WASHINGTON, March 29 (UPI) -- Experts debated just how much of a negative effect Chinese labor abuses have on the U.S. job market and economy during a Senate Democratic Policy Committee hearing Monday. At the partisan forum, attended by committee chairman Sen. Byron Dorgan, D-N.D., and Rep. George Miller, D-Calif., some argued that worker repression automatically stifles the bargaining position of workers and therefore must abnormally hold down wages, while others challenged a recent AFL-CIO complaint as exaggerating how much enforcing worker rights would help the U.S. economy.
The controversy centers around an AFL-CIO petition filed March 16 under Section 301 of U.S. trade law; it requires the U.S. president to impose trade sanctions on countries that abuse their workers if the abuse has harmed the U.S. economy.
"The petition shows ... that China's violation of worker rights lowers wages and production costs in China and as a result displaces hundreds of thousands of manufacturing jobs in the United States," said Mark Barenberg, a law professor at Columbia University in New York City, who also helped craft the AFL-CIO complaint.
He said the petition, using the trade model used by the U.S. International Trade Commission, shows that these violations allow China to enjoy a cost advantage of 10 percent to 43 percent of overall production costs, which has led to the loss of approximately 727,000 U.S. jobs. Barenberg also pointed out that jobs in several manufacturing sectors fell between 10 and 30 percent in the past three years.
Barenberg said that according to managers of several U.S. multinational corporations who spoke to him on condition of anonymity, "80 percent of ... contractors keep double or triple books, to hide the fact that they're not paying minimum wages, not paying overtime, and breaking China's maximum-hour laws. In their official statements, these same corporate managers say they're paying minimum wages," he said.
Workers, typically young women from rural areas, have to pay new employers deposits of up to one year's salary, surrender their national ID cards, have wages withheld for months at a time, and may be forced to work as many as eighteen hours a day without a day off.
Workers who complain are fired, lose their deposit, lose the wages being withheld, are thrown in jail, deported, and blacklisted for factory work. Anyone who tries to organize workers will be imprisoned after a mock trial, beaten and tortured.
"Could these government practices have no effect on the bargaining power and wages of the worker? It would be astonishing if they didn't," Barenberg said.
"The Chinese government has successfully created an "unfair trade" under the umbrella of "free trade," Ciping Huang, executive director of Chinese human rights group the Wei Jingsheng Foundation, said.
"China's labor repression diverts millions of manufacturing jobs from countries where labor rights are not so comprehensively denied, increasing unemployment and poverty among workers in developed and developing countries," she said.
Several U.S. industries have also complained that they do not want to lose intellectual property as part of U.S.-China trade, Miller told United Press International.
"The aircraft industry has complained about that, media companies have complained, some manufacturing companies -- they can't move to China because they're not prepared to give up their intellectual properties and their manufacturing processes, and that would be required to get a license and that's part of the unfair nature of this trading relationship," he said.
While not denying the seriousness of the abuses, Nicholas Lardy, senior fellow at the Institute for International Economics, challenged the claim that the abuses gave China-based companies an "unfair cost advantage."
"The basis for this contention is the petition's estimate that if China were to end its persistent repression of workers' rights that the average wage would rise by between 90 percent and 595 percent. This estimate is seriously flawed. It is based in a series of assumptions which may seem to be superficially plausible but are poorly supported," Lardy said.
"The estimated wage increase would lead to the bankruptcy of most firms since the resulting wage bill would exceed the entire value-added for the average firm," he said.
He added that labor productivity is "too low to support the postulated wage increase," so cost of labor could not be as far below actual cost and could not have caused so many manufacturing layoffs. He also dismissed the petition's assertion that Chinese wages in manufacturing are flat or falling, citing statistics that he said showed that real per capita gross domestic product in China was seven times its 1978 level and double its 1993 level.
"This economic growth has translated into substantial gains in real wages and living standards in China," Lardy said.
Rural incomes went up 60 percent during the last decade, and urban incomes twofold, he indicated. In all, real wages went up by between 45 percent and 65 percent, he said.
He also pointed out that while Chinese exports have gone up sharply, so have its imports, rising from $104 billion in 1993 to $413 billion in 2003, a point on which the petition is "strangely silent," he said.
"I know of no credible evidence that average real wages in manufacturing in China have stagnated or declined over any multi-year period in the past two-and-a-half decades," he said.
However, actual reported wages are not necessarily what workers get, according to Barenberg. "I talked to workers who were not paid for six months or a year at a stretch, and when they were paid, they got half of what they were promised," Barenberg said. "Factory workers in China typically make significantly less than China's own minimum wage."
Chinese minimum wage rates are not homogenous across the country, but rather depend on a number of factors, including where workers live.
And under the hukou, or internal passport policy, rural migrant workers have to pay for temporary residency permits that allow them to live, receive health care, and seek work in a city. If migrant workers rebel, they could be deported by local authorities and denied jobs in other factories.
The Chinese government vowed last August to change the policy that allows local authorities to forcibly deport migrant workers, as well as other policies that discriminate against rural migrant workers, China's People's Daily reported. The All-China Federation of Trade Unions also said they would work to mobilize workers against the problem of unpaid wages, the Daily reported last December.
But Barenberg said that after repealing the authority of local governments to deport jobless migrants, the government quietly issued new regulations that gave that power back to local governments.
A spokesman for the Chinese Embassy said he had not heard about any such new law.
"As far as I know there is no such change ... Actually, the central government has paid lots of attention to the rural workers' social welfare, including helping them to get unpaid wages [and] guaranteeing their kids equal rights to get into the city schools to receive education," Li Jianhua, spokesman for the embassy, told United Press International.
The Chinese government also said local authorities do not enforce labor laws. For example, State Administration of Work Safety Deputy Director Zhao Tiechui said that local governments were unwilling to close down mines that failed safety standards since the communities needed the revenue from the mines.
Huang disagrees. "The Chinese government turns a blind eye to [worker abuses], systematically and purposefully," Huang said.
According to embassy spokesman Jianhua "What I can say is that the central government is really determined to improve the welfare of the rural workers. On several occasions, Premier Wen specially addressed the problem and at yesterday's Politburo meeting, the problems were addressed again."
He added, "It's understandable that there are problems during the implementation process, but on the whole, their situations are improved."
