Briefing on the Chinese Garment Industry

China is now the world's biggest exporter of textiles and garments. Its factories supply almost all UK high street shops and its market share is predicted to increase over the coming years. The following information provides an overview of the Chinese garment industry, the situation for garment workers and recent developments influencing the sector.

Contents

Abbreviations used

The Structure and Workforce of the Chinese Garment Industry

The context for Chinese workers

♦ Economic Liberalisation since 1979
♦ Internal Migration Laws
♦ Oversupplies of low skill labour
♦ Chinese Labour Law

The All China Federation of Trade Unions (ACFTU)

• Membership and recruitment
• Relationship between local branches, the ACFTU and the Chinese Communist Party (CCP)
• Labour dispute mechanisms
• Challenges facing the ACFTU

Working Conditions in the Chinese Garment Industry

• Exploitation of migrant workers
• Restrictions on Freedom of Association

Recent Developments

↔ Collective Contracts
↔ Changes to Trade Union Law
↔ Increasing labour disputes and unrest
↔ Launch of CSC9000t Code of Conduct

Addressing the problems faced by Chinese garment workers

• Parallel Means
• Worker Training
• The Chinese Government

The EU and WTO position on trade with China

List of references

Labour Behind the Label Briefing on the Chinese garment industry, February 2007

Abbreviations used

ACFTU C All China Federation of Trade Unions
ATC C Agreement on textiles and clothing
CCP C Chinese Communist Party. National Government of China
CNTAC - China National Textile and Apparel Council
FoA C Freedom of Association
OHS C Occupational Health and Safety
MFA C Multi-fibre arrangement
SOE C state owned enterprise

The Structure and Workforce of the Chinese Garment Industry

The garment sector in China is based mainly on the east coast, in Guangdong, Zhejiang and Jiangsu provinces1,2,3. Most factories are within 'Special Economic Zones'. They are predominantly privately owned and foreign investment is common. For example in Guangdong province, 62% of garment factories are foreign owned, many by Hong Kong and Taiwanese companies2.

According to the Chinese National Textile Industry, 15 million people are employed in the industry. The workforce is made up mainly of young women, the majority of whom are also migrant workers3, 4, 5 (See below section on implications). Oxfam calculates that 4 out of 5 garment sector workers are women under 256. Significant discrimination against women over 35 has also been recorded7. Most garment workers are employed on short term contracts of one to three years and labour turnover is therefore high3, 8.

The context for Chinese workers

Economic Liberalisation since 1979

The move towards a 'socialist market economy' has changed garment sector ownership from mainly state owned to privately owned companies, creating high numbers of �glaid off workers�h from former State Owned Enterprises (SOEs) and impacting significantly on labour relations and social security arrangements in China2. A previous system of direct state ownership and control has been replaced by a system of laws and regulations that are currently only weakly enforced. For example, official Labour Law requires employers to provide old age, industrial injury, maternity and medical insurance, but this is not always provided in practice1, 5 . It is estimated that 9 out of 10 Chinese companies do not meet national labour law standards3.

Internal Migration Laws

A change in Chinese migration laws in the 1980s has prevented Chinese citizens from relocating freely in search of work. This combined with high levels of underdevelopment and poverty in rural areas, has led to a class of migrant workers in China.8,9,10. All Migrant workers (known as nongmingong) require a permit and a work visa in advance of moving to a city to start work. While in the cities they are not entitled to welfare benefits, to own property or to bring their family. When the contract ends they must return to their village4. These migrant workers are particularly vulnerable to exploitation, due to the alternative of rural poverty, their dependence on work visas and the oversupplies in China of low skilled labour.

Low skill labour supplies

It is estimated by the China Labour Bulletin that between 2003 and 2020, 15 million new people will enter the Chinese labour market each year, while only 8 million new jobs will be created at the current growth rate9. It is therefore likely that there will be further pressure on wages and job security for Chinese workers in the coming years. Nonetheless recent labour shortages have been observed in the Guangdong Garment sector11. Shortages of 30-40% have been blamed on bad working conditions, and more and more migrant workers relocating to areas with more skilled and better paid jobs e.g. in the electronics industry11,12. In response, some wage increases in Guangdong have occurred, but some factories have also relocated to other provinces.

