southern China 

said they were forced to labor for 15 hours a day for 28 days a month during peak 

seasons, work 28 days a month and up to 15 hours a day using dangerous toxic 

chemicals. 

The labor conditions in prisons and sweatshops are clearly different, but in all too 

many cases only by degree. If prisoners attempt to defend their rights they are 

quickly stifled by beatings or even torture. If workers do, they are either fired or 

arrested. Prisoners labor without remuneration and many factory workers are denied the pay that is due them for the hours they work. Forced labor and sweatshop 

conditions in the toy industry like nearly every other industry are perpetuated by 

the Chinese government because economic profit and GDP growth are the CCP’s 

number one priority. China still refuses to ratify the International Labor Organization’s convention against forced labor claiming its has a useful purpose in its reeducation camps. The government also will not ratify any United Nations or ILO conventions that allow workers to create and join independent unions and collectively 

bargain. 

This week The Salt Lake Tribune is running a series of investigative reports on 

working conditions in Guangdong province by reporter Loretta Tofani entitled 

‘‘American Imports, Chinese Deaths’’. It represents a 14-month effort and was sponsored by the Pulitzer Center for Crisis Reporting. With your permission I am attaching it to my testimony for the record. While it does not deal specifically with the 

toy industry, it is the most current expose of the tragic nature of work in southern 

China, the very same region where a majority of toys are produced for export to the 

United States. 

China’s National Trade Union 

The Chinese government outlaws all independent trade unions, forcing workers 

to join the state-sponsored All China Federation of Trade Unions (ACFTU). This organization, run by the CCP, with over 170 million members, is used to control union 

activities and workers. The ultimate goal of the ACFTU is to ‘‘uphold . . . the leadership of the Communist Party’’ and to quash any grassroots union movements. 

The government’s most recent tactic is to co-opt foreign companies into allowing 

their employees to join the ACFTU under the auspices of protecting the workers. 

In 2006 Wal-Mart—a company that does not allow its employees to unionize in any 

other country—finally capitulated to ACFTU demands and currently 77 out of 84 

of its stores in China have union branches. This tactic has two motives for the government as its economy’s shifts to privately owned enterprises. First dues paid by 

companies with ACFTU branches help off-set the losses from the diminishing stateowned sector, and second, the CCP can better monitor and control its private-sector 

workers. 

There is no evidence that Wal-Mart workers are allowed to bargain their own contracts with the company. And, unfortunately some in the American labor movement 

have seen fit to ignore the reality that the ACFTU is CCP controlled and an oppressor of workers rather than their advocates and have granted them a legitimacy they 

don’t deserve by meeting and working with them as equals. 

Sadly, workers who attempt to organize independent unions are quickly dealt 

with, usually by arrest and sentencing to serve terms in the Laogai and could end 

up making the products we are discussing here today. 

Conclusion 

The labor abuses in the toy industry prove that despite its rhetoric China has not 

progressed in human rights nor does it respect international labor standards. The 

high number of recalled toys made in China this year alone should be a sufficient 

warning for U.S. companies and consumers. The Chinese government continues to 

use forced labor to make goods, condones sweatshop conditions in its factories, and 

refuses to allow workers to create independent unions—is it really any wonder that 

low-quality, harmful toys are being exported to the U.S. and into the hands of our 

children? The toy industry in China is a vivid example that disproves the commonly 

mentioned notion that economic development and/or capitalism will bring demoVerDate Nov 24 2008 08:26 May 11, 2012 Jkt 074106 PO 00000 Frm 00017 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\74106.TXT SCOM1 PsN: JACKIE
14 

cratic change to China. In contrast, more and more U.S. companies are bending to 

the government’s demands making the totalitarian regime even stronger. 

The U.S. Government has an obligation to ensure that forced labor products and 

tainted goods do not enter our borders. American companies must take responsibility for the Chinese factories that produce their goods. They must perform more 

frequent inspections and audits and should not allow phony unions to be set up in 

their factories and workplaces. Profit is the only factor that has the potential to affect China’s behavior. Worker’s rights in China will not improve until foreign businesses and governments collectively decide to press China to stop using prison and 

sweatshop labor and to allow their workers to independently organize. 

The time has long past to discard meaningless Codes of Conduct. 

The Administration has rejected the AFL–CIO’s ‘‘301’’ petition on worker rights 

in China. I believe the Congress should itself resubmit this petition as well as significantly strengthen inspection at its ports of any and all products, including toys, 

which could endanger the health and well-being of American consumers. 

Thank you. 

The information referred, American Imports, Chinese Deaths, by Loretta Tofani, 

can be accessed at http://extras.sltrib.com/china/. 

THE SALT LAKE TRIBUNE: 

Chinese Workers Lose Their Lives Producing Goods for America—dated October 19, 2007. 

Metal Factories Fail To Protect Against Fatal Lung Diseases—dated October 

20, 2007. 

Primitive Machines Take Digits and Limbs—dated October 21, 2007. 

Workers Inhale Toxins Up To 70 Hours a Week—dated October 22, 2007. 

Cadmium Dust Causes Kidney Failure, Death—dated October 23, 2007. 

Companies Say They Are Not To Blame; Who Is?—dated October 24, 2007. 

Senator DORGAN. Mr. Wu, thank you very much for your testimony. I have some questions but I will wait until the others have 

testified. 

Dr. Bama Athreya, Executive Director of the International Labor 

Rights Forum, your organization has been extensively documenting 

the connection between Chinese toy sweatshops and product safety 

problems. We appreciate very much your willingness to be here and 

to testify today, and you may proceed. 

STATEMENT OF BAMA ATHREYA, EXECUTIVE DIRECTOR, 

INTERNATIONAL LABOR RIGHTS FORUM (ILRF) 

Dr. ATHREYA. Thank you very much, Senator Dorgan. Thanks to 

you and the Committee for the opportunity to testify and for your 

leadership on this very important issue. 

We all have read the scandalous news in recent months of toys, 

Thomas the Tank Engines, bibs, even baby clothes that are tainted 

with lead and toxic substances, and we should, rightly, be very concerned with the health and safety of our children—consumers in 

the United States, and, most importantly, our children who trust 

innocently in these toys. 

We are here today, however, to give voice to others who are, 

frankly, barely more than children themselves, and who are also 

tragic victims of the global toy industry. And these are the workers 

that work and apply these toxic substances to the toys, day in and 

day out, as Mr. Kernaghan has described. 

They operate machinery that produces the plastics for the toys. 

They breathe and touch the toxics, and almost never are they given 

protective gear or masks. In fact, most of the workers that we and 

our friends in China have interviewed would not know what protective gear looks like. 

15 

I have documented and included several examples in our written 

submission for the record. Here, I just want to summarize some of 

the facts and figures about the toy industry in China, and cite a 

couple of the very typical examples that we found in our research. 

There are approximately 8,000 toy factories in China today, and 

they employ more than 3 million workers. Most of these factories 

and workers are in south China and the Pearl River Delta, and virtually every American toy company produces its wares in this region. We have seen products for Mattel, Hasbro, Fisher-Price, Toys 

‘‘R’’ Us, and Disney. These are all well documented and users of 

Chinese toy factories. And the value of the toy exports to the U.S. 

market is estimated in excess of $15 billion per year. 

By far, the single largest toy retailer and the single largest beneficiary of this trade is Wal-Mart. Wal-Mart, alone, has toy sales of 

approximately $7.4 billion a year. Most of these toys, like most toys 

retailed in the U.S., are made in China. And Wal-Mart, therefore, 

bears a lion’s share of responsibility for pushing the toy industry 

into a region where product safety and worker safety inspection are 

nonexistent. 

On the subject of workers’ health and safety, I’m going to focus 

a bit on that, as Mr. Kernaghan has spoken very eloquently about 

the other worker rights abuses in these factories. But on worker 

health and safety, things are particularly grim. Toy factories that 

we have surveyed, and that our partners in China have surveyed, 

routinely fail to provide information or training to workers using 

chemicals at their work posts. Hundreds of workers that were surveyed by our allies in China reported that they are subjected to 

harmful chemical substances. These workers may be at risk of lead 

poisoning, plastic poisoning, and welding accidents. 

I am going to just name two examples of two factories that we 

investigated, one toy company, at Yu Bao, would actually ask its 

workers to make a Faustian bargain just to obtain their jobs in the 

first place. The company keeps two contracts for each worker. The 

first contract with the worker is what they hand to the labor rights 

monitors when they come to the factories to inspect, but the other 

is the real contract with the worker. The real contract stipulates 

the following, and I’m quoting a translation from a contract that 

we obtained, ‘‘During working hours, in case of injuries and/or disabilities as a result of not following the machine operating rules,’’ 

which the supervisor certifies to be true afterward, ‘‘the first party, 

the factory, without exception, does not grant or bear any responsibility, and, without exception, the second party, the worker, is, 

himself, responsible.’’ So, just to make that clear, workers are signing away any ability to hold the company, the factory, accountable 

if they are injured on the job. 

The same contract stipulates that workers must work for 12 

hours, 7 days per week, and if a worker fails to report for this entire period of duty for any reason, then, ‘‘without exception, the 

first party, the company, has no relationship with the employee, 

and the second party, the employee, must not, for any reason, raise 

the issue of litigation.’’ Again, in other words—I want to rephrase 

this—if a worker is severely maimed on the job and must leave her 

post to obtain medical emergency treatment, she is regarded as terVerDate Nov 24 2008 08:26 May 11, 2012 Jkt 074106 PO 00000 Frm 00019 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\74106.TXT SCOM1 PsN: JACKIE
16 

minated and has signed away her rights to bring a case forward 

for any damages. 

As if all of this were not enough, Yu Bao also compels workers 

to stay on the job by withholding a portion of their regular pay as 

a security. I’ll just name one other typical Chinese toy factory, Lee 

Der Industrial, a supplier to Mattel, and now infamous. Lee Der 

was one of the ones forced to close down due to excessive lead in 

its products. This caused immediate unemployment of all of Lee 

Der’s workers, and no mention was made by Mattel as to whether 

the lead poisoning they may have suffered would be treated. So, 

our investigators did go to interview the recently fired workers 

from this factory. They interviewed several ex-Lee Der workers. 

