[Senate Hearing 110-1127]
[From the U.S. Government Publishing Office]
S. Hrg. 110-1127
SWEATSHOP CONDITIONS
IN THE CHINESE TOY INDUSTRY
=======================================================================
HEARING
before the
SUBCOMMITTEE ON INTERSTATE COMMERCE, TRADE, AND TOURISM
of the
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
OCTOBER 25, 2007
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
DANIEL K. INOUYE, Hawaii, Chairman
JOHN D. ROCKEFELLER IV, West TED STEVENS, Alaska, Vice Chairman
Virginia JOHN McCAIN, Arizona
JOHN F. KERRY, Massachusetts TRENT LOTT, Mississippi
BYRON L. DORGAN, North Dakota KAY BAILEY HUTCHISON, Texas
BARBARA BOXER, California OLYMPIA J. SNOWE, Maine
BILL NELSON, Florida GORDON H. SMITH, Oregon
MARIA CANTWELL, Washington JOHN ENSIGN, Nevada
FRANK R. LAUTENBERG, New Jersey JOHN E. SUNUNU, New Hampshire
MARK PRYOR, Arkansas JIM DeMINT, South Carolina
THOMAS R. CARPER, Delaware DAVID VITTER, Louisiana
CLAIRE McCASKILL, Missouri JOHN THUNE, South Dakota
AMY KLOBUCHAR, Minnesota
Margaret L. Cummisky, Democratic Staff Director and Chief Counsel
Lila Harper Helms, Democratic Deputy Staff Director and Policy Director
Christine D. Kurth, Republican Staff Director and General Counsel
Paul Nagle, Republican Chief Counsel
------
SUBCOMMITTEE ON INTERSTATE COMMERCE, TRADE, AND TOURISM
BYRON L. DORGAN, North Dakota, JIM DeMINT, South Carolina,
Chairman Ranking
JOHN D. ROCKEFELLER IV, West JOHN McCAIN, Arizona
Virginia OLYMPIA J. SNOWE, Maine
JOHN F. KERRY, Massachusetts GORDON H. SMITH, Oregon
BARBARA BOXER, California JOHN ENSIGN, Nevada
MARIA CANTWELL, Washington JOHN E. SUNUNU, New Hampshire
MARK PRYOR, Arkansas
CLAIRE McCASKILL, Missouri
C O N T E N T S
----------
Page
Hearing held on October 25, 2007................................. 1
Statement of Senator Dorgan...................................... 1
Prepared statement........................................... 3
Witnesses
Athreya, Bama, Executive Director, International Labor Rights
Forum
(ILRF)......................................................... 14
Prepared statement........................................... 17
Eio, Peter, Member, Governance Board, ICTI CARE Foundation....... 22
Prepared statement........................................... 24
Kernaghan, Charles, Director, National Labor Committee........... 4
Prepared statement........................................... 7
Sanders, Hon. Bernard, U.S. Senator from Vermont................. 30
Wu, Harry, Executive Director, Laogai Research Foundation........ 9
Prepared statement........................................... 11
SWEATSHOP CONDITIONS
IN THE CHINESE TOY INDUSTRY
----------
THURSDAY, OCTOBER 25, 2007
U.S. Senate,
Subcommittee on Interstate Commerce, Trade, and
Tourism,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Subcommittee met, pursuant to notice, at 9:38 a.m. in
room SR-253, Russell Senate Office Building, Hon. Byron L.
Dorgan, Chairman of the Subcommittee, presiding.
OPENING STATEMENT OF HON. BYRON L. DORGAN,
U.S. SENATOR FROM NORTH DAKOTA
Senator Dorgan. I'm going to call the hearing to order this
morning. I'm Senator Dorgan. I'll be joined by colleagues in a
bit.
Today, the Subcommittee here in the Commerce Committee is
holding the fourth in a series of hearings that relate to
international trade. This hearing deals with the issue of
sweatshop conditions in the Chinese toy industry. There's been
a great deal of discussion and concern about products coming
into this country that are unsafe. Many of us have seen the
reports of toys being pulled off the shelf of major American
retailers because those toys are manufactured in China and come
to this country with lead content that is higher than would be
safe for children. We read the tragic stories of, for example,
Jarnell Brown, who ingested a small charm that came with a
Reebok tennis shoe, and, swallowing that charm, which turned
out to have been made of 99-percent lead, young Jarnell Brown
died. He was admitted to the hospital with brain swelling, and,
when they X-rayed him, they found a heart-shaped object in his
stomach. It was a charm that came with tennis shoes, but no one
would have known that it was 99-percent lead. Of course, no one
would have expected someone would swallow it, but a young child
swallowed it, and the young child died.
It's not an accident that products are containing lead,
coming from China. Lead is cheap, and the contractors want to
lower costs without respect to health consequences. And so, we
have to be vigilant about these things, and we have to stand up
for the interests of the consumer with respect to these
matters.
The issue of how a product is produced in China with
respect to toy manufacturing is one issue; that is, what
materials are used in its production. That's one issue. The
second issue, that has been less discussed, but, I think, is as
important, is, what are the conditions under which toy products
are manufactured?
The manufacturing of toys, of course, has migrated
substantially. I think 80 percent of the toys are now
manufactured in China. We have a witness today representing the
Toy Industry Association. And we appreciate that. It's
interesting that the term of ``toy industry,'' because it used
to be ``toy manufacturing.'' But the term ``toy manufacturing''
would no longer apply appropriately, because we don't
manufacture toys to any great extent in this country; they're
manufactured elsewhere, mostly in China.
The example of Etch-a-Sketch is one that I have written
about. Etch-a-Sketch is a little thing that most of us have
played with as kids, and Etch-a-Sketch was made in Bryan, Ohio.
And they were proud of making Etch-a-Sketch. People from that
little town--or, not so little--but that town of Ohio always
referred to their home town as the ``Town of Etch-a-Sketch.''
``Where are you from?'' ``Well, I'm from the town that makes--
where we make Etch-a-Sketch.'' Everybody knew about Etch-a-
Sketch. But now Etch-a-Sketch is gone from Ohio, it's made
exclusively in China.
The question that we ask today is under what conditions are
these toys made? Are there sweatshop conditions in China that
are existing with respect to the production of toys? And the
reason that I am interested in that is, I and my colleagues
have introduced a piece of legislation, S. 367, titled the
Decent Working Conditions and Fair Competition Act. And it
relates to the question of the production of products--not just
toys, but products--in sweatshop conditions in other countries.
The first question I asked with respect to the issue of fair
trade is, should we not, at least at the very start of this,
decide that we will not allow into our country products that
come from sweatshop labor? That is, persons who are working in
other countries in gross violation of those other countries'
labor laws. That ought to be the first step. Even if we
disagree about trade strategy, all of us ought to agree that,
after what we've done to pull ourselves up and create a middle
class, and the kinds of things that represent safe workplaces
and standards and dignity for American workers, we should at
least be able to agree we will not allow the product of
sweatshop labor to be brought into this country and sold on the
store shelves in America.
So, the question today is what is happening in China? What
kind of assurances do we have that the substantial portion of
toys, some 80 percent of which are produced in China, are being
produced under conditions that we would condone, under
conditions that we would not want to prevent coming into this
country? What is happening with respect to sweatshops in China?
We know they exist. Are they proliferating? Is it a substantial
problem? What's being done to stop it, to correct it? All of
these issues are very important in the construct of
international trade, and they certainly are important with
respect to legislation that a number of us are trying to get
passed here in the U.S. Senate, S. 367, the Decent Working
Conditions and Fair Competition Act.
[The prepared statement of Senator Dorgan follows:]
Prepared Statement of Hon. Byron L. Dorgan,
U.S. Senator from North Dakota
Today the Subcommittee is holding the fourth in a series of
hearings this year that relate to international trade. And the focus of
today's hearing is the prevalence of sweatshop conditions in the
Chinese toy industry.
Why is this an important issue? First, because eighty percent of
the world's toys are manufactured in China. Open the toy chest of any
American child, and odds are that over three-fourths of the toys will
be Chinese-made.
Second, because these toys are all too often manufactured under
inhuman production conditions that we would never tolerate in this
country.
And third, because these sweatshop practices ultimately have other
consequences, including unsafe products that pose a health hazard to
our children.
In recent months, there have been countless reports of dangerous
products being imported from China. For instance, Mattel, the biggest
toy company in the United States, announced three major product recalls
in just a five-week period involving Chinese-made products, the latest
involving 848,000 Chinese-made Barbie and Fisher-Price toys that
contained excessive amounts of lead.
These safety issues involving Chinese imports should surprise no
one. When production is outsourced to Chinese factories infamous for
paying their workers pennies an hour, for dumping toxic sludge into the
environment, and for covering up all kinds of health hazards, it should
come as no shock that the products turned out by those factories pose a
danger to our own health.
Five years ago, the Washington Post ran a story entitled ``Worked
Until They Drop''. The Post story described the story of a 19-year-old
girl who was literally worked to death at a Chinese factory making
stuffed toys for the U.S. market. Her coworkers said that she had been
on her feet for 16 hours running back and forth in the factory on the
day that she died, and it had been 2 months since she had had a day
off. The factory food was so bad that she was severely malnourished.
She woke up in the middle of the night coughing up blood, and died on
the floor of the dormitory bathroom.
According to the Post, some Chinese newspapers have a name for what
happened to Li Chun Mei: it's called ``guolaosi,'' which literally
means ``worked-to-death.'' I find it incredible that the phenomenon of
working young people to death is so common in China that they actually
have a name for it.
This story ran on the front page of the Washington Post in 2002,
but it was quickly forgotten. While I'm sure that the Post's readers
were shocked by the story, they probably didn't really understand how
it affected their own lives.
Well, here is a story that hits closer to home. It happened in
March 2006, when a 4-year-old Minnesota boy died of lead poisoning
after swallowing a heart-shaped metal charm that came as a ``gift with
purchase'' of Reebok shoes.
The boy's name was Jarnell Brown. The charm he ingested was found
to contain 99 percent lead. The safety threshold for lead content in
jewelry is 0.06 percent. The little boy ingested a piece of the charm,
and developed severe stomach pains. He was admitted to the hospital
with brain swelling. X-rays showed that the little boy had a heart-
shaped object in his stomach.
The charm was manufactured in a Chinese factory. Reebok recalled
over 500,000 of these charms, in some 25 countries. The vast majority
of the shipments had gone to the United States.
It's no accident that Chinese products are being found to contain
lead. The products contain lead because lead is cheap, and because the
Chinese contractors who made the products were ultimately trying to
lower costs without regard to the health consequence of the products.
To me, these two stories show dual sides of the same coin: if you
move production to Chinese factories that cut every possible corner to
lower costs, you end up with young women worked to death in China and
products that end up poisoning our kids here at home.
At today's hearing, we will hear from four witnesses with a variety
of perspectives on the issue of sweatshop conditions in the Chinese toy
industry.
Charlie Kernaghan is the Executive Director of the National Labor
Committee, which investigates sweatshop abuses around the world.
Harry Wu is the best-known Chinese human rights activist in the
United States, having spent 19 years in Chinese labor camps. He is the
Director of the Laogai Foundation, and an advocate for human rights in
China.
Bama Athreya is the Executive Director of the International Labor
Rights Forum, which documents child labor, forced labor, and other
abusive labor practices abroad.
Peter Eio is testifying on behalf of the Toy Industry Association,
Inc., of which he was recently the chairman. The Toy Industry
Association represents the interests of the largest companies selling
toys in the United States, representing about 85 percent of the U.S.
toy market. Mr. Eio is also a former President of Lego Systems, Inc.
I thank the witnesses for coming. Before turning to their
testimony, I would note that I have been working with a number of my
colleagues on S. 367, the Decent Working Conditions and Fair
Competition Act. This is a piece of legislation that would prohibit the
importation of products manufactured in sweatshop conditions. We have a
growing list of bipartisan cosponsors that now stands at 14 Senators. A
companion bill in the House of Representatives has 116 cosponsors. I
hope this hearing will provide additional momentum for that bill.
We have four witnesses today: first, Mr. Charles Kernaghan,
the Executive Director of the National Labor Committee, in New
York City. Mr. Kernaghan has previously testified before this
Committee. Second, Mr. Harry Wu, Executive Director of the
Laogai Research Foundation. Mr. Wu, I hope I have pronounced
that correctly. Dr. Bama Athreya, Executive Director,
International Labor Rights Forum; and Mr. Peter Eio, from the
ICTI CARE Governing Board, member, past Chair of the Toy
Industry Association.
And let me begin with Mr. Kernaghan.
Mr. Kernaghan, welcome back to the Committee. Thank you for
the work that you do at the National Labor Committee, exposing
sweatshop working conditions around the world. And I know that
you've been working on these issues with respect to China.
We will take your testimony, from all four of you. Your
formal written testimony will be made a part of the permanent
record, and I will ask all four of you to summarize your oral
testimony.
So, let's begin with you, Mr. Kernaghan. Why don't you
proceed.
STATEMENT OF CHARLES KERNAGHAN, DIRECTOR,
NATIONAL LABOR COMMITTEE
Mr. Kernaghan. Thank you, Senator. And thank you for
holding these critically important hearings.
Many Americans--many parents in America would be shocked
and disturbed if they knew the abusive sweatshop conditions
under which their children's toys are being made in China.
Parents, however, have no way of knowing, as Mattel, the
largest toy company in the world, hides its 40 or so contract
plants in China, just as the other companies do, refusing to
provide the American people with even the names and addresses
of those plants. Mattel Barbie toys, along with Thomas &
Friends toys for RC2 Corporation and Wal-Mart, are made at the
Xin Yi factory in Shenzhen. The 5,000 workers there are
stripped of their rights, forced to sign mostly blank temporary
contracts lasting anywhere from just 10 days to a maximum of 3
months. At management's discretion, new temporary contracts
could be extended every 2 or 3 months. Workers could be at the
factory for over a year, working full time, but always held as
temporary workers, which means they are stripped of their
rights--they have no right to paid maternity leave, no right to
health insurance, no right to sick days, no right to vacation,
no right to holidays.
The standard shift at the factory is 14 and a half hours a
day, from 7:30 in the morning until 10 p.m. at night, 6 days a
week. Workers are at the factory 87 hours a week, while working
70 hours, including 30 hours of overtime, which exceeds China's
legal limit by 260 percent. In 2006, it was worse. The workers
worked 7 days a week, from 7:30 in the morning until 10:30 at
night. They were routinely at the factory over 100 hours a
week.
