August | 2006 | STEPHEN F. DIAMOND

Followers of my blog are likely aware of the recent pronouncement that Wal Mart will allow its stores in China to unionize. The only problem with this otherwise welcome news is that there are no real trade unions in China! The state and party allow only its own tightly controlled labor organization, the oddly named All China Federation of Trade Unions, to exist. The ACFTU’s role is, quite literally, to serve as the eyes and ears of the party and state in the workplace. It functions like a police agency not a trade union. Nonetheless, many news reports continue to call this organization a trade union. I recently engaged the Wall Street Journal’s China correspondent, Mei Fong, in a discussion about this problem and thought it worth sharing. Graciously, I gave the last word to Ms. Fong, but that does not mean I concede to her argument as will become clear.

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Stephen,

regardless of what Dickens says or thinks of laws–or lawyers– in writing news articles journalists need to try to mantain a balanced viewspoint, inasmuch as possible. The ACFTU calls itself am umbrella organization of trade unions. Even unionists and labor activists commonly refer to it as a trade union–while noting the essential differences between what ACFTU does, and what traditional Western-style unions does, as I do in my stories. I’ve tried to make clear in my stories the exchanges between the ACFTU and Wal-mart have been less to do workers’ rights than the clash of two powerful entities intent on furthering their own goals.
We try not to opinionize or editorialize in our news articles. That’s for the Editorial page. I see here you’ve copied Danny Gittings in on our exchange. Perhaps you should consider submitting your views in form of an editorial there.
Best,

Mei Fong
Wall Street Journal
China correspondent

Mei Fong,

Thank you for your reply, though it is really beside the point. My original argument to you was that the ACFTU is not a trade union – in part because of its control by the government and the party. That point has yet to be refuted by you or anyone else and certainly not by the fact that Wal Mart of all organizations has allowed the ACFTU to impose a chapter in its work force.

I am intrigued by your view because it suggests that you (or perhaps the Wall Street Journal itself) believe there is a viable civil society in China with independent institutions capable of representing societal interests against the state. That surely would come as a surprise to the many genuine labor activists (and no doubt some courageous journalists?) who have been jailed, tortured and killed by the regime over many years. Perhaps to buttress your contention you can provide me with three examples over the last five years where the ACFTU has confronted the Chinese state or the party in any meaningful manner in order to defend the wages, hours, or working conditions of its members. Perhaps you can point to a major strike led by the ACFTU or its affiliates? Or perhaps you can point to a picket line it has set up to defend its members?

For the record, lawyers as well as journalists are often known for their precision in the use of language but as you know at times the “law is a ass,” (to quote Dickens) meaning that the language used by lawyers (or government officials or the media) can obscure reality. In my view any reporter who continues to call the ACFTU a “trade union” is engaged in Orwellian double speak. And as Dickens rightly stated, perhaps their eye needs to be “opened by experience.”

Just to tackle the question of ACFTU-state relations, however, it is clear even from a cursory reading of available public documents that the ACFTU and its affiliate bodies are so interwoven into the state and the party as to allow no meaningful distinction to be made. Not only are the leaders and no doubt most local officers party members but the entities themselves are meant to be part of the management of state owned enterprises.

For example, note this language in Article 35 of the Trade Union Law: “In a State-owned enterprise, the congress of the workers and staff members is the basic form of democratic management of the enterprise and the organ by which the workers and staff members exercise their right to democratic management, and discharges its functions and powers in accordance with the provisions of laws. The trade union committee of the State-owned enterprise is the working body of the congress of the workers and staff members and takes care of the day-to-day work of the congress, checks and supervises the implementation of the resolutions adopted by the congress.”

While you may be attempting to argue that de jure there is a difference between, for example, a “government” official and an “ACFTU” official, de facto, they serve different purposes for the same state interest. The concept of state is what I think is key here rather than government per se. And when a democratic movement emerges once again in China, as it surely will, I doubt that many Chinese workers will pause in consideration of such fine legal distinctions.

I believe our exchange may be of some interest to others so I hope you do not object to my sharing it.