None of the workers interviewed knew anything about the materials, including lead, that were used during production. They had 

not been told why the factory closed. They had not been told about 

the lead paint issues. Nor had they been given any information related to the poisoning they may have suffered on the job as a result 

of applying the toxic to the toys. 

I will just say, my—on behalf of my organization, that we do believe these workers need jobs, but we don’t believe in condoning the 

rush to profit from the desperation of Chinese workers, who are 

really forced to take these jobs by dire economic conditions in their 

country. We believe there must be global regulations in place that 

keep powerful corporations from maximizing the profits they can 

wring from human misery. 

The name brands that we’ve mentioned here today—Hasbro, 

Mattel, Fisher-Price, and certainly Wal-Mart—have access to the 

most sophisticated possible information on every aspect of China’s 

economy, including comprehensive data on the nature of China’s 

desperate labor force, the vast unemployment problem in China, 

and the—the companies are also privy to excellent data on the 

number of China’s labor inspectors, which is, frankly, vastly inadequate for the workforce, the number of product safety inspectors, 

and the overall current inspection capabilities of the Chinese government. 

Despite some of the newspaper statements that you’ve seen recently, these companies were not shocked that there was no product safety happening in these factories; they were well aware that 

the Chinese government does not have the capacity to conduct systematic investigations of these factories. Indeed, multinational corporations, such as the ones we’ve named, are seeking out this production destination precisely because there is very little regulation. 

Let me restate this. Wal-Mart and the world’s major toy brands 

and retailers are not producing in China despite the lack of meaningful protection for workers or product safety, they’re there precisely because of it, precisely because it lowers their costs not to 

have to worry about regulation. 

Wal-Mart and the world’s major toy brands and retailers are not 

producing in China despite the lack of meaningful protection for 

workers or product safety, they’re there precisely because of it, precisely because it lowers their costs not to have to worry about regulation. 

Lest this seem too dramatic a statement, I do want to remind us 

all of an example that came up several months ago of the U.S. 

17 

business lobby’s efforts to impede improvements to labor law reforms in China. The Chinese government has recognized that there 

is a problem in the fact that most private-sector workers in China 

are not covered by the country’s basic labor laws. They’re not covered, because they’re not considered to be contracted under—covered by a labor contract. 

Several months ago, a new labor contracts law was drafted by 

labor experts within China to provide basic labor law coverage to 

the country’s growing private-sector workforce. The U.S. Chamber 

of Commerce in China, on behalf of its corporate members, opposed 

the new draft law and lobbied to weaken the protections of the Chinese government that it was seeking to instate. China would not 

be as attractive a production destination to U.S. toy retailers if its 

workers were actually provided with the basic protections of China’s labor code. 

I will end my comments here. I simply want to reinforce the 

point that Mr. Kernaghan also made, that we cannot rely on the 

voluntary commitments, the voluntary promises made under corporate codes of conduct. They are grossly insufficient, particularly 

in a context where, on the one hand, Wal-Mart and other retailers 

and brands are telling you, ‘‘Don’t worry, we have voluntary codes 

of conduct. We will protect the workers, ourselves,’’ and, on the 

other hand, are vigorously lobbying the Chinese government not to 

strengthen its legal protections for workers. We do need legal protection. This is extremely important. And we—our organization 

feels that we cannot wait several years for the Chinese government 

or Chinese laws to catch up with the situation—the desperate situation faced by these workers. 

That is why it is so important, the legislation, Senator Dorgan, 

Senator Sanders, that you’ve supported and brought forward, to 

hold U.S. retailers accountable for labor rights violations throughout their supply chains around the world. We do need binding regulation, and we strongly thank you for your efforts in this regard. 

[The prepared statement of Dr. Athreya follows:] 

PREPARED STATEMENT OF BAMA ATHREYA, EXECUTIVE DIRECTOR, 

INTERNATIONAL LABOR RIGHTS FORUM (ILRF) 

Introduction 

Thank you for the opportunity to present our testimony on the plight of China’s 

factory workers. We have all read the scandalous news in recent months of the dangers to U.S. consumers of toys made in China’s factories, with revelations of lead 

paint and other toxic and hazardous substances on Thomas the Tank Engines, baby 

bibs and even children’s clothing. We should be very concerned with the health and 

safety of our children, who innocently trust in the safety of their pretty toys. 

We are here today to give voice to others who are barely more than children and 

who are also tragic victims of the global toy industry. These are China’s toy factory 

workers. 

The International Labor Rights Forum (ILRF) has long fought to give voice to the 

abusive conditions faced by factory workers in China and around the world. Over 

the past decade we have worked closely in solidarity with China’s factory workers. 

I have traveled to China’s industrial centers in Guangdong province many times, 

have visited many factories and spoken directly with many dozens of workers. We 

have also made it possible for Chinese factory workers to speak on their own behalf 

in front of public audiences in the United States, to explain first hand the abuses 

they suffer in the completely unregulated export factories of southern China. 

These are the workers who apply the lead paint to the toys and who breathe the 

paint fumes day in and day out. They operate the machinery that produces the plastics for the toys, and breathe and touch those toxics as well. Almost never are they 

18 

given protective gear or masks—most would not know what protective gear looks 

like. They live and work in industrial slums that often resemble the images in 

Charles Dickens’ novels, crowded, almost unbearably polluted, and with limited access to clean, safe water. 

Here are the hard facts and figures. There are approximately 8,000 toy factories 

in China today, employing more than three million workers. Most of these factories 

and workers are in the Pearl River Delta area of southern China. Virtually every 

American toy company produces its wares in this region. Mattel, Hasbro, FisherPrice, Toys R Us, and Disney are all well documented end users of China’s toy factories. The value of China’s toy exports to the U.S. market alone is estimated in 

excess of $15 billion per year. As I will explain, however, our concern is not simply 

with the brands, but even more principally with the retailers of these toys, who bear 

the most responsibility for the horrific conditions under which they are produced. 

Of these, the single biggest toy retailer by far is Wal-Mart. Wal-Mart alone has annual toy sales of approximately $7.4 billion. Most of these toys, like most toys retailed in the U.S., are made in China. And Wal-Mart bears a lion’s share of responsibility for pushing the toy industry into a region where product safety and worker 

safety inspection is virtually nonexistent. The Wal-Mart model of doing business, as 

I’ll explain, is precisely to push suppliers to produce in corners of the world where 

they can escape the costs that are inherent in providing protections for consumers 

or protections for workers. 

Eric Clark’s excellent book ‘‘The Real Toy Story’’ documents the life story of one 

typical toy factory worker, and our own allies in China have documented many dozens of similar stories. I’d like to quote from Clark’s moving and detailed description 

of the 18 year old worker he met: ‘‘Li Mei soon had small wounds on her hands and 

elbows, burn marks on her uniform, her shoes, and socks. When they moved her 

to trimming plastic toys with small sharp knives, she often cut herself, once so 

badly that her hand bled heavily but the medical box was locked. Rather than pay 

at the clinic, she bound up the wound in a bit of cloth. Much worse things happened: 

workers in the die-casting and moulding department lost fingers and even arms, 

while hole-making workers often had their hands punctured and crushed because 

they had no reinforcing gloves.’’ 

Our allies in south China have conducted systematic research on the area’s toy 

factories throughout 2007. The results to date indicate repeated and endemic violations of China’s basic labor laws in every single factory. Compulsory overtime with 

inadequate and illegally low compensation is prevalent. Workers routinely work 10 

to 14 hours per day during the busy season. Because of a system of illegal fines and 

fees, workers actually receive well below the region’s mandated minimum wage. 

Very few workers are covered by government-mandated medical insurance or pension funds. Employees suffer verbal and sometimes physical abuse and sexual harassment. 

On the subject of these workers’ safety and health, things are particularly grim. 

Toy factories routinely fail to provide information or training to workers using 

chemicals at their work posts. Hundreds of workers that surveyed by our Chinese 

partners reported that they are subjected to harmful chemical substances. These 

workers may be at risk of lead poisoning, plastic poisoning or welding accidents. 

To cite the example of one of the factories we surveyed, the Duoyuan factory making Hasbro toys: Every day, workers are required to move bundles of PVC materials 

between departments. Each bundle averages about 100 lb. and workers describe 

these jobs as extremely fatiguing and not fit for the average workers. Production 

departments are installed with large machines, and workers are denied the necessary training to operate these machines. Induction heating machines and cutting 

machines are particularly high-risk. However, the only warning notice posted on 

this machinery reads, ‘‘Careful of high temperature.’’ Chemicals such as paint and 

dilutants are used in the silk print department. However, the company does not provide any related chemical information nor does it distribute any safety equipment. 

Another toy company that we investigated, Yu Bao, would ask workers to make 

a Faustian bargain just to obtain their jobs. The company keeps two contracts for 

each worker. The company’s first contract with the worker is used to hand to factory 

inspectors when they visit. The other is the real contract with the worker. The real 

contract stipulates the following: ‘‘During working hours, in case of injuries and/or 

disabilities as a result of not following the (machine) operating rules, which the supervisor certifies to be true afterward, the first party (the factory), without exception, does not grant or bear any responsibility, and without exception, the second 

party (the worker) is himself responsible.’’ The same contract stipulates that workers must work for 12 hours, 7 days per week, and if a worker fails to report for 

this entire period of duty for any reason then ‘‘without exception, the first party (the 

company) has no relationship (with the employee); and the second party (the emVerDate Nov 24 2008 08:26 May 11, 2012 Jkt 074106 PO 00000 Frm 00022 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\74106.TXT SCOM1 PsN: JACKIE
19 

ployee) must not for any reason raise the issue of litigation.’’ In other words, if a 

worker is severely maimed on the job and must leave her post to obtain medical 

emergency treatment, she is regarded as terminated and has signed away her rights 

to bring a case forward for any damages. Why would any manager ask a worker 

to sign such a contract, except that such clauses are actually likely to be invoked? 

