In this issue:
- Protecting Labour Rights Through the Collective Contract
- Commentary: The Social Cost of China's Accession to the WTO

Protecting Labour Rights Through the Collective Contract

Introducing the CC2005 Programme

To assist and complement the aims of the corporate social accountability movement, China Labour Bulletin is promoting the use of collective employment contracts in the China-based supplier firms of multinational companies. Since the mid-1990s, the Chinese government and the All-China Federation of Trade Unions (ACFTU) have consistently urged enterprises and workers to undertake collective bargaining with a view to signing collective employment contracts. To this end, the government has enacted the Regulations on Collective Contracts, the Trial Methods for Collective Consultation on Wages, and other applicable regulations. We believe that China's current social, economic, political and legal environment makes it both necessary and feasible for the collective contract system to be promoted and implemented in Chinese supplier firms today.

In promoting the project of "Protecting Chinese Workers' Rights through the Collective Contract - CC2005," we aim to achieve the following three goals:

o To mobilize workers to participate in collective bargaining, so that they can play an active role in protecting their own rights.

o To achieve real implementation of China's labour laws, trade union legislation and the relevant standards of the International Labour Organization.

o To provide a new and effective means by which multinational buyers can realize their commitment to the principle of social accountability.

While acknowledging the importance of codes of conduct and social accountability standards, we believe the collective contract has the following three advantages over them:

o Since the collective contract is legally enforceable, Chinese supplier firms are obliged to adhere to its provisions, and this gives multinational buyers a more effective guarantee that they can fulfil their social accountability goals.

o Being formulated on the basis both of Chinese law and of the specific circumstances of individual Chinese enterprises, the collective contract better reflects the wishes and aspirations of both workers and management in the supplier factories, and is therefore a more targeted and effective tool.

o Since the workers' own elected representatives participate in the design and drafting of the collective contract and directly supervise its implementation, the contract can be more readily and fully implemented.

From the corporate social accountability perspective, the collective contract system serves the following three functions:

o It converts the code of conduct from being a moral or ethical standard into a legal standard, and thus transforms the employer's moral responsibility into a legal obligation.
o It turns the code of conduct - a "foreign imported" standard - into a set of rules that is based on Chinese law and takes into account the specific circumstances of Chinese supplier firms.
o It changes the status of workers from that of observers or onlookers into being direct participants in, and supervisors of, the labour standards process.

There are three preconditions for effective implementation of the CC2005 standard:

o An attitude of sincerity and active cooperation on the multinational buyers' part.
o The collaboration of the Chinese supplier firms in providing the requisite time and space for the workers' involvement in the process.
o An arousal of the workers' awareness of their rights, and a willingness on their part to fully participate in the process.

Implementation of the CC2005 programme will help to foster and strengthen, among Chinese workers, three levels of awareness - greater awareness of labour rights, greater organizational awareness, and greater participatory awareness. By promoting the collective contract in Chinese supplier firms, moreover, we expect to see a "triple win" situation for all the parties concerned:

o Multinational buyers will enhance their social and ethical reputation and prestige.
o Chinese supplier firms will achieve a stable labour-relations situation in their factories.
o Chinese workers will secure a genuine protection of their basic rights and interests.

We are hopeful that the CC2005 programme will gain increasing recognition and support from all sectors of society, both in China and abroad, over the coming months and years.

15 December 2005
China Labour Bulletin
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Commentary: The Social Cost of China's Accession to the WTO

By Cai Chongguo

China joined the World Trade Organisation (WTO) four years ago in December 2001, after preparing and negotiating for membership for 15 years, a process that resulted in major changes in the country.

Over the years, the Chinese government and mainstream economists regarded China's accession to the WTO as a trading policy issue, that they were never able to accurately calculate the impact on people's livelihood. It was regarded as a technical problem, confined to how to open up China's economy to foreign investment. But very few of them considered the high price that society, especially ordinary Chinese citizens, would have to pay for this economic commitment.