Sincerely,

Stephen F. Diamond, J.D., Ph.D.
Associate Professor of Law
School of Law
Santa Clara University

Stephen,

I don’t think you can take what you cited below as evidence that the ACFTU is a part of the Chinese government. Many Chinese organizations –and for that matter, foreign organizations operating in China–tend to place a lot of importance on Chinese top leaders’ utterances. Just because B happens after A doesn’t mean A and B are necessarily the same entity, although we can take note of the connections.

Your views on the ACFTU are by no means unusual and shared by many analysts, scholars as well as labor unionists. I’ve noted in my stories, ACFTU’s top leader is also a senior member of the Chinese Communist Party, and a lawmaker.But as a news organization, we strive to be precise in our language.

Thanks for your feedback.

Best,

Mei Fong
Wall Street Journal
China correspondent

Mei Fong,

I would really like to know how one makes a distinction of any value whatsoever between the ACFTU and the Chinese government.

Here is a useful comment from the China Labour Bulletin in Hong Kong which I assume you follow:

That all changed after Hu Jintao, China’s president and Communist Party leader, directly intervened in March of this year. A lengthy article published on August 15 in the Beijing daily newspaper Xin Jing Bao (New Capital News) explains why the current spate of Wal-Mart union branches in China has emerged so suddenly and unexpectedly:

“According to the ACFTU’s records, On March 14 this year CPC Central Committee General Secretary Hu Jintao issued instructions on a report titled A Situation Analysis on the Factors of Instability in Foreign-invested Enterprises in China’s Coastal Area, and Some Proposed Countermeasures. Hu Jintao ordered: “Do a better job of building Party organizations and trade unionsin foreign-invested enterprises.” This created a new and opportune moment for union building in foreign enterprises. On March 16 the ACFTU instructed its staff to study Hu Jintao’s comments, and itset the target of unionizing 60 percent or more of the country’s foreign-invested enterprises by the end of 2006, and 80 percent or more by the end of 2007.”

Best, Steve Diamond

Dear Stephen,

If you read my stories closely you will see that I write about the differences between Western-style trade unions and what China calls trade unions. I’ve also noted the ACFTU’s close ties with the government, although technically it isn’t an arm of the government as you said in your email below. I enclose a few stories I’ve written recently on this. Hope it helps.

Best,

Mei Fong
China Correspondent
Wall Street Journal
**

Wal-Mart Meets With Officials From China Union —- By Mei Fong

The Wall Street Journal via Dow Jones

BEIJING — Wal-Mart Stores Inc. executives have met with officials from
China’s main trade-union group to discuss how to expand unions into all of the
retail company’s Chinese stores, people familiar with the matter said.

The meetings between Wal-Mart and officials from the All-China Federation of
Trade Unions, or ACFTU, began this week and involved senior personnel from both
sides. They follow the establishment of unions in several of Wal-Mart’s Chinese
outlets in recent weeks after an effort by the Chinese trade group to get access
to the work force of the world’s largest retailer.

Wal-Mart has resisted union involvement with its work force. The Bentonville,
Ark., company has inherited some unionized stores through acquisitions in
countries such as Brazil and Japan but has no unionized stores in the U.S. In
China, its stance toward unions had caused friction with the powerful ACFTU,
which has strong ties to the Chinese government and has been pushing to
establish more unions in foreign companies in China.

The ACFTU is criticized by some labor advocates outside China as a tool that
helps Chinese authorities control workers and prevent the spread of independent
unions. ACFTU officials acknowledge their focus is on promoting good relations
between employers and employees instead of using collective bargaining and other
tools to defend workers’ rights as Western-style unions do.

Wal-Mart China spokesman Jonathan Dong said in a telephone interview yesterday
that the company is working with the ACFTU on the establishment of grass-roots
unions within stores in China. In a written statement, Joe Hatfield, chief
executive of Wal-Mart Asia, said, “I fully anticipate working collaboratively
with leadership from ACFTU and Union organizations at all levels to create a
model working relationship.” The statement also said Wal-Mart China and ACFTU’s
“mutual aim is to establish grass-roots unions within each Wal-Mart store
throughout China.” Wal-Mart has about 60 stores in China.