Chinese Labour Law

» Freedom of Association

There remains no Freedom of Association in China. Article 3 of China's trade Union Law, states that "gall manual or mental workers... have the right to organize and join trade unions according to law"13. However, in reality, the All China Federation of Trade Unions (ACFTU) is the only legally recognised trade union and therefore has a complete monopoly on representation. (See below for more information on the ACFTU).

» International Agreements

China has ratified the UN covenant on Economic, Social and Cultural rights, but with reservations on the right to organize trade unions. It has not ratified the International Labour Organisation (ILO) conventions on Freedom of Association (FoA) and the right to collectively bargain (no.s 87 and 98).However, the ILO 1998 Declaration on Fundamental Principles and Rights at work, requires all members to respect, promote and realize FoA, regardless of whether they have ratified the conventions. So far China has ignored this14.

» The law on strikes

The right to strike was removed from the Chinese constitution in 1982 and is not mentioned in the most recent trade union and labour law acts13. Formally the law neither allows nor disallows strikes though in practice they are frequently repressed7,13 . Despite this, there is some pressure and lobbying within China for the formal right to strike to be reintroduced. In the city of Dalian, pilot regulations on strikes have been implemented15 and some academics and labour lawyers on the fringes of the ACFTU are "quietly lobbying for the right to strike" on the grounds that it is necessary for the successful functioning of the new market economy7. In addition, the Chinese government didn't enter any reservations on the right to strike when signing the UN Covenant on economic, social and cultural rights7.The formal role of the ACFTU when strikes occur is to mediate between employers and employees to resolve the situation. An ACFTU branch could not legally instigate a strike and is not the representative of the workers in negotiations.

The All China Federation of Trade Unions (ACFTU)

The All China Federation of Trade Unions is the only legally recognised trade union in China. Its official mandate is both to represent the interests of workers and to "take economic development as the central task, uphold the socialist road, the people's democratic dictatorship and leadership by the Communist Party of China"16. In reality this means it has a monopoly on representation, is officially subordinate to the CCP and has a fundamental conflict of interests between promoting party policies and workers interests.

Membership and recruitment

The ACFTU claims to have 134 million members16 making it the largest trade Union in the world14. However, there is suspicion that in reality many branches exist only on paper and establishing a Union can be a bureaucratic exercise. In some places where the ACFTU claims to have branches there is no knowledge of them among workers10,17,. Traditionally, the ACFTU was based in State Owned Enterprises (SOEs) and it is still under represented in the non state owned sector10,18 . This is significant as a large proportion of the garment sector is non state owned2. There is currently a big a recruitment drive, focusing specifically on increasing representation in private enterprises and membership in the private sector is increasing, though it's proportionally still low (estimated at 5% in 2000)19. Two years ago Wal-Mart conceded that ACFTU branches could be established in their retail outlets in China, and the first branch was established in 200610,20.

In its 2003 Congress, the ACFTU also recognised migrant workers as a formal section of the workforce for the first time. It announced a specific recruitment drive aimed at increasing membership amongst migrant workers, but so far, according to ICFTU, little progress appears to have been made17.

Relationship between local branches, the ACFTU and the Chinese Communist Party (CCP)

All local ACFTU union branch representatives are subject to approval by the provincial level offices and all union branches must be affiliated to the ACFTU21. In many branches, the union officers are also members of the enterprises' management and/or CCP members13, 19 . The level to which the employees can be represented in disputes with the company management can therefore be limited (see below). Constitutionally the Union is bound to accept the leadership of the CCP and is officially subordinate to party policy. It therefore faces an ongoing conflict of interests in representing workers' rights and supporting the government line.

