Raising labor standards, corporate social responsibility and missing links vietnam and china compared

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Anita Chan and Hong-zen Wang


The anti-sweatshop movement has targeted corporations for allowing sub-standard labor conditions in the factories that produce their brand-name merchandise. Underlying this campaign is the notion that corporations should be held to socially responsible standards. Many major Western multinationals have responded, in self-protection, by drawing up corporate codes of conduct. But despite the anti-sweatshop movement’s success in this, labor standards in the export sector of the developing world continue to decline. We continue to witness a “race to the bottom”, in which countries of the South lower their own labor standards and wages in the labor-intensive export industries in order to remain competitive and provide a “good” investment climate for foreign investors (Greider, 2001; Ross & Chan, 2002). This in turn sometimes drives down labor standards of the corresponding industries in the developed world (Esbenshade, 2001; Kwong, 1998; Ross, forthcoming).

The anti-sweatshop movement succeeded the campaign to divest from Apartheid South Africa. The latter, also premised on Western corporate social responsibility, preoccupied the concerns of many grassroots protest activists of the developed world from the mid-seventies to the mid-eighties. The movement was global but was targeted at only one country – South Africa. In contrast, the new movement, dating back to the early nineties and spearheaded by the Nike Watch campaign, is truly globalized. The concern is no longer just on one host country but many—those that export labor-intensive goods to the developed world. This includes, in particular, several countries that are located in Asia, the fastest developing region in the world over the past decade.

The anti-sweatshop movement has introduced a new player into the traditional paradigm of industrial relations as a tripartite structure constituting the state, employers and labor. Grassroots non-government organizations (NGOs) such as student groups, church groups, environmental groups, labor organizations, consumer groups, community groups, etc. have become players that can no longer be dismissed as fringe. The movement has taken the moral high ground, and today a large number of transnational corporations (TNCs) have openly accepted that they hold a responsibility to upgrade labor standards in the factories that produce merchandise bearing their names. Many TNCs have now hired a corps of staff to handle labor rights/human rights issues. In the mid-1990s a flurry of internal and external social monitoring, auditing and verification activities to ensure improvement of labor standards gave birth to a flourishing new monitoring and auditing business, but only limited improvements in labor conditions have ensued.

Thus far the impact has been restricted principally to large factories, and even here, excessively long work hours remain a serious problem.1 Monitoring all of the thousands and thousands of small subcontractors and sub-subcontractors is simply not feasible.2 There is also evidence, as a profitable new field of business has emerged—social monitoring and auditing, with new auditing companies springing up—that the effort sometimes consists of perfunctory exercises (Brown, 2001; LARIC, 1999) and even bribery. Subcontractors also cheat, including elaborate feats like secretly moving part of the production to a newly established factory after being caught for violating the client company’s code, and continued violations of labor standards in the new establishment (Roberts and Bernstein, 2000). Suppliers often try, by hook or by crook, to resist raising labor standards, and some Western TNCs are ready to turn a blind eye. When plagued by bad publicity, such companies may succumb to pressure, but once the wind blows over, they relapse to bad practices.3

In this paper we would like to offer two alternative possibilities, in addition to putting pressures on Western corporations to monitor subcontractors, for raising labor standards in the world’s labor-intensive export industries. This will require the anti-sweatshop movement to adopt a new paradigm: identifying missing links and players in the global chain of production.

The Global Production Chain – The Missing Links

Today, when one speaks of TNCs that produce in poor countries, what comes to mind are the big brand-name TNCs of the Western developed world such as Nike. The dominant belief among critics from the developed world is that these Western TNCs are omnipotent, that wherever they sally forth in the world, they call the shots. The influential book No Logo by Naomi Klein (2000) is premised precisely on this paradigm. We do not dispute the fact that Western TNCs do have a lot of leverage over their suppliers, but we do not see their power as omnipotent. Precisely because they are not, the campaign to oblige the big Western TNCs to adopt and enforce corporate codes of conduct has its limitations.

Asia, as the fastest industrializing region in the world, now has its own share of TNCs. Many of these are Taiwanese, Korean and Hong Kong owned: i.e., firms from the so-called Newly Industrializing Countries (NICs), which we shall call “middleman states” in the global production chain. As of the 1980s they relocated much of their labor-intensive production off shore to their poorer Asian neighbors, particularly China. In the process, some of these companies have themselves grown to become gigantic Asian TNCs. An excellent example is Pou Chen, which manufactures for all of the famous brand-name athletic footwear companies of the developed world. It employs some 170,000 people in a number of countries4 and makes a handsome profit every year.5 Such companies occupy an important position in the world’s production chain. Small and medium-sized suppliers may not have much bargaining power against Western TNCs,6 but these enormous suppliers are not as vulnerable to pressures. If one brand-name Western corporation threatens to remove orders for merchandise, the supplier still has other brand names among its clients. And these large middle-man manufacturers can also ride out hard times among their largest buyers. While Nike’s profits fell by 43% from 1997 to 1999, the profits of Yue Yuen, one of the Pou Chen Group’s companies that counts Nike as one of its big customers, increased by 24% during the same period.7