The factory is excessively hot. Everyone's dripping in
their own sweat. The workers are prohibited from standing up
during working hours and say that, after a few hours of this,
their legs go numb. The workers say that you can see young
women in the factory crying every day as the supervisors scream
and yell at the workers, push them to go faster. Workers who
speak up or speak back to a supervisor will be immediately
fired.
The base wage in Shenzhen is 53 cents an hour. But here,
the factory cheats the workers of their overtime pay; at least
20 percent of their overtime pay every week is confiscated from
the workers. This is the equivalent of losing 2 days wages per
week. It was, again, worse in 2006, when the workers were paid
no overtime premium at all, and were cheated of 40 percent of
the wages due them.
The workers are housed in primitive dorms, 12 people
crowded into each room, sleeping on double-level metal bunkbeds
and fed company food the workers describe as awful.
It doesn't have to be this way. This Mattel Barbie toy was
made in that factory. This Barbie pet doctor toy. We know it
entered the United States with a landed customs value of just
$9. That's the total cost of production. Even on sale, the toy
retails for $29.99. That's an astonishing markup of $20.99 on
this toy. In other words, it's marked up 233 percent.
There's enough money here to make toys safe and to treat
the workers in China with dignity and respect, and at least
adhere to China's labor laws. In fact, Mattel spent $3.45 to
advertise this toy, which is 18 times more than the 19 cents
they paid the workers to make it. It doesn't have to be this
way.
At the Guangzhou Vanguard Water Sports Products factory in
China, they make goods for Speedo, such as this Condor mask--
swim mask. Speedo may be the best-known and the best-selling
swimwear brand in the world, and an Olympic sponsor, but the
400 workers at the factory are drowning in abuse. At the
Guangzhou factory, the workers are forced to work 14-and-a-half
hours a day, from 8 o'clock in the morning--8:30 a.m. in the
morning until 11 p.m., 7 days a week. There are 15-and-a-half
hour shifts, 17-and-a-half hour shifts, and even 24-hour
shifts. The workers are at the factory over 100 hours a week,
they're working overtime hours that exceed the legal limit in
China by 430 percent. Workers are routinely cheated out of 40
percent of their wages. It's an--they're losing, really, 2
weeks' wages every month they're being shortchanged.
Despite the fact that they're not paid overtime, if the
workers miss a single shift--a single overtime shift, they are
docked nearly 2 weeks' wages, despite the fact, again, that
they're being routinely cheated of their wages. Supervisors
constantly scream and yell and harass their workers, calling
them ``idiots,'' ``garbage.'' Talking back to management is
strictly prohibited. One worker who tried to defend himself by
answering back to his supervisor was attacked, choked, beaten,
fired.
The pace of production is grueling. Workers in this factory
are allowed a minute and a half to assemble this toy, this
mask, this Condor mask, for which they are paid less than 2
cents. Workers are so exhausted when they return to their
dormitories that they frequently just climb into bed with their
clothing and shoes on, collapse, and go to sleep.
The dormitories--the bathrooms are filthy, the workers have
no hot water. They have to make their own hot water by
fashioning a wood-burning stove out of an oil drum. They heat
their own water in a little plastic bucket, they take it back
to their room, and they take a sponge bath.
I don't think that there is a single Olympic athlete, no
matter how committed, who could endure what China's sweatshop
workers endure day in and day out.
And, finally, Thomas & Friends went to China, stumbled,
and, of course, was recalled. At the factory where the Thomas &
Friend trains were recalled, the factory, called Hansheng Wood
Products factory in Dongguan, the workers are suffering right
up to the last minute, and being cheated right up to the last
minute. That factory had 1,500 workers. Every single worker has
now been laid off, and they have not received their full
severance pay. They are suffering right up to the end. I don't
think there's been one single medical examination provided to
any of the workers who handled the lead paint, which is
required by law in China, to see whether or not they're
suffering any effects of lead paint.
The workers at the Thomas & Friends factory or contractor
were working 14-and-a-half to 15 hours, sometimes 16 hours,
from 8 o'clock in the morning until 10:30 at night. During the
peak seasons, they also worked 7 days a week and went for
months without a single day off. They also were cheated of 16
percent of their overtime pay which was legally due them.
At the Li Cheng industrial complex in Dongguan, where RC2
Corporation has its headquarters and makes toys for Thomas &
Friends, Disney, NASCAR, under licensing agreements, conditions
are also brutal. At the Yong Yi factory, RC2 workers are forced
to toil all-night shifts, 21 to 23 hours, every single
Saturday, from 8 o'clock until 5 a.m. or 7 o'clock in the
morning the following morning. This is the only way the workers
will receive Sunday off.
At the Ri Sheng factory, the RC2 workers are systematically
cheated their legal overtime wages. They're not paid overtime
wages. They're cheated of 42 percent of the overtime wages
legally due them.
At the Pinghu factory, the largest in the zone, all they
hire is temporary workers all of the time, full time. The
workers--this is an illegal scam to strip the workers of their
rights.
The companies say that, ``We don't need laws.''
Corporations tell us, ``We don't need laws to protect our
children against toxic or sweatshop toys,'' as they can
regulate themselves through voluntary codes of conduct and
private monitoring schemes. However, this summer's recall--
massive recall of toxic and hazardous toys made under sweatshop
conditions in China clearly demonstrates that corporate self-
regulation is not enough. Toxic and sweatshop toys are two
sides of the same coin and need to be regulated by enforceable
laws, such as the law that you introduced, Senator Dorgan,
which I think is absolutely essential to ending sweatshop
abuse, not only in China, but across the world.
Thank you very much.
[The prepared statement of Mr. Kernaghan follows:]
Prepared Statement of Charles Kernaghan, Director,
National Labor Committee
Senator Dorgan, I want to thank you for holding this very important
hearing investigating illegal sweatshop conditions under which our
children's toys are made. In 2006, the American people spent $22.3
billion purchasing over three billion toys and sporting goods. Last
year, China accounted for over 86 percent of all toy imports into the
U.S., and to day in 2007, China's toy imports have surged another 16
percent. The timing of your hearings could not have been more
appropriate, as the last 3 months of the year typically account for
almost 80 percent of all toy sales. Last year, holiday sales in the
U.S. reached a total of $457.4 billion. This year, each consumer is
expected to spend $791 on holiday purchases, including toys and
sporting goods.
Many parents in America would be shocked and disturbed if they knew
of the abusive sweatshop conditions under which their children's toys
are being made in China. Parents, however, have no way of knowing, as
toy companies like Mattel (which is the largest in the world) hide
their 40 or so contract plants in China, refusing to provide the
American people with even the names and addresses of their plants.
Mattel's Barbie toys, along with Thomas & Friends toys for the RC2
Corporation and Wal-Mart are made at the large Xin Yi factory in
Shenzhen. The 5,000 workers there are stripped of their rights, forced
to sign mostly-blank temporary contracts lasting anywhere from just 10
days to a maximum of 3 months. At management's discretion, ``new''
temporary contracts can be renewed every two to 3 months. Workers can
be employed full time for a year or more, but always remain temporary
workers with no legal rights. Temporary workers can be easily fired for
being ``inattentive'' at work, or for ``speaking during working
hours.'' Temporary workers have no right to participate in the
mandatory national Social Security program which provides health care,
no right to paid holidays, vacation, sick days, maternity leave, or
severance pay.
The routine shift is 14\1/2\ hours a day, from 7:30 a.m. to 10
p.m., 6 days a week. Workers are typically at the factory 87 hours a
week, while toiling 70 hours, including 30 hours of forced overtime,
which exceeds China's legal limit by 260 percent!
In 2006, it was even worse, as the young toy workers were routinely
kept at the factory 15 hours a day, from 7:30 a.m. to 10:30 p.m., 7
days a week, going for months without a single day off. The workers
were typically at the factory 105 hours a week, while forced to work 50
overtime hours a week, which exceeds China's legal limit by 530
percent!
The factory is excessively hot and everyone is drenched in their
own sweat. Workers are prohibited from standing up during working
hours, and cannot leave their hard wooden benches, which do not have
back rests. The workers say that after several hours, their legs become
numb. It is routine for the supervisors to yell and curse at the
workers and every day, the workers, say, you can see young women
crying. Workers have but two choices: to bow their heads and remain
silent despite the humiliation, or speak up and be immediately fired
without receiving their back wages. Independent unions are, of course,
prohibited in China, leaving the workers with no voice. Workers who
fall behind in their assigned production goal are docked 5 hour's
wages.
The base wage in Shenzhen is just 53 cents an hour, $4.27 a day,
and $21.34 a week. Despite being forced to work a 70-hour week, workers
report being routinely cheated of nearly 20 percent ($8.31) in overtime
wages legally due them each week. This is the equivalent of being
cheated out of 2 day's wages each week. For working 70 hours, the
workers earn just $39.79 while they should have been paid $48.60. In
2006, this too was even worse, since the Xin Yi factory illegally paid
no overtime premium at all, robbing the workers of 40 percent of the
wages legally due them!
Workers are housed in primitive dorms, 12 people crowded into each
room, sleeping on double-level metal bunk beds and fed company food the
workers describe as ``awful.'' Every morning workers have to cue up to
wait their turn to brush their teeth and use the toilet. After
deductions for room and board, the workers' take-home pay drops to just
46 cents an hour.
It does not have to be this way! As an example, Mattel's ``Barbie
Hug `N Heal Pet Doctor'' set costs just $9.00 to make in China, yet--
even on sale--it retails for $29.99 in the U.S. This means that the
price of the Mattel toy is being marked up an astonishing $20.99--or
233 percent.
So there is clearly sufficient money around both to make safe toys
and to treat the toy workers as human beings, respecting their most
basic legal rights.
Mattel spent nearly $2 billion in advertising over the last 3
years, which amounts to 11\1/2\ percent of its revenues. This means
that Mattel spent $3.45 to advertise the Barbie Pet Doctor toy--more
than 18 times the 19 cents they paid the workers in China to make it!
There is absolutely no need for toxic and hazardous toys, as one
industry estimate puts the price of thoroughly screening toys at just
10 cents per toy. Further, with a 233 percent ($20.99) mark-up on each
toy, it is clear that Mattel could afford to assure respect for worker
rights in China and pay the workers a fair wage so they could climb out
of misery and at least into poverty. After all, Mattel's CEO paid
himself $7.3 million last year, 6,533 times more than he paid his toy
workers in China.
It is important to note that while Mattel's Barbie brand is
fiercely protected by all sorts of enforceable laws backed up by
sanctions--(Mattel sues an average of once a month to protect Barbie
and its other toys)--there are no similar laws to prevent toxic toys
from reaching our children, and certainly no laws to protect the
fundamental human and worker rights of the young toy worker who makes
Barbie. To legally protect the rights of the human being--according to
Mattel and the other corporations--would be ``an impediment to free
trade.'' So Barbie is fiercely protected, but not the human being who
made Barbie.
Like many Americans, I was embarrassed and angered when Mattel's
vice president apologized to a Chinese government official for the
massive toxic toy recalls. Mattel apologized after the official pointed
out that Mattel makes a large proportion of its profits from its
Chinese manufacturers and that Mattel ought to appreciate China's
``cooperation.''
This is the sort of cooperation they meant: As late as 2005, Mattel
sought and won special ``waivers'' so they could pay their workers less
than the already-below-subsistence legal minimum wage. And to this day,
Mattel has additional special ``waivers'' allowing its toy workers to
toil 77 hours a week--including 32 hours of forced overtime--which just
happens to exceed China's legal limit by 295 percent!
Corporations say there is no need for laws to protect our children
against toxic or sweatshop toys, as they can regulate themselves
through voluntary codes of conduct and private monitoring schemes.
However, this summer's massive recall of toxic and hazardous toys--made
under abusive sweatshop conditions in China--clearly demonstrates that
corporate self-regulation is not enough. Toxic and sweatshop toys are
two sides of the same coin, and need to be regulated by enforceable
laws.
The Guangzhou Vanguard Water Sports Products factory in China
manufactures swimming gear and sporting goods for Speedo, their major
client, as well as Toys ``R'' Us, the giant French retailer Carrefour,
which is second only to Wal-Mart--and others.
Speedo may be the top-selling and best-known swimwear brand in the
world, and an official sponsor of the upcoming 2008 Olympic Games in
China, but the 400 workers producing Speedo goods at the Guangzhou
Vanguard factory are drowning in abuse.
One worker told us, ``What lies in front of us is a blanket of
darkness. We have no hope.'' Another worker shed tears as he described
being forced to work a grueling all-night 23-hour shift on a dangerous
compression molding machine, explaining how exhausted he was, and
terrified that his hands would be crushed by the relentless motion of
the machine if he slowed down even for a second.
The routine shift at the Guangzhou factory is 14\1/2\ hours a day,
from 8:30 a.m. to 11 p.m., 7 days a week. There are also frequent 15\1/
2\ hour shifts to midnight and 17\1/2\ hour shifts to 2 a.m., which is
common with Speedo production. There are even grueling 24-hour, all-
night shifts. Workers report toiling for months at a time without
receiving a single day off. Workers are routinely at the factory over
100 hours a week, including at least 44 hours of mandatory overtime
each week, exceeding China's legal limit on overtime by 430 percent!
Workers are also routinely cheated out of 40 percent of the wages
legally due them. The minimum wage in Guangzhou is just 60 cents an
hour, $4.77 a day and $23.87 a week. All weekday overtime must be paid
at a 50 percent premium, or 90 cents an hour, while weekend overtime
must be compensated at a 100 percent premium, at $1.19. Factory
management refuses to pay any overtime premium at all. So instead of
earning $70.43 a week, the Guangzhou factory pays just $41.32 for 84
hours of work, meaning that the workers are being cheated of $29.11 in
wages legally due them each week. This is an enormous loss for these
poor workers, whose regular weekly pay is just $23.87. The workers are
earning on average just 49 cents an hour--including all the grueling
overtime hours--while the legal minimum wage is 60 cents an hour.
Despite the fact that the workers are illegally not paid any
overtime premium, if they fail to show up for even a single overtime
shift, 2 days' wages will be deducted from their pay as punishment.
Supervisors constantly abuse and harass the workers, calling them
``idiots'' and ``garbage'' and screaming at them to work faster.
Talking back to management is strictly prohibited. One worker who tried
to defend himself by answering back to a supervisor was attacked,
choked, beaten and fired. Workers have no voice or rights. Workers have
no choice but to bow their heads and remain silent.
The pace of production is also grueling. For example, someone
working on a compression molding machine--which forms the swim masks--
must complete one operation every nine to 12 seconds, 310 to 410 per
hour, and 3,720 to 4,920 operations in the standard 12-hour shift.
