WAL-MART ACCEPTS CHINESE LABOR UNIONS

UNCLAS SECTION 01 OF 02 BEIJING 017771

SIPDIS

SIPDIS
SENSITIVE

DEPT FOR EAP/CM AND DRL/ILCSR
DEPT PASS USTR FOR KARESH, A. ROSENBERG, MCCARTIN
LABOR FOR ILAB - CARTER, OWENS, HELM, ZHAO, SCHOEPFLE
TREAS FOR OASIA/ISA-CUSHMAN
USDOC FOR 4420/ITA/MAC/MCQUEEN
GENEVA FOR CHAMBERLIN

E.O. 12958: N/A
TAGS: ELAB ECON EINV PGOV CH
SUBJECT: WAL-MART ACCEPTS CHINESE LABOR UNIONS

Ref: Guangzhou 25215

(U) SENSITIVE BUT UNCLASSIFIED: NOT FOR INTERNET
DISTRIBUTION


1. (SBU) Summary: Since July 29, The All China Federation
of Trade Unions (ACFTU) has established unions in at least
five of Wal-Mart's 60 Chinese stores (ref). ACTFU has been
talking for several years about expanding its representation
in foreign-invested enterprises (FIEs),Wal-Mart in particular.
Suddenly they have succeeded. Local ACFTU officials told
Wal-Mart that they received instructions to organize Wal-Mart
from their national (Communist Party-dominated) leadership.
This is consistent with press reports that Chinese President
Hu Jintao issued an instruction in March to "do more to build
Party organizations and trade unions in FIEs." Wal-Mart has
now publicly agreed to cooperate with the ACFTU, and will pay
the ACFTU a legally-mandated two percent of its payroll in
each unionized store. While some outside observers may
consider this a victory for ACFTU, it is not a worker-driven
process, and ACFTUQs track record on protecting workersQ rights
is poor in any case, due to its conflicting allegiance to the
Party and various levels of government. The Wal-Mart unions
have more to do with the role of politics in the ACFTU than
with advancing workersQ rights.
End summary.


2. (SBU) Since the end of July, at least five of Wal-
Mart's 60 stores in China have established unions. The
ACFTU, China's only permitted labor federation, has vowed
to organize them all. After a shaky initial public
relations response, Wal-Mart issued a press release on
August 10, stating it would work "collaboratively with
leadership from the ACFTU and union organizations at all
levels to create a model working relationship." Joe
Hatfield, of Wal-Mart's head office in China, told laboff
on August 14 that Wal-Mart decided to issue the statement
after consulting with both its headquarters in Arkansas and
ACFTU leaders in Beijing. Hatfield said Wal-Mart's usual
policy is not to engage with labor unions or other "third
parties" in dealing with its employees, but that Wal-Mart
decided to be proactive in this case.


3. (SBU) Hatfield told Laboff that ACFTU was making
approaches to workers in at least half of Wal-Mart's
Chinese stores, often furtively or after hours. ACFTU's
own accounts in the Chinese press make the same claim, but
cite workers' fear of company retaliation as the reason.
Hatfield said Wal-Mart wants to bring this organizing
activity out into the open. Under the agreement they have
reached with ACFTU so far, Hatfield said Wal-Mart will
allow ACFTU representatives into its stores to make
presentations to workers, and will respect duly registered
unions. Wal-Mart will also begin paying ACFTU a legally
mandated "union fee" of two percent of its total payroll
in all unionized stores, to be shared 60/40 between the
store union and local ACFTU office. (ACFTU unions normally
do not deduct dues from members wages, although they can
legally do so.) Many non-unionized FIES already contribute
2 percent of their total payroll to workers' social funds.


4. (SBU) ACTFU has been talking about expanding its
representation in FIEs for several years, hoping to raise
union density in FIEs from 20-25 percent to 60-80 percent.
Hatfield acknowledged that Wal-Mart resisted ACFTU in the
past, but said there has been a political change. He said
local ACFTU officials told Wal-Mart that they were
specifically instructed by their national, Communist Party-
dominated, leadership to intensify their push in FIEs in
general, and at Wal-Mart in particular.


5. (SBU) An August 15 article in the Xin Jing Bao, a
Beijing daily newspaper, may offer an explanation. The
article, citing ACFTU sources, reported that Chinese
President Hu Jintao ordered more effort to be put into

BEIJING 00017771 002 OF 002


building Party and Trade Union organizations in FIEs in
March, after reading a Government report on "Factors for
Instability in Foreign-Invested Enterprises in China's
Coastal Regions." According to the article, ACFTU national
vice-chairman Xu Deming followed up by leading an ACFTU
study mission to Quanzhou in Fujian Province, where ACFTU
failed to create a Wal-Mart union in 2004. ACFTU created a
Wal-Mart working group in Quanzhou in May, which
spearheaded a renewed organizing effort. The Quanzhou
store formed a union, which was registered on July 29, the
first at Wal-Mart (reftel). Hatfield noted, and press
accounts corroborate, that the number of union members in
each unionized store so far is relatively small, e.g., 25-
30 workers out of 500. In one store, Hatfield said, about
30 of 40 workers who signed the union petition were not
even Wal-Mart employees, but vendor representatives.


6. (SBU) Hatfield said Wal-Mart does not consider the
formation of ACFTU chapters in its stores a bad thing.
Through its cooperation with the ACFTU, Wal-Mart hopes to
showcase what a good employer it is, and hopes to eliminate
some of the "hard knocks" it has received in the local and
foreign press. Hatfield said Wal-Mart abides strictly by
local law, even eschewing side agreements with local
governments that some competitors use to evade legally-
mandated labor standards.


7. (SBU) Comment: Under China's Trade Union Law,
establishing a union is not difficult. Twenty-five workers
(or only ten in Guangdong Province) merely need to petition
the local ACFTU office for registration. Employer
agreement is not required. What is interesting in this
case is not that the unions have been formed, but that it
has taken so long. ACFTU blames employer resistance for
their low level of representation in FIEs. In fact, it has
more to do with lackluster organizing efforts, and ACFTU's
inability to convince workers that they are relevant. Now,
thanks to some direction from the top, the situation has
changed, but no well-informed observer of the China labor
situation expects ACFTU unions at Wal-Mart or any FIE to
effectively represent their members. By law and in
practice, ACFTU unions are subservient to local Government
and Party officials, who generally place a higher priority
on attracting investment and maintaining a business-
friendly environment. While some observers may consider
the creation of these ACFTU unions in Wal-Mart a victory
for labor over an intransigent multinational, this case has
more to do with the role of politics in the ACFTU than with
advancing workers' rights.

Sedney