Labour dispute mechanisms

There are three official levels on which disputes can be settled in China. The first is mediation within the enterprise, between employees and employers. The ACFTU�s role in this is to act as a mediator, not a representative of the employees. The second level is arbitration involving the local labour administration offices, managed by regional Labour Disputes and Arbitration Committees (LDACs). This is a supposedly tripartite process between government representatives, the ACFTU and the local government economic management office (who represent employers). The final level is the civil courts. The recent increase in the number of disputes has put the LDACs under pressure and many disputes now bypass arbitration and go straight to the courts.

Challenges facing the ACFTU

The ACFTU is currently under severe pressure, in terms of financial capacity, its legitimacy amongst workers and its ability to adapt to the very different labour relationships of the socialist market economy. The latest 2001 Trade Union Laws may have empowered it to play a greater role in representing workers, but the lack of real freedom of association within the ACFTU, as well as its capacity restraints continue to inhibit it.

The liberalisation of China�s economy, increasing Foreign Direct Investment (FDI) and the new labour law framework have increased the demands of workers on the ACFTU. The number of independent labour actions and spontaneous protests in China, (despite severe repression) have increased significantly in recent years indicating the perception by workers that the ACFTU is unable to defend their interests5,15,17 . In turn, the increases in labour unrest have increased government pressure on the ACFTU to resolve the disputes and maintain order and productivity. The ACFTU also faces financial challenges. ACFTU staff are paid by the CCP, however as the government seeks to reduce budgets, these finances are under threat. Other money comes from a 2% levy on the wage bill of all SOEs. However with mass closures and downsizing in this sector ACFTU membership and revenue have fallen. Its ability to replace this from the private sector is limited by a low presence in private enterprises and lack of any enforcement mechanism for collecting wage levies19.

Working Conditions in the Chinese Garment Industry

The Chinese industry's competitiveness lies in its efficiency, its ability to produce at short notice and its back-linked industries (such as cotton production). The knock on effects for conditions are long hours and overtime at short notice22. Research for Oxfam�s �Trading Away our Rights� report found that women faced 150 hours overtime per month, 60% had no written contract, and 90% had no access to social insurance.12 Standard working hours are between 10-12 hours and sometimes 15-16 hours a day with one or two days off a month12,21. The ACFTU itself found that 62% of workers worked 7 days a week and a quarter were not getting their wages paid on time12. Health and safety conditions in the factories include exposure to toxic chemicals, fire hazards and high risk of industrial accidents. Most migrant workers are either not covered or only partially covered for maternity pay, sick pay or work injury21.Non-payment of wages and wages being withheld for months are also major issues in China and the reasons for many labour disputes1,5,23. Wages in the garment sector have also been identified as lower than in other manufacturing industries in China8, a factor contributing to the current labour shortages in Guangdong. Payment of less than the minimum wage is common and piece rate wages are often inadequate to cover living costs1, 5,9.

Exploitation of migrant workers

The high number of migrant workers and their restricted status while working away from home, leaves them particularly vulnerable to exploitation. Examples include many migrant workers in SEZ�s not having contracts15 and many facing wage arrears and a severe lack of OHS. In 2004 the total amount of wage arrears owed to migrant workers was calculated at US$800 million17. As migrant workers do not have full residency permits within cities their access to basic services is also limited24. Limited income and limited access to property mean many migrant workers live in employer owned dormitories where conditions are often crowded and dirty4,5 .

Due to the cost of work visas, some employers pay for these in advance, meaning workers are in debt when they begin their contracts. Many workers are also required to pay �deposits� to the employers or hand over their ID documents at the start of the contract2, 12,24 . This creates a system of economic bondage for many migrant workers within the garment sector allowing employers to more easily enforce excessive overtime and flexible hours. According to the Fairwear Foundation there is little understanding amongst migrant workers of their legal rights or entitlements2. Most are either not covered or only partially covered for maternity pay, sick pay and work injuries12, 21 . Pensions are generally not provided1.

Restrictions on Freedom of Association

Workers who organise independently, protest or strike in China do so at great personal risk and face violent repression and imprisonment13. Labour activists can be sentenced to forced labour, following criminal trials which do not reach international standards according to Amnesty. This is known as �Reform through labour� or Laogai. They can also face �reeducation through labour� (or Laojiao) which is a form of administrative detention without trial or appeal. Officially this can not exceed three years but in practice it can be extended at will24.