Production line workers are allowed just 1\1/2\ minutes to assemble
each Speedo ``Condor'' swim mask, for which they are paid less than two
cents.
Workers are so exhausted by the long hours and grueling production
goals 7 days a week that they often return to their dorms after work
only to collapse into bed, falling asleep with their clothes and shoes
still on--despite the fact that the dorm rooms are stiflingly hot.
Workers are drenched in their own sweat all day, but on the shop floor
and in their dorms.
Workers report handling potentially dangerous chemicals, oil paint,
thinners and solvents including benzene. Yet they do not know the names
of the chemicals, let alone their health hazards or how to respond in
case of an emergency. In the silk screening department, workers say
they are working with a solvent which, if even one drop touches their
body, their skin begins to burn and fester.
In another direct violation of China's laws, management has refused
to inscribe its workers in the mandatory national Social Security
program, leaving the workers without health insurance, including for
work injuries. There is no paid maternity leave, no paid holidays and
no paid sick days.
Eight workers are crowded into primitive 14-by-19-foot dorm rooms,
sleeping on double-level metal bunk beds that line the walls. There is
no other furniture, not even a chair. The rooms reek of perspiration
due to the stifling heat, leading the workers to refer to their dorm
room, sarcastically, as a ``sauna.'' The shared bathrooms are filthy,
and due to a shortage of hot water, workers wishing to wash must heat
their own water on a makeshift wood stove they set us using an old oil
drum. Workers carry small plastic buckets of hot water back to their
rooms where they take a sponge bath. The workers can afford to spend
only $1.52 a day on food.
The Guangzhou Speedo workers are in a trap, with no voice, no
rights, and no exit.
It is unlikely that any Olympic athlete--no matter how committed--
could endure what China's sweatshop workers suffer day in and day out.
Speedo and the others must clean up this factory and guarantee that
the workers' legal human and worker rights will finally be respected.
Senator Dorgan. Mr. Kernaghan, thank you very much. I have
a good number of questions for you, but I'm going to wait and
have the other witnesses testify first.
Mr. Wu, thank you for being with us. You, I believe, have
testified before this Committee on a previous occasion, some
many years ago. I know that you have been incarcerated in China
for many years. You've spoken out aggressively on Chinese
policies. We appreciate very much your courage in doing so.
Why don't you proceed to give us your testimony.
STATEMENT OF HARRY WU, EXECUTIVE DIRECTOR,
LAOGAI RESEARCH FOUNDATION
Mr. Wu. Thank you, Mr. Dorgan.
I want to ask that you put my written testimony in the
record, and I will also say something not in my written
testimony.
First of all, I feel a kind of difference that we, today,
are talking about the toy industry. Number one, the Chinese
have set up their prison system to manufacture things from 1949
until today. And the Laogai system is still effective today.
Fifty years ago, I made some comments. One was about the
Hungarian Revolution in 1956. Second, I criticized the
government for dividing people into different classes. That is
a kind of violation of human rights. And I was sentenced to
life in a prison camp. I spent 19 years over there. Has there
been a change or not?
Unfortunately, today there are many people who just for
writing an article on a website or saying something that
criticizes the government, are still in jail. So, whatever the
economic development is like today in China, the political
system has not changed. The Laogai system plays a very
important role--it is meant to quiet the people, to quiet those
who criticize the government. It's to assist in that. But the
Chinese stopped using the word ``Laogai.'' ``Laogai'' is a
regular name, it is a government issue. But, later, they
stopped using it, using ``prison system'' instead--they tried
to say, ``Well, we have prisons, the same as in America.'' But
in the Chinese prison system, there's a lot of prisoners who
are there because they disagree with the government.
And since 1990, America has had a big problem with MFN,
most-favored nation trading status, and it is related to the
prison labor--forced labor. And America has had a law since the
1930s forbidding any product made from forced-labor to be
imported into the United States. And there were five to six
American companies that were publicized by American customers,
but, unfortunately, those cases were dismissed.
And there are two customs representatives today in Beijing.
They spend money and do nothing. For example, this is their
report. There's a court paper. Shandong province--a prison,
they produce 8 million to 10 million mugs which they export to
the United States. And now they have won the case. The Chinese
company was published--was punished, and--unfortunately, that
customs representative had no response on this issue.
And--a prison, using a small company in front of the
prison, and using the police family and policemen to export
instead of the prisoners. It means the present prison--the
prison can force the products to be indirectly exported to the
United States. This indirect exporting is much larger than ever
before. Many prison camps today have stopped the production in
the agricultural and construction areas and are working in the
processing of products, particularly in garments, toys,
electronical components, footballs, crafts, all kinds of
things, which are processed by prison labor, and exported to
the United States.
The second problem is in the so-called sweatshops.
Unfortunately, I received this newspaper just recently, from
Salt Lake City. An importer reported on what's happening inside
China. The total (I have 2 days reports from newspapers that
tally the Chinese) how long they work, just as he described,
and how much they're paid, and, particularly, that people have
lost their arms, lost their fingers, lost their legs, and
nobody cares about it. And I want to share with you about this
newspaper.
And, finally, I want to say, in China there's a union, so-
called--let me explain the name, because we don't care about
this name. Chinese National Trade Union. It is a government
union. It is a Communist union. That's the only union in China.
And no one accepted it. But today, Wal-Mart accepts it. Wal-
Mart does not allow any of its American workers to organize
unions in America, but they accept the Chinese union, and
cooperate with the Chinese union.
When I was here 20 years ago, I heard that Wal-Mart was
very proud that of all its products, maybe 70 percent, 80
percent, were made in America. But today, probably the reverse,
70 percent, 80 percent come from China.
This can be combined into one story about our relationship
with the Chinese. It is a Communist regime. And we are so
enthusiastic to trade with them, do business, and we say that
capitalism can destroy socialism. That is true. The ideological
crisis is serious in China today. But the profit from the trade
not only benefits America, but it also benefits the Chinese
Communist system. That's why you see the Chinese Communist
system doing something in Sudan, Burma, and North Korea. And
you will see that the Chinese government is going to do more.
Thank you.
[The prepared statement of Mr. Wu follows:]
Prepared Statement of Harry Wu, Executive Director,
Laogai Research Foundation
Good morning, I would first like to thank the Senate Commerce
Subcommittee on Interstate Commerce and Trade and especially Chairman
Dorgan and his staff for inviting me here today. This issue is
extremely timely in light of recent toy recalls, and I am pleased that
the U.S. Senate is concerned about labor conditions in China's toy
industry.
I have been asked to focus on the Chinese labor system and the
working conditions in toy factories in China. For many years human
rights organizations have raised awareness about the atrocious
conditions in Chinese sweatshops where workers make most of the clothes
we are wearing right now, and most of the toys our children play with.
Today my testimony will confirm that Chinese and foreign-owned
companies operating in China consistently violate international labor
standards in the toy industry and the Chinese Communist Party (CCP)
ignores these violations in order to maintain economic growth and
foreign investment. The Chinese government placates the international
community by agreeing to promote labor rights in multi-lateral meetings
while continuing to allow the abuse of its workers at home.
First, I will cover a subject less discussed in the international
arena--forced labor. I will begin with early CCP theories on forcing
prisoners to work, and will provide current examples of forced labor
being used in the toy industry specifically. Next, I will discuss
China's so-called national trade union, the All China Federation of
Trade Unions (ACFTU), and its role as one of the Party's many tools to
repress its people. I will conclude with what actions the U.S.
Government and American companies should take.
My knowledge of this subject originates from my 19 years in China's
prison camps where I was forced to labor, and from my subsequent work
as a human rights activist. I am the founder and the Executive Director
of the Laogai Research Foundation which began in 1992 for the purpose
of researching and raising awareness about China's vast system of
prison camps, called the ``Laogai'', and other human rights abuses in
China.
Chinese Government Labor Theories
The Chinese word ``Laogai'', meaning ``reform through labor,''
refers to a system of forced labor camps that spans China's entire
territory. Since the inception of the Chinese Communist Party in 1949
the Chinese government's ideology has been to use its people to fulfill
its political and economic goals. As a result humans are viewed as
expendable commodities. Mao Zedong immediately recognized prisoners as
a huge source of manpower, and in 1951 amended the ``Resolution of the
Third National Public Security Conference'' to support this idea:
The large number of people who are serving their sentences is
an enormous source of labor. In order to reform them, in order
to solve the problems of the prisons, in order that these
sentenced counterrevolutionaries will not just sit there and be
fed for nothing, we should begin to organize our Laogai work.
In the areas where this work already exists, it should be
expanded.
During the 1950s and 1960s Laogai inmates were the primary labor
force for massive state-run reconstruction projects such as irrigation,
mining, and dam projects that would have been impossible to undertake
with regular workers. As China's economy developed and it shifted from
agriculture to manufacturing, so did the type of work that prisoners
were forced to endure. During Deng Xiaoping's reform era the goal for
economic development drove the country to open to foreign investment
and the importance of forced labor increased. In the 1988 ``Criminal
Reform Handbook'' Deng reiterated that one of the three major functions
of the Laogai facilities was to organize ``criminals in labor and
production, thus creating wealth for society.'' This amount of profit
cannot be underestimated because prisoners are not compensated for
their work.
Forced Labor and the Toy Industry
In our foundation's most recent biannual handbook (Laogai Handbook
2005-2006) we identified more than 1,100 labor camps by name and
location (693 prisons and 352 re-education through labor camps).
According to our research, there are eleven (11) prisons that produce
toys for domestic and international markets in provinces across China
and there are likely many more.
These provinces include Beijing, Shanghai, Gansu, Hunan, Hubei,
Zhejiang, Shandong, Liaoning, and Henan. In the No. 2 Re-education
through labor camp in Shandong province female prisoners, many of whom
are imprisoned for political reasons, are forced to work without pay on
handicrafts and toys for international export. Former prisoners from
the camp have described some of their tasks to include applying
artificial eyelashes and hair to dolls. At the Shiliping re-education
thorough labor camp in Zhejiang province, where profits equal about 80
million yuan or almost 11 million U.S. dollars, inmates produce wool
sweaters, leather products, and toys for international export. Hunan
province's Chishan Prison forces its inmates to make toys for export to
South Korea. At a juvenile detention facility in Shanghai youths are
forced to produce toys, clothes and other products.
In June 2004, Li Ying a former political prisoner held for 2 years
at the Shanghai Women's re-education through labor facility talked
about the toys she was forced to produce--dolls that were eventually
sold in Italy. She asserted that she and her fellow inmates on ``Team
No. 3'' made these dolls from June 2002-May 2003 laboring from 7 a.m.
until 11 p.m., and sometimes even until 1 a.m. The prisoners were
required to fulfill a quota of 120 dolls per day without pay in
horrible working conditions.
The U.S. State Department's Annual Human Rights Report from 2006
confirms that ``prison labor'' is common in China. The report states
that throughout last year ``prisoners worked in facilities directly
connected with penal institutions; in other cases they were contracted
to nonprison enterprises. . . . Facilities and their management
profited from inmate labor.'' This fact that companies are using forced
labor makes it very likely that some of the toys are entering the
United States.
Unfortunately, the Memorandum of Understanding on Prison Labor
(MOU) signed between the United States and China in the United States
has proven to be completely ineffective in stopping the trade in forced
labor products. Our own efforts to gather specific evidence are
hampered significantly by the fact that China has deemed much
information about these camps to be ``state secrets''. They severely
punish anyone who reveals it. While we have revealed much information
about the Laogai over the years, we have also contributed to simply
forcing the trade to go further underground. The Chinese systematically
use legitimate trading companies unconnected to the Laogai to sell the
products abroad.
A recent civil case involving the importation of forced labor made
coffee mugs was brought by a U.S. company in Ohio. Detailed evidence of
the production link to Luzhong Prison was presented. Unfortunately, the
bringing of such cases is extremely rare, not because forced labor is
rare, but rather because it is dangerous and difficult to gather the
information in the first place.
Sweatshops
Of course, the overwhelming majority of toys made in China are
produced in private factories, most of which are foreign-owned. Many of
these can and have been defined as ``sweatshops'' by NGO's, unions, and
journalists in literally hundreds of reports over the past decade.
The State Department's investigation also reported the sweatshop
conditions that exist in factories including those that make toys:
In July more than 1,000 workers at a plastic toy factory in
Dongguan, Guangdong Province, rioted over allegations of
inadequate pay and working conditions, particularly excessive
overtime, and protesters clashed with police and company
security. Dozens of workers were detained after the two-day
protest.
In September of this year, the Hong Kong labor rights organization,
Students and Scholars against Corporate Misbehaviour (SACOM), exposed
the conditions at a factory in China making toys for Disney. Workers at
Haowei Toys in southern China said they were forced to labor for 15
hours a day for 28 days a month during peak seasons, work 28 days a
month and up to 15 hours a day using dangerous toxic chemicals.
The labor conditions in prisons and sweatshops are clearly
different, but in all too many cases only by degree. If prisoners
attempt to defend their rights they are quickly stifled by beatings or
even torture. If workers do, they are either fired or arrested.
Prisoners labor without remuneration and many factory workers are
denied the pay that is due them for the hours they work. Forced labor
and sweatshop conditions in the toy industry like nearly every other
industry are perpetuated by the Chinese government because economic
profit and GDP growth are the CCP's number one priority. China still
refuses to ratify the International Labor Organization's convention
against forced labor claiming its has a useful purpose in its
reeducation camps. The government also will not ratify any United
Nations or ILO conventions that allow workers to create and join
independent unions and collectively bargain.
This week The Salt Lake Tribune is running a series of
investigative reports on working conditions in Guangdong province by
reporter Loretta Tofani entitled ``American Imports, Chinese Deaths''.
It represents a 14-month effort and was sponsored by the Pulitzer
Center for Crisis Reporting. With your permission I am attaching it to
my testimony for the record. While it does not deal specifically with
the toy industry, it is the most current expose of the tragic nature of
work in southern China, the very same region where a majority of toys
are produced for export to the United States.
China's National Trade Union
The Chinese government outlaws all independent trade unions,
forcing workers to join the state-sponsored All China Federation of
Trade Unions (ACFTU). This organization, run by the CCP, with over 170
million members, is used to control union activities and workers. The
ultimate goal of the ACFTU is to ``uphold . . . the leadership of the
Communist Party'' and to quash any grassroots union movements.
