Published by World Tibet Network News - Thursday - June 26, 1997

Milarepa Fund

Working Paper E1997-1

June 6, 1997

Executive Summary

In 1993, President Clinton vowed to link China's Most Favored Nation trading status (MFN) to significant human rights improvements in China and Tibet, only to de-link a year later. Since then, human rights abuses in China and Tibet have only risen.

Since 1994, the overall business effort for China has been estimated as high as tens of millions of dollars per year, with companies like Boeing, Motorola, GE, and GM leading the way in local initiatives and DC lobby-shops. These companies, motivated by the promise of Chinese contracts, have muzzled US public concern over human rights abuses in Tibet and China, and directly effected the human rights climate there.

The actions of The Boeing Company and Nike are indicative of the current trend in US corporate behavior in China and the influence of foreign policy. The willingness of corporations such as Holiday Inn Worldwide to enter into cooperative relationships with the Chinese government in Tibet also illuminates an alarming policy in that region.

In the same time period, companies like Todd Oldham indicate a small but steadily growing trend in small to mid-cap businesses making decisions to positively effect human rights conditions in Tibet and China. Levi Strauss has even taken the initiative to pull its operations out of China due to human rights conditions. Many, such as Reebok, have created human rights guidelines, though recent research indicates they are not enforced.

Transnational corporations bear great responsibility to all of the countries they are operating in. Large-scale lobbying efforts aimed at protecting unhindered trading relations with China have not and will not curb human rights abuses in Tibet and China. Similarly, sanctions and isolationist policies against China will do little to further quality of life there. Alternatives combining trade and human rights objectives in corporate operations and political lobbying remain largely untried.

Introduction

The issue of Most Favored Nation Status for China has been debated annually since the Tiannemen Square massacre of 1989. In 1993, President Clinton vowed to link China's Most Favored Nation trading status (MFN) to significant human rights improvements in China and Tibet , only to de-link a year later. With human rights no longer a criteria for determining trade with China, Clinton and supporters of MFN hoped that through an economic-driven 'comprehensive engagement' the U.S. would be in a better position to influence their human rights policies.

Given new support from Christian groups and concern over presidential campaign contributions, this year's congressional debate promises to be the most heated yet, as corporate lobbying on behalf of the Chinese government and media attention is at an all-time high. The proponents of the continuation of MFN-status believe a policy of 'comprehensive engagement' that emphasizes an economic relationship with China promises the best results for trade and human rights in China, while those against seek a leverage to insure protection of internationally recognized human rights.

Since 1993, corporate lobbying on behalf of the Chinese government, in regards particularly to Most Favored Nation (MFN) trading status, has mushroomed. The overall business effort for China has been estimated as high as tens of millions of dollars per year. In the last two years, a coordinated local lobbying initiative has been led by companies such as Boeing, Motorola, GE, and GM, and at least four major business groups in DC are lobbying for unrestricted U.S.-China Trade .

This kind of lobbying, motivated by promise of Chinese contracts, has recently muzzled US concern over human rights abuses in Tibet and China, and directly effected the human rights climate there. Directly following President Clinton's 1994 de-linking of human rights and trade, crack-downs in Tibet occurred almost immediately . Two years later, the 1996 State Department Report on Human Rights revealed that human rights abuses in China have consistently risen. The report also indicated that government control over religious and other fundamental rights have intensified.

With lobbying and trade, corporations are playing an active role in effecting human rights in China and Tibet. Unfortunately, these have largely been negative effects. This report examines the words and deeds of U.S. corporations in current and past debates over MFN, as well as on the ground in China and Tibet. Because the number of U.S. companies now in China range well into the thousands, we have chosen case studies that are indicative of current trends or corporations that are leaders in their area.

Case Studies

The following condensed case studies identify common trends in three key areas: U.S. lobbying, tourism in Tibet, and garment industries. In the time period studied, these areas have taken precedence in media and consumer campaigns. Other pressing areas, such as mineral extraction, prison labor, and environmental hazards, are addressed in reports forthcoming from several different organizations .