The anti-sweatshop pressure that originates in North America and Europe does not target Pou Chen directly, and so Pou Chen does not feel the heat enough to raise its labor standards beyond the minimal: i.e., its relatively skilled workers generally only receive the legal minimum wage level of the poor host country. Ironically, Western TNCs have become a buffer for these powerful Asian TNCs.

In this paper, based on empirical research comparing Taiwanese investors’ practices in managing factories in Vietnam and China, we offer new perspectives on how to improve conditions in the factories of the South that produce for export. Our findings show that Taiwanese investors are less abusive in their labor practices in Vietnam than in China, and we will investigate why the Taiwanese behave differently in these two countries. We shall show that the state can be an important actor in raising labor standards, yet the state is often ignored in the conceptual scheme of the anti-sweatshop movement, which tends to over-emphasize the effectiveness of grassroots pressure on Western corporations.

By state, we refer to three separate types of actors—the state hosting the manufacturing sites (e.g., Vietnam and China); the middleman state from which the investors come (e.g., Taiwan and Korea); and the developed importer state (e.g., the U.S., UK and Germany). We argue these three sets of players, whose roles have been ignored, are crucial in any efforts to upgrade labor standards. We shall discuss all three types, but in particular will look at the potential role of the host state and, secondarily, the middleman state.

Taiwan: From a NIC to a Middleman state

Taiwanese investment in Southeast became noticeable after 1986 as Taiwanese labor costs soared. But it was after 1990, after the cross-strait political tensions eased, that vast amounts of Taiwanese capital poured into China at the expense of Southeast Asian countries, which had been the main recipients. Up to the end of 2001, China absorbed about half of the Taiwanese capital invested overseas, totalling US$29.4 billion (IDIC, 2002). But the Taiwanese government has encouraged its business people not to concentrate too much capital in China, as Taipei is worried that Taiwan will become dependent on its investments in the PRC. After the Taiwan Straits crisis of 1996, when China fired missiles in the vicinity of Taiwan, the Taiwanese government actively promoted a “go-south policy,” encouraging investment in Vietnam and other Southeast Asian countries (Wang and Hsiao, 2002). Vietnam had the added advantage that there were no quotas for Vietnamese exports to the European Union, whereas there were for Chinese goods.8 All through the 1990s and up until today, Taiwan has been the number one investor in Vietnam. Thus Taiwanese investment is more important to Vietnam than to China.

Most of the Taiwanese capital that has gone abroad is in manufacturing industry. By the 1990s Taiwan had become an important middleman state in the global production chain for labor-intensive products such as footwear, electronic hardware, and clothing. Taiwanese-based computer companies, for instance, produced more machines on the Chinese mainland than they did at home in 2002 (Garten, 2002; Forney, 2001).9

Labor conditions in Taiwanese-run factories in Asia and elsewhere in the world, including Central America10 and southern Africa11, have raised human rights concerns in the past decade. Taiwanese management often employs a disciplinarian style, with harsh working conditions (Chan, 2001: 46-56, 97-106; Wang, 2002), but this style is not the same everywhere. When we compare Taiwanese management behavior in Vietnam and China, it becomes apparent that labor standards are better in Vietnam. Why is it that in a country where the Taiwanese actually have more leverage, Taiwanese managers are less abusive? We will first present empirical evidence comparing the work conditions of the workers of these two country’s Taiwanese-owned factories and then analyze the factors contributing to this difference, finally coming back to our original discussion on how the global chain of production provides an avenue to improving working conditions in the globalized manufacturing sector.

The empirical data used to illustrate our argument will be drawn from primary documentation and field research in both Vietnam and China. The most germane field data for Vietnam was collected by one of the co-authors, Hong-zen Wang, between 2001 and 2002 in three separate field visits to Hanoi and the Ho Chi Minh City area. The last of these research trips was taken in the company of the paper’s co-author, Anita Chan. In order to gain a broad perspective on Taiwanese investors’ management practices, people holding different positions and perspectives were interviewed: Vietnamese workers, trade union officials, employers associations, and NGOs; Western monitoring companies; Taiwanese officials and investors; and their PRC staff hired from China.12 In addition, 16 workers were interviewed in the Hanoi-Haiphong region and in the Ho Chi Minh City region using a semi-structured questionnaire. Fieldwork in China was conducted in 1996 by Anita Chan in the cities of Dongguan and Humen in Guangdong Province and Putian in Fujian Province, and in 2002 in Dongguan and in Fuzhou, Fujian. Interviews were conducted in Dongguan and Putian with the Taiwanese Business Associations13 and Chinese trade union officials and in Dongguan and Fuzhou with workers from Taiwanese-owned factories. A questionnaire devised by Chan was also distributed to large numbers of workers at a number of Taiwanese-owned footwear factories in five cities in 1996. This survey is supplemented by information gleaned from a very large number of newspaper clippings from the PRC on working conditions in Taiwanese factories there.