The government's most recent tactic is to co-opt foreign companies
into allowing their employees to join the ACFTU under the auspices of
protecting the workers. In 2006 Wal-Mart--a company that does not allow
its employees to unionize in any other country--finally capitulated to
ACFTU demands and currently 77 out of 84 of its stores in China have
union branches. This tactic has two motives for the government as its
economy's shifts to privately owned enterprises. First dues paid by
companies with ACFTU branches help off-set the losses from the
diminishing state-owned sector, and second, the CCP can better monitor
and control its private-sector workers.
There is no evidence that Wal-Mart workers are allowed to bargain
their own contracts with the company. And, unfortunately some in the
American labor movement have seen fit to ignore the reality that the
ACFTU is CCP controlled and an oppressor of workers rather than their
advocates and have granted them a legitimacy they don't deserve by
meeting and working with them as equals.
Sadly, workers who attempt to organize independent unions are
quickly dealt with, usually by arrest and sentencing to serve terms in
the Laogai and could end up making the products we are discussing here
today.
Conclusion
The labor abuses in the toy industry prove that despite its
rhetoric China has not progressed in human rights nor does it respect
international labor standards. The high number of recalled toys made in
China this year alone should be a sufficient warning for U.S. companies
and consumers. The Chinese government continues to use forced labor to
make goods, condones sweatshop conditions in its factories, and refuses
to allow workers to create independent unions--is it really any wonder
that low-quality, harmful toys are being exported to the U.S. and into
the hands of our children? The toy industry in China is a vivid example
that disproves the commonly mentioned notion that economic development
and/or capitalism will bring democratic change to China. In contrast,
more and more U.S. companies are bending to the government's demands
making the totalitarian regime even stronger.
The U.S. Government has an obligation to ensure that forced labor
products and tainted goods do not enter our borders. American companies
must take responsibility for the Chinese factories that produce their
goods. They must perform more frequent inspections and audits and
should not allow phony unions to be set up in their factories and
workplaces. Profit is the only factor that has the potential to affect
China's behavior. Worker's rights in China will not improve until
foreign businesses and governments collectively decide to press China
to stop using prison and sweatshop labor and to allow their workers to
independently organize.
The time has long past to discard meaningless Codes of Conduct.
The Administration has rejected the AFL-CIO's ``301'' petition on
worker rights in China. I believe the Congress should itself resubmit
this petition as well as significantly strengthen inspection at its
ports of any and all products, including toys, which could endanger the
health and well-being of American consumers.
Thank you.
The information referred, American Imports, Chinese Deaths, by
Loretta Tofani, can be accessed at http://extras.sltrib.com/china/.
The Salt Lake Tribune:
Chinese Workers Lose Their Lives Producing Goods for
America--dated October 19, 2007.
Metal Factories Fail To Protect Against Fatal Lung
Diseases--dated October 20, 2007.
Primitive Machines Take Digits and Limbs--dated October
21, 2007.
Workers Inhale Toxins Up To 70 Hours a Week--dated
October 22, 2007.
Cadmium Dust Causes Kidney Failure, Death--dated
October 23, 2007.
Companies Say They Are Not To Blame; Who Is?--dated
October 24, 2007.
Senator Dorgan. Mr. Wu, thank you very much for your
testimony. I have some questions but I will wait until the
others have testified.
Dr. Bama Athreya, Executive Director of the International
Labor Rights Forum, your organization has been extensively
documenting the connection between Chinese toy sweatshops and
product safety problems. We appreciate very much your
willingness to be here and to testify today, and you may
proceed.
STATEMENT OF BAMA ATHREYA, EXECUTIVE DIRECTOR, INTERNATIONAL
LABOR RIGHTS FORUM (ILRF)
Dr. Athreya. Thank you very much, Senator Dorgan. Thanks to
you and the Committee for the opportunity to testify and for
your leadership on this very important issue.
We all have read the scandalous news in recent months of
toys, Thomas the Tank Engines, bibs, even baby clothes that are
tainted with lead and toxic substances, and we should, rightly,
be very concerned with the health and safety of our children--
consumers in the United States, and, most importantly, our
children who trust innocently in these toys.
We are here today, however, to give voice to others who
are, frankly, barely more than children themselves, and who are
also tragic victims of the global toy industry. And these are
the workers that work and apply these toxic substances to the
toys, day in and day out, as Mr. Kernaghan has described.
They operate machinery that produces the plastics for the
toys. They breathe and touch the toxics, and almost never are
they given protective gear or masks. In fact, most of the
workers that we and our friends in China have interviewed would
not know what protective gear looks like.
I have documented and included several examples in our
written submission for the record. Here, I just want to
summarize some of the facts and figures about the toy industry
in China, and cite a couple of the very typical examples that
we found in our research.
There are approximately 8,000 toy factories in China today,
and they employ more than 3 million workers. Most of these
factories and workers are in south China and the Pearl River
Delta, and virtually every American toy company produces its
wares in this region. We have seen products for Mattel, Hasbro,
Fisher-Price, Toys ``R'' Us, and Disney. These are all well
documented and users of Chinese toy factories. And the value of
the toy exports to the U.S. market is estimated in excess of
$15 billion per year.
By far, the single largest toy retailer and the single
largest beneficiary of this trade is Wal-Mart. Wal-Mart, alone,
has toy sales of approximately $7.4 billion a year. Most of
these toys, like most toys retailed in the U.S., are made in
China. And Wal-Mart, therefore, bears a lion's share of
responsibility for pushing the toy industry into a region where
product safety and worker safety inspection are nonexistent.
On the subject of workers' health and safety, I'm going to
focus a bit on that, as Mr. Kernaghan has spoken very
eloquently about the other worker rights abuses in these
factories. But on worker health and safety, things are
particularly grim. Toy factories that we have surveyed, and
that our partners in China have surveyed, routinely fail to
provide information or training to workers using chemicals at
their work posts. Hundreds of workers that were surveyed by our
allies in China reported that they are subjected to harmful
chemical substances. These workers may be at risk of lead
poisoning, plastic poisoning, and welding accidents.
I am going to just name two examples of two factories that
we investigated, one toy company, at Yu Bao, would actually ask
its workers to make a Faustian bargain just to obtain their
jobs in the first place. The company keeps two contracts for
each worker. The first contract with the worker is what they
hand to the labor rights monitors when they come to the
factories to inspect, but the other is the real contract with
the worker. The real contract stipulates the following, and I'm
quoting a translation from a contract that we obtained,
``During working hours, in case of injuries and/or disabilities
as a result of not following the machine operating rules,''
which the supervisor certifies to be true afterward, ``the
first party, the factory, without exception, does not grant or
bear any responsibility, and, without exception, the second
party, the worker, is, himself, responsible.'' So, just to make
that clear, workers are signing away any ability to hold the
company, the factory, accountable if they are injured on the
job.
The same contract stipulates that workers must work for 12
hours, 7 days per week, and if a worker fails to report for
this entire period of duty for any reason, then, ``without
exception, the first party, the company, has no relationship
with the employee, and the second party, the employee, must
not, for any reason, raise the issue of litigation.'' Again, in
other words--I want to rephrase this--if a worker is severely
maimed on the job and must leave her post to obtain medical
emergency treatment, she is regarded as terminated and has
signed away her rights to bring a case forward for any damages.
As if all of this were not enough, Yu Bao also compels
workers to stay on the job by withholding a portion of their
regular pay as a security. I'll just name one other typical
Chinese toy factory, Lee Der Industrial, a supplier to Mattel,
and now infamous. Lee Der was one of the ones forced to close
down due to excessive lead in its products. This caused
immediate unemployment of all of Lee Der's workers, and no
mention was made by Mattel as to whether the lead poisoning
they may have suffered would be treated. So, our investigators
did go to interview the recently fired workers from this
factory. They interviewed several ex-Lee Der workers. None of
the workers interviewed knew anything about the materials,
including lead, that were used during production. They had not
been told why the factory closed. They had not been told about
the lead paint issues. Nor had they been given any information
related to the poisoning they may have suffered on the job as a
result of applying the toxic to the toys.
I will just say, my--on behalf of my organization, that we
do believe these workers need jobs, but we don't believe in
condoning the rush to profit from the desperation of Chinese
workers, who are really forced to take these jobs by dire
economic conditions in their country. We believe there must be
global regulations in place that keep powerful corporations
from maximizing the profits they can wring from human misery.
The name brands that we've mentioned here today--Hasbro,
Mattel, Fisher-Price, and certainly Wal-Mart--have access to
the most sophisticated possible information on every aspect of
China's economy, including comprehensive data on the nature of
China's desperate labor force, the vast unemployment problem in
China, and the--the companies are also privy to excellent data
on the number of China's labor inspectors, which is, frankly,
vastly inadequate for the workforce, the number of product
safety inspectors, and the overall current inspection
capabilities of the Chinese government.
Despite some of the newspaper statements that you've seen
recently, these companies were not shocked that there was no
product safety happening in these factories; they were well
aware that the Chinese government does not have the capacity to
conduct systematic investigations of these factories. Indeed,
multinational corporations, such as the ones we've named, are
seeking out this production destination precisely because there
is very little regulation. Let me restate this. Wal-Mart and
the world's major toy brands and retailers are not producing in
China despite the lack of meaningful protection for workers or
product safety, they're there precisely because of it,
precisely because it lowers their costs not to have to worry
about regulation.
Wal-Mart and the world's major toy brands and retailers are
not producing in China despite the lack of meaningful
protection for workers or product safety, they're there
precisely because of it, precisely because it lowers their
costs not to have to worry about regulation.
Lest this seem too dramatic a statement, I do want to
remind us all of an example that came up several months ago of
the U.S. business lobby's efforts to impede improvements to
labor law reforms in China. The Chinese government has
recognized that there is a problem in the fact that most
private-sector workers in China are not covered by the
country's basic labor laws. They're not covered, because
they're not considered to be contracted under--covered by a
labor contract.
Several months ago, a new labor contracts law was drafted
by labor experts within China to provide basic labor law
coverage to the country's growing private-sector workforce. The
U.S. Chamber of Commerce in China, on behalf of its corporate
members, opposed the new draft law and lobbied to weaken the
protections of the Chinese government that it was seeking to
instate. China would not be as attractive a production
destination to U.S. toy retailers if its workers were actually
provided with the basic protections of China's labor code.
I will end my comments here. I simply want to reinforce the
point that Mr. Kernaghan also made, that we cannot rely on the
voluntary commitments, the voluntary promises made under
corporate codes of conduct. They are grossly insufficient,
particularly in a context where, on the one hand, Wal-Mart and
other retailers and brands are telling you, ``Don't worry, we
have voluntary codes of conduct. We will protect the workers,
ourselves,'' and, on the other hand, are vigorously lobbying
the Chinese government not to strengthen its legal protections
for workers. We do need legal protection. This is extremely
important. And we--our organization feels that we cannot wait
several years for the Chinese government or Chinese laws to
catch up with the situation--the desperate situation faced by
these workers.
That is why it is so important, the legislation, Senator
Dorgan, Senator Sanders, that you've supported and brought
forward, to hold U.S. retailers accountable for labor rights
violations throughout their supply chains around the world. We
do need binding regulation, and we strongly thank you for your
efforts in this regard.
[The prepared statement of Dr. Athreya follows:]
Prepared Statement of Bama Athreya, Executive Director,
International Labor Rights Forum (ILRF)
Introduction
Thank you for the opportunity to present our testimony on the
plight of China's factory workers. We have all read the scandalous news
in recent months of the dangers to U.S. consumers of toys made in
China's factories, with revelations of lead paint and other toxic and
hazardous substances on Thomas the Tank Engines, baby bibs and even
children's clothing. We should be very concerned with the health and
safety of our children, who innocently trust in the safety of their
pretty toys.
We are here today to give voice to others who are barely more than
children and who are also tragic victims of the global toy industry.
These are China's toy factory workers.
The International Labor Rights Forum (ILRF) has long fought to give
voice to the abusive conditions faced by factory workers in China and
around the world. Over the past decade we have worked closely in
solidarity with China's factory workers. I have traveled to China's
industrial centers in Guangdong province many times, have visited many
factories and spoken directly with many dozens of workers. We have also
made it possible for Chinese factory workers to speak on their own
behalf in front of public audiences in the United States, to explain
first hand the abuses they suffer in the completely unregulated export
factories of southern China.
These are the workers who apply the lead paint to the toys and who
breathe the paint fumes day in and day out. They operate the machinery
that produces the plastics for the toys, and breathe and touch those
toxics as well. Almost never are they given protective gear or masks--
most would not know what protective gear looks like. They live and work
in industrial slums that often resemble the images in Charles Dickens'
novels, crowded, almost unbearably polluted, and with limited access to
clean, safe water.
Here are the hard facts and figures. There are approximately 8,000
toy factories in China today, employing more than three million
workers. Most of these factories and workers are in the Pearl River
Delta area of southern China. Virtually every American toy company
produces its wares in this region. Mattel, Hasbro, Fisher-Price, Toys R
Us, and Disney are all well documented end users of China's toy
factories. The value of China's toy exports to the U.S. market alone is
estimated in excess of $15 billion per year. As I will explain,
however, our concern is not simply with the brands, but even more
principally with the retailers of these toys, who bear the most
responsibility for the horrific conditions under which they are
produced. Of these, the single biggest toy retailer by far is Wal-Mart.
Wal-Mart alone has annual toy sales of approximately $7.4 billion. Most
of these toys, like most toys retailed in the U.S., are made in China.
And Wal-Mart bears a lion's share of responsibility for pushing the toy
industry into a region where product safety and worker safety
inspection is virtually nonexistent. The Wal-Mart model of doing
business, as I'll explain, is precisely to push suppliers to produce in
corners of the world where they can escape the costs that are inherent
in providing protections for consumers or protections for workers.
Eric Clark's excellent book ``The Real Toy Story'' documents the
life story of one typical toy factory worker, and our own allies in
China have documented many dozens of similar stories. I'd like to quote
from Clark's moving and detailed description of the 18 year old worker
he met: ``Li Mei soon had small wounds on her hands and elbows, burn
marks on her uniform, her shoes, and socks. When they moved her to
trimming plastic toys with small sharp knives, she often cut herself,
once so badly that her hand bled heavily but the medical box was
locked. Rather than pay at the clinic, she bound up the wound in a bit
of cloth. Much worse things happened: workers in the die-casting and
moulding department lost fingers and even arms, while hole-making
workers often had their hands punctured and crushed because they had no
reinforcing gloves.''
Our allies in south China have conducted systematic research on the
area's toy factories throughout 2007. The results to date indicate
repeated and endemic violations of China's basic labor laws in every
single factory. Compulsory overtime with inadequate and illegally low
compensation is prevalent. Workers routinely work 10 to 14 hours per
day during the busy season. Because of a system of illegal fines and
fees, workers actually receive well below the region's mandated minimum
wage. Very few workers are covered by government-mandated medical
insurance or pension funds. Employees suffer verbal and sometimes
physical abuse and sexual harassment.
