China and The Race to the Bottom

With a workforce of 750 million people, China is the new global workhorse. Though a single-party Communist state, China’s economy is market-driven, and trade with China is a trillion dollar industry.

Trade with China has been of particular global importance since the end of the Multi-Fibre Agreement (MFA). The MFA was created in the 1970s to give some protection to the textile industries of industrialised countries facing competition from countries with lower manufacturing costs. Production quotas were put into place when a surge of imports threatened to cause serious damage to industrialised country's indigenous producers.

The Price of Free Trade

In 1995 the WTO began a gradual, 10-year fade out of the MFA in order to bring textile trade into line with global free trade regulations. The WTO and other supporters of the change stress that it will lead to increased efficiency and lower costs for Western consumers. Yet "low cost" and "efficiency" often come at the expense of basic workers' rights, such as freedom to organise and form unions, fair compensation, and workplace safety. In no place is this more true than in China.

Workers' Rights in China

China has a poor record on protecting workers' rights. The Communist party controls the only trade union allowed under Chinese law. Often union representatives hold management or even high-level government positions. Many workers come from rural areas and are made to live in factory-controlled dormitories where strict rules limit and proscribe their activities. No single government department oversees occupational health and safety, and the ILO reports that safety monitors can often be placated with bribes.

The Race to the Bottom

Other countries whose economies rely heavily on manufacturing exports are feeling the threat. Over half of developing countries' exports are now manufacturing goods, compared to 20 years ago when oil exports dominated. Chinese factories are undercutting many other developing countries' costs of production, and, since China is a member of the WTO since 2001, there are no quotas governing Chinese exports. In an effort to keep their manufacturing industries afloat, developing countries such as Bangladesh, Cambodia, the Philippines, Mexico and Sri Lanka are cutting corners, where they can, in what has been labeled, "The Race to the Bottom". Developing nations are struggling to compete with China by cutting workers' wages, requiring overtime work with no corresponding overtime pay, cracking down on trade unions, and ignoring or circumventing workplace health and safety procedures in the name of lower costs and greater efficiency.

Click here to find out How the Race to the Bottom is affecting Cambodia's garment industry

China

• 31 cents/hour wages
• No independent trade unions
• 110,000 garment factories
• $52 billion in textile and apparel exports in 2002
• 3,784 new textile plants under construction in 2003, with $258 billion already invested for post-quota years
• US trade deficit with China: $125 billion in 2003

As the International Confederation of Free Trade Unions reports in an April 2005 report:

"The pitiless repression of independent union activity in China enables businesses in China to offer far more advantageous prices and delivery times than their competitors. Such exploitation of Chinese workers is helping to reduce the prices paid to suppliers the whole world over, which is in turn putting pressure on those suppliers to scale back the rights of their workers in a bid to remain competitive. Consequently, China is -- in effect -- dragging down workers' rights worldwide, a situation that the international trade union movement has strongly denounced both from solidarity with Chinese workers and owing to the knock-on effects it is having in other countries."

Click here to read about the ICFTU report on the Race to the Bottom and its effect on labour conditions in the Philippines.

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Last Modified: Sunday, 22-Apr-2007 15:19:31 EST
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