Our comparative evidence comes most directly from Taiwanese managers’ own descriptions of how they behave differently in Vietnam and in China. In field research conducted by a group of Taiwanese academics14 with 42 Taiwanese management personnel in southern Vietnam and northern Vietnam (Hanoi and Haiphong) the managers observed repeatedly that they had to abide by the law of the land. They were surprisingly frank about the harsh management methods they themselves personally had used in China, which they refrained from using in Vietnam. One Taiwanese factory owner complained,

You can’t even touch the Vietnamese workers, let alone abuse them. In China, we used a Taiwanese management style. When we began our operations in China, we frequently resorted to punishment. Physical punishments were very common, including even hitting, like in the military.

Another Taiwanese manager, after complaining about the low educational level of Vietnamese workers, who did not know how many grams make a kilogram, noted,

But let me talk about something else. Their human rights awareness is very high. In Taiwan, when we served as army conscripts we had to obey blindly as if this were natural. But not here at all. That is why I think Taiwanese who are into shoe-making here have to face a lot of labor disturbances and strikes. They easily stage mass protests. In our company this happened last year on the night of the Moon Festival. Their labor and democratic consciousness is very high. .... This is not just a problem only at my factory, this is a problem of the entire society. In Vietnam their protection of labor rights is too stringent. This is something totally unexpected.

Thus Taiwanese managers in Vietnam feel they need to use “soft” management methods; while in China they can use a “militaristic” management method. An article in a Taiwanese shoe industry magazine succinctly summarized Taiwanese managers’ attitude towards violations of labor rights in China:15

Herein lies the crux of the problem – this so-called militaristic style of management. This kind of management means that the freedom and rights of employees to a certain extent have to be restricted and confined, and inevitably it contravenes mainland labor laws…..But mainland workers and employees’ lack of self-motivation and the historical remnants of the “big rice bowl” work ethic are the core of the problem. Many Taiwanese investors indicate that they really want to be more humane to Chinese employees but find this unfeasible: “Once you are humane, productivity would immediately drop.”

When we asked seven Vietnamese workers in the Ho Chi Minh City region what they considered as the optimal amount of overtime work a week, all seven emphasized that they wanted one day off a week (in China, during busy seasons workers in the middleman-owned factories often work for a few months without any days off), and an absolute maximum of 12 hours of overtime from Monday to Saturday on top of a normal 48 hour week. Their answers for overtime were in various combinations: 3 hours a day 4 days a week; or 4 hours a day 3 days a week; or 3 hours a day 3 days a week; or 2 – 3 hours a day plus 4-6 hours on Sunday. In other words, they took a 60 hour week as an absolute maximum, which is the legal maximum allowed by the Vietnamese labor law. This optimal number was based on practical experience that anything longer would be beyond their physical endurance. Some workers did report that they worked over 12 hours a day at peak season. If the managers pushed them too far, they indicated, they would just go on strike. In Haiphong, one manager told us he was worried about his workers going on strike if he had kept pushing them to work over 60 hours for more than two weeks.

In comparison, a survey of China’s footwear industry in 1996 devised by Anita Chan found that in Taiwanese-funded enterprises, the average number of work hours was 11 hours each day (Chan, 2000). A 2001 report on the work conditions of 92 workers in the export toy industry in Guangdong province showed that in the busy season workers labored for up to 14 to 18 hours without any days off (Hong Kong Christian Industrial Committee, 2001, p. 19). Long work hours have become such a pervasive problem, often reported in the Chinese local press, that it is considered the norm. The only improvement is that large factories that supply Western TNCs that are under pressure from the anti-sweatshop movement have felt obliged to contain the length to a 60-hour week with one day off each week. Even the 60-hour week violates the Chinese labor law. Notably, too, Chinese migrant workers tend to have no awareness of their legal rights. In the 2001 survey cited above, 90 out of the 92 workers did not know the legal minimum wage and 95% did not know the maximum legal number of work hours. In interviewing that we conducted with 16 workers at a Hong Kong-owned toy factory in Dongguan City in March 2002, only one worker claimed awareness of the maximum number of legal work hours, 3 answered they “know a little,” and 12 answered, “do not know.”16

Even worse, a staggering amount of wages are owed to the Chinese workers. 43% of the 51,000 cases of workers’ complaints lodged by letters and by personal visits to the Shenzhen City authorities during 2001 related to unpaid wages.17 One Chinese newspaper article described it as having become a “custom” in Guangdong province, while another described it as an “incurable disease”.18 When the illegally long work hours and these unpaid wages are taken into account, a sizeable proportion of the workers are making considerably less than the legal minimum wage. By contrast, these two serious problems of very long work hours and widespread non-payment of wages do not appear to be as serious in Ho Chi Minh City, where there is a large concentration of Taiwanese factories.