On the subject of these workers' safety and health, things are
particularly grim. Toy factories routinely fail to provide information
or training to workers using chemicals at their work posts. Hundreds of
workers that surveyed by our Chinese partners reported that they are
subjected to harmful chemical substances. These workers may be at risk
of lead poisoning, plastic poisoning or welding accidents.
To cite the example of one of the factories we surveyed, the
Duoyuan factory making Hasbro toys: Every day, workers are required to
move bundles of PVC materials between departments. Each bundle averages
about 100 lb. and workers describe these jobs as extremely fatiguing
and not fit for the average workers. Production departments are
installed with large machines, and workers are denied the necessary
training to operate these machines. Induction heating machines and
cutting machines are particularly high-risk. However, the only warning
notice posted on this machinery reads, ``Careful of high temperature.''
Chemicals such as paint and dilutants are used in the silk print
department. However, the company does not provide any related chemical
information nor does it distribute any safety equipment.
Another toy company that we investigated, Yu Bao, would ask workers
to make a Faustian bargain just to obtain their jobs. The company keeps
two contracts for each worker. The company's first contract with the
worker is used to hand to factory inspectors when they visit. The other
is the real contract with the worker. The real contract stipulates the
following: ``During working hours, in case of injuries and/or
disabilities as a result of not following the (machine) operating
rules, which the supervisor certifies to be true afterward, the first
party (the factory), without exception, does not grant or bear any
responsibility, and without exception, the second party (the worker) is
himself responsible.'' The same contract stipulates that workers must
work for 12 hours, 7 days per week, and if a worker fails to report for
this entire period of duty for any reason then ``without exception, the
first party (the company) has no relationship (with the employee); and
the second party (the employee) must not for any reason raise the issue
of litigation.'' In other words, if a worker is severely maimed on the
job and must leave her post to obtain medical emergency treatment, she
is regarded as terminated and has signed away her rights to bring a
case forward for any damages. Why would any manager ask a worker to
sign such a contract, except that such clauses are actually likely to
be invoked? As if all of this were not enough, Yu Bao compels workers
to stay on the job by withholding some of their pay as a `security.'
Another typical Chinese toy factory is Lee Der Industrial, a
supplier to Mattel and now infamous. Lee Der was forced to close down
due to excessive lead in its products. This caused immediate
unemployment of all Lee Der's workers; no mention was made as to
whether any lead poisoning they may have suffered would be treated. To
find out, recently, our Chinese partners traveled to the factory site
and interviewed some ex-Lee Der workers. None of the workers knew
anything about the materials (including lead) that they were using
during production. They had not been informed why the factory closed
nor given any information related to the poisoning they may have
suffered.
Why do workers accept these jobs? The country's enormous and
desperate population of unemployed have no choice. With well over a
billion people, of course China has the world's largest labor force. In
addition, despite the GDP growth rates that appear on paper, there are
nowhere near enough jobs, so most of those billion plus people are
barely surviving. In the countryside, where 900 million of those people
live, the land cannot support the growing population. Even those
peasants who had been getting by are now faced with competition from
foreign agricultural markets, a result of expanded trade ties and
China's recent entry into the WTO, and that will put tens of millions
more out of work. These tens of millions will flee to urban areas to
seek work. However, China's cities are also plagued with vast number of
unemployed. Again as a result of free market pressures, many of China's
state owned enterprises have gone out of business in recent years,
creating an even greater pool of unemployed and increasingly desperate
workers.
Yes, these workers need jobs. However should we condone the rush to
profit from this desperation? We believe there must be global
regulations in place that keep powerful corporations from maximizing
the profits they can wring from human misery. ILRF is not an
organization that opposes global trade, per se, but we cannot ignore
the fact that the reason why virtually every U.S. toy company has
chosen to produce in China is because of a `race to the bottom.' The
stories and statistics on China's workers that I have cited here today
are no secret to Hasbro, Fisher-Price and certainly not to Wal-Mart.
These name brands and retail giants have access to the most
sophisticated possible information on every aspect of China's economy,
including comprehensive data on the nature of China's desperate labor
force and vast unemployment problem; these companies are also privy to
excellent data on the number of China's labor inspectors, the number of
product safety inspectors, and the overall current inspection
capabilities of the Chinese government. Multinational corporations seek
out production destinations precisely where there is little or no
regulation of labor or environmental conditions. Let me restate this:
Wal-Mart and the world's major toy brands and retailers are not
producing in China despite the lack of meaningful product or worker
safety regulation--they are there precisely because of it.
Lest this seem too dramatic a statement, let me cite the example of
the U.S. business lobby's efforts to impede improvements to China's
labor laws. The Chinese government recognizes the problems faced by its
workers. With the assistance of several labor experts, last year a new
labor contracts law was drafted to provide basic labor law coverage to
the country's growing private sector workforce. The U.S. Chamber of
Commerce in China, on behalf of its corporate members, opposed the new
draft law and lobbied to weaken the protections the Chinese government
sought to instate. China would not be as attractive a production
destination to U.S. toy retailers were its workers actually provided
with basic legal protections.
The companies that make up the U.S. Chamber of Commerce, and more
broadly the companies that consume cheap Chinese goods and hook U.S.
consumers on the habit of these cheap goods, do not like regulation.
Typically they prefer their consumers to relay on voluntary measures,
`codes of conduct.' This is a device we see used, for example, by Wal-
Mart today to explain why binding regulations are not needed to correct
human rights abuses. Collectively the various codes and monitoring
initiatives that have emerged over the past two decades are referred to
under the broader rubric of ``Corporate Social Responsibility,'' or
CSR.
In a new report which ILRF just released yesterday, we document the
systematic failures of Wal-Mart to enforce its so-called ethical
standards in its supplier factories around the world. Key findings
include:
Decreasing Percentage of Factories Rated Green: The number
of factories rated green (as having no or low-risk violations)
had been consistent at 21 percent for the first 2 years that
data was available, decreased to 10 percent in 2005 and to only
6 percent in 2006. Wal-Mart explains the dramatic shift as
resulting from increasing standards for factories. However, it
is more likely that the factories that actually complied with
ethical standards did not meet Wal-Mart's demand for the
cheapest possible product, and that Wal-Mart therefore ceased
doing business with the more ethical factories.
Decreasing Number of People Trained by Ethical Standards
Staff: The number of suppliers and factory management personnel
trained by ethical standards staff increased from 4,644 in 2003
to 11,000 in 2005, a significant increase in the number of
people being made aware of the Standards for Suppliers. In
2006, however, training was cut in half. Only 5,000 suppliers
and members of factory management were trained that year.
Recurring Violations: The 2004, 2005 and 2006 company
reports listed some common and repeated violations that are
``related to legally required benefits not being paid,''
``workers not being paid for all hours worked,'' and ``the use
of double books to hide the number of hours worked.'' Wal-Mart
describes these common violations as ``Global Challenges and
Trends.'' The ``double books'' violation is particularly
telling since it reveals that suppliers and factory management
officials recognize that they are violating labor rights
standards and laws.
One of the challenges of analyzing Wal-Mart's Ethical Standards
program, and the extent of violations against workers throughout its
supply chain, is the lack of accurate information available to the
public. Information on sourcing policies and practices is conspicuously
absent from the Ethical Standards Reports. It is not clear how Wal-Mart
decides which factories to use, and it is not evident that its sourcing
practices have changed in response to repeated sweatshop exposes.
Pressures on suppliers to produce goods quickly and at the lowest
possible cost necessarily lead to excessive overtime and illegally low
wages due to Wal-Mart's unreasonable deadlines for orders and demands
for ultra-low prices.
On health and safety issues, Wal-Mart and other toy brands' codes
of conduct and auditing systems are particularly inadequate. We have
worked for several years now with trained occupational health and
safety experts who led a training program within south China's
factories. They found an enormous lack of basic information in these
factories, not only among workers, but also among factory management.
Neither retailers nor brands bother to provide factory managers with
information they have on such dangers as lead paint exposure. While
companies claim to protect workers' safety and health through their
codes of conduct, most companies do not take even the first steps to
encode meaningful standards that specifically identify hazardous
substances and train or even suggest to factory monitors how to inspect
for occupational illness. I have actually accompanied company monitors
on their factory inspections so I can attest to the fact that nowhere
in the standard questionnaire do company auditors ask such questions as
what are the factory's accident rates, what are the rates of illness
among workers, what are the systems for hazard communications, what
procedures are in place to limit exposures to chemicals, etc. Health
and safety inspectors with whom we work report that many toys are hand-
painted by workers who stand over the toxic fumes applying paint to the
toys for up to 20 hours per day! If Wal-Mart and other toy retailers
had been measuring illness rates among their factory employees, might
we consumers have known much sooner that there were problems here?
Surely we can do better than to leave these horrific abuses to the
`free market' to address through such weak and voluntary efforts. None
of the systems noted above contain any truly meaningful sanction for
bad behavior. As we have seen first-hand in our current case against
Wal-Mart, retailers who have played such a strong role in the
development of voluntary systems are usually loath to see such systems
assist in holding the companies themselves legally liable for non-
compliance with local labor laws. This alone is evidence enough that
local law enforcement is not the answer.
Why hasn't Wal-Mart been here before you testifying? They are the
largest customer for all these brands that have been named, they are
the ones who have pushed these companies overseas. Let's tell the story
of Huffy Bikes as an example of how the company's price pressures led
directly to an unsafe product for consumers, and the flight of a
company from good factory conditions where labor laws were enforced to
a place where workers could be exploited. What happened to Huffy is
also the story of many a toy manufacturer.
Despite making bikes in the United States for many years, Huffy was
forced to close three factories and lay off thousands of workers. Huffy
could not compete with cheap bicycles coming from China. Celina, OH,
where a large Huffy factory was closed, was hit particularly hard by
the demand for low cost bicycles. Celina Mayor Paul Arnold said ``. . .
[Wal-Mart's] demand for cheaper bicycles drove Huffy out of Celina.
[Mansfield News Journal, 12/8/03]
After Filing for Bankruptcy, Huffy is Now Partly Owned by
the Chinese Government. After Wal-Mart's unfair demands pushed
Huffy into bankruptcy, the Chinese government's export credit
insurance agency, known as Sinosure, took control of 30 percent
of the company's stock options. Sinosure executive vice
president Zhidong Liang will be Chairman of the Board and over
the next 5 years, Sinosure is expecting to control more than 50
percent of the company. As part of the deal, Huffy's pension
plan was dismantled and its current and former employees must
seek assistance from Pension Benefit Guarantee Corporation.
[Daily Deal, 10/18/05; Bicycle Retailer and Industry News, 10/
1/05]
According to Gary Gereffi, a Professor of Sociology at Duke
University, ``Wal-Mart is telling its American suppliers that they have
to meet lower price standards that Wal-Mart wants to impose. The
implication of that in many cases is if you're going to be able to
supply Wal-Mart at the prices Wal-Mart wants, you have to go to China
or other offshore locations that would permit you to produce at lower
cost. . . .''
What do we do, then, to stop this relentless race to the bottom?
Clearly we cannot rely on voluntary company commitments as the answer.
Companies will not respect worker rights unless there are prohibitive
legal sanctions in place. Without the fear of such sanctions, companies
like Wal-Mart, Mattel and Disney will correctly calculate that it is
cheaper to suffer a little bad publicity once in awhile than to provide
systematic and meaningful protections for workers and consumers.
As I have noted, the Chinese government has taken steps in recent
years to reform its labor laws, and may over time take more such steps.
Nevertheless serious challenges to enforcement remain, and may take
many, many years to address. In the interval, it is highly likely that
if retailers and manufacturers see enhanced worker protections, they
will flee to yet more lawless destinations around the globe.
We at ILRF recognize that enforceable global human rights laws are
also a dream for a far distant future. We are doing what we can to
utilize existing U.S. laws to hold U.S. corporations accountable for
abuses suffered by workers overseas. We have used U.S. laws to bring
forward cases in U.S. courts on behalf of abused workers in China and
elsewhere. We have also worked with U.S. Congress to strengthen worker
rights protections in our trade laws, and to push for adequate
enforcement of those labor clauses. We applaud the initiative of
Senator Byron Dorgan and Senator Lindsey Graham to promote a new
legislative remedy for worker rights abuses in the global supply chains
that bring consumer goods to the United States, the S. 367 bill to
amend the Tariff Act to prohibit the import, export and sale of goods
made with sweatshop labor. These are necessary but not sufficient
initiatives, and are, of course, vigorously opposed by the same U.S.
business community that claims to be implementing ethical standards in
its overseas production. We ask why Wal-Mart and the toy brands have
not been called upon today to answer for the exploitation of their
factory workers overseas? We look forward to a lively, substantive
exchange with U.S. corporations on the investments they have made to
promote voluntary CSR initiatives, while all the while vigorously
opposing enforceable domestic labor laws and enforceable legislation on
international labor standards.
Our grateful thanks to the Committee for the opportunity to present
this testimony today.
Senator Dorgan. Dr. Athreya, thank you very much for your
comments.
We have been joined by Senator Sanders, who I invited to
join the panel this morning. And we expect Senator Brown to be
along, as well.
Our last--Senator Sanders, if you don't mind, I'll ask Mr.
Eio to present, and then you may have a statement and then ask
questions, as well. And we appreciate your being here.
Mr. Robert Eio--am I pronouncing that correctly?
Mr. Eio. Mr. Peter Eio, sir.
Senator Dorgan. OK.
Mr. Eio. Your--but the ``Eio'' pronunciation is correct.
Senator Dorgan. First name is Peter.
Mr. Eio. Yes.
Senator Dorgan. I apologize. Mr. Peter Eio, former Chairman
of the Toy Industry Association.
I should mention that we did invite Mattel to be present at
the hearing. They chose not to. We wanted someone with the Toy
Industry Association. Mr. Eio is the former Chairman of that
association. He chaired the group, as I indicated, when it was
known as the Toy Manufacturers Association, but I'm guessing,
Mr. Eio, that, because the manufacturing is largely gone, the
name has changed to Toy Industry. But you, in any event, are
welcome to discuss that.
I thank you very much for being here because we wanted to
hear the perspective of the toy industry as well. And, as I
indicated, I had invited Mattel, because Mattel has been the
subject of some of the testimony. But your presence is
appreciated, and why don't you proceed.