As if all of this were not enough, Yu Bao compels workers to stay on the job by 

withholding some of their pay as a ‘security.’ 

Another typical Chinese toy factory is Lee Der Industrial, a supplier to Mattel and 

now infamous. Lee Der was forced to close down due to excessive lead in its products. This caused immediate unemployment of all Lee Der’s workers; no mention 

was made as to whether any lead poisoning they may have suffered would be treated. To find out, recently, our Chinese partners traveled to the factory site and interviewed some ex-Lee Der workers. None of the workers knew anything about the materials (including lead) that they were using during production. They had not been 

informed why the factory closed nor given any information related to the poisoning 

they may have suffered. 

Why do workers accept these jobs? The country’s enormous and desperate population of unemployed have no choice. With well over a billion people, of course China 

has the world’s largest labor force. In addition, despite the GDP growth rates that 

appear on paper, there are nowhere near enough jobs, so most of those billion plus 

people are barely surviving. In the countryside, where 900 million of those people 

live, the land cannot support the growing population. Even those peasants who had 

been getting by are now faced with competition from foreign agricultural markets, 

a result of expanded trade ties and China’s recent entry into the WTO, and that 

will put tens of millions more out of work. These tens of millions will flee to urban 

areas to seek work. However, China’s cities are also plagued with vast number of 

unemployed. Again as a result of free market pressures, many of China’s state 

owned enterprises have gone out of business in recent years, creating an even greater pool of unemployed and increasingly desperate workers. 

Yes, these workers need jobs. However should we condone the rush to profit from 

this desperation? We believe there must be global regulations in place that keep 

powerful corporations from maximizing the profits they can wring from human misery. ILRF is not an organization that opposes global trade, per se, but we cannot 

ignore the fact that the reason why virtually every U.S. toy company has chosen 

to produce in China is because of a ‘race to the bottom.’ The stories and statistics 

on China’s workers that I have cited here today are no secret to Hasbro, FisherPrice and certainly not to Wal-Mart. These name brands and retail giants have access to the most sophisticated possible information on every aspect of China’s economy, including comprehensive data on the nature of China’s desperate labor force 

and vast unemployment problem; these companies are also privy to excellent data 

on the number of China’s labor inspectors, the number of product safety inspectors, 

and the overall current inspection capabilities of the Chinese government. Multinational corporations seek out production destinations precisely where there is little 

or no regulation of labor or environmental conditions. Let me restate this: Wal-Mart 

and the world’s major toy brands and retailers are not producing in China despite 

the lack of meaningful product or worker safety regulation—they are there precisely 

because of it. 

Lest this seem too dramatic a statement, let me cite the example of the U.S. business lobby’s efforts to impede improvements to China’s labor laws. The Chinese government recognizes the problems faced by its workers. With the assistance of several labor experts, last year a new labor contracts law was drafted to provide basic 

labor law coverage to the country’s growing private sector workforce. The U.S. 

Chamber of Commerce in China, on behalf of its corporate members, opposed the 

new draft law and lobbied to weaken the protections the Chinese government sought 

to instate. China would not be as attractive a production destination to U.S. toy retailers were its workers actually provided with basic legal protections. 

The companies that make up the U.S. Chamber of Commerce, and more broadly 

the companies that consume cheap Chinese goods and hook U.S. consumers on the 

habit of these cheap goods, do not like regulation. Typically they prefer their consumers to relay on voluntary measures, ‘codes of conduct.’ This is a device we see 

used, for example, by Wal-Mart today to explain why binding regulations are not 

needed to correct human rights abuses. Collectively the various codes and monitoring initiatives that have emerged over the past two decades are referred to under 

the broader rubric of ‘‘Corporate Social Responsibility,’’ or CSR. 

In a new report which ILRF just released yesterday, we document the systematic 

failures of Wal-Mart to enforce its so-called ethical standards in its supplier factories around the world. Key findings include: 

20 

• Decreasing Percentage of Factories Rated Green: The number of factories rated 

green (as having no or low-risk violations) had been consistent at 21 percent 

for the first 2 years that data was available, decreased to 10 percent in 2005 

and to only 6 percent in 2006. Wal-Mart explains the dramatic shift as resulting 

from increasing standards for factories. However, it is more likely that the factories that actually complied with ethical standards did not meet Wal-Mart’s demand for the cheapest possible product, and that Wal-Mart therefore ceased 

doing business with the more ethical factories. 

• Decreasing Number of People Trained by Ethical Standards Staff: The number 

of suppliers and factory management personnel trained by ethical standards 

staff increased from 4,644 in 2003 to 11,000 in 2005, a significant increase in 

the number of people being made aware of the Standards for Suppliers. In 2006, 

however, training was cut in half. Only 5,000 suppliers and members of factory 

management were trained that year. 

• Recurring Violations: The 2004, 2005 and 2006 company reports listed some 

common and repeated violations that are ‘‘related to legally required benefits 

not being paid,’’ ‘‘workers not being paid for all hours worked,’’ and ‘‘the use of 

double books to hide the number of hours worked.’’ Wal-Mart describes these 

common violations as ‘‘Global Challenges and Trends.’’ The ‘‘double books’’ violation is particularly telling since it reveals that suppliers and factory management officials recognize that they are violating labor rights standards and laws. 

One of the challenges of analyzing Wal-Mart’s Ethical Standards program, and 

the extent of violations against workers throughout its supply chain, is the lack of 

accurate information available to the public. Information on sourcing policies and 

practices is conspicuously absent from the Ethical Standards Reports. It is not clear 

how Wal-Mart decides which factories to use, and it is not evident that its sourcing 

practices have changed in response to repeated sweatshop exposes. Pressures on 

suppliers to produce goods quickly and at the lowest possible cost necessarily lead 

to excessive overtime and illegally low wages due to Wal-Mart’s unreasonable deadlines for orders and demands for ultra-low prices. 

On health and safety issues, Wal-Mart and other toy brands’ codes of conduct and 

auditing systems are particularly inadequate. We have worked for several years now 

with trained occupational health and safety experts who led a training program 

within south China’s factories. They found an enormous lack of basic information 

in these factories, not only among workers, but also among factory management. 

Neither retailers nor brands bother to provide factory managers with information 

they have on such dangers as lead paint exposure. While companies claim to protect 

workers’ safety and health through their codes of conduct, most companies do not 

take even the first steps to encode meaningful standards that specifically identify 

hazardous substances and train or even suggest to factory monitors how to inspect 

for occupational illness. I have actually accompanied company monitors on their factory inspections so I can attest to the fact that nowhere in the standard questionnaire do company auditors ask such questions as what are the factory’s accident 

rates, what are the rates of illness among workers, what are the systems for hazard 

communications, what procedures are in place to limit exposures to chemicals, etc. 

Health and safety inspectors with whom we work report that many toys are handpainted by workers who stand over the toxic fumes applying paint to the toys for 

up to 20 hours per day! If Wal-Mart and other toy retailers had been measuring 

illness rates among their factory employees, might we consumers have known much 

sooner that there were problems here? 

Surely we can do better than to leave these horrific abuses to the ‘free market’ 

to address through such weak and voluntary efforts. None of the systems noted 

above contain any truly meaningful sanction for bad behavior. As we have seen 

first-hand in our current case against Wal-Mart, retailers who have played such a 

strong role in the development of voluntary systems are usually loath to see such 

systems assist in holding the companies themselves legally liable for non-compliance 

with local labor laws. This alone is evidence enough that local law enforcement is 

not the answer. 

Why hasn’t Wal-Mart been here before you testifying? They are the largest customer for all these brands that have been named, they are the ones who have 

pushed these companies overseas. Let’s tell the story of Huffy Bikes as an example 

of how the company’s price pressures led directly to an unsafe product for consumers, and the flight of a company from good factory conditions where labor laws 

were enforced to a place where workers could be exploited. What happened to Huffy 

is also the story of many a toy manufacturer. 

Despite making bikes in the United States for many years, Huffy was forced to 

close three factories and lay off thousands of workers. Huffy could not compete with 

21 

cheap bicycles coming from China. Celina, OH, where a large Huffy factory was 

closed, was hit particularly hard by the demand for low cost bicycles. Celina Mayor 

Paul Arnold said ‘‘. . . [Wal-Mart’s] demand for cheaper bicycles drove Huffy out of 

Celina. [Mansfield News Journal, 12/8/03] 

• After Filing for Bankruptcy, Huffy is Now Partly Owned by the Chinese Government. After Wal-Mart’s unfair demands pushed Huffy into bankruptcy, the Chinese government’s export credit insurance agency, known as Sinosure, took control of 30 percent of the company’s stock options. Sinosure executive vice president Zhidong Liang will be Chairman of the Board and over the next 5 years, 

Sinosure is expecting to control more than 50 percent of the company. As part 

of the deal, Huffy’s pension plan was dismantled and its current and former employees must seek assistance from Pension Benefit Guarantee Corporation. 

[Daily Deal, 10/18/05; Bicycle Retailer and Industry News, 10/1/05] 

According to Gary Gereffi, a Professor of Sociology at Duke University, ‘‘Wal-Mart 

is telling its American suppliers that they have to meet lower price standards that 

Wal-Mart wants to impose. The implication of that in many cases is if you’re going 

to be able to supply Wal-Mart at the prices Wal-Mart wants, you have to go to 

China or other offshore locations that would permit you to produce at lower 

cost. . . .’’ 

What do we do, then, to stop this relentless race to the bottom? Clearly we cannot 

rely on voluntary company commitments as the answer. Companies will not respect 

worker rights unless there are prohibitive legal sanctions in place. Without the fear 

of such sanctions, companies like Wal-Mart, Mattel and Disney will correctly calculate that it is cheaper to suffer a little bad publicity once in awhile than to provide systematic and meaningful protections for workers and consumers. 

