Apple, China, Labor Rights, and U.S. Workers

Reading the New York Times wrenching investigation into unsafe and inhumane working conditions in the Chinese factories that make Apple’s iPhones and iPads--and Apple’s indifference to the problem--made me recall a forgotten footnote in the recent history of U.S. trade policy.

Twice during the George W. Bush administration, in 2004 and 2006, the AFL-CIO filed what is known as a Section 301 petition asking the U.S. government to take action against China over persistent violations of labor rights. The petition charged that China had failed systematically to adhere to such basic international requirements as barring child labor, permitting free association, and enforcing minimum wages, working hours and occupational health and safety standards. Twice, the Bush administration refused even to investigate the allegations.

The AFL-CIO petition was thorough, with voluminous documentation of labor rights abuses in China, and a sophisticated analysis of the impacts of those violations on U.S. workers. Section 301(of the U.S. Trade Act of 1974) requires evidence that an allegedly unfair foreign practice “burdens or restricts U.S. commerce” before the government can take action. While it is certainly possible to quibble with the petition’s methodology, it clearly demonstrated that workers’ rights violations in China had played some significant role in losses of employment and wages by U.S. manufacturing workers.

The past five years, during which nearly 3 million manufacturing jobs disappeared in the United States,  have only reinforced that conclusion. Recent work by economists David Autor, David Dorn and Gordon Hanson, while it does not look specifically into the effects of lax labor standards, found that Chinese import competition accounted for a sizable percentage of that job loss. Low wages, poor working conditions, and weak safety standards are all ways for companies to save money and gain cost advantages over other potential suppliers. While investments in new technology can narrow the cost difference, U.S. companies too often are forced out of business, or must cut wages and workers to remain competitive -- precisely what the AFL-CIO petition alleged.

But the Bush administration refused to pursue an investigation that, at the least, could have resulted in stepped up pressure on the Chinese government to improve working conditions in its factories, and at the most might have led to some sort of temporary trade sanctions against China to force action on the problem.

Instead, enforcement has been left in the hands of the private sector, of the U.S. multinationals that source from China. As the Times story notes, some companies like Nike, Intel and Hewlett-Packard, have better records in overseeing their suppliers. But the story, and a similar investigation last year by Wired magazine, underscores the basic problem in leaving enforcement to the private sector. Even for Apple, the most profitable brand in the world and one that basks in public adulation, the costs of enforcement are seen as too high. It would mean policing hundreds of suppliers, and refusing to buy from those that persistently fail to adhere to proper standards for their workforce. That could raise costs for Apple and make it more difficult to keep delivering new generations of products to consumers with the same regularity.

As one former Apple executive is quoted in the NYT story: “We’ve known about labor abuses in some factories for four years, and they’re still going on. Why? Because the system works for us. Suppliers would change everything tomorrow if Apple told them they didn’t have another choice.”

President Obama, in this week’s State of the Union address, announced the launch of new internal task force to investigate unfair trade practices in China and other countries. The AFL-CIO should dust off and update its petition and present it again to the administration. And this time, it deserves a serious investigation.