STATEMENT OF PETER EIO, MEMBER, GOVERNANCE BOARD, ICTI CARE
FOUNDATION
Mr. Eio. Thank you, Senator Dorgan and Senator Sanders.
My name is Peter Eio, and I'm a member of the Governance
Board of the ICTI CARE Foundation. I retired 5 years ago as
president of the Lego Toy Company in the Americas, and, as you
stated, I am a past chair of the Toy Industry Association. And
you were correct also, in those days it was the Toy
Manufacturers Association.
The ICTI CARE Foundation is an independent foundation that
oversees the ethical manufacturing program of the worldwide toy
industry. The International Council of Toy Industries, or ICTI,
is the umbrella industry association of 21 national toy
associations around the world, of which the U.S. Toy Industry
Association is the largest member.
Our Governance Board was founded by such people as Carl
Bildt, former Prime Minister and current Foreign Minister of
Sweden; Maria Livanos Cattaui, former Secretary General of the
International Chamber of Commerce; and Amir Dossal, Executive
Director of the United Nations Fund for International
Partnerships.
As I'm sure you know, many organizations ``talk,'' and some
``do.'' We are doers. We are the first worldwide industry to
bring together brands, retailers, government, civil society,
and manufacturers to achieve a common goal: to help create a
better life for workers in our supply chain. I have focused my
remarks on this effort, as I believe that is most of what the
committee has asked us to cover.
Our program is called the ICTI CARE Process and has been
operating in China for about 2 years. It is the worldwide toy
industry's effort to develop a transparent, independent system
that will ensure its products are manufactured in safe,
healthy, and fair work environments. To achieve this, it aims
to provide a single, fair, thorough, and consistent monitoring
program for toy factories. We began in China, where more than
75 percent of the world's toys are made, and expect to expand
into other countries, beginning next year.
This process begins with a global code of business
practices, continues with a monitoring protocol and guidance
document, and is enforced through the periodic certification
and recertification of factories that comply. Operations in
China are managed by an office in Hong Kong, while the actual
audits are carried out by third-party social compliance
auditing companies.
To date, there are more than 1,200 toy factories in China,
employing more than a million people, that are registered and
active in this process, with 670 factories currently certified
as being in compliance. The others are working toward
compliance. We expect those numbers to grow significantly next
year as more auditors are trained and more factories used by
major retailers join the system.
Senators, clearly, certifying factories is not sufficient
unless you have toy brands and retailers who are willing, not
only to accept those certifications, but also to demand them.
Currently, there are 290 toy brands around the world,
representing an estimated 75 percent of global toy production,
that are pledged to order product only from factories certified
by our program by a date no later than year end 2009. In
addition, a growing list of major retailers have joined us
around the world, including Wal-Mart, Target, Sears, K-Mart,
Carrefour, Tesco, Argus, and the smaller retailers grouped in
the American Specialty Toy Retailing Association, ASTRA.
Our toy industry has twice been awarded grants by the U.S.
Department of State as part of their Partnership to Eliminate
Sweatshops program, in support of two phases of our ``Toward
Better Workplace Standards in China's Toy Factories'' program.
In this program, we brought together toy factory managers,
Chinese labor inspectors, and social compliance auditors to
learn international and Chinese labor law and the requirements
of the ICTI CARE Process, as well as to receive practical
training in working together to improve labor law enforcement.
We would welcome the opportunity of further funding, should
that opportunity present itself.
The Governance Board, of which I am a member, is a fully
independent body whose members are drawn from current and
former toy industry leaders, members of civil society, and
international civil servants. We oversee the ICTI CARE process,
raise funds to support it, and, beginning this year, will issue
annual reports on our activities.
We believe we were asked here today because we're the most
advanced global industry organization working towards improving
labor conditions in our industry's supply chain. In 2 short
years, we have made great strides forward, but recognize there
is a great deal still to be done.
In closing, I would like to thank the other organizations
testifying here today for continuing to make us more aware of
all that needs to be done, and also for helping us to come--
become better at doing it. We know that, by working together
with our partners in China, we will be able to achieve
continued progress.
Mr. Chairman and Members of the Committee, thank you for
this opportunity to address you, and I look forward to
responding to your questions.
[The prepared statement of Mr. Eio follows:]
Prepared Statement of Peter Eio, Member, Governance Board,
ICTI CARE Foundation
Good morning, Mr. Chairman and Members of the Subcommittee. My name
is Peter Eio and I am a member of the Governance Board of the ICTI CARE
Foundation. This is an independent foundation that oversees the ethical
manufacturing program of the worldwide toy industry. The International
Council of Toy Industries (or ICTI) is the umbrella industry
association for 21 national toy associations around the world (list at
Appendix I), of which the U.S. Toy Industry Association is the largest
member. I retired 5 years ago as President of the LEGO toy company in
the Americas and I am a past chair of the Toy Industry Association.
As I'm sure you know, many organizations talk and some do. We are
doers, the first worldwide industry to bring together brands,
retailers, government, civil society and manufacturers to achieve a
common goal--to help create a better life for workers in our supply
chain. I would like to focus my remarks on this effort, believing it
covers most of the territory I was asked to cover.
Our program is called the ICTI CARE Process and has been operating
in China for about 2 years. It is the worldwide toy industry's effort
to develop a transparent, independent system that will ensure its
products are manufactured in safe, healthy and fair work environments.
To achieve this, it aims to provide a single, fair, thorough and
consistent monitoring program for toy factories. We began in China,
where more than 75 percent of the world's toys are made, and expect to
expand into other countries beginning next year.
This process begins with a global Code of Business Practices,
continues with a Monitoring Protocol and Guidance Document, and is
enforced through the periodic certification and recertification of
factories that comply. Operations in China are managed by an office in
Hong Kong, while the actual audits are carried out by third-party
social compliance auditing companies.
To date there are more than 1,200 toy factories, employing more
than one million workers, registered and active in this process, with
670 factories currently certified as being in compliance. (Current
statistics at Appendix II). We expect that number to grow significantly
next year, as more auditors are trained and as more factories used by
major retailers join the system.
Clearly, certifying factories is not sufficient unless you have toy
brands and retailers who are willing not only to accept those
certifications but also to demand them. Currently, there are 290 toy
brands around the world representing an estimated 75 percent of global
toy production that are pledged to order product only from factories
certified by our program by a date no later than year-end 2009. In
addition, a growing list of major retailers have joined us around the
world, including Wal-Mart, Target, Sears, K-Mart, Carrefour, Tesco,
Argus and the smaller retailers grouped in the American Specialty Toy
Retailers Association (ASTRA).
Our toy industry has twice been awarded grants by the U.S.
Department of State (Bureau of Democracy, Human Rights & Labor), as
part of their ``Partnership to Eliminate Sweatshops'' program, in
support of two phases of our ``Toward Better Workplace Standards in
China's Toy Factories'' program. In it, we brought together toy factory
managers, Chinese labor inspectors and social compliance auditors to
learn international and Chinese labor law and the requirements of the
ICTI CARE Process, as well as to receive practical training in working
together to improve labor law enforcement. We would eagerly accept the
opportunity for further funding, should that opportunity present
itself.
The Governance Board of which I am a member is a fully independent
body, whose members are drawn from current and former toy industry
leaders, members of civil society and international civil servants.
(See Appendix III for current members.) We oversee the ICTI CARE
Process, raise funds to support it and, beginning this year, will issue
annual reports of our activities.
In summary, the ICTI CARE Process is a work in progress, working
toward improved labor conditions in our industry's supply chain,
through factory monitoring and worker capacity-building. We are well
advanced, but recognize there is a great deal still to be done.
As part of that, in 2008 we will start a new phase of our program,
which adds education, training and capacity-building to our factory
certification program.
You have also asked me to cover a few areas which may not have been
as specifically answered as you wish in this presentation on our ICTI
CARE Process program.
With regard to the toy industry's formal relationship to
Chinese factories where toys are made, this is almost always a
contract manufacturing relationship. Through the ICTI CARE
Process, we have a direct relationship to the qualification of
factories to be part of the toy supply chain.
Regarding working conditions in factories, we have a very
strict Code of Business Practices, with specific guidelines,
regarding how manufacturers must treat their workers. Our code
does not permit child, slave or prison labor; it requires
decent living conditions and, with regard to wages and hours,
requires compliance with Chinese law--which, by the way, is
very strict. We have been working on strict enforcement of
those laws with the Chinese government for several years and we
can report some good progress in factories that have been
audited in accordance with our guidelines.
With regard to the impact of Chinese toy manufacturing on
domestic toy production, the U.S. toy industry began sourcing
overseas some 40 years ago, beginning in Japan and later moving
to Taiwan, Korea and parts of Southeast Asia. Nearly 75 percent
of toys sold in the USA are made in China and the rest are
divided among the USA and a variety of other countries in
Europe and Asia.
In closing, we would like to thank the other organizations
testifying here today for continuing to make us more aware of all that
needs to be done and also for helping us to become better at doing it.
We know that by working together with our partners in China, we will be
able to achieve continued progress. Mr. Chairman and members of the
committee, thank you for this opportunity to address you. I look
forward to responding to your questions.
Appendix I
ICTI Members (21 National Associations)
Australia
Austria
Brazil
Canada
China
Chinese Taipei
Denmark
France
Germany
Hong Kong
Hungary
Italy
Japan
Mexico
Netherlands
Russia
Spain
Sweden
Switzerland
United Kingdom
United States
Appendix II
ICTI CARE Process Statistics
(As of 30 September 2007)
Factory Compliance Monitoring
Current Target 12/31/07
Toy factories in the system 1,242 1,500
(registered, applications)
Seals of Compliance issued 669 800
Employees covered 1.1 million
``Date Certain'' Program
Toy brands pledged to source only 290 (75 percent of world toy
from certified factories by the end market)
of 2009
Major Retailer Commitments to the ICTI CARE Process
Recognize the ICTI CARE Process Seal of Compliance as a replacement
for own social compliance audits.
Wal-Mart
Target
Costco
Kmart Sears
Dollar General
ASTRA (American Specialty Toy Retailing Association)
Carrefour (France)
Chelsea Stores (UK)
Tesco (UK)
Argus (UK)
Woolworth (UK)
Colruyt Group (Belgium)
Top-Toy (Scandinavia)
Coles-Myer (Australia)
Appendix III
ICTI CARE Foundation Governance Board Membership
(As of 22 October 2007)
Name Affiliation
Alan Hassenfeld (Co-Chair) Chairman (non-executive) Hasbro
Maria Livanos Cattaui (Co-Chair) Former Secretary-General,
International Chamber of Commerce
(ICC)
Thomas A. Debrowski Executive Vice President, Worldwide
Operations, Mattel
Amir A. Dossal Executive Director, United Nations
Fund For International Partnerships
(UNFIP)
Peter Eio Former President, Lego Americas
(retired)
Gary Hutchens President, International Council of
Toy Industries (ICTI)
Steven Jesseph Vice Chairman, President and CEO,
Worldwide Responsible Apparel
Production (WRAP)
Alan E. Munn Former President and CEO, TOMY Europe
(retired)
Jane Nelson Senior Fellow and Director of the
Corporate Social Responsibility
Initiative, Kennedy School of
Government, Harvard University;
Director, Business Leadership and
Strategy, Prince of Wales
International Business Leaders Forum
(IBLF); Senior Fellow, the Brookings
Institution
William Reese President and CEO, International Youth
Foundation (IYF)
Paul Rice President and CEO, TransFair USA
T.S. Wong Immediate Past President, ICTI;
Managing Director, Jetta Ltd.
Christian Ewert, ex officio President, ICTI CARE Foundation
Senator Dorgan. Mr. Eio, thank you very much. We appreciate
your being here and your testimony.
Let me begin with you, Mr. Wu. You spent 19 years in a
Chinese prison. You have come to this country and lived here
now for some while, have testified previously before this
Committee, on human rights issues and so on. I believe, in your
testimony, you indicated that there is toy manufacturing
occurring in Chinese prisons, and that, by indirect methods,
toys produced in Chinese prisons find their way to American
store shelves. Is that what you're suggesting?
Mr. Wu. Yes. Chinese prison camps right now have signed
contracts with state-run enterprises, contract by contract. So,
for example, they produce the toys just by one process to
another process. That's all. Particularly in Guangdong,
Shanghai, Zhejiang, Shandong provinces, many prison camps right
now are working on the processing of cameras, toys, footballs,
electronical components, every kind of thing, but they are
indirectly exported----
Senator Dorgan. Mr. Wu, how do you know that?
Mr. Wu. Oh, we have people in there. We do have the
evidence.
Senator Dorgan. So, you're saying that toys, garments, and
so on, are produced in prison camps, and, through indirect
methods, then marketed through Chinese government-owned
enterprises, and then being sent to the store shelves in our
country.
Mr. Wu. Correct.
Senator Dorgan. Mr. Kernaghan, you have described, in great
detail, sweatshop conditions, dangerous working conditions,
workers being cheated, workers being worked long, long hours, 7
days a week. Tell me how you know that. Can you describe for us
the research and the investigation you have done that will give
us confidence that what you are testifying is, indeed, a fact?
Mr. Kernaghan. Well----
Mr. Wu. I will give you two examples. The first example is
Christmas lights. They were assembled by prisoners in a number
of the prisons, and exported by a Chinese export company. It is
a different company. The second case is artificial flowers. The
prisoners sit in a small space and put these leaves and flowers
on the branches, including the label, ``Made in the United
States,'' 99 cents, $1.99, each of them.
Senator Dorgan. The label says, ``Made in the United
States''?
Mr. Wu. Yes. They are imported by Ben Franklin. Yes.
Senator Dorgan. By Ben Franklin stores?
Mr. Wu. Yes.
Senator Dorgan. Mr. Kernaghan, tell me your--the results of
your investigations. You've described to me what you found, but
tell me how those investigations occurred and how we understand
that these are firsthand, observable conditions?
Mr. Kernaghan. Well, some of the research was carried out
over a year, starting in mid-2006, with another return at 2007.
Pictures were smuggled out of the factory. Pay stubs were
smuggled out of the factory. All these pictures of the toys
were smuggled out of the factory. Dormitory photographs were
smuggled out of the factory. Plus, we also used shipping
records, based on U.S. Customs documents, to arrive at the
pricing of the toys, the landed customs value, which is the
total production cost.
I can't go much beyond that, because, like Mr. Wu said,
anyone involved in this research will be sent away, so it's
not--there's--it's impossible to do this openly. It was even
during the overthrow of President Aristide, in Haiti, with the
Tonton Macoutes running wild, it was easier to research in
Haiti than it is to research in China. So, this stuff needs to
be--remain--it comes from the workers.