As I have noted, the Chinese government has taken steps in recent years to reform its labor laws, and may over time take more such steps. Nevertheless serious 

challenges to enforcement remain, and may take many, many years to address. In 

the interval, it is highly likely that if retailers and manufacturers see enhanced 

worker protections, they will flee to yet more lawless destinations around the globe. 

We at ILRF recognize that enforceable global human rights laws are also a dream 

for a far distant future. We are doing what we can to utilize existing U.S. laws to 

hold U.S. corporations accountable for abuses suffered by workers overseas. We 

have used U.S. laws to bring forward cases in U.S. courts on behalf of abused workers in China and elsewhere. We have also worked with U.S. Congress to strengthen 

worker rights protections in our trade laws, and to push for adequate enforcement 

of those labor clauses. We applaud the initiative of Senator Byron Dorgan and Senator Lindsey Graham to promote a new legislative remedy for worker rights abuses 

in the global supply chains that bring consumer goods to the United States, the S. 

367 bill to amend the Tariff Act to prohibit the import, export and sale of goods 

made with sweatshop labor. These are necessary but not sufficient initiatives, and 

are, of course, vigorously opposed by the same U.S. business community that claims 

to be implementing ethical standards in its overseas production. We ask why WalMart and the toy brands have not been called upon today to answer for the exploitation of their factory workers overseas? We look forward to a lively, substantive 

exchange with U.S. corporations on the investments they have made to promote voluntary CSR initiatives, while all the while vigorously opposing enforceable domestic 

labor laws and enforceable legislation on international labor standards. 

Our grateful thanks to the Committee for the opportunity to present this testimony today. 

Senator DORGAN. Dr. Athreya, thank you very much for your 

comments. 

We have been joined by Senator Sanders, who I invited to join 

the panel this morning. And we expect Senator Brown to be along, 

as well. 

Our last—Senator Sanders, if you don’t mind, I’ll ask Mr. Eio to 

present, and then you may have a statement and then ask questions, as well. And we appreciate your being here. 

Mr. Robert Eio—am I pronouncing that correctly? 

Mr. EIO. Mr. Peter Eio, sir. 

Senator DORGAN. OK. 

Mr. EIO. Your—but the ‘‘Eio’’ pronunciation is correct. 

Senator DORGAN. First name is Peter. 

22 

Mr. EIO. Yes. 

Senator DORGAN. I apologize. Mr. Peter Eio, former Chairman of 

the Toy Industry Association. 

I should mention that we did invite Mattel to be present at the 

hearing. They chose not to. We wanted someone with the Toy Industry Association. Mr. Eio is the former Chairman of that association. He chaired the group, as I indicated, when it was known as 

the Toy Manufacturers Association, but I’m guessing, Mr. Eio, that, 

because the manufacturing is largely gone, the name has changed 

to Toy Industry. But you, in any event, are welcome to discuss 

that. 

I thank you very much for being here because we wanted to hear 

the perspective of the toy industry as well. And, as I indicated, I 

had invited Mattel, because Mattel has been the subject of some of 

the testimony. But your presence is appreciated, and why don’t you 

proceed. 

STATEMENT OF PETER EIO, MEMBER, GOVERNANCE BOARD, 

ICTI CARE FOUNDATION 

Mr. EIO. Thank you, Senator Dorgan and Senator Sanders. 

My name is Peter Eio, and I’m a member of the Governance 

Board of the ICTI CARE Foundation. I retired 5 years ago as president of the Lego Toy Company in the Americas, and, as you stated, 

I am a past chair of the Toy Industry Association. And you were 

correct also, in those days it was the Toy Manufacturers Association. 

The ICTI CARE Foundation is an independent foundation that 

oversees the ethical manufacturing program of the worldwide toy 

industry. The International Council of Toy Industries, or ICTI, is 

the umbrella industry association of 21 national toy associations 

around the world, of which the U.S. Toy Industry Association is the 

largest member. 

Our Governance Board was founded by such people as Carl Bildt, 

former Prime Minister and current Foreign Minister of Sweden; 

Maria Livanos Cattaui, former Secretary General of the International Chamber of Commerce; and Amir Dossal, Executive Director of the United Nations Fund for International Partnerships. 

As I’m sure you know, many organizations ‘‘talk,’’ and some ‘‘do.’’ 

We are doers. We are the first worldwide industry to bring together 

brands, retailers, government, civil society, and manufacturers to 

achieve a common goal: to help create a better life for workers in 

our supply chain. I have focused my remarks on this effort, as I 

believe that is most of what the committee has asked us to cover. 

Our program is called the ICTI CARE Process and has been operating in China for about 2 years. It is the worldwide toy industry’s effort to develop a transparent, independent system that will 

ensure its products are manufactured in safe, healthy, and fair 

work environments. To achieve this, it aims to provide a single, 

fair, thorough, and consistent monitoring program for toy factories. 

We began in China, where more than 75 percent of the world’s toys 

are made, and expect to expand into other countries, beginning 

next year. 

This process begins with a global code of business practices, continues with a monitoring protocol and guidance document, and is 

23 

enforced through the periodic certification and recertification of factories that comply. Operations in China are managed by an office 

in Hong Kong, while the actual audits are carried out by thirdparty social compliance auditing companies. 

To date, there are more than 1,200 toy factories in China, employing more than a million people, that are registered and active 

in this process, with 670 factories currently certified as being in 

compliance. The others are working toward compliance. We expect 

those numbers to grow significantly next year as more auditors are 

trained and more factories used by major retailers join the system. 

Senators, clearly, certifying factories is not sufficient unless you 

have toy brands and retailers who are willing, not only to accept 

those certifications, but also to demand them. Currently, there are 

290 toy brands around the world, representing an estimated 75 

percent of global toy production, that are pledged to order product 

only from factories certified by our program by a date no later than 

year end 2009. In addition, a growing list of major retailers have 

joined us around the world, including Wal-Mart, Target, Sears, KMart, Carrefour, Tesco, Argus, and the smaller retailers grouped in 

the American Specialty Toy Retailing Association, ASTRA. 

Our toy industry has twice been awarded grants by the U.S. Department of State as part of their Partnership to Eliminate Sweatshops program, in support of two phases of our ‘‘Toward Better 

Workplace Standards in China’s Toy Factories’’ program. 

In this program, we brought together toy factory managers, Chinese labor inspectors, and social compliance auditors to learn international and Chinese labor law and the requirements of the ICTI 

CARE Process, as well as to receive practical training in working 

together to improve labor law enforcement. We would welcome the 

opportunity of further funding, should that opportunity present 

itself. 

The Governance Board, of which I am a member, is a fully independent body whose members are drawn from current and former 

toy industry leaders, members of civil society, and international 

civil servants. We oversee the ICTI CARE process, raise funds to 

support it, and, beginning this year, will issue annual reports on 

our activities. 

We believe we were asked here today because we’re the most advanced global industry organization working towards improving 

labor conditions in our industry’s supply chain. In 2 short years, we 

have made great strides forward, but recognize there is a great 

deal still to be done. 

In closing, I would like to thank the other organizations testifying here today for continuing to make us more aware of all that 

needs to be done, and also for helping us to come—become better 

at doing it. We know that, by working together with our partners 

in China, we will be able to achieve continued progress. 

Mr. Chairman and Members of the Committee, thank you for 

this opportunity to address you, and I look forward to responding 

to your questions. 

[The prepared statement of Mr. Eio follows:] 

24 

PREPARED STATEMENT OF PETER EIO, MEMBER, GOVERNANCE BOARD, 

ICTI CARE FOUNDATION

Good morning, Mr. Chairman and Members of the Subcommittee. My name is 

Peter Eio and I am a member of the Governance Board of the ICTI CARE Foundation. This is an independent foundation that oversees the ethical manufacturing program of the worldwide toy industry. The International Council of Toy Industries (or 

ICTI) is the umbrella industry association for 21 national toy associations around 

the world (list at Appendix I), of which the U.S. Toy Industry Association is the 

largest member. I retired 5 years ago as President of the LEGO toy company in the 

Americas and I am a past chair of the Toy Industry Association. 

As I’m sure you know, many organizations talk and some do. We are doers, the 

first worldwide industry to bring together brands, retailers, government, civil society 

and manufacturers to achieve a common goal—to help create a better life for workers in our supply chain. I would like to focus my remarks on this effort, believing 

it covers most of the territory I was asked to cover. 

Our program is called the ICTI CARE Process and has been operating in China 

for about 2 years. It is the worldwide toy industry’s effort to develop a transparent, 

independent system that will ensure its products are manufactured in safe, healthy 

and fair work environments. To achieve this, it aims to provide a single, fair, thorough and consistent monitoring program for toy factories. We began in China, where 

more than 75 percent of the world’s toys are made, and expect to expand into other 

countries beginning next year. 

This process begins with a global Code of Business Practices, continues with a 

Monitoring Protocol and Guidance Document, and is enforced through the periodic 

certification and recertification of factories that comply. Operations in China are 

managed by an office in Hong Kong, while the actual audits are carried out by 

third-party social compliance auditing companies. 

To date there are more than 1,200 toy factories, employing more than one million 

workers, registered and active in this process, with 670 factories currently certified 

as being in compliance. (Current statistics at Appendix II). We expect that number 

to grow significantly next year, as more auditors are trained and as more factories 

used by major retailers join the system. 

Clearly, certifying factories is not sufficient unless you have toy brands and retailers who are willing not only to accept those certifications but also to demand them. 

Currently, there are 290 toy brands around the world representing an estimated 75 

percent of global toy production that are pledged to order product only from factories 

certified by our program by a date no later than year-end 2009. In addition, a growing list of major retailers have joined us around the world, including Wal-Mart, Target, Sears, K-Mart, Carrefour, Tesco, Argus and the smaller retailers grouped in the 

American Specialty Toy Retailers Association (ASTRA). 