(END)

Red Flag: China’s Union Push Leaves Wal-Mart With Hard Choice — Law Requires Foreign Firms To Allow Organized Labor; Retailer’s Tough Stance — One Store’s Workers Are Wary
By Mei Fong in Beijing and Ann Zimmerman in Dallas
1502 words
13 May 2006
The Wall Street Journal
A1
English
(Copyright (c) 2006, Dow Jones & Company, Inc.)
BEIJING — As Wal-Mart Stores Inc. pushes into China, its reluctance to allow unions into its stores here is moving the company toward a potential showdown with the government and its biggest trade-union group.

The looming confrontation has big implications for the discount retailing giant and for other Western businesses doing business in China. Wal-Mart has long resisted unions in the 15 countries in which it operates, but it cannot afford to stumble in the world’s most populous nation.

The outcome is also important for the Chinese government. Former state-run companies have been shedding thousands of workers, and foreign companies like Wal-Mart are creating new jobs. The government is eager for the umbrella group of Chinese trade unions, called the All-China Federation of Trade Unions, or ACFTU, to make inroads with these private employers. Although the federation isn’t a government entity, it is backed by the government and has ties to the Communist Party. Its chairman, Wang Zhaoguo, is a member of the party’s Central Committee Politburo.

In 2004, the ACFTU publicly identified foreign companies that hadn’t unionized. Many companies on the list bowed to pressure and agreed to allow their employees to unionize, which boosted the union group’s membership significantly. Wal-Mart attracted headlines for agreeing to work with the group.

The company now says that it did not agree to unionize, but to abide by a Chinese law barring companies from obstructing workers from forming unions. Mike Duke, chief executive of Wal-Mart International, said early this month that as far as he knew, no Wal-Mart worker at any of its 58 stores in China had expressed an interest in forming a union. A company spokeswoman said subsequently that some workers may have discussed it, “but it takes more than scattered interest for the company to be required by law to respond.”

Wang Ying, the ACFTU division chief in charge of organizing trade unions at foreign companies, claims that some local unions have had trouble approaching Wal-Mart workers, and that the company has warned workers against speaking with trade-union officials during working hours. According to Ms. Wang, a local union representative in Qingdao approached Wal-Mart workers by pretending to be a customer, but staffers were too scared to talk.

“We pay our workers to take care of customers,” says Wal-Mart spokeswoman Beth Keck. “We clearly can’t permit a situation where workers are free to engage in political discussion during the work day.”

The ACFTU was founded in 1925 and claims a membership of 134 million workers. Among its goals, it says, is “to protect the legitimate interests and democratic rights” of workers. Some international labor experts, however, contend it helps China’s leaders control both workers and independent unions, and that the dues it collects are mainly used to organize events. It does not take part in American-style collective bargaining over wages and benefits, although it says it does hold conferences between workers and management.

“If Wal-Mart continues to be against unions, they may not face ACFTU alone, but also the whole of China,” says Ms. Wang, hinting that Wal-Mart could face pressure directly from the Chinese government.

From its inception, Wal-Mart has vehemently fought attempts to unionize its stores in the U.S. Its late founder, Sam Walton, believed unions were a divisive force and would make the company uncompetitive. Thus far, Wal-Mart has remained mostly union-free throughout the world.

China is vitally important to the Bentonville, Ark.-based retailer. Chief Executive Lee Scott has repeatedly said China is the only country where it can feasibly duplicate the size and success it has had in the U.S. Wal-Mart has opened 58 stores in China and has 30,000 employees. It has stepped up store openings throughout the country and expects to open about 20 this year.

China is also a critical supplier of merchandise. Wal-Mart purchased $18 billion in goods directly from Chinese manufacturers last year. It obtained a substantial additional amount of Chinese goods through its suppliers.

John Frisbie, president of the U.S.-China Business Council, a Washington-based trade organization, says foreign companies are not required to set up unions in China unless employees request them. But Chang Kai, professor of School of Labor Relations and Human Resources at Renmin University in Beijing, notes that “companies in China can’t obstruct the establishment of trade unions.”