Senator Dorgan. I understand. So, in the case that you
described today, one of them is a Mattel toy. Would you hold
that up? That is a----
Mr. Kernaghan. This was an almost exact replica of the
picture that workers sent us. And we were fortunate enough to
find the landed customs value, the shipping records. And this
came in. It was for Target. It came in at a landed customs
value of $9. And the toy--we purchased it at a Toys ``R'' Us,
also went to Toys ``R'' Us--for $29.99.
Senator Dorgan. And there's 19 cents of Chinese labor----
Mr. Kernaghan. Yes, even----
Senator Dorgan.--in the product?
Mr. Kernaghan.--less than that. That's a very, you know,
liberal estimate as--what they were paid. And, of course, the--
Mattel spends--spent $2 billion in advertising over the last 3
years, so they're spending 11.5 percent of their revenues in
advertising, so they spend, you know, 18 times more to
advertise this toy than they paid the workers to make it.
Senator Dorgan. Based on your investigation, the company
that sells that product in the United States, what knowledge do
they have of the conditions of the factory in which the product
is produced?
Mr. Kernaghan. I would say none, because, even Mattel--and
I have to say this--I heard Mattel say they are a good company
so often I began to believe it. I always thinking maybe they're
the Jesuits, and they're traveling around the world to help
develop poor countries. But then, with the toy recall, Mattel
actually admitted they have no idea, it's out of control, they
did not even know where their toys were being made, they
certainly didn't know where parts of their toys were being
made, because their contractors were illegally subcontracting
to subcontractors who, in turn, were subcontracting to other
factories. It was completely out of control. They've admitted
it.
Now, Mattel says it has the best code of conduct
imaginable. As a matter of fact, in the Xin Yi factory, where
the workers are held as temporary workers, which means from
the--from the very beginning, they have absolutely no rights,
zero rights--the first day they come into the factory, they're
given a training session, where they teach the workers how to
lie to Mattel auditors and other corporate auditors; they tell
them to say, ``The work conditions are great, management's
fine, we're never forced to work overtime, we're paid
correctly, our dorms are beautiful.'' The very first day, they
receive that training.
On top of that, if you read Mattel's own audits--and I
was--I--shocked, because I don't believe anybody ever reads
these things--if you read Mattel's own audits, they read like a
nightmare: 80-hour work weeks, 7-day work weeks--I mean, it's
frightening. Fungus growing on the walls of the dormitory, and
it's--it would--frightening. These are their own audits. This
audit--and, of course, they don't name the--they don't--won't
give you the name of the factory. This is factory number 18.
They won't tell you what factory it is. They worked with this
factory for 6 years to clean it up, and yet, for 6 years, the
80-hour work weeks went on.
And one other thing that blew my mind, personally. Mattel
apologized to China, their government official in China, for
the recall. After the Chinese government official said to
Mattel, ``Don't you realize a large portion of your profits
come out of our manufacturers in China,'' Mattel then
apologized to China for the recalls, for making them seem too
excessive. It turns out that the cooperation that the
government official was referring to with Mattel--Mattel was
given waivers, as late as 2005, to pay below the minimum wage.
So, this is the monitoring operation. They got waivers to pay
below the pitiful minimum wage in China. To this day, they have
waivers to allow workers to work excessive amount of overtime.
In China, the law is 36 hours of overtime a month. Mattel has
waivers to let the workers work--allow the workers to work up
to 72 hours a week, which is 295-percent higher than China's
labor laws. So, this thing is out of control.
Senator Dorgan. I'm going to ask a couple more questions,
then I'm going to call on my colleague Senator Sanders.
Dr. Athreya, same question to you. You are testifying about
conditions inside of China. Tell me how you know these
conditions exist.
Dr. Athreya. I will say I have, myself, traveled to China
on several occasions, and have traveled extensively in this
region of south China, where most manufacturing for the U.S.
market occurs. I have been able to go into factories, to my own
surprise, openly, with factory--with the sort of folks that are
hired to do compliance for some of these companies, and have
been proud to walk me around the factory to show me what their
labor monitoring looks like. I, therefore, can verify,
directly, that they are vastly inadequate to uncover the
tremendous range of problems that these workers suffer. Workers
are not interviewed confidentially.
Now, we do also have allies in China, as I have mentioned,
that we cannot name and we cannot identify, but they are very
close to workers in these factories, because they are in these
communities, day in and day out, and have the trust of the
workers and, therefore, are able to gain information directly
from factory workers on a routine basis, month in, month out,
and to verify the nature of what companies report in their
annual reports, et cetera.
Senator Dorgan. Mr. Eio, thank you for your work and your
description of what you're trying to do to develop codes of
conduct and so on. In your testimony, you indicated 670
factories currently certified as being in compliance with the
standards you're developing, but there are 8,000 toy factories
in China. So, would you agree that the kinds of things that
have been described by others on the panel can exist--can exist
quite easily--because you've got close to 7,500 factories not
in compliance?
Mr. Eio. Yes. And, certainly, I think the examples we've
heard of here are very egregious, and they do occur. And that's
precisely why the ICTI CARE Foundation was set up. We are very
young. We have been--it took a number of years to put together
an international code of manufacturing practices, because we
were working with organizations in 21 different countries. The
code is now globally accepted code, and the phase we're working
on now is the implementation and the monitoring. And, as I say,
we have, so far, signed up with 1,200 companies. I think there
are 3,500 toy companies that are licensed to export out of
China, and it obviously is our intention that all of those
should eventually come under the ICTI code. We have about 1--
just over 1 million workers who are covered by the factories
that are approved, out of a total of about 3 million, so we
have a long way to go.
One of the things we do is, we provide workers with a copy
of the code, which tells them what their rights are and what
they are entitled to do. And this is--generally, as has been
observed, is not known by many of the workers, and this
educational process is a very important part of what we do.
Senator Dorgan. I see three issues coming to the same
intersection.
One, American workers lost jobs because they couldn't
compete with somebody that's working 80 hours a week, 7 days a
week, for 20 or 30 cents an hour, and shouldn't have to try to
compete with that. No American workers should be told, ``You've
lost your job because you can't compete with a sweatshop.''
Second, unsafe products. If you don't know about the
factory, where the work's being produced, you probably don't
know what ingredients exist, or you probably look the other
way. What about the product safety for American consumers?
And, third, the sweatshop conditions and the abuse of
workers inside plants in China.
Our country ought to at least, as a matter of standard,
say, ``We will not accept, for sale in this country, products
produced with forced labor or sweatshop labor.'' And that's the
legislation Senator Sanders and I and Senator Brown and others
have introduced. And we're going to push to try to get at least
the U.S. Congress on record to say that we have disagreements
on trade, but they ought not be a disagreement in this Congress
about this principle. We should not have the product of
sweatshop labor coming into this country to be sold. That's
profiting at the misery of others, and that's not something
this country should condone.
Senator Sanders, thank you for joining us. Why don't you
proceed.
STATEMENT OF HON. BERNARD SANDERS,
U.S. SENATOR FROM VERMONT
Senator Sanders. Well, Mr. Chairman, thank you for holding
this hearing. And, most especially, I want to thank all of the
panelists for being here. The issue that we're dealing with
today is an issue that should be dealt with in virtually every
Committee of the U.S. Senate. Too often, it is swept under the
rug.
The bottom line here, to my mind, is that these unfettered
so-called ``free trade'' agreements that have been pushed on us
by large multinational corporations are certainly hurting
American workers. The middle class is shrinking, poverty is
increasing. They are certainly hurting the health of our
people; in this case, our children. Where products are coming
into this country that can make our kids sick is unacceptable.
And, last but certainly not least, as people who care about
working folks in other countries, these policies are doing
horrendous harm to people in China, in other developing
countries, who are working 70 or 80 hours a week in horrendous
working conditions.
So, I think what you are telling us is that the time is
long overdue for this Congress to begin rethinking these
unfettered free trade policies which are hurting so many people
in America and all over the world. And I want to thank you very
much for doing that.
In my view, if, to the degree that the people of our
country know what is happening in countries like China, where
people are being exploited so ruthlessly, where their lives are
endangered by horrendous working conditions and exposure to
harmful chemicals, to the degree that the American people
understand that--and they are understanding it more and more--
they will say, ``No more. We need to rethink these entire
policies.''
The bad news is that what you have described this morning
is going on. That is the very bad news. The good news, I should
tell you, is that, in this country and around the world, there
is growing discontent with these unfettered free trade
policies. Some of you may have seen, recently, just a couple of
weeks ago, on the front-page Wall Street Journal, almost two-
thirds of Republicans, by a two-to-one vote--two-thirds of
Republicans--are beginning to doubt whether unfettered free
trade is good for this country. And I think the polls for
Democrats are even higher.
The one last point that I want to make--and I think Senator
Dorgan touched on it--or maybe Mr. Wu did, I can't remember
who--is the incredible situation when you have the United
States Chamber of Commerce telling the Chinese government, an
authoritarian government, that they are going too far in giving
workers more rights. Can you imagine that? This is a country
which is supposed to believe in freedom and democracy, and you
have the Chamber of Commerce of this country, representing
corporate America, telling an authoritarian government that
they've got to ease back, they're giving workers too many
rights. Can you believe that? I mean, it is really quite
unbelievable and quite a national disgrace.
Senator Dorgan. Senator Sanders, might I observe, on that
point, exactly the same thing happened it the Philippines.
President Arroyo, of the Philippines, at one point said, ``We
really need--given the miserable poverty and wage rates, we
really need to consider increasing the minimum wage.'' The U.S.
Chamber of Commerce folks and--particularly, the very next day,
one American company doing business in the Philippines, said,
``You do that, we leave.'' It is the same story virtually all
over the world.
Senator Sanders. The last point that I want to make is, I
believe we are making progress in raising consciousness. And a
lot of that has to do with the work that all of you are doing.
And we appreciate that very much. You keep up the fight out
there at the grassroots level. We'll do what we can inside here
in the Senate. And thank you.
And, Senator Dorgan, again, thank you for being the leader
in raising consciousness on this issue. I wish more of
subcommittee chairmen were holding the same type of hearings
within their jurisdictions.
Thank you.
Senator Dorgan. Mr. Kernaghan, you heard Mr. Wu describe
garments and toys made in Chinese prisons, and then, through
indirect marketing, go to the central government of China and
then marketed back so that those products come into this
country. I'm going to ask, in several different ways, that that
be investigated. But I'd like to have your assessment of that.
Do you believe that is happening in China?
Mr. Kernaghan. Yes. Mr. Wu has documented it thoroughly.
We've been following your work for years. It's been very well
documented. There is no question that prison labor is
especially involved in making parts of toys, Christmas
ornaments, and so on.
If I could just say one thing----
Senator Dorgan. Yes.
Mr. Kernaghan.--because I feel your legislation, the Decent
Working Conditions and Fair Competition Act, is so critical
that if you look at this Barbie doll, Mattel has won all sorts
of enforceable laws to protect this doll, backed up by
sanctions. In fact, Mattel sues, on the average of once a
month, to protect Barbie. And they've been doing this for the
last 10 years, just as the other companies have. But when you
go to Mattel and say, ``Can't the workers who make the Barbie
doll--the young women in China--can't they also be legally
protected--their rights be legally protected?'' Mattel and the
other corporations say, ``No, that would be an impediment to
free trade.'' So, we live in a society where Barbie is
protected, but not children in the United States--they're not
protected legally from toxic toys--and the workers in China are
not legally protected, because their corporations won't allow
it. And that's why I think your legislation is the critical
legislation to finally level the playing field.
Senator Dorgan. Mr. Kernaghan, you're talking about Mattel.
We, in fact, invited them to this hearing. But I assume you're
using that company because that company's been in the news
because of substantial recalls. But this issue is much, much
broader than a company, is it not?
Mr. Kernaghan. Yes, of course. Yes. Yes, exactly. It's--
Mattel--just like--I like to be concrete, because
abstractions--it's hard to judge. But----
Senator Dorgan. Dr. Athreya, in your testimony, you
mentioned Huffy bicycles, which is a story close to my heart,
because I've talked to workers from Huffy bicycle factories in
Ohio. One of them told me a very plaintive story about, to the
last day at work at Huffy bicycles. I believe they were
produced for 100 years in our country. Over a century, Huffy
bicycles were produced in this country, most--not all, but most
in Ohio by people that appreciated their jobs, average about
$11 an hour, plus benefits. On the last day of work after they
were all fired, as they left their parking space--parking lot
where their cars had rested while they worked, the workers at
Huffy bicycle left a pair of empty shoes in the space where
they parked their cars. And it was a way for the workers, after
that parking lot had emptied, and now had a pair empty shoes in
the parking space--it was the only way the workers had to say
to that company, ``You can move our jobs to China, but, by God,
you're not going to fill our shoes.'' What a poignant,
plaintive way for workers to send a message to a company.
That story--the story of Huffies--the story of Huffy
bicycles is an almost unbelievable story. They actually pawned
off on this government the pension responsibilities for the
workers that were displaced at Huffy. But those bicycles, I
believe, are now made in Shenzhen, China, and, I believe, made
for 20 to 30 cents an hour labor by people working 7 days a
week. Do you have any knowledge about the conditions of
manufacture for Huffy bicycles in China?
Dr. Athreya. Yes, thank you, Senator Dorgan. That is a case
that you know very well, and, you know, I certainly agree with
all the--what you've just said.
We don't--I'm not going to answer the question about
conditions within the factory, because our researchers didn't
look at that factory recently, and so, I don't want to be
speaking out of turn about current conditions in that factory.
One thing I would like to emphasize related to your remarks
is, in our written submission for the record we did make a
point of really discussing the role of Wal-Mart in driving
production into these very tragic factories in China. And the
Huffy bicycle case was simply an example of that, but we've
seen it over and over, and we've seen it in the toy industry,
in the garment industry, we've seen it in virtually every
light-manufacturing industry. And the nature of the
contradiction, the hypocrisy, is that you have, on the one
hand, Wal-Mart claiming that it has a code of conduct to
protect worker rights, and that it insists that all its
suppliers enforce this code; on the other hand, Wal-Mart, known
very--you know, sort of, infamous for going back to the
suppliers of the bicycles, the dolls, the baby clothes, year
after year, and systematically pushing down the prices and
saying, ``You must give us this product for 5-percent less this
year than you did last year.'' And manufacturers in the U.S.,
one after another, so many stories that are so similar to the
Huffy bike story, if a manufacturer is saying, ``The only way I
can get it to Wal-Mart for 5-percent cheaper, 10-percent
cheaper, 15-percent cheaper, is to close down this factory and
move overseas to the cheapest possible place I can find.''