Another source of direct personal comparative evidence about work conditions in China and Vietnam comes from the PRC employees who have been hired by Taiwanese factories in Vietnam to be mid-level management personnel. The practice of importing PRC personnel to serve as supervisors in factories in Vietnam has been going on for a number of years. Having been in China for more about a decade, the Taiwanese have trained a competent corps of PRC supervisors who are familiar with production and Taiwanese management, and they only need to be paid at about a third the salary of Taiwanese (Wang and Hsiao, 2002; Lin, 2001). Those imported to Vietnam from the PRC can provide an interesting comparative perspective on the two countries’ labor conditions because they worked under the same management in both places. We interviewed twelve of them and they all concur that work conditions are harsher in China, and in particular regarding excessive overtime work. One of them told us,
Chinese workers’ conditions are more miserable than the Vietnamese, whose human rights are better protected. In China we had to work much longer, sometimes until 1:00 or 2:00 am. Next morning, we still have to get up early at 6:00 am to continue the work. In Vietnam, you cannot force workers to work after 10:00 pm. Why is there such a difference? The government. The Chinese government wants to make money and therefore just neglects workers’ rights.

A second commented, “In Vietnam, we can’t expect workers to work overtime after 9:00 p.m. In China, the workers still have to work even up to midnight if the managers demand it.” A third noted, “In Haiphong here in Vietnam we frequently have to work overtime, even to midnight. But I feel that we are lucky here compared with our work in China, where I worked much longer.”

Factors Contributing to the Differences in Labor Standards

Why do the Taiwanese companies behave differently in China and Vietnam? If we go by conventional wisdom, Taiwanese business people in Vietnam should have fewer qualms. Vietnam is a poor country heavily reliant on Taiwanese investment compared to China and therefore should be much more vulnerable. Like other developing countries, Vietnam should be bending over backwards to create a “good” investment climate to attract foreign investment. Besides, the common belief about out-group/in-group behavior, that people tend to treat out-groups worse than in-groups, should have led the Taiwanese to mistreat Vietnamese workers more than fellow ethnic Chinese. Does not the Chinese Communist Party’s United Front Department constantly court the Taiwanese, lavishly impressing on them that they are special because they are “compatriots,” and do not Taiwanese businesspeople respond in kind? But the selection of quotes cited above suggest the Taiwanese do not harbour any such feelings. In fact, if anything, they are more cautious with the Vietnamese workers. Taiwanese managers are resigned to the fact that if they want to stay in Vietnam to make money they have to abide by its laws. There are several underlying institutional reasons that contribute to this difference between countries.

1. The Household Registration System

In both Vietnam and China, most of the workers in the export-product factories are migrants from the countryside. Both Vietnam and China have a household registration system (the ho khau system in Vietnamese and hukou system in Chinese) which requires rural people who move into the cities to register with the police. In Vietnam, though, enforcement of this regulation is lax, and many peasants have moved into the cities to get a job without registering (Hardy, 2001: 187, 206-7). When they ignore the rules they do not get into trouble with the police.

China’s household registration system, in contrast, maintains a rigid distinction between the population who have a rural household registration and residents who have an urban registration. Movement of rural people into the cities is restricted, and they need a permit to stay and work temporarily in any urban area. If caught without these permits, people with a rural registration are often placed in a detention center, fined, and deported back to their home village.

Dorothy Solinger (1993:83) describes the procedures a peasant has to go through in order to work in an urban area:

