All eyes on Nike's test case for labour standards

PUBLISHED : Tuesday, 15 July, 2003, 12:00am
UPDATED : Tuesday, 15 July, 2003, 12:00am


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As freedom of speech protests fill the streets of Hong Kong, the United States faces its own public debate over the boundaries of free expression. On June 26, the US Supreme Court ruled judges in California would decide whether Nike, the world's leading shoe manufacturer, lied and thereby abused the legal limits of commercial speech in defending labour conditions in its factories abroad.

American anti-globalisation activists charged that Nike's denial of contracting to sweatshops is a direct violation of California's truth-in-advertising law. The results of the trial could dramatically influence labour standards, corporate transparency and accountability in the 51 countries in which Nike operates. A ruling against Nike could start a ripple effect, creating new labour standards for US-based multinational corporations and also non-US businesses wanting to sell to the American market, especially those operating from Asia. So, in a strange twist of fate, Nike, so often accused of labour exploitation, could be responsible for the near abolition of sweatshop labour around the world.

In the 1990s, Nike began a public relations campaign defending the labour conditions of its overseas factories by staging an expensive and far-reaching public relations campaign. Labour activists claim Nike made false statements about its labour practices. But Nike asserts that free speech clauses in the First Amendment of the US Constitution protects its right to make statements in letters to customers, press releases and advertisements even if those statements may have falsely portrayed how it treats its workers.

The First Amendment allows much space for false statements in public debate precisely because opposing opinions strengthen the marketplace of public discourse. But California law stipulates that anyone can sue a company engaged in false advertising because these commercial falsehoods actually taint the market. California's Supreme Court ruled that Nike's public defences constituted 'commercial speech' aimed at consumers of their products and therefore, like all advertisements, are not protected under the First Amendment.

Unless the California ruling is overturned, firms everywhere may feel the effects, including those in Hong Kong. If a company's public statements mislead the public - intentionally or not - they could face lawsuits for any good-faith declarations about business issues, ranging from its environmental record to its hiring practices. The effect would silence companies, muzzle debate and reverse a positive trend towards increased corporate transparency. For its part, Nike has already decided not to release its annual 'corporate social responsibility' report.

So it seems the lawsuit will in fact make multinational operations more secretive. But whatever the fallout of the California ruling, a more essential question remains: Is the Nike corporation - and other multinationals like it - truly the embodiment of global capitalism's triumph at the expense of poor workers? Or are they offering opportunities to nations that desperately need jobs? In Vietnam and some other countries, the answer seems clear: Nike factories are a godsend.

According to Johan Norberg, the author of 'In Defence of Global Capitalism', Nike jobs come with a regular wage, with free meals, free medical services, training and education. The average pay at Nike factories near Hanoi is US$54 a month, almost three times the minimum wage at state-owned enterprises. Despite anti-sweatshop activists' claims, 2.2 million children in Vietnam shifted from toil to school because their parents' 'sweatshop' wages free them from the burden of earning an income. If the California lawsuit goes forward, evidence about the labour practices of Nike contractors will be made public, leading some factories to end contracts with Nike to keep their practices private. This would send workers in Vietnam back to a life of poverty.

Nike's Vietnam operations offer only one case of the positive effect that many multinationals can potentially have on impoverished countries. On average, multinationals in the least developed countries pay twice as much as domestic companies for similar work. This leads scholars like David Dollar, Director of Developmental Policy at the World Bank, to conclude that more economic integration - more globalisation - will benefit the rest of the world.

None of this should obscure a dismal truth: sweatshop labour exists, and it is often the byproduct of an increasingly globalised economy. Nevertheless, workers in both multinational factories and the multinational corporations themselves can reap benefits if adequate labour standards are enforced. To be sure, Nike - true to its Greek name of 'victory' - will fight this battle to the end and, most important for its labourers abroad, the world will be watching.

Alonzo Emery is a writer based in San Francisco