Lobbying Efforts

For years, corporations such as Boeing, Nike, TRW, Allied Signal, Motorola, ConAgra, Rockwell, Dresser, Eastman Chemical, GM, UTC, Ford, AIG, AMP and American Standard, have assumed responsibility for assuring 'pro-MFN' votes from representatives in their regions. For example, at the Public Affairs Council's 1996 "National Grassroots Conference," Dresser and Motorola alone claimed credit for delivering 29 of the state's 31 congressional 'pro-MFN' votes in Texas, while Boeing delivered 8 of 9 in Washington .

The Boeing Company. Boeing has been at the forefront of lobbying efforts to de-link human rights and trade, and to renew MFN status for China. In 1994, 14% of Boeing's business was with China and Boeing currently controls over 61% of the foreign market there. In its campaign efforts to renew China's MFN status, Boeing actively pursued permanent MFN for China, as well as entrance to the World Trade Organization and International Labor Organization, by involving itself in various trade associations (NAM, USCBC and the Chamber of Commerce). Boeing was also a leader in organizing key congressional districts mentioned above, playing on American workers' fears of losing jobs, even though technology transfer set in contracts will not bring long-term job protection. Boeing currently sources from six Chinese government owned factories. The airplane manufacturer was one of ten corporations that jointly wrote to President Clinton on May 11, 1994, urging him to "to pursue an approach towards China which does not put at

risk the commercial relationship in order to advance other policy interests," as part of the lobbying push convincing Clinton to de-link human rights and trade. Other corporations include Chrysler, Digital, Kodak, General Electric, Honeywell, Motorola, TRW, and AT&T. It would seem that Boeing's massive lobbying has paid off. On Vice President Al Gore's March 1997 visit to Beijing, he presided over a $685 million contract signing with Boeing and Chinese President Jiang Zemin. However, only 2 months later, in a move that has typified China's eco-political strategy, China announced a $1.5 billion dollar contract with French airplane manufacturer, Airbus Industrie. French President Jacques Chirac and Zemin presided over the announcement ceremony, a month after France helped silence a U.N. resolution that would have censured China's human rights records . At their annual meeting on April 28, 1997, Boeing shareholders overwhelmingly rejected a resolution that would have required the company to adopt human rights c

riteria for their business with China .

Tourism in Tibet

Foreign joint ventures in Tibet of this nature are particularly threatening given the Chinese government's five year plan, which stresses the need to "open the tourist market, to gradually set up tourist agencies abroad, to do publicity and promotion work, and to ensure the steady development of tourist sources." The kind of tourism they endorse is exemplified below.

Holiday Inn Worldwide. A subsidiary of Bass, PLC, the Holiday Inn entered into a direct partnership with the Chinese government in 1986 and opened a hotel in Lhasa, the capitol city of Tibet. The 'Lhasa Hotel' is run jointly by the Holiday Inn and a division of the Chinese government called the Tibet Tourism Corporation. The Holiday Inn accounts for 75 percent of all foreign money coming into Tibet. It was built with Chinese labor, often billets Chinese troops, and is used by security forces to monitor the activities of tourists. There is evidence suggesting that phones and faxes at the 'Lhasa Hotel' are tapped by the Chinese government. Holiday Inn tour guides are directed to confiscate cameras from tourists, and to lead them away from Tibetan demonstrations. Holiday Inn's travel brochures describe Tibet as a "magical world where the local people talk proudly of their heritage and where relics of their ancient past abound."

Garment Industries

This sector has received the most scrutiny in recent years due to several consumer boycott campaigns regarding corporate irresponsibility and sweatshops. Many companies have voluntarily drafted codes of conduct or country codes, though very few have pulled out of China or Tibet according to their codes. Codes and standards are often not enforced, as revealed most recently in a report that documented how Reebok has not met its own production standards in China .