If a factory’s leaders wished to engage peasant laborers, they needed to deal with the city labor bureau. First the workers or their group had to be in possession of a certificate from the home place’s government allowing them to leave and go into the city. Then the workers had to be issued a temporary work permit (linshi gongzuo xukezheng). Next factory officials were to take this permit to the public security bureau, which would dispense a temporary residence certificate before the workers or group would be entitled to sign a contract with the enterprise. No individual [holding a non-urban hukou] was allowed to change jobs without retracing these steps.
Under the fetters of the pass system, Chinese migrant workers are much more vulnerable to management than Vietnamese migrant workers. Management only has to take away a few necessary documents from the workers, and they will have difficulty leaving despite harsh work conditions. If they quit without getting their documents back they cannot apply for another job and also face a high chance of being thrown into detention camps by the police if they venture onto the streets (Chan, 2002, Becquelin, 2003). China’s household registration system, we believe, has much to do with the long work hours and widespread non-payment of wages among Chinese migrant workers described earlier. In 2002, the Chinese government finally tried to alleviate the problems by ordering that the local fee for the temporary work permit be decreased to under 10 yuan a month, so that migrants could afford to register. But the government has not eliminated the household registration system, and there have been reports that in many locales the police and local governments have been resisting changes and have not eased up in their treatment of migrants.19

By contrast we found no evidence during interviews with Vietnamese workers, officials, Taiwanese management, foreign labor standard monitoring agencies or the Vietnamese news media that the household registration system has caused any withholding of personal documents, restrictions in job and geographical mobility, or harassment by police due to absence of documents.

2. Living arrangements

When China opened up to foreign investments in the 1980s, dormitories sprang up when foreign investors came in to set up factories. Building dormitories for workers has become the norm in South China. In Guangdong province, according to one estimate, about 80% of the workers live in dormitories, usually at the factory site, provided and subsidized by the factory (Shenzhen Institute of Contemporary Observation, 2002, p. 4). On the surface, this seems to be a service provided to migrants. By contrast, foreign factories in Vietnam do not normally have dormitories for workers. Almost all workers (local and migrants alike) live in private housing.20 One explanation provided to us is that Vietnamese workers do not like the restrictions of dormitory regulations. A Taiwanese factory had built a dormitory in 1994 for 6000 workers, but only 1000 live there. Another explanation offered by some Vietnamese trade union officials was that the government does not favor the building of dormitories. One staff person from a brand-name shoe company confirmed this explanation, in that she knew Pou Chen Corporation had repeatedly applied to the government to build dormitories but had been denied permission.21 Both explanations account for the absence of dormitories. Maybe the Vietnamese government does not want dormitories because it does not want to let workers be subject to round-the-clock control by foreign management. There are now plans by local governments to invite real-estate developers to build workers’ dorms, but these dorms are to be located off factory sites, and are not just for the workers of one factory.

In China, where the migrant workers often live in dormitories located in factory compounds, movement into and out of the factory compound can be monitored and controlled. Disciplining workers is easier. In dormitories workers also tend to eat in canteens, which cuts down on other extraneous activities. Work, eating and sleeping, shuttling back and forth the short distance between workshop and dormitory encompasses their daily lives. More important, this makes it much easy to enforce long stretches of overtime, even into the small hours of the morning. The fact that Chinese migrant workers work longer hours than Vietnamese workers can partly be accounted for by the differences in living arrangements.
3. The Two Nations’ Trade Unions

There are similarities and differences between the two countries’ trade unions. In many ways they share features in common, due to their Communist roots and to the fact that they continue to be bureaucracies of one-party states. When both countries began to open up to foreign investors, both the Vietnam General Confederation of Labor (VGCL) and the All-China Confedeation of Trade Unions (ACFTU) tried to establish branches in foreign enterprises, for a number of reasons. Ideologically, in both countries the penetration of foreign capital is by definition supposed to be exploitative. This reaction was particularly strong in the earlier years of the economic reforms. Bureaucratically, the two unions have wanted to expand their power, their influence and their finances. For these several reasons, setting up workplace unions in foreign factories has become an important union policy.

Management will try to ward off this pressure as much as possible, until it has itself laid the foundations for setting up a company union. A Taiwanese informant in Vietnam who had worked in China told us that before he allowed a trade union branch to be set up he had cultivated a small batch of loyal workers by giving them benefits and then arranged to have them appointed the new branch’s representatives. Another interviewee was dismissive of the trade union in his factory, “Basically the trade union will not be out of our control. If someone likes criticizing the company, well, we have a ‘graveyard’ in the company, and he’ll be sent there to be buried.” At the workplace level, in both Vietnam and China the unions are likely to be in the pockets of management, or are even part of management.

But at the levels above the workplace, we find differences between the VGCL and the ACFTU. Generally the Ho Chi Minh City municipal trade union is more aggressive in protecting the rights of its workers in Taiwanese-funded factories. In 2002 we personally witnessed the hostility openly expressed by a deputy union chair towards a Taiwanese diplomatic staff member who accompanied us to our interview session at the city trade union office. The union official said his office had been working with the Korean Embassy for two years to reduce labor abuses in Korean factories and had attained some success, yet the Taiwanese diplomats had not even contacted the union in all these years. The session ended with trade union officials chiding the Taiwanese official for not reining in the Taiwanese businessmen’s authoritarian treatment of Vietnamese workers. A reporter from the Vietnamese union newspaper The Laborer who was present joined in the accusation. The next day a report on our interview appeared in his newspaper, and the thrust of the report pointedly was on how the Taiwanese official had agreed to do something about improving labor standards. Soon afterwards we were informed by a Taiwanese official that his office would indeed seek to do something about the problems.22 Putting pressure on a middleman government’s representatives can pay off.