Our toy industry has twice been awarded grants by the U.S. Department of State 

(Bureau of Democracy, Human Rights & Labor), as part of their ‘‘Partnership to 

Eliminate Sweatshops’’ program, in support of two phases of our ‘‘Toward Better 

Workplace Standards in China’s Toy Factories’’ program. In it, we brought together 

toy factory managers, Chinese labor inspectors and social compliance auditors to 

learn international and Chinese labor law and the requirements of the ICTI CARE 

Process, as well as to receive practical training in working together to improve labor 

law enforcement. We would eagerly accept the opportunity for further funding, 

should that opportunity present itself. 

The Governance Board of which I am a member is a fully independent body, 

whose members are drawn from current and former toy industry leaders, members 

of civil society and international civil servants. (See Appendix III for current members.) We oversee the ICTI CARE Process, raise funds to support it and, beginning 

this year, will issue annual reports of our activities. 

In summary, the ICTI CARE Process is a work in progress, working toward improved labor conditions in our industry’s supply chain, through factory monitoring 

and worker capacity-building. We are well advanced, but recognize there is a great 

deal still to be done. 

As part of that, in 2008 we will start a new phase of our program, which adds 

education, training and capacity-building to our factory certification program. 

You have also asked me to cover a few areas which may not have been as specifically answered as you wish in this presentation on our ICTI CARE Process program. 

• With regard to the toy industry’s formal relationship to Chinese factories where 

toys are made, this is almost always a contract manufacturing relationship. 

Through the ICTI CARE Process, we have a direct relationship to the qualification of factories to be part of the toy supply chain. 

25 

• Regarding working conditions in factories, we have a very strict Code of Business Practices, with specific guidelines, regarding how manufacturers must 

treat their workers. Our code does not permit child, slave or prison labor; it requires decent living conditions and, with regard to wages and hours, requires 

compliance with Chinese law—which, by the way, is very strict. We have been 

working on strict enforcement of those laws with the Chinese government for 

several years and we can report some good progress in factories that have been 

audited in accordance with our guidelines. 

• With regard to the impact of Chinese toy manufacturing on domestic toy production, the U.S. toy industry began sourcing overseas some 40 years ago, beginning in Japan and later moving to Taiwan, Korea and parts of Southeast 

Asia. Nearly 75 percent of toys sold in the USA are made in China and the rest 

are divided among the USA and a variety of other countries in Europe and Asia. 

In closing, we would like to thank the other organizations testifying here today 

for continuing to make us more aware of all that needs to be done and also for helping us to become better at doing it. We know that by working together with our 

partners in China, we will be able to achieve continued progress. Mr. Chairman and 

members of the committee, thank you for this opportunity to address you. I look forward to responding to your questions. 

APPENDIX I 

ICTI Members (21 National Associations) 

Australia 

Austria 

Brazil 

Canada 

China 

Chinese Taipei 

Denmark 

France 

Germany 

Hong Kong 

Hungary 

Italy 

Japan 

Mexico 

Netherlands 

Russia 

Spain 

Sweden 

Switzerland 

United Kingdom 

United States 

APPENDIX II 

ICTI CARE Process Statistics 

(As of 30 September 2007) 

Factory Compliance Monitoring 

Current Target 12/31/07 

Toy factories in the system (registered, applications) 1,242 1,500 

Seals of Compliance issued 669 800 

Employees covered 1.1 million 

‘‘Date Certain’’ Program 

Toy brands pledged to source only from certified factories by the 

end of 2009 

290 (75 percent of world 

toy market) 

Major Retailer Commitments to the ICTI CARE Process 

Recognize the ICTI CARE Process Seal of Compliance as a replacement for own 

social compliance audits. 

Wal-Mart 

Target 

Costco 

Kmart Sears 

Dollar General 

ASTRA (American Specialty Toy Retailing Association) 

Carrefour (France) 

Chelsea Stores (UK) 

Tesco (UK) 

Argus (UK) 

Woolworth (UK) 

Colruyt Group (Belgium) 

Top-Toy (Scandinavia) 

Coles-Myer (Australia) 

26 

APPENDIX III 

ICTI CARE Foundation Governance Board Membership 

(As of 22 October 2007) 

Name Affiliation 

Alan Hassenfeld (Co-Chair) Chairman (non-executive) Hasbro 

Maria Livanos Cattaui (Co-Chair) Former Secretary-General, International Chamber of 

Commerce (ICC) 

Thomas A. Debrowski Executive Vice President, Worldwide Operations, Mattel 

Amir A. Dossal Executive Director, United Nations Fund For International Partnerships (UNFIP) 

Peter Eio Former President, Lego Americas (retired) 

Gary Hutchens President, International Council of Toy Industries 

(ICTI) 

Steven Jesseph Vice Chairman, President and CEO, Worldwide Responsible Apparel Production (WRAP) 

Alan E. Munn Former President and CEO, TOMY Europe (retired) 

Jane Nelson Senior Fellow and Director of the Corporate Social Responsibility Initiative, Kennedy School of Government, 

Harvard University; Director, Business Leadership and 

Strategy, Prince of Wales International Business Leaders Forum (IBLF); Senior Fellow, the Brookings Institution 

William Reese President and CEO, International Youth Foundation 

(IYF) 

Paul Rice President and CEO, TransFair USA 

T.S. Wong Immediate Past President, ICTI; Managing Director, 

Jetta Ltd. 

Christian Ewert, ex officio President, ICTI CARE Foundation 

Senator DORGAN. Mr. Eio, thank you very much. We appreciate 

your being here and your testimony. 

Let me begin with you, Mr. Wu. You spent 19 years in a Chinese 

prison. You have come to this country and lived here now for some 

while, have testified previously before this Committee, on human 

rights issues and so on. I believe, in your testimony, you indicated 

that there is toy manufacturing occurring in Chinese prisons, and 

that, by indirect methods, toys produced in Chinese prisons find 

their way to American store shelves. Is that what you’re suggesting? 

Mr. WU. Yes. Chinese prison camps right now have signed contracts with state-run enterprises, contract by contract. So, for example, they produce the toys just by one process to another process. That’s all. Particularly in Guangdong, Shanghai, Zhejiang, 

Shandong provinces, many prison camps right now are working on 

the processing of cameras, toys, footballs, electronical components, 

every kind of thing, but they are indirectly exported—— 

Senator DORGAN. Mr. Wu, how do you know that? 

Mr. WU. Oh, we have people in there. We do have the evidence. 

Senator DORGAN. So, you’re saying that toys, garments, and so 

on, are produced in prison camps, and, through indirect methods, 

then marketed through Chinese government-owned enterprises, 

and then being sent to the store shelves in our country. 

Mr. WU. Correct. 

Senator DORGAN. Mr. Kernaghan, you have described, in great 

detail, sweatshop conditions, dangerous working conditions, workers being cheated, workers being worked long, long hours, 7 days 

a week. Tell me how you know that. Can you describe for us the 

27 

research and the investigation you have done that will give us confidence that what you are testifying is, indeed, a fact? 

Mr. KERNAGHAN. Well—— 

Mr. WU. I will give you two examples. The first example is 

Christmas lights. They were assembled by prisoners in a number 

of the prisons, and exported by a Chinese export company. It is a 

different company. The second case is artificial flowers. The prisoners sit in a small space and put these leaves and flowers on the 

branches, including the label, ‘‘Made in the United States,’’ 99 

cents, $1.99, each of them. 

Senator DORGAN. The label says, ‘‘Made in the United States’’? 

Mr. WU. Yes. They are imported by Ben Franklin. Yes. 

Senator DORGAN. By Ben Franklin stores? 

Mr. WU. Yes. 

Senator DORGAN. Mr. Kernaghan, tell me your—the results of 

your investigations. You’ve described to me what you found, but 

tell me how those investigations occurred and how we understand 

that these are firsthand, observable conditions? 

Mr. KERNAGHAN. Well, some of the research was carried out over 

a year, starting in mid-2006, with another return at 2007. Pictures 

were smuggled out of the factory. Pay stubs were smuggled out of 

the factory. All these pictures of the toys were smuggled out of the 

factory. Dormitory photographs were smuggled out of the factory. 

Plus, we also used shipping records, based on U.S. Customs documents, to arrive at the pricing of the toys, the landed customs 

value, which is the total production cost. 

I can’t go much beyond that, because, like Mr. Wu said, anyone 

involved in this research will be sent away, so it’s not—there’s— 

it’s impossible to do this openly. It was even during the overthrow 

of President Aristide, in Haiti, with the Tonton Macoutes running 

wild, it was easier to research in Haiti than it is to research in 

China. So, this stuff needs to be—remain—it comes from the workers. 

Senator DORGAN. I understand. So, in the case that you described today, one of them is a Mattel toy. Would you hold that up? 

That is a—— 

Mr. KERNAGHAN. This was an almost exact replica of the picture 

that workers sent us. And we were fortunate enough to find the 

landed customs value, the shipping records. And this came in. It 

was for Target. It came in at a landed customs value of $9. And 

the toy—we purchased it at a Toys ‘‘R’’ Us, also went to Toys ‘‘R’’ 

Us—for $29.99. 

Senator DORGAN. And there’s 19 cents of Chinese labor—— 

Mr. KERNAGHAN. Yes, even—— 

Senator DORGAN.—in the product? 

Mr. KERNAGHAN.—less than that. That’s a very, you know, liberal estimate as—what they were paid. And, of course, the—Mattel 

spends—spent $2 billion in advertising over the last 3 years, so 

they’re spending 11.5 percent of their revenues in advertising, so 

they spend, you know, 18 times more to advertise this toy than 

they paid the workers to make it. 

Senator DORGAN. Based on your investigation, the company that 

sells that product in the United States, what knowledge do they 

28 

have of the conditions of the factory in which the product is produced? 

Mr. KERNAGHAN. I would say none, because, even Mattel—and I 

have to say this—I heard Mattel say they are a good company so 

often I began to believe it. I always thinking maybe they’re the Jesuits, and they’re traveling around the world to help develop poor 

countries. But then, with the toy recall, Mattel actually admitted 

they have no idea, it’s out of control, they did not even know where 

their toys were being made, they certainly didn’t know where parts 

of their toys were being made, because their contractors were illegally subcontracting to subcontractors who, in turn, were subcontracting to other factories. It was completely out of control. They’ve 

admitted it. 