Nike. Nike is the leader in shoe production and its production in Asia is similar to most other major shoe companies. In 1987 Nike moved a large number of its shoe manufacturing from South Korea and Taiwan to China and Indonesia. Democratic reform in both S. Korea and Taiwan between 1987 and 1991, caused wages in South Korea to triple. These democratic reforms permitted workers to organize and to request wage increases for the first time. That same year Nike relocated to China and Indonesia, the two governments that were ranked by an article in Asian Wall Street Journal as the two worst for foreign investors, due to rampant corruption. From 1990 to 1994 the number of training shoes imported from China to the UK alone (in thousands of pounds) has increased by thirty times. Nike dictates the price per shoe and even the cost of operation to its subcontractors forcing them to set high quotas for their workers and to pay low wages. A British NGO estimates that the labor cost involved in making one pair of Nike sh

oes is only $3 in Vietnam, yet it may sell for $100 in the U.S. Nike is one among may who have lobbied heavily for the renewal of China's Most Favored Nation Status.

Levi Strauss. In 1991, Levi Strauss & Co., the largest privately-held US clothing manufacturer and retailer, set up a management task force called the Sourcing Guidelines Working Group to draw up Global Sourcing Guidelines based on reviews of the United Nation's Universal Declaration of Human Rights. These guidelines would dictate their relationships with overseas producers. In accordance with these guidelines - despite China's potential to become one of the largest markets for blue jeans - Levi Strauss began to phase out of its use of contractors' there in 1993, and to no longer make direct investments there "unless there is a substantial improvement in human rights conditions in the PRC." China - and Burma a year earlier - had violated Levi's 'Guidelines for Country Selection,' that demand that human rights, health and safety, political and social stability, be investigated and approved in nations in which Levi's is operating.

Todd Oldham. Fashion designer Todd Oldham discovered that a portion of his sweaters were being manufactured in China. After long discussions with the Chinese-American owner of the manufacturing plant, they both agreed that Todd Oldham could not continue to manufacture in China. In 1996, Todd Oldham pulled the manufacture of his sweaters out of China and brought them to the United States. Oldham has also discontinued using any fabrics from China, choosing instead to support countries with more conscionable human rights records. Todd Oldham is a member of the Tibetan Freedom Coalition and the Hang Tag Campaign, a coalition of over thirty business leaders committed to promoting consumer responsibility and awareness of abusive working conditions in China.

Conclusion

By and large, lobbying done by transnational corporations to protect trade with China are often not for the good of American workers, particularly given large scale technology tranfer and the nature of joint venture contracts. The de-linking of human rights and trade has left the United States with no leverage to insist upon the protection of Tibet's religious and cultural heritage, and has in fact allowed human rights abuses to worsen.

Trade and human rights in China can go hand in hand, though U.S. foreign policy has moved primarilly in the extremes. The diplomatic fear of communicating an isolationist policy to China is a real one. Any attempt to discuss, in any forum, the efforts of the Tibetan government in exile or human rights abuses, is met by the Chinese government's accusations of meddling in internal affairs. Yet, 'comprehensive engagement' has proved itself to be a failed experiment. However amiable diplomatic relations remain between the US and China as a result of that policy, there is little if any incentive for China to adopt the economic, social and humanitarian standards of conduct accepted internationally.

There have been attempts to use American economic leverage in ways other than MFN, including tracing of Peoples Liberation Army goods and prison labor-made products. Continued alternatives must be sought as we address human rights and trade together. Places where common ground may lie are:

Chinese rule of law and stronger corporate guidelines with both internal and external auditing and accountability.

Though it is difficult to locate companies who have begun to make business decisions that positively effect human rights conditions in Tibet and China, they do exist. Todd Oldham and Levi Strauss demonstrate the possibilities of operating effectively and ethically in China. Consumers are beginning to insist upon human rights standards more and more. As companies begin to enforce those standards, either out of conscience or insistence from consumers, change will begin to take place, not only in overseas factories, but in American buying patterns as well.

(those who wish to receive the entire report e-mail: jonvoss@milarepa.org)

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