And now that these companies have been in China for a
number of years, what we're seeing happen within the Chinese
factories--and I've actually talked to factory managers who
have been so outraged at what they themselves are facing that
they've confessed this to me--that they have the--you know, the
Wal-Mart buyers come in and say, ``OK, you know, you gave us
this whatever-it-is product for this much last year, we want it
for this much less this year,'' and the factory manager is
saying, ``The only way I can get it to them for that much less
is to stop paying myself.'' I mean, there's nowhere else to cut
the costs.
Senator Dorgan. Dr. Athreya, in your testimony you talk
about the new report by the International Labor Rights group,
and it describes the percentage of factories--the decreasing
percentage of factories rated, ``green,''--the number of
factories rated green or having no risk or low-risk violations
had been consistent at 21 percent--I'm quoting you--for the
first 2 years that data was available, decreased to 10 percent
in 2005, and only 6 percent in 2006. I don't understand that. I
mean, that is completely at odds with what we hear publicly
from many companies who have said, ``Look, we understand
there's a serious problem here, and we're hiring lots of
contractors. We haven't been able to figure out what they're
doing, but we've got projects going on. We're going to get to
the bottom of it. We don't want workers abused.'' You know, the
material they put out in press statements from these companies
is, ``We're going to get a handle on this. We're working hard
to do it.'' And yet, the number of factories rated as having
low risk or no risk has dropped dramatically. What is your
assessment of that?
Dr. Athreya. This is precisely--and this--by the way, this
report was based on--you know, as Mr. Kernaghan said earlier,
it's too bad more of us don't read what the companies
themselves say; you can find this information in their own
reports on their ethical sourcing--but this precisely points
out the hypocrisy, on the one hand, of their saying, ``Oh,
we've got this code, and we want the factories to implement the
code,'' on the other hand, it being really clear that those
factories that actually meet the code aren't giving them the
stuff at the cheap prices that they want. And so, if they have
to make a choice between the worst factory with the worker
rights violations that's giving them the lower price and the
factory with the better conditions for workers, they--they'll
go with the worst factory.
Senator Dorgan. Mr. Eio, do you think that, if we do
nothing here in the United States Congress--for example, we
don't pass the sweatshop bill that I've introduced with my
colleagues--if we just do nothing but hold a hearing once a
year, lament what's going on--is this something that will be
corrected in the private sector, or will we still see this
aggressive approach to saying, ``We're going to drive down
prices and we're going to circle the globe in our corporate
plane, looking for the lowest possible labor rate, the cheapest
conditions of production, the least environmental standards,
and so on, and that's what we're going to produce''?
Mr. Eio. I think one of the things that I--one of the
points I'd like to make is--and I'd to leave as evidence a copy
of our code of manufacturing.
Senator Dorgan. Without objection.
[The information previously referred to follows:]
------
Mr. Eio. Right. This is--recently, Wal-Mart has announced
that they will not accept toys from any supplier that is not
certified under the ICTI Code of Practices. And that is our
aim, to have all retailers, on a worldwide basis, agree to
that. We audit those factories on a regular basis. We do
surprise audits, unannounced audits. And we feel that we're
making good progress, and, within the next 2 to 3 years, will
cover the majority of the industry, not only in China, but also
in South America, in the Czech Republic, in Hungary, and places
like that.
Senator Dorgan. Mr. Eio, though, I have read extensively
about this subject, and what I have read tells me that auditors
have come in to a number of these plants, are treated to a
ruse, and the ruse is double sets of books, workers being told,
``You dare not speak to the auditor. If you speak to the
auditor, here's what you must say.'' And we know of many
examples in which inspectors have come into the plants, have
left the plants, believing that the information they have seen
would tell them that plant is in compliance, when, in fact,
that plant is aggressively abusing workers rights. In this
case, how do your investigators know that you're getting the
right story, the straight information?
Mr. Eio. We have, obviously, encountered those ruses, as
well, double bookkeeping and many practices like that. But I
would emphasize that we're using professional outside auditor--
audit companies, many of them global, and our auditors are
trained to look for issues precisely like that. Currently, we
have about 250, and our aim is to build up to 600.
Senator Dorgan. How have you been financed?
Mr. Eio. Initially, we have been financed entirely by
donations from within the industry, of about $5 million, and
our aim is ultimately to make this a self-financing exercise,
in that the factories pay for the audits, and they also pay for
the seal of approval once they have been approved.
Senator Dorgan. The BusinessWeek magazine that I have used
on the floor of the Senate in some presentations, the cover of
BusinessWeek--I don't have the date on that--but it says,
``Secrets, Lies, and Sweatshops: How the Chinese Supplies Hide
the Truth from U.S. Companies.'' And the article inside that
BusinessWeek is quite illuminating, describing the deception
that occurs that allows plants to abuse workers, effectively
create nearly sweatshop conditions and yet pass inspection. I'm
not suggesting that your inspectors aren't good. You, of
course, with 8,000 toy manufacturers just in China alone, with
only a couple of hundred--250 or so investigators, much more
needs to be done.
But, having said that, I applaud your work. I want you to
be successful. I think it's a step in the right direction to be
concerned about this, to care about it, and to take action to
try to represent change, even if it is small, incremental
change.
Mr. Wu, let me come back to you for just a moment. As I
indicated, I've long admired you and your steadfastness in
support of human rights. You've spent 19 years of your life in
a prison. You've spent a substantial portion of your life in a
prison for, in my judgment, speaking truth to power. And we in
this country know that China will be a significant part of our
future. China is a big player on the world scene, and becoming
an even bigger player.
The question is what set of policies can we implement in
this country to continue to try to move China, or persuade or
coax or push China in the right direction toward greater human
rights, greater engagements on the issues that matter to
people, to workers, and so on? You come here this morning and
you testify that Chinese government sanctions, production of
goods in their prisons, then, through indirect methods, gets
them to a government-owned company and markets them in our
country--there's no consumer in this country that should ever
want to buy goods that are made by forced labor from prisons.
No one should want to do that. And yet, if this is happening--
and you say it is--if this is happening, it's a real abridgment
of any sort of common sense or moral values or human dignity.
So, the question is, what kinds of steps do you think can be
taken that will, not only more commonly expose this, but,
second, force the Government of China to discontinue these
practices?
Mr. Wu. Well, I am very touched by your talking about the
story very close to your heart about the bicycle workers. I
want to share with you my experience.
I was in a prison camp, working in a coal mine--12 hours a
day, 7 days a week. We were pulling the coal out. And it's just
like an animal, doing that.
But who cares about these things? Our coal mine produced
million of tons of coal for the market. Not really--some people
care. Everything matters to people who lost their legs, lost
their arms, even lost their lives. It is quite normal. I was in
an accident, and I almost lost my life. The police prepared a
coffin for me. Finally, I survived. I only--you know, my neck,
my back was broken, I lost consciousness. I don't want to go
back to that situation.
And I am very happy that Americans are talking about
Chinese prison labor and sweatshops. But the problem you
raise--you raise two questions, the first question is, American
workers lost their jobs to whom? To Chinese workers. But
Chinese workers are under a Communist regime. Would you be
willing to see American workers lose jobs to the Soviet
workers? You would not. You said, ``No, we will not go over
there.''
And the second question is, Americans today, so
enthusiastic, go to China and they want to invest, want to buy,
want to sell, and they stay in Beijing, in a hotel. They just
see the products. They don't see the producers, they don't see
how the products are produced. They don't care. Wal-Mart, they
have a contract with the Chinese, saying, OK, the seller has to
agree that none of the products are made by prisoners. So,
there's a protection. They don't do anything about it. And the
Chinese contractor says, ``OK, I will do it, I will give you
the product, I will sign a subcontract with other people.
That's our side of the story.''
I think the problem is--now related to a security problem.
You see the Chinese, what they are doing in Sudan today.
They're doing something in North Korea, whatever. This is a
Communist regime. It has kind of come to the stage that causes
security problems for America. I think this is a very big
issue, not only BusinessWeek talking about slave labor.
Actually in China the workers' conditions are horrible. Child
labor, I never mentioned anything about that. Prison labor,
very normal. Today there are 3 million, 4 million people there,
and every day they are forced to labor. So, who cares?
I just don't know how to answer your question, but I do
think, when Americans are in church on Sunday morning, they
pray to God. They have to think about who makes these products
and under what kind of conditions. They really have to care
about it.
Thank you.
Senator Dorgan. Mr. Wu, thank you very much.
There are, I think--and I don't know that you would agree
with this--there are some signs in China of some movement in
ways that are hopeful. But there are many areas in which there
must be additional movement in order to come into the
mainstream of what we expect, of how countries treat their
workers and so on. But this issue--we're talking now about
China. We could talk about Sri Lanka or Bangladesh or Indonesia
or other countries, as well, where Mr. Kernaghan has visited--
Honduras, as an example, we held a hearing about that. We
talked about China, because the migration of so many American
jobs to a low-cost manufacturing platform has moved in many
directions, but most prominently it has moved to China. And
then, therefore, the spotlight of worker abuse that exists
properly shines on where most of those jobs have gone. And so,
that's the reason we speak of China at this point.
As you mentioned, Mr. Wu, there are many other issues with
respect to China, larger geopolitical issues that might cause
our State Department to look the other way, or our policymakers
to ignore--to be content to not see some other things that are
happening, and to engage in other ways. But this issue of
international trade, worker abuse, sweatshops, and so on, is a
very important issue.
And I want to ask Mr. Kernaghan, if I might--the work that
you are doing--you've done this work for some long while--do
you see progress? And, if so, where does that progress exist?
You work in many countries. Where do you see progress?
Mr. Kernaghan. Well, there has been some progress, I--in
terms of the most egregious violations. For example, in Central
America, back in the early 1990s, there was enormous amounts of
child labor. In fact, the girls used to tell us--these are,
like, 11-, 12-year-old kids, and 13-year-old kids--that if they
let the boss fondle them--these were young girls--they would
get a few extra pennies at the end of the week. There were
actually even brothels on--in some of these free trade zones.
Workers could be shot and killed for trying to organize. There
have been some positive changes. However, when it comes to
wages and hours and the right to organize, there have been
minimal improvements. And, sad to say, in China, as Mr. Wu
said, workers simply have no human rights freedoms or religious
freedoms or free-press freedoms or labor freedoms, and so, you
have workers really stripped of their rights. That situation
has not improved.
Senator Dorgan. There are countries, in which you have done
investigations, where workers, who have attempted to organize
fellow workers for better conditions, are imprisoned, and, in
some cases, worse. Is that correct?
Mr. Kernaghan. Yes. Yes. Yes. I mean, it's--imprisoned on
trumped-up charges--I mean, very horrible things that the
American people would be shocked--it just doesn't get out to
the general public enough.
Senator Dorgan. I am Co-Chairman of a commission here in
the Congress that works on a number of these issues, including
developing and retaining--and maintaining, I should say, a list
of those who are imprisoned for human rights violations in
China. And it is the case that there are some very courageous
people, who stand up for the rights of workers, who find that
they end up in a Chinese prison cell.
At any rate, let me say to all four of you that I
appreciate your willingness to be here. I think this work must
continue, and must continue aggressively.
I'm going to do a couple of things as a result of this
hearing. We have legislation on sweatshop abuse that this
Congress needs to address. We might disagree about a lot of
things in this Congress. We have a trade agreement with Peru
that they say might come to the floor of the Senate very soon.
We have a trade agreement with Colombia that's done, a free
trade agreement with South Korea that is completed, a free
trade agreement with Panama that is done. We're going to have
free trade agreements come to the floor of the U.S. Senate.
And, of course, they, I believe, were all completed under what
is called ``fast track authority,'' which means no one can
offer any amendments of any kind to the trade agreement. It's a
kind of self-restraint or a straightjacket that Congress has
decided to put itself in. We have now eliminated that
condition, so future trade agreements cannot be negotiated
under those conditions. And we have sufficient votes, I
believe, in the Senate, to prevent a restoration of fast track.
But, nonetheless, we have trade agreements coming to the
floor of the Senate at some point in the future. It seems to me
that those who care about trade, those who assert that trade is
very important--and I believe it is, I support trade, and
plenty of it, but I demand it be fair, and I demand that it not
be trade conditioned under sweatshop labor and so on--those who
really believe in trade ought to be the first to sign as
cosponsors to a piece of legislation that would end sweatshop
labor--products from sweatshop labor coming to this country and
being sold in this country. That would be the surest way to
require that standards rise in other countries, in order for
them to be able to produce and to ship their products to this
country.
So, I and my colleagues intend to push very, very hard, in
the coming weeks, on S. 367, the Decent Working Conditions and
Fair Competition Act. It's, effectively, an anti-sweatshop
labor bill, is really what it is, trying to give workers around
the world some rights.
And I think your willingness to come here today and be a
part of a hearing, and to testify publicly about what you see
is happening, is very, very important.
Let me also just, finally, say this. It is, it seems to me,
a lonely job, to be working for organizations that do these
things. It's not so lonely if you're part of a big association
of manufacturers and employers who have common cause in seeking
workers around the world who will work for the least cost and
produce your product for the highest profits. But it is a
lonely job to investigate these issues and to support workers
in the farthest regions of the world, and to insist on
standards in this country, when we do trade, that would require
that those standards abroad be lifted rather than diminished.
So, I appreciate it, and on behalf of the U.S. Senate, I
hope you will continue your work, and be even more vigilant,
and continue to be willing to contribute in open hearings.
Mr. Eio, you represent an industry that's come under--you
previously, in fact, headed an industry that's come under very
severe attack and very severe criticism, and, in my judgment,
for justifiable reasons. I think many of them have done almost
nothing, and many of them have not cared at all--produce where
it's cheap, sell where they can get a good price, and fatten
the checkbook. I appreciate the fact that you've come here
today, and I appreciate that you're working for organizations
that are hiring investigators to try to see if you can develop
some standards--some standards that address these issues. I
think that's good news. I appreciate it. I think you would
agree with me that you've made a step, albeit, perhaps, a small
step, in the right direction, and we commend that step and hope
that you'll reach a full gallop pretty soon.
To Mr. Wu, thank you for your courage. Thank you for
continuing to speak out against what you believe are, and what
are, human rights abuses.
And, Dr. Athreya, thanks for the work of your organization.
Please continue it.
Mr. Kernaghan, I expect that we will call you before the
Congress once again, because your organization has done some
really groundbreaking work, and we appreciate it.
This hearing is adjourned.
[Whereupon, at 11 a.m., the hearing was adjourned.]