Statement of John J. Sweeney, President
American Federation of Labor and Congress of Indutrial Organizations

Testimony Before the Subcommittee on Trade
of the House Committee on Ways and Means

Hearing on United States-China Trade Relations and the
Possible Accession of China to the World Trade Organization

June 8, 1999

Thank you, Mr. Chairman and members of the Subcommittee, for this opportunity to present the views of the AFL-CIO on China's accession to the World Trade Organization (WTO).

The AFL-CIO believes strongly that we have a responsibility to work to strengthen democratic forces, improve economic conditions, and advance human rights in China. In the long run, we believe the ties between our countries will be strengthened, rather than weakened, by such efforts.

An overriding concern for the labor community is China's horrendous record of human and workers' rights violations. There should be no accession or grant of permanent or annual normal trade relations (NTR) until China makes material progress to protect the rights of workers. Furthermore, any accession agreement must effectively address serious unresolved issues with the draft commercial terms and ensure that the United States retain broad and effective tools to address problems with compliance.

China repeatedly and flagrantly violates internationally recognized core labor standards, by denying Chinese workers freedom of association and the right to organize and bargain collectively, as well as by the abuse of prison labor. The end result, as the 1998 State Department's Human Rights Report confirms, is that no independent labor unions are allowed to function in China today. Existing unions are completely controlled by the Communist Party, and many are not independent of management.

The State Department's report notes that the Chinese government's "human rights record deteriorated sharply beginning in the final months of [1998] with a crackdown against organized political dissent." Restriction of religious freedom intensified in 1998, according to the report. The repression of workers' rights likewise worsened in late 1998 and early 1999.

A recent report by the International Confederation of Free Trade Unions (ICFTU) documents two additional disturbing trends. First, many labor activists have been jailed or sentenced to reeducation camps for the crimes of advocating free and independent trade unions; for protesting corruption, embezzlement, and non-payment of wages by managers; and for providing information on workers' activities to journalists. According to the ICFTU, at least 78 people have been detained in connection with independent labor activities since 1989. Second, there have been increasing confrontations, sometimes violent, between protesting workers and the police. In January of this year, for example, police attacked one hundred retired factory workers, who were protesting unpaid pensions, in Wuhan. Ten of the elderly activists were beaten, including a 70-year old man who was knocked unconscious.

The ICFTU notes that many workers are being penalized for protesting unpaid wages or unpaid pensions. The ICFTU warns that this trend is likely to increase with China's economic slowdown, as workers increasingly face situations where wages or pensions cannot be paid due to mismanagement or embezzlement of funds from defunct state enterprises.

It is clear that the Chinese government is implementing an economic policy based on strategically restricting access to its home market, while aggressively promoting exports. The systematic violation of internationally recognized workers' rights is a crucial component of this strategy. Often China's actions represent an explicit violation of bilateral agreements between China and the United States.

In a 1992 Memorandum of Understanding on market access, for example, the Chinese government agreed to eliminate "all import substitution regulations, guidance and policies." Two years later, according to the United States Trade Representative's 1997 National Trade Estimate Report on Foreign Trade Barriers, China announced an automotive industrial policy that explicitly called for "production of domestic automobiles and automobile parts as substitutes for imports" and established local content requirements, which forced companies to use domestic products, even when less expensive or better-quality foreign products were available. This policy caused U.S. exports of auto parts to China to plummet, from $218 million in 1993, the year before the policy went into effect, to $132 million in 1998. U.S. imports of auto parts from China, meanwhile, rose from $339 million to $1.036 billion during the same period. It is unlikely that WTO accession, in and of itself, will bring about the necessary changes in China's domestic economic policies that have been promised, particularly in light of past compliance problems.

The skewed U.S.-China trade relationship continues to worsen. Last year, the United States racked up a merchandise trade deficit with China of $57 billion, up from $50 billion last year and balance in 1980. The United States imported $71 billion worth of goods from China in 1998, while exporting only $14 billion worth, a ratio of more than 5 to 1, by far our most asymmetrical trade relationship.

At the 1996 WTO ministerial in Singapore, WTO members committed themselves to observe core labor standards, including freedom of association, the right to organize and bargain collectively, and prohibitions on child labor, forced labor, and employment discrimination.

The next WTO ministerial will take place later this year in Seattle. This will be a crucial opportunity to press for further progress in strengthening the WTO's commitment to promote core labor standards. Labor leaders from all over the world will gather in Seattle to press the trade ministers and heads of state to incorporate enforceable workers' rights and environmental standards into WTO rules.

Given the current workers' rights and human rights problems in China, it is therefore essential that U.S. negotiators insist on three conditions prior to China's accession to the WTO. First, that the Chinese government observe and effectively enforce core labor standards as a condition of accession. Chinese workers must be allowed to join together, organize, and bargain for better working conditions and wages. Second, the Chinese government must immediately free all jailed human and labor rights activists. Third, the Chinese government must agree to support U.S. efforts to incorporate enforceable workers' rights into WTO rules, including establishing a working party on workers' rights, which would allow a constructive dialogue on workers' rights to take place at the WTO.

In addition, the AFL-CIO continues to have serious concerns about the unresolved commercial terms of accession, as well as the enforceability of any agreement with China, given China's poor record of compliance with past bilateral agreements and the failure of the U.S. government to aggressively enforce these agreements.

In order to adequately address these commercial concerns, the accession agreement should include:

- a safeguard provision against unpredicted import surges that will remain in place for at least 15 years and/or until a review determines that Chinese conditions no longer warrant such a measure.

- provisions ensuring that parties other than the U.S. government can take action when imports cause market disruption. Unions, among others, should have standing to bring cases or appeal when the U.S. government fails to act.

- an effective general safeguard, with multilateral surveillance measures, including periodic reviews with accurate and adequate information provided.

- measures to address the problem of company-to-company offset agreements, in addition to those addressing government requirements.

- provisions to ensure that labor unions will have access to the information necessary to make complaints regarding performance requirements and offsets, especially since many of these deals are secret, and the parties involved do not have an incentive to make them public.

- a review process to determine when the period during which China will be considered a non-market economy for purposes of calculating dumping margins will end.

- a ten-year phaseout on the quotas on Chinese apparel and textiles. The longer phaseout is necessary to prevent disruption of U.S. and other countries' apparel and textile markets.

- a guarantee that the U.S. will retain the ability to use Section 301 and other trade remedies effectively in the event that China fails to comply with the accession agreement.

The central enforcement issue is whether bringing China into the WTO will improve or worsen the U.S. government's ability to enforce China's compliance with the letter and the spirit of international trading and workers' rights norms. While accession will in principle bring China under the discipline of WTO rules and dispute settlement, the U.S. will forfeit its ability to use some U.S. trade measures unilaterally (for example, the trade measures available under section 301 are very limited as applied to WTO members).

Since the WTO does not allow trade sanctions based on workers' or human rights violations, the U.S. will clearly lose the ability to withdraw trade benefits (or threaten to do so) in response to China's egregious and persistent violation of internationally recognized workers' rights. The annual congressional debate over renewing normal trade relations has at least succeeded in keeping public attention focused on these problems.

These issues must be addressed before China is allowed to join the world trading community. Human rights, workers' rights, and compliance with internationally recognized trading norms are necessary components of a well-functioning international trade system.

Mr. Chairman, members of the Subcommittee, thank you for your time and attention.