ACFTU’s goal is to increase the number of foreign companies with unionized work forces. Currently, only about 30% of foreign companies in China have trade unions. Trade groups are aiming for 60% by the end of this year and 80% by 2007.

French retailer Carrefour SA, Wal-Mart’s biggest rival, is 70% unionized in China. McDonald’s Corp., Motorola Inc. and other Western companies have allowed union organization in areas where workers request it.

Poor working conditions and low wages are generating social unrest and represent a growing threat to China’s economic progress. The government is trying to craft a new set of labor laws that give workers greater protections. These rules are likely to give additional power to the ACFTU. Government officials hope the changes will deter the development of more independent unions like those that have formed in southern China’s manufacturing heartland.

The proposed rules worry some foreign companies that fear new curbs on their autonomy. The “strict regulations” could raise production costs and “force foreign companies to reconsider new investments or continuing their activities in China,” says Serge Janssens de Varebeke, president of the European Union Chamber of Commerce in China, in a letter to China’s National People’s Congress last month.

Wal-Mart has a history in both the U.S. and abroad of resisting the involvement of any third-parties with its work force. In 2000, a group of butchers in a Texas Wal-Mart supercenter voted to unionize. Shortly thereafter, Wal-Mart announced it was switching to prepackaged beef and reassigned the store’s butchers. In Canada, the United Food and Commercial Workers organized a Jonquiere, Quebec, Wal-Mart in 2004. The retailer shuttered the store last year, claiming it was losing money and that union demands would prevent it from becoming profitable.

A company spokeswoman says that because Wal-Mart has acquired some existing retailers, employees have union representation in some stores the company controls in Brazil, Argentina, Germany and Japan. In Germany, work councils made up of Wal-Mart employees negotiate on behalf of employees in individual stores.

The Chinese trade-union group has suggested there will be political pressure on Wal-Mart to unionize because Chinese President Hu Jintao and members of China’s National People’s Congress are placing greater importance on the issue.

In China, companies with unions must contribute 2% of their payrolls as union dues. Under some Chinese provincial regulations, local unions can collect this percentage from companies without unions as well, in order to fund the establishment of trade unions.

ACFTU has said that if Wal-Mart does not acquiesce to trade-union wishes, it may start enforcing this little-used regulation on the retailer. “We have a clear attitude toward Wal-Mart. They must comply with the laws of our country,” said Ms. Wang, the ACFTU division chief.

Wal-Mart says it already collects 2% of total wages at each of its Chinese stores and sets the money aside in a fund for its employees in China. Instead of the funneling the money to ACFTU, Wal-Mart says, an employee council at each store determines how to use it. Some stores have used it for employee birthday parties, while others have donated it to charity, Wal-Mart says.

If Wal-Mart interferes with employee efforts to unionize, it could also face more stringent inspections for sanitation and worker health and safety, according to one person familiar with the ACFTU’s planning. Wal-Mart says it already has many inspections of its stores and is organized to handle them.

“If Wal-Mart is smart, they should let [ACFTU] in,” says Hong Kong legislator and labor union supporter Lee Cheuk Yan, who contends the trade-union group is more interested in increasing its dues-paying membership than pressing for better wages for its members.

The ACFTU acknowledges it is different from many unions in the West. But Li Jianming, a director at the ACFTU, says the organization was instrumental in negotiating 754,000 contracts covering 103 million workers by the end of 2005.

Wal-Mart’s Ms. Keck declines to comment on ACFTU’s effectiveness. She says Wal-Mart wants a good relationship with the government and a “direct and productive relationship” with its employees as well.

Dear Mei Fong,

You should really stop calling the labor organizations at Wal Mart in China trade unions. As you must surely know, there are no real trade unions in China, only an arm of the government and Communist Party called the All China Federation of Trade Unions. Unlike the unions that represent workers at the Wall Street Journal, these unions are controlled by the state itself and have no power independent of that state.

Sincerely,

Stephen F. Diamond, J.D., Ph.D.
Associate Professor of Law

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STEPHEN F. DIAMOND

A legal scholar and political scientist at Santa Clara University in Silicon Valley.

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