Recent developments

Collective Contracts

Since the 1990s the ACFTU has been promoting the use of collective contracts as a means to improve working conditions. These are negotiated between trade union representatives and employers and cover working hours, pay, H&S and insurance18. Where a Union branch doesn�t exist, workers are allowed by law to negotiate themselves with employers15, 18. The number of collective contracts is growing, though there are few collective contracts used in private companies. In practice these contracts normally only reflect minimum labour law requirements and do not involve any actual bargaining15, 18. Also, as negotiations are carried out by ACFTU
representatives, workers are not always aware that the contracts exist.

Changes to Trade Union law

The latest changes to the trade union law in China give more priority to worker representation in labour disputes (the ACFTU has commonly sided with employers in the past19). They provide extra powers for local branches to hold enterprises liable under the law for breaches in collective contracts and to request government assistance if labour law is broken. There is also some extra protection provided for union officials from employer retaliation23.

However, the new law still maintains the ACFTU�s monopoly status and does not prevent union officers from being members of the employer�s management.

Increasing labour disputes and unrest

Labour disputes have been increasing significantly across China since the 1990s13,17, 18. The number of �mass incidents� (sit-ins, riots, strikes and demonstrations) reached 74 000 and involved 3.7 million people in 2004. This was an all time high and compared to 10 000 incidents in 199425. Within the garment sector the number of arbitrated disputes (taken to local labour offices) has also increased, mainly about wages and OHS complaints5. Examples include:

c) In Zhejiang province, 12,000 workers in 113 private sweater factories were involved in strike action over wages. The dispute continued for four years with annual strikes during the busy season. In 2004, with involvement from the ACFTU, a collective agreement on minimum wages was agreed10.

d) In Beijing, 24 female migrant workers in the garment sector took their case of withheld wages to the courts. Working with legal aid attorneys they eventually received all their back wages plus compensation10.

e) In 2004, workers took part in mass protests over low pay and excessive overtime at the Stella International shoe factory in Guangdong. Following the protests 10 workers were arrested and charged for criminal damage caused during the protests.

However, working with China Labour Bulletin the workers secured legal representation and were able to challenge the lack of evidence provided against them. In a landmark case, the lack of alternative means of representation was cited by lawyers as a key reason behind the protests26.

Launch of CSC9000t Code of Conduct

CSC9000t (the China Social Compliance 9000 for the textile and apparel industry) is a code of conduct for textile and clothing enterprises. It was launched in 2005 by the China National Textile and Apparel Council, (CNTAC), an industry association existing to develop the textile sector. It is also administered by them. The CSC9000t includes general principles, detailed regulations on labour conditions and a process for self assessment.

The CNTAC sees the CSC9000t as a means to claim back Chinese control over their workers rights, streamline the multiple codes and auditing procedures that have been used up until now and improve China�fs labour standards in the eyes of the global community (thereby reducing calls for protectionism against China).

As of August 2005 roughly 170 Chinese firms had signed up to participate, and two major foreign investors, the Hudson Bay Company (Canadian) and Linmark (Hong Kong) had agreed to work with their suppliers to implement the code. However, the code is still very new, proportionally only a very small number of firms are involved and it is not compulsory. CSC9000t could be of some use as a tool for progress on code compliance other than freedom of association, but there are several problems:

�� The code is based mainly on Chinese labour law, plus some international conventions. Therefore it does not allow for freedom of association and falls short of key ILO standards. As such, if it gains popularity it will undermine other, more rigorous codes.
�� It goes against the idea that it is not possible for companies to meet their full social responsibility obligations while sourcing from China.

�� The ITGLWF has characterised it as a �gwatered down version of SA8000�h, due to the absence of FoA provision, living wage allowances and freedom from discrimination on political affiliation or sexual orientation.

�� There have been significant problems with previous auditing systems due to cheating and falsification of records. HKCIC found examples of false records being submitted and bribes being used before audits. ICFTU also has examples of falsified time sheets and payslips in China.