In contrast to Vietnam, Chinese officials at all levels are careful not to show displeasure to Taiwanese officials about abusive behavior towards Chinese workers, and the Chinese union does not appear to have taken Taiwanese diplomats to task, either. The Vietnamese union is more assertive on behalf of workers in other respects, too. Whereas a Vietnamese trade union official noted to us that if workers cannot resolve problems at the workplace level, they seek help from the local union, in China, in contrast, workers usually go to the labor bureau or local government, not the union, reflecting the weakness of the union.

Some of the local units of the Vietnamese union confederation take a proactive stance. In the district of Dong Nai, near Ho Chi Minh City, the district union is implementing a new policy to raise workers awareness. It runs a one-day training course on the Vietnamese Labor Law that is required for all job applicants who seek work through its employment office. The workers we interviewed who had taken the course appreciated it. Notably, knowledge of the law puts them at an advantage over the migrant Chinese workers who, as we discussed earlier in the paper, tend to have no idea of their rights in terms of the legal minimum wage and maximum work hours. Ignorance renders them more vulnerable to exploitation. Intervention from an official trade union can be beneficial to workers.

But the union’s efforts are not always successful. An informal tripartite relationship has emerged in Ho Chi Minh City, and we interviewed officials of all three parties: the union, the employers association (which has the support of Taiwanese investors), and the Labor Department. The employers association made intensive lobbying efforts to increase the maximum number of overtime hours each year from 200 to 400, and in the negotiations over the lengthening of work hours, with the city government’s Labor Department playing the role of final arbitor, the union in the end had to agree to a compromise of a maximum of 300 hours of overtime a year. This represents a large decline in labor standards. In short, in Ho Chi Minh City, lobbying and pressures by employers’ groups succeeded in bending local government policy. The influence of the union was insufficiently strong to block it, and there were no counter-pressures from abroad. This type of scenario has also been played out repeatedly in China, where national and local Chinese authorities have bent to concerted pressures from investors on numerous occasions and there are few or no counter-pressures from abroad.

Since both trade unions are bureaucracies under one-party systems, the policies of the central party-state are bound to have repercussions on the way the local unions function. In the mid-nineties one of us participated in a comparative study between the VGCL and the ACFTU (Chan and Norlund, 1998) and concluded that the two unions were diverging in their development. Vietnam’s labor laws, trade union laws and trade union constitutions, drawn up and passed at various times in the 1990s, pointed to the VGCL being granted more autonomy by the Vietnamese Communist Party to exercise initiative to protect workers’ rights. Industrial and professional unions were to be strengthened, freeing them from the control of local governments, which tend to be more pro-development and therefore pro-management and pro-capital. At the international level, the VGCL was allowed to participate in international trade union organizations, and allowed to accept financial assistance and technical aid. The Vietnamese laws relating to labor rights are more detailed than the Chinese, and violations are clearly defined, making enforcement more easily applicable. One very important article in the Vietnamese trade union law is that “the full time trade union worker is paid by the trade union fund” (Socialist Republic of Vietnam, Law on Trade Unions, 1995, Chapter XIII, Articles 155, Clause 3). As trade union membership in the foreign-funded enterprises has increased, reaching a 70% unionization rate, the union is now better able to finance itself. By contrast, the ACFTU continues to get management to pay the salaries of the enterprise trade union chairs and staff. In all these areas the ACFTU is lagging behind, or rather the Chinese state is lagging behind.

