To trade freely or fairly with China?

PUBLISHED : Saturday, 19 August, 2000, 12:00am
UPDATED : Saturday, 19 August, 2000, 12:00am

MICHAEL SANTORO is idealistic enough to believe foreign business can foster sweeping social changes in China. He is also savvy enough to realise overseas capital is just as likely to saddle local workers with sorrowful wages and dangerous labour conditions. Squaring the circle is part of Santoro's purpose in writing this volume about multinational corporations and human rights responsibilities.

In many ways, Profits And Principles: Global Capitalism And Human Rights In China is an odd book. Santoro is writing for a US audience and he struggles to find middle ground between corporate managers who want to pursue mainland profits without worrying about sacrificing principles and US politicians who question Beijing's entry into the World Trade Organisation (WTO), Washington's policy of 'comprehensive engagement' and the value of multinationals doing business in China altogether.

Santoro hinges his argument on a phenomenon he calls 'human rights spin-off' - that the pursuit of profit by well-managed Western multinationals also creates unintended social benefits for their employees. Alternatively, mainland staff members working at US multinationals gain from high wages and radical new ideas that serve to foster democracy: merit-based hiring practices, information sharing, teamwork and leadership styles, to cite a few.

Santoro can only support his contention with limited studies and anecdotal impressions gained from his visits to the mainland. But a lot is riding on the spin-off hypothesis. For if it were false, he writes, it would mean the 'United States has sacrificed its human rights ideals at the altar of economic expediency'.

What Santoro concludes, perhaps rightly, is that many large multinational corporations come to the mainland with the long-term goal of penetrating business markets and capturing the Chinese consumer. That requires investment in capital and human resources, mostly salaries and worker training. Whether pursuing such strategies allow foreign corporations to help 'redefine power relationships within China', as Santoro writes, is another matter entirely.

Nor is it the whole story and the author knows it. For while a select handful of Western multinational companies exhibit model citizenship on the mainland, there are tens of thousands of other firms tapping locally based domestic and foreign subcontractors to gain access to China's cheap labour. These firms work on thin margins, high turnover and quick turnaround times, and provide their staff rock-bottom wages and minimum work protections. They also find willing accomplices in local, provincial and a national government eager to attract investment, employ workers and generate hard currency through exports.

Santoro goes easy on governments, international institutions, and the multinationals. Rather than demand accountability, he floats a rather fuzzy notion of 'fair share' theory of moral responsibility, which calls upon each player, including the consumer who shops for cheap clothes and toys, to shoulder part of the responsibility for upholding international human rights standards.

Fair share smacks of volunteerism and relies heavily on industry-wide initiatives and good faith behaviour. The author himself acknowledges this kind of approach is unlikely to succeed in beating global sweatshop networks. Taxes and penalties are a much more direct means of stopping labour abuses.

Santoro notes that an enforceable labour clause administered by the World Trade Organisation would be much more effective in ending abusive industrial behaviour. Self-styled free-trade purists argue the WTO is an inappropriate venue for pursuing what they deem non-trade social issues. Santoro makes a strong case that there is sufficient precedence for an international labour rights code in the way the WTO deals with other so-called fairness issues, such as product dumping, intellectual property rights, and the environment.

He is also right that minimum international labour standards help sweatshop workers who have no ability to organise and voice their opinions independently. Santoro refutes the argument made by some Asian governments that minimum standards really are a protectionist club in disguise wielded by the West to deprive developing countries of their comparative advantage in unskilled labour. Adherence to minimum standards overseas, Santoro correctly points out, are certainly not going to create jobs in the US and Europe.

As far as how multinational corporations should respond when authoritarian governments attempt political and civil repression in the workplace, Santoro also offers some useful advice: get your head out of the sand and be morally prepared.

Profits And Principles

by Michael Santoro

Cornell University Press $180