�� As a product of the Chinese government and national industry association, the code has not been developed independently and is administered without any external, independent verification mechanism.

Addressing the problems faced by Chinese garment workers

In the last ten years there has been a significant amount of research, worker exchange, and awareness-raising by campaigners relating to China. Given the restrictive legal situation, the issues for workers are how to implement codes of conduct and how to open up space to organise. Many organisations have focussed on worker training in order to increase work place democracy and access to legal rights. There are several Multi Stakeholder Initiatives (MSI�fs) currently working with business to develop these ways of working. So far, most practical work on code implementation and CSR has taken place in Guangdong.

Parallel means

In response to the lack of FoA allowed within Chinese supplier firms, some companies have used �gparallel means�h in order to increase worker involvement in the organisation. This has included H&S committees and welfare committees, where committee members are elected from within factories. These types of elections are allowed by law. This method has been put into practice by Reebok c2000 working with the Asia Monitor Resource Center and other Hong Kong groups, however with mixed success. Some of the committees formed were later assimilated into the ACFTU. The Ethical Trading Initiative is also focussing on H&S committees. There remain issues around the impacts of parallel means and whether they are undermining attempts at genuine FoA. The very high turnover of the workforce in the garment sector also makes the work difficult to sustain.

Worker training

There have been many attempts to work with genuine organisations on training, investigation and democracy (facilitating elections, committees). The Clean Clothes Campaign have been calling on brands to associate with the Hong Kong groups organising this work. For example Chinese Working Women Network organise training and provide free consultations for migrant workers on OHS, legal issues and women�s health. Other organisations offering training on legal issues for workers include LESN, China Labour Bulletin, CLSN and LSC.

Training is broadly agreed to be useful so long as it�s independent. However there is also concern that it might be co-opted by corporates, as audits were. Both training and parallel means are useful tools which brands sourcing from China can be encouraged to use � as a number have - but they should not replace other aspects of code implementation.

The Chinese Government

In contrast to many other garment producing countries the Chinese government is strong. It therefore has more capacity to implement change and as a socialist state, maintains some commitment to workers rights. At the moment for example, it is supportive of CSR initiatives. Chinese labour law is often quite reasonable on paper, except for on freedom of association, but implementation in practice is poor. Nonetheless the government remains highly repressive of political freedoms and prepared to crack down quickly on independent organising and political protests.

The EU and WTO position on trade with China

When China joined the WTO in 2001 certain safeguards were agreed to protect other WTO members from Chinese exports. These include allowing a WTO member to restrain increasing Chinese imports that disrupt its market (available to 2013), with a special textiles safeguard available until 20089.This was put into practice in 2005, during the China/ EU �bra wars�. Following the end of the MFA there was a rapid increase of Chinese textile and clothing imports into Europe. In June 2005, the EU implemented the safeguard mechanism and negotiated with China to cap import growth of textiles at 10% for the next three years. However, many orders had
already been placed and the quota for 2005 already exceeded. Chinese garment imports were held in EU ports for several weeks before a deal was finally reached, allowing half the imports in and counting the other half against the 2006 quota. As of 2008 none of these safeguards will apply. As well as the bra wars, the EU has refused on other occasions to give China most favoured nation status, as it says it hasn�t done enough to become a full market economy9.

Peter Mandelson stated the EU�s position in June as the following:

They are seeking �a policy that braces EU producers for change while allowing China to benefit from textile liberalisation�. They reject �a return to the quota system for textiles� and argue their policy �is based on the need to manage change and adjustment, rather than to manage trade�. Mandelson also stressed that he is �hopeful� that the EU and China can negotiate �a solution that is mutually acceptable to both sides� while recalling that the EU reserves the right under the Textiles Specific Safeguard Clause to take action to provide its industry with �breathing space�27.

