The China Journal (pages 101-13) No. 54, July 2005 global production, company codes of conduct, and labor conditions in china: a case study of two factories Pun Ngai

As China becomes integrated into the world economy, most of the manufacturing there of Western brand-name goods has been produced under contract by Hong Kong, Taiwanese or, increasingly, privately owned PRC companies. These, and not the brand-name Western transnational corporations (TNCs), own and run factories inside China in what has become a global production chain.¹

In the past two decades, these Asian companies have come under attack for labor violations numerous times in the international media and in academic studies.² These reports have fueled an anti-sweatshop movement in the West to put pressure on the famous-brand corporations to oblige their suppliers to upgrade labor standards in China and in other developing countries.³ This push began after The Washington Post ran a story in 1992 about Levi jeans made by Chinese prison labor.⁴ Concerned about its corporate image worldwide, Levi Strauss immediately reacted to public concern by drawing up a code of labor standards,⁵ and pressures rapidly built from a broad coalition of church groups, student groups, consumer NGOs, and for other companies to follow suit.⁶ In response, from the mid-1990s onward Western TNCs have competed to introduce corporate codes of conduct into China as part of these companies’ strategic policies to secure the sale of their goods and services on the global market.⁷ A corporate code of conduct is a formal statement specifying the ethical standards that a transnational company holds and applying these to the factories of its suppliers or to its trade partners.⁸ The corporate codes normally specify that there should be no forced or bonded labor; no child labor; no discrimination in employment; adequate wages and benefits; limits against excessive hours of overtime work; no chemical or other hazards to safety and health; and a decent working environment. A few company codes even contain clauses on freedom of association and a right to collective bargaining.⁹

To ensure these codes are being complied with, TNCs have allocated staff to check on the suppliers’ factories, but because the needed scale of such monitoring is often substantial they often have hired commercial firms to conduct the monitoring on a regular ongoing basis.

The regulation of labor standards by transnational corporations has occurred at a time when the Chinese government has been developing a new system of labor legislation and institutions to protect labor, including the promulgation of a new Labor Law in 1995 and the setting up of labor arbitration committees for channeling labor disputes.¹⁰ Nevertheless, within factories the state’s role in regulating management-labor relations and providing labor protection has been seriously limited, and has therefore often failed to prevent labor protests and resistance.¹¹

In line with the government’s negligence in overseeing labor conditions and management practices within the foreign-run factories in the export sector, no government departments, including the Labor Bureau, have seriously evaluated the corporate codes of conduct, assessed their influence on labor rights protection, or monitored the process. This situation provides room for the TNCs to enforce their own standards through the corporate codes of conduct. As a company officer in the so-called “human-rights department” of an American TNC in China remarked to me, “The government is useless here; no labor law is actually enforced. We take up its role to provide labor protections”.

A Reebok document, “Towards Sustainable Code Compliance: Worker Representation in China” (2002), proclaimed:

“For over a decade, Reebok International Ltd. has implemented its code of conduct—the Reebok Human Rights Production Standards—in the independently owned and operated factories that make its products. We do this to: 1) benefit the lives of the 150,000 workers who make our products; 2) ensure that workplace conditions meet internationally recognized standards and local law; 3) honor our corporation’s commitment to human rights; and 4) protect our brand reputation”.

Critics argue that these company codes are ploys of public relations as the TNCs are the judge and jury of their own codes because the TNCs have an interest is not publicizing rights violations in their supplier factories,¹² and there is no way outsiders can appraise the situation. Moreover, the pressure for implementing the corporate code is from the TNCs, but not from the suppliers or producers.¹³ These suppliers or producers for TNCs in China have no choice but to agree to implement the company codes, accept in-house TNCs’ representatives to supervise working conditions, and a handful of them even accept a couple of new TNC’s pilot projects to allow workers’ committees or trade unions to be set up through democratic elections. All these activities have had a substantial impact on the re-organization of Chinese factory regimes in terms of production facilities, management practices and working and living conditions of workers.

This article attempts to understand the corporate ethical codes movement in China by drawing on information from the case studies of two factories that had to respond to the corporate social responsibility programs. The article will examine the process of implementation of corporate codes at the company level, and the implication of code practices on labor rights. More than simply arguing that the ethnical code movement is only a public relation exercise, I will point to the fact that this movement as a top-down process of labor rights protection results in a process of capital “co-opting” of civil and labor rights in Chinese society and elsewhere as well.