The massive propaganda campaign and real "reforms" made in preparation for WTO membership produced a complete change in the collective consciousness of society in China as well as changes in the economic culture and the political and economic elite. The WTO campaign intentionally created a new fantasy to replace the fantasy of Communism, purporting that once China joined the WTO, foreign investment would flood into the country and China's economy would develop rapidly, creating job opportunities for many Chinese. The legal system, economic management and corporate management would improve rapidly and this would accelerate China's industrial and technological modernisation. This fantasy of the central government, however, had a highly detrimental impact at the local level as well as among the leaders of state enterprises. They gave up attempts to strengthen the enforcement of existing laws and regulations and efforts to modernize government administration, economic planning and management, and corporate management, focusing instead on attracting foreign investment. They lost confidence and the patience to improve the operations of state-owned enterprises and collectively-owned enterprises. They even lost interest in their own enterprises. Attracting foreign investment and increasing exports became their singular goal. Joining the WTO would ultimately change China's entire strategy on economic development, i.e. by building it on expanding external trade and increasing foreign investment. As a result, China's economy is heavily dependent on foreign trade, which now accounts for more than 70 percent of China's national income - about 20 percent higher than that of Western countries. China has becomes the "world's factory" for cheap goods, and government offices throughout China have in fact become the China offices of international investors.

The Chinese people, in particular the ordinary workers, are suffering as a result of this reform programme.

The first result of this phenomenon is that the number of unemployed and the poor in the cities has grown dramatically. Government and businesses have laid off large numbers of workers under the programme of "quickening the pace of enterprise reform" to prepare for the entry of China into the WTO. In fact what has happened is that without the supervision of an independent workers' organisation and without an effective employees' committee, many enterprises which were faced with temporary difficulties have been forced to close down or be privatised. At the same time, other companies that are performing well have also cut their workforce, or forced some employees to take early retirement in order to improve competitiveness. Over the past 10 years, millions of workers in China have been laid off or suffered retrenchment. (The latter term applies to employees of state-owned enterprises, who once they are retrenched, lose the job they were assigned under the centrally planned economic system and are forced to accept a gradually diminishing set of social security benefits.) As of the end of 2004, some experts estimate that the number of unemployed living in urban areas in China had reached more than 20 million and that the unemployment rate lies somewhere between 15 and 18 percent. The rate of impoverishment in urban areas has also quickened. According to official statistics, about 24 million people living in urban areas depend on the minimum living allowance for their existence. This is a 10-fold increase in 10 years. However, there are a large number of poor who do not even receive this.

A second development is that more jobs are just temporary positions and working conditions have worsened. For those employed and living in urban areas, few have any kind of job security with the exception of civil servants. The head of the state enterprise or the owner of a private enterprise can fire or lay off workers at any time. Thus, for today's workers, the hours are long, the workload is heavy, and the wages are low. According to a survey done by China's Ministry of Labour and Social Security at the end of 2004, workers in all industries in China work longer hours than the law designates, working on average about 50 hours a week. Separately, a survey done by the Guangdong Provincial branch of the All China Federation of Trade Unions (ACFTU) released at the beginning of 2005, revealed that 76.3 percent of those working in the Pearl River Delta area in urban areas earned less than 1,000 yuan a month. In the past 12 years, monthly wages have risen by just 68 yuan. At the same time, work-related injuries and occupational illnesses had risen rapidly around the country. Every week there is a report of another coal mine explosion or accident.

A third phenomenon of this rapid pace of reform is the breakdown of the social security system and the privatization and commercialization of public services such as education and medical facilities. In order to quicken the pace of reform and before the set up of the new social security system, the government and enterprises have thrown out the existing pension and medical payment plans which were part of the state enterprise system. According to official reports, less than 15 percent of the workforce in China has a pension plan and medical insurance. The privatisation and the commercialisation of the medical system has brought about yearly increases in the cost of medical care. According to one report that was released in May this year, about half the population in China does not go to the doctor when they are ill because they can not afford to. As for education, in the past 10 years, tuition fees and charges have risen 15-fold.

Everyone is aware of the fact that over the past decade the inequalities in society and the wealth gap between different geographic areas in China have worsened; domestic enterprises, especially heavy industry, are near collapse. Strikes, marches, demonstrations and other forms of protest are more frequent. The oppression of the government has become more severe. China's entry into the WTO has put more workers in prison for daring to fight against the injustices in today's society.

19 December 2005