The Telegraph
Since 1st March, 1999
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Union draws China into outsource brawl

Washington, March 21: In a precedent that promises to be yet another threat to business outsourced to India, America’s biggest trade union has filed a pioneering complaint with the US Trade Representative (USTR) that more than 700,000 Americans have lost their jobs “as a direct result of violations of workers’ rights by the Chinese government”.

The crux of the unusual complaint by the 13 million-member American Federation of Labour and Congress of Industrial Organisations (AFL-CIO) is that because Chinese workers are underpaid and taking advantage of China’s “repression” of its labour, American companies are outsourcing their jobs to the communist state or setting up manufacturing units in China after closing down plants in the US.

If AFL-CIO succeeds in getting the Bush administration to act on its complaint and take steps to prevent US businesses from the “unfair practice” of exporting jobs to China, the precedent could be used in an argument against India that its low wages are an unfair trade practice in encouraging the migration of services and jobs from the US through outsourcing.

Such a scenario would be a variation of the drive in the last decade in Europe and the US to boycott Indian carpets produced with child labour. India largely got over that campaign by labelling carpets with the certification that child labour was not involved. The administration has 45 days to act on the petition by the powerful trade union.

In a reflection of election season populism, Democratic presidential candidate John Kerry reacted to the petition saying “the Bush administration has completely walked away from using trade policy to raise living standards and improve the rights of workers at home and abroad. This case marks an important challenge on behalf of American workers and raises real concerns about China’s treatment of its workers”.

In any action on this complaint, the USTR will have to use Section 301 of the US Trade Act of 1974. This section, once dreaded by countries like India, was used in the early 1990s to apply unilateral trade sanctions on countries that engaged in business activities considered unfavourable to US trade interests.

It was amended in 1988 to include labour policies and workers’ rights. But Section 301 has been used only by multinational corporations, primarily to protect intellectual property.

The complaint by AFL-CIO will, therefore, be a test case in using a trade law to promote the rights of workers.

The organisation’s secretary and treasurer, Richard Trumka, told a news conference here that “China has emerged as a chief violator of workers’ rights and its workforce is so large and its labour repression so comprehensive that it is dragging down standards for the entire world economy”.

There are fears that this case, if successful, could strengthen demands — opposed by developing countries such as India — for including labour standards in World Trade Organisation deals and agreements.

Section 301 of the US trade act has largely been superseded by the WTO, but in an ominous warning for India, Trumka demanded that President George W. Bush “direct the USTR to enter into no new WTO-related trade agreements until the WTO requires each of its members to comply with the core labour rights of the International Labour Organisation”.

Lest it should be accused of insensitivity to the problem of job export, the administration hastily filed a case in the WTO against China, attacking its tax breaks for integrated circuits manufacturers. It is the first complaint filed against China by any WTO member since Beijing joined the organisation in December 2001.

The White House was recently severely embarrassed by Kerry’s revelation that the administration’s choice for a new post of manufacturing czar was an entrepreneur who had opened a factory in China. The administration immediately cancelled his appointment.

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