The permission given to the VGCL to participate in international trade union activities and the strengthening of industrial unions could both be observed at a workshop that took place in Singapore in January 2002, organized by the International Garment, Textile and Leather Workers Federation (IGTLWF). The purpose of the workshop was to solicit the agreement of representatives from Vietnamese, Indonesian and Taiwanese unions to participate in signing an International Framework Agreement with the Pou Chen Footwear Company, the largest footwear company in the world to make brand-name sports shoes. The agreement was to be a kind of international collective contract between workplace unions and the company. One of us was present at the workshop and saw that the Vietnamese trade union agreed to participate without much ado, whereas the delegates of the Indonesia and Taiwanese unions were hesitant and could not make a decision right there. The leading delegate from the VGCL was the vice president of the Vietnamese National Union of Industrial Workers, the “mega” industrial union that was formed in 1997 by amalgamating unions of all industries (Chan & Norlund, 1998, p. 193). This was an organizational restructuring to strengthen the industrial unions. The alacrity with which its vice-president could make such an important decision at the workshop without consultation with her superiors in VGCL or with the Party reflects on the autonomy enjoyed by the industrial union. Although Pou Chen’s manufacturing base is largely in China (131 production lines out of 181 in 1999),23 the ACFTU was not invited because it is not recognized by the IGTLWF. Had ACFTU representatives been present, it is unlikely that they would agree to sign the Agreement without extensive consultations back in China. It was very obvious that the Vietnamese union representatives at the workshop were well versed in the international CSR issue and were willing to participate as a trade union. In contradistinction, at another workshop held in Guangzhou by Social Accountability International (SAI), a New York-based NGO that issues licenses to factories that comply with its labor standards, an ACFTU official who was invited had few inklings of the issues discussed at the workshop. Highly embarrassed and uncomfortable, he could barely respond to simple questions on China’s labor law loopholes on overtime work hours.24 These incidents point to how an openness to and acceptance by the international trade union community of a once isolated union—Vietnam’s—has paid off, compared to one that continues to isolate itself and also continues to be isolated.25

The Role of the State

Inasmuch as both the VGCL and the ACFTU are trade unions of one-party “socialist” states, they are by nature state bureaucracies. The policies and practices of the VGCL, documented above, are therefore reflections of positions taken by the Vietnamese party and government. Coming back to our model of a global chain of production, in which we point to the critical importance of the position taken by the host-country governments, we argue here that one reason why Vietnamese workers are less exploited in the export sector than Chinese workers is because the VGCL has been granted more authority to protect the workers. And it is notable, too, that the Vietnamese government and trade union are willing to engage in a dialogue on the international norms set for labor standards. Now that the anti-sweatshop movement has pushed the Western multinationals to upgrade labor standards, the Vietnam union has taken this opportunity to launch into a new direction with regard to labor standards—to upgrade them rather then continue to participate in a race to the bottom. The Vietnamese government and trade union have openly urged their factories to apply for SA8000, a certification of labor standards issued by SAI that increasingly is gaining recognition by Western corporations.26 In 2002 the Vietnamese government agreed to participate in a program funded by the U.S. Department of State to work with SAI to improve labor standards in Vietnamese factories.27

Elsewhere in Asia, Cambodia has gone further than Vietnam. It signed the U.S.-Cambodia Textile Agreement in 1999, under which Cambodia receives “bonus” quotas from the U.S. if it shows “substantial compliance in enforcing its labor laws” (Sayres, 2002: 12). The ILO is to be the monitoring agent, giving the program greater legitimacy. One commentator notes, “The scrutiny could be used to Cambodia’s advantage. It has a unique opportunity to build a reputation as a ‘manufacturing safe haven’ for image-sensitive multinationals to protect their brands from the taint of sweatshop” (Kazmin, 2002). Vietnam is unwilling to tie trade to labor standards at a state-to-state level and prefers to raise standards via compliance to an NGO’s standard.

China, on the other hand, has always considered any reference to its labor standards as outside intervention in its internal affairs, dismissing such efforts as motivated by “protectionism” (Li, 2000). Since criticisms of labor standards are subsumed under criticisms of human rights violations, China is always sensitive to and adamant against any mention of its record in this regard. Chinese newspapers often carry detailed, lengthy reports on abuses in Taiwanese-owned factories in China, but do not report anything about the anti-sweatshop movement and the increasing degree of monitoring of Taiwanese-funded factories on Chinese soil. By pretending this does not exist, China is saying it prefers to continue to compete for foreign investments and export markets by using a low-wage and low labor-standards industrial development strategy. But then again, the Chinese government has come under very little pressure from abroad to consider a different policy.

Conclusion and Prognosis

In this paper we have presented evidence that Taiwanese investors’ management practices differ in response to the practices of the host state. We have also seen how the state from which the investors come can also play a role. Taiwan’s de facto embassies and consulates around the world are painfully aware of the poor reputation of Taiwanese manufacturers abroad. In Ho Chi Minh City, for instance, we sensed their staff’s concern about the Taiwanese companies’ image. In their New York City office Taiwanese officials similarly took an apologetic stance when confronted by NGOs and trade union delegates protesting against Taiwanese managers’ union-busting mistreatment of Nicaraguan workers (Ross and Kernaghan, 2000; Perrin, 2001; Liu, 2000).28 Notably, Taiwan and South Korea are two states that feel they are in precarious circumstances and thus are particularly sensitive to international opinion. When, at the behest of the anti-sweatshop movement in August 2000, forty-eight members of the U.S. Congress signed a petition regarding the mistreatment and firing of the Nicaraguan workers, and five Congressmen wrote a letter to Taiwan president Chen Shui-bian. Taipei became alarmed, triggering unprecedented hearings in the Taiwanese parliament over the issue of Taiwanese mistreatment of workers abroad. The company quickly rehired the workers and made concessions on other fronts.29 Pressing the middleman states can be as important as pressure on Western brand-name corporations.