Now, Mattel says it has the best code of conduct imaginable. As 

a matter of fact, in the Xin Yi factory, where the workers are held 

as temporary workers, which means from the—from the very beginning, they have absolutely no rights, zero rights—the first day they 

come into the factory, they’re given a training session, where they 

teach the workers how to lie to Mattel auditors and other corporate 

auditors; they tell them to say, ‘‘The work conditions are great, 

management’s fine, we’re never forced to work overtime, we’re paid 

correctly, our dorms are beautiful.’’ The very first day, they receive 

that training. 

On top of that, if you read Mattel’s own audits—and I was—I— 

shocked, because I don’t believe anybody ever reads these things— 

if you read Mattel’s own audits, they read like a nightmare: 80- 

hour work weeks, 7-day work weeks—I mean, it’s frightening. Fungus growing on the walls of the dormitory, and it’s—it would— 

frightening. These are their own audits. This audit—and, of course, 

they don’t name the—they don’t—won’t give you the name of the 

factory. This is factory number 18. They won’t tell you what factory 

it is. They worked with this factory for 6 years to clean it up, and 

yet, for 6 years, the 80-hour work weeks went on. 

And one other thing that blew my mind, personally. Mattel 

apologized to China, their government official in China, for the recall. After the Chinese government official said to Mattel, ‘‘Don’t 

you realize a large portion of your profits come out of our manufacturers in China,’’ Mattel then apologized to China for the recalls, 

for making them seem too excessive. It turns out that the cooperation that the government official was referring to with Mattel— 

Mattel was given waivers, as late as 2005, to pay below the minimum wage. So, this is the monitoring operation. They got waivers 

to pay below the pitiful minimum wage in China. To this day, they 

have waivers to allow workers to work excessive amount of overtime. In China, the law is 36 hours of overtime a month. Mattel 

has waivers to let the workers work—allow the workers to work up 

to 72 hours a week, which is 295-percent higher than China’s labor 

laws. So, this thing is out of control. 

Senator DORGAN. I’m going to ask a couple more questions, then 

I’m going to call on my colleague Senator Sanders. 

Dr. Athreya, same question to you. You are testifying about conditions inside of China. Tell me how you know these conditions 

exist. 

29 

Dr. ATHREYA. I will say I have, myself, traveled to China on several occasions, and have traveled extensively in this region of south 

China, where most manufacturing for the U.S. market occurs. I 

have been able to go into factories, to my own surprise, openly, 

with factory—with the sort of folks that are hired to do compliance 

for some of these companies, and have been proud to walk me 

around the factory to show me what their labor monitoring looks 

like. I, therefore, can verify, directly, that they are vastly inadequate to uncover the tremendous range of problems that these 

workers suffer. Workers are not interviewed confidentially. 

Now, we do also have allies in China, as I have mentioned, that 

we cannot name and we cannot identify, but they are very close to 

workers in these factories, because they are in these communities, 

day in and day out, and have the trust of the workers and, therefore, are able to gain information directly from factory workers on 

a routine basis, month in, month out, and to verify the nature of 

what companies report in their annual reports, et cetera. 

Senator DORGAN. Mr. Eio, thank you for your work and your description of what you’re trying to do to develop codes of conduct and 

so on. In your testimony, you indicated 670 factories currently certified as being in compliance with the standards you’re developing, 

but there are 8,000 toy factories in China. So, would you agree that 

the kinds of things that have been described by others on the panel 

can exist—can exist quite easily—because you’ve got close to 7,500 

factories not in compliance? 

Mr. EIO. Yes. And, certainly, I think the examples we’ve heard 

of here are very egregious, and they do occur. And that’s precisely 

why the ICTI CARE Foundation was set up. We are very young. 

We have been—it took a number of years to put together an international code of manufacturing practices, because we were working 

with organizations in 21 different countries. The code is now globally accepted code, and the phase we’re working on now is the implementation and the monitoring. And, as I say, we have, so far, 

signed up with 1,200 companies. I think there are 3,500 toy companies that are licensed to export out of China, and it obviously is our 

intention that all of those should eventually come under the ICTI 

code. We have about 1—just over 1 million workers who are covered by the factories that are approved, out of a total of about 3 

million, so we have a long way to go. 

One of the things we do is, we provide workers with a copy of 

the code, which tells them what their rights are and what they are 

entitled to do. And this is—generally, as has been observed, is not 

known by many of the workers, and this educational process is a 

very important part of what we do. 

Senator DORGAN. I see three issues coming to the same intersection. 

One, American workers lost jobs because they couldn’t compete 

with somebody that’s working 80 hours a week, 7 days a week, for 

20 or 30 cents an hour, and shouldn’t have to try to compete with 

that. No American workers should be told, ‘‘You’ve lost your job because you can’t compete with a sweatshop.’’ 

Second, unsafe products. If you don’t know about the factory, 

where the work’s being produced, you probably don’t know what inVerDate Nov 24 2008 08:26 May 11, 2012 Jkt 074106 PO 00000 Frm 00033 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\74106.TXT SCOM1 PsN: JACKIE
30 

gredients exist, or you probably look the other way. What about the 

product safety for American consumers? 

And, third, the sweatshop conditions and the abuse of workers 

inside plants in China. 

Our country ought to at least, as a matter of standard, say, ‘‘We 

will not accept, for sale in this country, products produced with 

forced labor or sweatshop labor.’’ And that’s the legislation Senator 

Sanders and I and Senator Brown and others have introduced. And 

we’re going to push to try to get at least the U.S. Congress on 

record to say that we have disagreements on trade, but they ought 

not be a disagreement in this Congress about this principle. We 

should not have the product of sweatshop labor coming into this 

country to be sold. That’s profiting at the misery of others, and 

that’s not something this country should condone. 

Senator Sanders, thank you for joining us. Why don’t you proceed. 

STATEMENT OF HON. BERNARD SANDERS, 

U.S. SENATOR FROM VERMONT 

Senator SANDERS. Well, Mr. Chairman, thank you for holding 

this hearing. And, most especially, I want to thank all of the panelists for being here. The issue that we’re dealing with today is an 

issue that should be dealt with in virtually every Committee of the 

U.S. Senate. Too often, it is swept under the rug. 

The bottom line here, to my mind, is that these unfettered socalled ‘‘free trade’’ agreements that have been pushed on us by 

large multinational corporations are certainly hurting American 

workers. The middle class is shrinking, poverty is increasing. They 

are certainly hurting the health of our people; in this case, our children. Where products are coming into this country that can make 

our kids sick is unacceptable. And, last but certainly not least, as 

people who care about working folks in other countries, these policies are doing horrendous harm to people in China, in other developing countries, who are working 70 or 80 hours a week in horrendous working conditions. 

So, I think what you are telling us is that the time is long overdue for this Congress to begin rethinking these unfettered free 

trade policies which are hurting so many people in America and all 

over the world. And I want to thank you very much for doing that. 

In my view, if, to the degree that the people of our country know 

what is happening in countries like China, where people are being 

exploited so ruthlessly, where their lives are endangered by horrendous working conditions and exposure to harmful chemicals, to the 

degree that the American people understand that—and they are 

understanding it more and more—they will say, ‘‘No more. We need 

to rethink these entire policies.’’ 

The bad news is that what you have described this morning is 

going on. That is the very bad news. The good news, I should tell 

you, is that, in this country and around the world, there is growing 

discontent with these unfettered free trade policies. Some of you 

may have seen, recently, just a couple of weeks ago, on the frontpage Wall Street Journal, almost two-thirds of Republicans, by a 

two-to-one vote—two-thirds of Republicans—are beginning to doubt 

31 

whether unfettered free trade is good for this country. And I think 

the polls for Democrats are even higher. 

The one last point that I want to make—and I think Senator 

Dorgan touched on it—or maybe Mr. Wu did, I can’t remember 

who—is the incredible situation when you have the United States 

Chamber of Commerce telling the Chinese government, an authoritarian government, that they are going too far in giving workers 

more rights. Can you imagine that? This is a country which is supposed to believe in freedom and democracy, and you have the 

Chamber of Commerce of this country, representing corporate 

America, telling an authoritarian government that they’ve got to 

ease back, they’re giving workers too many rights. Can you believe 

that? I mean, it is really quite unbelievable and quite a national 

disgrace. 

Senator DORGAN. Senator Sanders, might I observe, on that 

point, exactly the same thing happened it the Philippines. President Arroyo, of the Philippines, at one point said, ‘‘We really 

need—given the miserable poverty and wage rates, we really need 

to consider increasing the minimum wage.’’ The U.S. Chamber of 

Commerce folks and—particularly, the very next day, one American company doing business in the Philippines, said, ‘‘You do that, 

we leave.’’ It is the same story virtually all over the world. 

Senator SANDERS. The last point that I want to make is, I believe 

we are making progress in raising consciousness. And a lot of that 

has to do with the work that all of you are doing. And we appreciate that very much. You keep up the fight out there at the grassroots level. We’ll do what we can inside here in the Senate. And 

thank you. 

And, Senator Dorgan, again, thank you for being the leader in 

raising consciousness on this issue. I wish more of subcommittee 

chairmen were holding the same type of hearings within their jurisdictions. 

Thank you. 

Senator DORGAN. Mr. Kernaghan, you heard Mr. Wu describe 

garments and toys made in Chinese prisons, and then, through indirect marketing, go to the central government of China and then 

marketed back so that those products come into this country. I’m 

going to ask, in several different ways, that that be investigated. 

But I’d like to have your assessment of that. Do you believe that 

is happening in China? 

Mr. KERNAGHAN. Yes. Mr. Wu has documented it thoroughly. 

We’ve been following your work for years. It’s been very well documented. There is no question that prison labor is especially involved in making parts of toys, Christmas ornaments, and so on. 

