China Tells Businesses to Unionize

By DAVID BARBOZA

SHANGHAI — Some of the world’s biggest corporations are facing intense pressure from China to allow the state-approved union to form in their Chinese plants and offices. But many companies fear admitting the unions will give their Chinese employees the power to slow or disrupt their operations and will significantly increase the cost of doing business here.

Employees at a Wal-Mart outlet in the southwest of China voted in 2006 to form a trade union. A spokesman for Wal-Mart, which has opposed unions in the United States, said the company had a “good relationship” with the union in China.
The companies, many of which moved to China to lower manufacturing costs and some to avoid unions in their home countries as well, are now being asked to meet a Sept. 30 deadline to make their offices and factories union shops.

Companies that do not comply risk being publicly vilified or blacklisted by the union, and perhaps penalized by the government, since businesses are required by law to allow unions to form.

Lawyers and analysts say that demands of the All China Federation of Trade Unions, the only union the Communist Party allows, could sharply alter business practices of foreign companies in China, including giving lower-level workers the power to bargain over anything from pay raises to whether a Chinese headquarters should be moved elsewhere in the country.

“This will dramatically change the landscape here,” said Andreas Lauffs, a lawyer at Baker & McKenzie’s Shanghai office who is an authority on China’s labor laws. “At the very least, company management must now consult, and in many cases bargain, with employees and unions on a wide range of matters, whereas in the past they enjoyed almost unlimited autonomy.”

The union push is coming at a time when global corporations are already facing rising labor and commodity costs in China, which is struggling to contain inflation.

Hundreds of big corporations, like Wal-Mart, McDonald’s and Yum Brands, which operates KFC and Pizza Hut, have agreed to set up unions in their Chinese operations.

But union officials say that some nonmanufacturing companies are resisting. Microsoft’s China operation did not respond this week to questions about the union drive. The consulting giant PricewaterhouseCoopers said that its workers were not unionized but that it was studying the matter.

Union officials say they are focusing on global companies, but Chinese companies make up the bulk of the manufacturing work force and they are also expected to face audits and pressure to unionize.

For years, Western labor activists have taken aim at China’s manufacturing industry, exposing hundreds of exploitive factories that employ child labor, force workers to toil as many as 100 hours a week without overtime pay or benefits, and violate labor and safety rules.

And some of the world’s biggest brand names, like Wal-Mart, Disney and Adidas, have been singled out for using contractors that violate China’s labor laws. The companies have, in many cases, investigated the claims and fired contractors.

The new government pressure seems to be part of a sweeping effort aimed at addressing some of the ugly consequences of China’s dynamic economic growth, like rampant pollution, a growing income gap and widespread labor abuse.

Up until now, though, the state-controlled union has done little to agitate on behalf of workers, legal experts say, and has often done more to control workers than to benefit them. The union’s reputation for allowing abuses to exists has led some to doubt whether it can properly represent workers.

But the union, which says it already has 200 million members, is promising to truly represent workers, and is gaining standing with Communist Party leaders.

In 2004, the National People’s Congress, the state legislative body, carried out inspections of companies operating in China to ensure that they were following labor laws and had dues-paying union members. Union officials, using increasingly bold tactics, have zeroed in on the China operations of the 500 biggest global corporations, which would mean millions of new union members. The union says it intends to combat worker exploitation.

“Some foreign companies in China haven’t behaved well in dealing with their workers’ interests and rights,” Wang Ying, an official at the All China Federation of Trade Unions in Beijing, said in a telephone interview this week. “As the economy and society develops, China needs to improve workers’ legal rights and interests, which is a demand of a civilized society.”