In short, in the global production chain these “middleman states” can have a part to play in raising labor standards—as can the host-country states that are identified in Figure 1. But their pivotal positions in the chain have been overlooked by both NGOs and practitioners.


Figure 1 represents a model that includes what we call the “missing links.” The dotted lines show possible pressures that can be applied on the middleman-country manufacturers to raise labor standards. As these are the players who directly manage production and interface with the workers, they are the ones whose behavior must ultimately be altered. The fact that they behave differently in different host countries attests to the fact they can indeed be influenced to adjust their behavior, and shows, too, that they very noticeably take into account the policies taken by the host state.

Our comparison of Vietnam and China reveals a further actor in this scenario: the host-country union federation. We have observed how, in Vietnam, the unions have attained the room to take greater initiatives on behalf of workers than in China, and also that the Vietnamese unions have been able to reach out to make international linkages, whereas Chinese unions have been blocked from such avenues by AFL-CIO inspired embargoes. There are distinct advantages in helping these reforming “socialist” state union federations to attain greater autonomy and linkages.. Having emerged from a socialist past where trade unions were an arm of the party-state assigned largely to fulfill welfare roles, there is much that they can learn from the international trade union community in how to operate within enterprises vis a vis management. For example, in China collective bargaining is legalized under the labor law, but even those trade union officials who have the best of intensions have little idea of how to engage in the highly legalistic processes of collective bargaining. Technical assistance from abroad to the Chinese trade unions is now possible, and the ILO and the German unons, for instance, are now providing some training in collective bargaining and other matters. Such efforts may ultimately yield positive results, as has been the case with the Vietnamese trade unions

The third type of state shown in Figure 1 is the developed-country importer state. It has been seen in this paper how, for instance, the U.S. State Department took steps in Vietnam and Cambodia to improve labor standards by way of negotiated trade agreements. The anti-sweatshop movement would do well to bring pressure and persuasion to bear upon its members’ own governments. As observed in Vietnam, importer-state intervention can pay off.

Whatever the motive, the Vietnamese government agreed in these negotiations to what seems to be a new strategy that to expand its export market and thus also attract more foreign investment. It is a complete reversal of the race to the bottom strategy. Cynics may want to dismiss the government’s strategy on the grounds that Vietnam is a poor country with a heavy reliance on apparel exports,30 capitulating to American pressure in allowing its labor standards to be linked with trade. Even if this were the case, it would illustrate that pressures from abroad can motivate a host-country government to improve labor standards. But the reality is more complex. The evidence suggests there are elements in the Vietnamese government and the VGCL that are receptive to such pressures and can in fact deliberately use these to strengthen national policies on behalf of workers. Although such elements appear to be weaker in China than in Vietnam, they have had sufficient influence within the government, on their own, to shape increasingly good national labor laws. In China, as in Vietnam, appropriately applied pressures and trade inducements from abroad can assist these progressive elements in the government and union.

The willingness of Vietnam and Cambodia to raise labor standards in their own countries is the first sign of a possible upturn in the race to the bottom. But the chance of these two Davids setting new norms for global behavior for the Southern countries is slim so long as China, the Goliath that dominates the world’s cheap labor market, is not in the process of raising its own standards. As observed, Vietnam capitulated to this competitive pressure by giving in to lobbying efforts by foreign investors and the Vietnamese employers associations, despite the VGCL’s objections, to lengthen Vietnam’s maximum annual overtime work hours from 200 to 300 hours. The pressure to reduce wages and depress standards in the face of global low wage competition, particularly from China, is unrelenting. The Vietnamese textile and apparel industry faces an added uncertain future because Vietnam is not a member of the WTO. By 2005 the Multi-fiber Agreement removes all important trade barriers among WTO member countries, and Vietnam will be disadvantaged. It will face even greater difficulty competing with quota-free export countries like China (Sayres, 2002).

The success of the anti-sweatshop’s campaign for corporate social responsibility has its limits. Unless the campaign brings the state back into the global chain of production, to include not only their own country’s government but also the host states and unions and the middleman states, which are in positions to play key roles, success will only be piecemeal, and labor standards will continue to spiral downwards.

Becquelin, Nicolas. 2003. “Without Residency Rights, Millions Wait in Limbo,” South China Morning Post, 27 February.

Brown, Joshua Samuel. 2001. “Confession of a Sweatshop Inspector,” Albion Monitor, September 1, Access at

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