If I could just say one thing—— 

Senator DORGAN. Yes. 

Mr. KERNAGHAN.—because I feel your legislation, the Decent 

Working Conditions and Fair Competition Act, is so critical that if 

you look at this Barbie doll, Mattel has won all sorts of enforceable 

laws to protect this doll, backed up by sanctions. In fact, Mattel 

sues, on the average of once a month, to protect Barbie. And 

they’ve been doing this for the last 10 years, just as the other companies have. But when you go to Mattel and say, ‘‘Can’t the workers who make the Barbie doll—the young women in China—can’t 

32 

they also be legally protected—their rights be legally protected?’’ 

Mattel and the other corporations say, ‘‘No, that would be an impediment to free trade.’’ So, we live in a society where Barbie is 

protected, but not children in the United States—they’re not protected legally from toxic toys—and the workers in China are not legally protected, because their corporations won’t allow it. And 

that’s why I think your legislation is the critical legislation to finally level the playing field. 

Senator DORGAN. Mr. Kernaghan, you’re talking about Mattel. 

We, in fact, invited them to this hearing. But I assume you’re using 

that company because that company’s been in the news because of 

substantial recalls. But this issue is much, much broader than a 

company, is it not? 

Mr. KERNAGHAN. Yes, of course. Yes. Yes, exactly. It’s—Mattel— 

just like—I like to be concrete, because abstractions—it’s hard to 

judge. But—— 

Senator DORGAN. Dr. Athreya, in your testimony, you mentioned 

Huffy bicycles, which is a story close to my heart, because I’ve 

talked to workers from Huffy bicycle factories in Ohio. One of them 

told me a very plaintive story about, to the last day at work at 

Huffy bicycles. I believe they were produced for 100 years in our 

country. Over a century, Huffy bicycles were produced in this country, most—not all, but most in Ohio by people that appreciated 

their jobs, average about $11 an hour, plus benefits. On the last 

day of work after they were all fired, as they left their parking 

space—parking lot where their cars had rested while they worked, 

the workers at Huffy bicycle left a pair of empty shoes in the space 

where they parked their cars. And it was a way for the workers, 

after that parking lot had emptied, and now had a pair empty 

shoes in the parking space—it was the only way the workers had 

to say to that company, ‘‘You can move our jobs to China, but, by 

God, you’re not going to fill our shoes.’’ What a poignant, plaintive 

way for workers to send a message to a company. 

That story—the story of Huffies—the story of Huffy bicycles is an 

almost unbelievable story. They actually pawned off on this government the pension responsibilities for the workers that were displaced at Huffy. But those bicycles, I believe, are now made in 

Shenzhen, China, and, I believe, made for 20 to 30 cents an hour 

labor by people working 7 days a week. Do you have any knowledge 

about the conditions of manufacture for Huffy bicycles in China? 

Dr. ATHREYA. Yes, thank you, Senator Dorgan. That is a case 

that you know very well, and, you know, I certainly agree with all 

the—what you’ve just said. 

We don’t—I’m not going to answer the question about conditions 

within the factory, because our researchers didn’t look at that factory recently, and so, I don’t want to be speaking out of turn about 

current conditions in that factory. 

One thing I would like to emphasize related to your remarks is, 

in our written submission for the record we did make a point of 

really discussing the role of Wal-Mart in driving production into 

these very tragic factories in China. And the Huffy bicycle case was 

simply an example of that, but we’ve seen it over and over, and 

we’ve seen it in the toy industry, in the garment industry, we’ve 

seen it in virtually every light-manufacturing industry. And the naVerDate Nov 24 2008 08:26 May 11, 2012 Jkt 074106 PO 00000 Frm 00036 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\74106.TXT SCOM1 PsN: JACKIE
33 

ture of the contradiction, the hypocrisy, is that you have, on the 

one hand, Wal-Mart claiming that it has a code of conduct to protect worker rights, and that it insists that all its suppliers enforce 

this code; on the other hand, Wal-Mart, known very—you know, 

sort of, infamous for going back to the suppliers of the bicycles, the 

dolls, the baby clothes, year after year, and systematically pushing 

down the prices and saying, ‘‘You must give us this product for 5- 

percent less this year than you did last year.’’ And manufacturers 

in the U.S., one after another, so many stories that are so similar 

to the Huffy bike story, if a manufacturer is saying, ‘‘The only way 

I can get it to Wal-Mart for 5-percent cheaper, 10-percent cheaper, 

15-percent cheaper, is to close down this factory and move overseas 

to the cheapest possible place I can find.’’ 

And now that these companies have been in China for a number 

of years, what we’re seeing happen within the Chinese factories— 

and I’ve actually talked to factory managers who have been so outraged at what they themselves are facing that they’ve confessed 

this to me—that they have the—you know, the Wal-Mart buyers 

come in and say, ‘‘OK, you know, you gave us this whatever-it-is 

product for this much last year, we want it for this much less this 

year,’’ and the factory manager is saying, ‘‘The only way I can get 

it to them for that much less is to stop paying myself.’’ I mean, 

there’s nowhere else to cut the costs. 

Senator DORGAN. Dr. Athreya, in your testimony you talk about 

the new report by the International Labor Rights group, and it describes the percentage of factories—the decreasing percentage of 

factories rated, ‘‘green,’’—the number of factories rated green or 

having no risk or low-risk violations had been consistent at 21 percent—I’m quoting you—for the first 2 years that data was available, decreased to 10 percent in 2005, and only 6 percent in 2006. 

I don’t understand that. I mean, that is completely at odds with 

what we hear publicly from many companies who have said, ‘‘Look, 

we understand there’s a serious problem here, and we’re hiring lots 

of contractors. We haven’t been able to figure out what they’re 

doing, but we’ve got projects going on. We’re going to get to the bottom of it. We don’t want workers abused.’’ You know, the material 

they put out in press statements from these companies is, ‘‘We’re 

going to get a handle on this. We’re working hard to do it.’’ And 

yet, the number of factories rated as having low risk or no risk has 

dropped dramatically. What is your assessment of that? 

Dr. ATHREYA. This is precisely—and this—by the way, this report 

was based on—you know, as Mr. Kernaghan said earlier, it’s too 

bad more of us don’t read what the companies themselves say; you 

can find this information in their own reports on their ethical 

sourcing—but this precisely points out the hypocrisy, on the one 

hand, of their saying, ‘‘Oh, we’ve got this code, and we want the 

factories to implement the code,’’ on the other hand, it being really 

clear that those factories that actually meet the code aren’t giving 

them the stuff at the cheap prices that they want. And so, if they 

have to make a choice between the worst factory with the worker 

rights violations that’s giving them the lower price and the factory 

with the better conditions for workers, they—they’ll go with the 

worst factory. 

34 

Senator DORGAN. Mr. Eio, do you think that, if we do nothing 

here in the United States Congress—for example, we don’t pass the 

sweatshop bill that I’ve introduced with my colleagues—if we just 

do nothing but hold a hearing once a year, lament what’s going 

on—is this something that will be corrected in the private sector, 

or will we still see this aggressive approach to saying, ‘‘We’re going 

to drive down prices and we’re going to circle the globe in our corporate plane, looking for the lowest possible labor rate, the cheapest conditions of production, the least environmental standards, 

and so on, and that’s what we’re going to produce’’? 

Mr. EIO. I think one of the things that I—one of the points I’d 

like to make is—and I’d to leave as evidence a copy of our code of 

manufacturing. 

Senator DORGAN. Without objection. 

[The information previously referred to follows:] 


1025CODE1.eps
35 

Mr. EIO. Right. This is—recently, Wal-Mart has announced that 

they will not accept toys from any supplier that is not certified 

under the ICTI Code of Practices. And that is our aim, to have all 

retailers, on a worldwide basis, agree to that. We audit those factories on a regular basis. We do surprise audits, unannounced audits. And we feel that we’re making good progress, and, within the 

next 2 to 3 years, will cover the majority of the industry, not only 

in China, but also in South America, in the Czech Republic, in 

Hungary, and places like that. 

Senator DORGAN. Mr. Eio, though, I have read extensively about 

this subject, and what I have read tells me that auditors have come 

in to a number of these plants, are treated to a ruse, and the ruse 


1025CODE2.eps
36 

is double sets of books, workers being told, ‘‘You dare not speak to 

the auditor. If you speak to the auditor, here’s what you must say.’’ 

And we know of many examples in which inspectors have come into 

the plants, have left the plants, believing that the information they 

have seen would tell them that plant is in compliance, when, in 

fact, that plant is aggressively abusing workers rights. In this case, 

how do your investigators know that you’re getting the right story, 

the straight information? 

Mr. EIO. We have, obviously, encountered those ruses, as well, 

double bookkeeping and many practices like that. But I would emphasize that we’re using professional outside auditor—audit companies, many of them global, and our auditors are trained to look for 

issues precisely like that. Currently, we have about 250, and our 

aim is to build up to 600. 

Senator DORGAN. How have you been financed? 

Mr. EIO. Initially, we have been financed entirely by donations 

from within the industry, of about $5 million, and our aim is ultimately to make this a self-financing exercise, in that the factories 

pay for the audits, and they also pay for the seal of approval once 

they have been approved. 

Senator DORGAN. The BusinessWeek magazine that I have used 

on the floor of the Senate in some presentations, the cover of 

BusinessWeek—I don’t have the date on that—but it says, ‘‘Secrets, 

Lies, and Sweatshops: How the Chinese Supplies Hide the Truth 

from U.S. Companies.’’ And the article inside that BusinessWeek is 

quite illuminating, describing the deception that occurs that allows 

plants to abuse workers, effectively create nearly sweatshop conditions and yet pass inspection. I’m not suggesting that your inspectors aren’t good. You, of course, with 8,000 toy manufacturers just 

in China alone, with only a couple of hundred—250 or so investigators, much more needs to be done. 

But, having said that, I applaud your work. I want you to be successful. I think it’s a step in the right direction to be concerned 

about this, to care about it, and to take action to try to represent 

change, even if it is small, incremental change. 