List of references

1. Hong Kong Christian Industrial Committee (HKCIC) (2004) �Conditions of women workers in SEZ and Labour standards in supplier factories of German garment retailer companies and brands in China�. Accessed 3/4/06 from http://www.cleanclothes.org/pub.htm
2. HKCIC (2004) �FairWear Foundation background report on China�, Fair Wear Foundation, Amsterdam
I3. CFTU (2005) �Stitched Up! How those imposing unfair competition in the textiles and clothing industries are the only winners in this race to the bottom�, accessed 04/06 from
http://www.icftu.org/displaydocument.asp?Index=991223200&Language=EN
4. www.maquilasolidarity.org/resources/maquilas/china.htm (Maquila Solidarity Network), accessed 03/06
5. Chan, Jenny W. L (2005) �Gender and Global Labour Organising: Migrant women workers of the Garment industry in South China�, accessed 04/06 from www.sweatshopwatch.org
6. www.oxfam.ca/news/maketradefair/TAOR_facts.htm, (Oxfam Canada) accessed 27/05/06
7. Chen, John (2004) �Two core labour rights assessed�, International Union Rights, 11(4), p6-7
8. China Textile University and Harvard Center of Textile and Apparel Research (1999) �The development of the China Apparel Industry Report�, Beijing

9. Li, Jane (2004) �MFA Phase Out � Impact on Chinese workers�, Asia Labour Update, Issue 52, accessed 5/06 from www.amrc.org.hk
10. America Centre for International Labour Solidarity (2005) �Justice for all: The struggle for workers rights in China�, Washington, accessed 04/06 from
http://www.solidaritycenter.org/content.asp?contentid=501
11. www.china.org.cn, (China Internet Information Centre, Beijing), accessed 27/5/06. Cafod (1998) �Asian Garment industry and Globalisation Policy Paper�
13. Cornell University (2000) �Freedom of Association and the effective recognition of the right to collective bargaining�, accessed 05/06 from www.cornell.edu/
14. Blackburn, Daniel (2004) �China and the labour movement�, International Union Rights, 11(4), p2
15. ICFTU (2005) �China, Peoples republic of: Annual Survey of violations of trade union rights, 2005�accessed 04/06 from
http://www.icftu.org/displaydocument.asp?Index=991222281&Language=EN
16. www.acftu.org.cn (ACFTU), accessed 05/06
17. http://www.ihlo.org/LRC/ACFTU/index.html (IHLO article, �ACFTU 14th Congress: The stalemate continues�), accessed 3/4/06
18. Kai, Chang (2004) �Collective bargaining: problems and solutions�, International Union Rights, 11(4), p3- 4
19. Howell, Jude (2004) �Trade Unionism in China, Sinking or Swimming?�, accessed 04/06 from
http://www.ihlo.org/LRC/ACFTU/000604.html
20. China Labour Bulletin (2006) �Wal-Mart Unionisation Drive Ordered by Hu Jintao in March � A Total of 17 Union Branches Now Set Up,� accessed 29/8 from www.china-labour.org.hk
21. Wong, Monina (2005) �Moving beyond the MFA. Regulating Business Practices through Strengthening labour�, Hong Kong Christian Industrial Committee.
22. Loong-Yu, Au (2006) �The Post MFA era and the rise of China� accessed 3/04/06 from
http://www.ihlo.org/LRC/G/001105.html
23. Cooney, Sean (2004) �Limitations and possibilities�, International Union Rights, 11(4), p8-9
24. Amnesty International (Dutch section) (2006) �When In China: Encounters with Human Rights�
25. ICFTU (2005) �Whose Miracle? How China�s workers are paying the price for it�s economic boom.�
Accessed 04/06 from
http://www.icftu.org/displaydocument.asp?Index=991223214&Language=EN
26. Dongfang, Han (2004) �It�s our union and we want it back�, International Union Rights, 11(4), p16-17
27.://ec.europa.eu/comm/commission_barroso/mandelson/speeches_articles/temp_icentre.cfm?temp=sppm 033_en, accessed 06/06
28. Oxfam (2004) �Trading Away our Rights: Women working in global supply chains.� Oxford: Oxfam

About the author:

Ruth Domoney - Labour Behind the Label