Mr. Wu, let me come back to you for just a moment. As I indicated, I’ve long admired you and your steadfastness in support of 

human rights. You’ve spent 19 years of your life in a prison. You’ve 

spent a substantial portion of your life in a prison for, in my judgment, speaking truth to power. And we in this country know that 

China will be a significant part of our future. China is a big player 

on the world scene, and becoming an even bigger player. 

The question is what set of policies can we implement in this 

country to continue to try to move China, or persuade or coax or 

push China in the right direction toward greater human rights, 

greater engagements on the issues that matter to people, to workers, and so on? You come here this morning and you testify that 

Chinese government sanctions, production of goods in their prisons, 

then, through indirect methods, gets them to a government-owned 

company and markets them in our country—there’s no consumer in 

this country that should ever want to buy goods that are made by 

forced labor from prisons. No one should want to do that. And yet, 

if this is happening—and you say it is—if this is happening, it’s a 

real abridgment of any sort of common sense or moral values or 

37 

human dignity. So, the question is, what kinds of steps do you 

think can be taken that will, not only more commonly expose this, 

but, second, force the Government of China to discontinue these 

practices? 

Mr. WU. Well, I am very touched by your talking about the story 

very close to your heart about the bicycle workers. I want to share 

with you my experience. 

I was in a prison camp, working in a coal mine—12 hours a day, 

7 days a week. We were pulling the coal out. And it’s just like an 

animal, doing that. 

But who cares about these things? Our coal mine produced million of tons of coal for the market. Not really—some people care. 

Everything matters to people who lost their legs, lost their arms, 

even lost their lives. It is quite normal. I was in an accident, and 

I almost lost my life. The police prepared a coffin for me. Finally, 

I survived. I only—you know, my neck, my back was broken, I lost 

consciousness. I don’t want to go back to that situation. 

And I am very happy that Americans are talking about Chinese 

prison labor and sweatshops. But the problem you raise—you raise 

two questions, the first question is, American workers lost their 

jobs to whom? To Chinese workers. But Chinese workers are under 

a Communist regime. Would you be willing to see American workers lose jobs to the Soviet workers? You would not. You said, ‘‘No, 

we will not go over there.’’ 

And the second question is, Americans today, so enthusiastic, go 

to China and they want to invest, want to buy, want to sell, and 

they stay in Beijing, in a hotel. They just see the products. They 

don’t see the producers, they don’t see how the products are produced. They don’t care. Wal-Mart, they have a contract with the 

Chinese, saying, OK, the seller has to agree that none of the products are made by prisoners. So, there’s a protection. They don’t do 

anything about it. And the Chinese contractor says, ‘‘OK, I will do 

it, I will give you the product, I will sign a subcontract with other 

people. That’s our side of the story.’’ 

I think the problem is—now related to a security problem. You 

see the Chinese, what they are doing in Sudan today. They’re doing 

something in North Korea, whatever. This is a Communist regime. 

It has kind of come to the stage that causes security problems for 

America. I think this is a very big issue, not only BusinessWeek 

talking about slave labor. Actually in China the workers’ conditions 

are horrible. Child labor, I never mentioned anything about that. 

Prison labor, very normal. Today there are 3 million, 4 million people there, and every day they are forced to labor. So, who cares? 

I just don’t know how to answer your question, but I do think, 

when Americans are in church on Sunday morning, they pray to 

God. They have to think about who makes these products and 

under what kind of conditions. They really have to care about it. 

Thank you. 

Senator DORGAN. Mr. Wu, thank you very much. 

There are, I think—and I don’t know that you would agree with 

this—there are some signs in China of some movement in ways 

that are hopeful. But there are many areas in which there must 

be additional movement in order to come into the mainstream of 

what we expect, of how countries treat their workers and so on. 

38 

But this issue—we’re talking now about China. We could talk 

about Sri Lanka or Bangladesh or Indonesia or other countries, as 

well, where Mr. Kernaghan has visited—Honduras, as an example, 

we held a hearing about that. We talked about China, because the 

migration of so many American jobs to a low-cost manufacturing 

platform has moved in many directions, but most prominently it 

has moved to China. And then, therefore, the spotlight of worker 

abuse that exists properly shines on where most of those jobs have 

gone. And so, that’s the reason we speak of China at this point. 

As you mentioned, Mr. Wu, there are many other issues with respect to China, larger geopolitical issues that might cause our State 

Department to look the other way, or our policymakers to ignore— 

to be content to not see some other things that are happening, and 

to engage in other ways. But this issue of international trade, 

worker abuse, sweatshops, and so on, is a very important issue. 

And I want to ask Mr. Kernaghan, if I might—the work that you 

are doing—you’ve done this work for some long while—do you see 

progress? And, if so, where does that progress exist? You work in 

many countries. Where do you see progress? 

Mr. KERNAGHAN. Well, there has been some progress, I—in terms 

of the most egregious violations. For example, in Central America, 

back in the early 1990s, there was enormous amounts of child 

labor. In fact, the girls used to tell us—these are, like, 11-, 12-yearold kids, and 13-year-old kids—that if they let the boss fondle 

them—these were young girls—they would get a few extra pennies 

at the end of the week. There were actually even brothels on—in 

some of these free trade zones. Workers could be shot and killed 

for trying to organize. There have been some positive changes. 

However, when it comes to wages and hours and the right to organize, there have been minimal improvements. And, sad to say, in 

China, as Mr. Wu said, workers simply have no human rights freedoms or religious freedoms or free-press freedoms or labor freedoms, and so, you have workers really stripped of their rights. That 

situation has not improved. 

Senator DORGAN. There are countries, in which you have done investigations, where workers, who have attempted to organize fellow 

workers for better conditions, are imprisoned, and, in some cases, 

worse. Is that correct? 

Mr. KERNAGHAN. Yes. Yes. Yes. I mean, it’s—imprisoned on 

trumped-up charges—I mean, very horrible things that the American people would be shocked—it just doesn’t get out to the general 

public enough. 

Senator DORGAN. I am Co-Chairman of a commission here in the 

Congress that works on a number of these issues, including developing and retaining—and maintaining, I should say, a list of those 

who are imprisoned for human rights violations in China. And it 

is the case that there are some very courageous people, who stand 

up for the rights of workers, who find that they end up in a Chinese prison cell. 

At any rate, let me say to all four of you that I appreciate your 

willingness to be here. I think this work must continue, and must 

continue aggressively. 

I’m going to do a couple of things as a result of this hearing. We 

have legislation on sweatshop abuse that this Congress needs to 

39 

address. We might disagree about a lot of things in this Congress. 

We have a trade agreement with Peru that they say might come 

to the floor of the Senate very soon. We have a trade agreement 

with Colombia that’s done, a free trade agreement with South 

Korea that is completed, a free trade agreement with Panama that 

is done. We’re going to have free trade agreements come to the 

floor of the U.S. Senate. And, of course, they, I believe, were all 

completed under what is called ‘‘fast track authority,’’ which means 

no one can offer any amendments of any kind to the trade agreement. It’s a kind of self-restraint or a straightjacket that Congress 

has decided to put itself in. We have now eliminated that condition, 

so future trade agreements cannot be negotiated under those conditions. And we have sufficient votes, I believe, in the Senate, to prevent a restoration of fast track. 

But, nonetheless, we have trade agreements coming to the floor 

of the Senate at some point in the future. It seems to me that those 

who care about trade, those who assert that trade is very important—and I believe it is, I support trade, and plenty of it, but I demand it be fair, and I demand that it not be trade conditioned 

under sweatshop labor and so on—those who really believe in trade 

ought to be the first to sign as cosponsors to a piece of legislation 

that would end sweatshop labor—products from sweatshop labor 

coming to this country and being sold in this country. That would 

be the surest way to require that standards rise in other countries, 

in order for them to be able to produce and to ship their products 

to this country. 

So, I and my colleagues intend to push very, very hard, in the 

coming weeks, on S. 367, the Decent Working Conditions and Fair 

Competition Act. It’s, effectively, an anti-sweatshop labor bill, is 

really what it is, trying to give workers around the world some 

rights. 

And I think your willingness to come here today and be a part 

of a hearing, and to testify publicly about what you see is happening, is very, very important. 

Let me also just, finally, say this. It is, it seems to me, a lonely 

job, to be working for organizations that do these things. It’s not 

so lonely if you’re part of a big association of manufacturers and 

employers who have common cause in seeking workers around the 

world who will work for the least cost and produce your product for 

the highest profits. But it is a lonely job to investigate these issues 

and to support workers in the farthest regions of the world, and to 

insist on standards in this country, when we do trade, that would 

require that those standards abroad be lifted rather than diminished. 

So, I appreciate it, and on behalf of the U.S. Senate, I hope you 

will continue your work, and be even more vigilant, and continue 

to be willing to contribute in open hearings. 

Mr. Eio, you represent an industry that’s come under—you previously, in fact, headed an industry that’s come under very severe 

attack and very severe criticism, and, in my judgment, for justifiable reasons. I think many of them have done almost nothing, and 

many of them have not cared at all—produce where it’s cheap, sell 

where they can get a good price, and fatten the checkbook. I appreciate the fact that you’ve come here today, and I appreciate that 

40 

you’re working for organizations that are hiring investigators to try 

to see if you can develop some standards—some standards that address these issues. I think that’s good news. I appreciate it. I think 

you would agree with me that you’ve made a step, albeit, perhaps, 

a small step, in the right direction, and we commend that step and 

hope that you’ll reach a full gallop pretty soon. 

To Mr. Wu, thank you for your courage. Thank you for continuing to speak out against what you believe are, and what are, 

human rights abuses. 

And, Dr. Athreya, thanks for the work of your organization. 

Please continue it. 

Mr. Kernaghan, I expect that we will call you before the Congress once again, because your organization has done some really 

groundbreaking work, and we appreciate it. 

This hearing is adjourned. 

[Whereupon, at 11 a.m., the hearing was adjourned.] 

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