OFFICIAL TRADE UNION SEEKS TO ORGANIZE 60 PERCENT

C O N F I D E N T I A L SECTION 01 OF 02 BEIJING 022277

SIPDIS

SIPDIS

DEPT PASS USTR FOR STRATFORD, MCCARTIN, KARESH, ROSENBERG
TREASURY FOR OASIA/ISA-CUSHMAN
USDOC FOR 4420/ITA/MAC/MCQUEEN
LABOR FOR ILAB-CARTER, OWENS, HELM, ZHAO, SCHOEPFLE
GENEVA FOR CHAMBERLIN

E.O. 12958: DECL: 10/17/2016
TAGS: ELAB ECON EINV PGOV CH
SUBJECT: OFFICIAL TRADE UNION SEEKS TO ORGANIZE 60 PERCENT
OF FOREIGN INVESTORS

REF: BEIJING 17771

Classified By: Deputy Economic Section Chief, Christopher Beede, reason
1.4(d).


1. (C) Summary: The All China Federation of Trade Unions
(ACFTU) has announced that it has organized unions at all
Wal-Marts in China and intends to double union presence in
foreign-invested enterprises (FIEs) from 30 to 60 percent by
the end of the year. ACFTU said it will focus on "Fortune
500 multinationals" and specifically named Kodak and Dell
Computer as its immediate targets. China-based executives at
Kodak, Dell and General Electric (GE) say ACFTU has adopted a
new strategy of reaching out directly to workers, and that an
increasing union presence in FIEs is inevitable. The reason
for ACFTU's intense focus on FIEs is not clear. ACFTU enjoys
support for its campaign at the highest levels of the
government, but US companies told Laboff they do not see any
coordinated effort to use ACFTU to restrict foreign
investment. Our contacts also noted that cash, in the form
of substantial union fees, seems to be a major motivation for
ACFTU, and given the Chinese Government's recent circumspect
attitude toward foreign investment, FIEs are a relatively
easy target. End Summary.


2. (SBU) The ACFTU, China's only legal labor federation,
held a press conference on October 12 to announce that it has
succeeded in organizing unions in all of China's Wal-Marts.
ACFTU also repeated its vow to organize unions in 60 percent
of FIEs by the end of the year, and said it is already
established in 30 percent of FIEs. ACFTU's most senior
organizer, Guo Wencai, said the union would concentrate on
the most union-resistant "Fortune 500" multinationals first.
He named Kodak and Dell Computer operations in China as
immediate targets. Laboff discussed the ACFTU's campaign
with China-based executives from Kodak, Dell, and General
Electric (GE),as well as with one of China's prominent labor
NGOs.


3. (C) Executives at GE, Kodak and Dell all agreed that
ACFTU's success in organizing unions at Wal-Mart this year
(ref) marks a new strategy for the union. In the past,
ACFTU's standard practice was to have a local or municipal
ACFTU office approach a company's management and seek its
cooperation in organizing a union. GE, Kodak and Dell have
all been approached this way several times in recent years.
Each company said they have consistently maintained that they
would abide by Chinese law, and respect their workers' right
to establish unions, but would not take it upon themselves to
organize unions. ACFTU's new strategy at Wal-Mart was to
reach out directly to workers, persuade them to set up unions
and provide advice and assistance. In this way, ACFTU was
able to organize 62 Wal-Mart stores and distribution centers
in the space of a few weeks. Previous ACFTU campaigns to
increase union representation in FIEs, most recently in 2004,
produced few results, but all three companies told Laboff
that they take ACFTU's newest pledge to repeat its success at
Wal-Mart seriously, and believe it is inevitable that more
and more FIEs will become unionized. Chris Lin, a legal
counsel at GE (protect),said that ACFTU has publicly
repeated its 60 percent target so often that it has become a
matter of face. ACFTU can play with the numbers to some
extent, he said, but it will have to establish unions in more
FIEs to achieve its goal. Albert Wang of Dell (protect) felt
that following success at Wal-Mart, ACFTU is probably hoping
for a domino effect. ACFTU's, Guo Wencai told the press on
October 12 that acheiving its 60 percent goal by the end of
2006 may be difficult, but that ACFTU would exert high
pressure on "fortune 500" FIEs until unions are established.


4. (C) Guo Wencai and other ACFTU officials frequently
accuse FIEs of resisting unionization, and business contacts
have told Laboff that many FIEs do work their local
government contacts to keep ACFTU at bay. At the October 12
press conference, ACFTU attributed this resistance by FIEs to
their not understanding that ACFTU's goal is not engage in

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confrontation, but to promote the development of the
enterprise and ensure harmonious labor-management relations,
as well as protect workers' rights. By all accounts, ACFTU
unions are overwhelmingly passive and cooperative with
management, but some FIEs complain of union interference in
personnel decisions, resent the presence of a Party
organization inside their business, or are concerned that
ACFTU could become more confrontational in the future,
especially if there is an economic downturn, in which case
ACFTU could deploy the significant power it enjoys under
Chinese law. Albert Wang told Laboff that his and other
companies have tried to maintain a low profile, working
constructively with local ACFTU organizations and
consolidating local government support for their existing
labor relations arrangements. Since the unionization of
Wal-Mart, however, Wang said ACFTU has shown it is willing to
go around management, and this will require employers to
reach out to ACFTU to pre-empt being "ambushed."


5. (C) All three businessmen told Laboff that the Chinese
Government's attitude and rhetoric toward foreign investment
has hardened in recent months, and that the ACFTU may be
invoking economic nationalism for its own ends. Lin said
ACFTU may feel that it has more room to maneuver now that the
government appears less inclined to protect foreign
investors. However, none of the three companies believe that
there is any coordinated effort to use the union to
discourage foreign investment or make life more difficult for
investors. Dell's Albert Wang, referring to recent press
reports that President Hu called for increasing union and
Party organizations in FIEs (ref),said that the government
may feel it needs these unions to keep its finger on the
pulse of the Chinese labor force. Chris Lin speculated that
ACFTU Chairman and Communist Party Politburo Member Wang
Zhaoguo may see expanding ACFTU's presence in FIEs as a way
to burnish his own leadership credentials. Dell and GE also
said that money is major factor. Under China's Trade Union
law, ACFTU is entitled to a union fee of 2 percent of the
total wage bill (not just 2 percent of union members' wages)
in any company in which it has established a union. FIEs,
whose wages tend to be higher than Chinese private companies,
are an easy source of cash.


6. (C) Liu Kaiming (protect),director of a Guangdong-based
labor NGO, Institute for Contemporary Observation, told
Laboff on October 18 that he believes money is the primary
factor. ACFTU cares about three things, he said, 1) showing
the Party how many unions it can create, 2) showing the Party
how many members it has (on paper),and 3) collecting its 2
percent fee (or some negotiated portion thereof). Liu said
ACFTU is going after FIEs because they pay higher wages, are
more likely to follow Chinese law, and are more sensitive to
negative press publicity than Chinese private companies. Now
that ACFTU has learned to approach workers directly, FIEs
have become easy targets as well as a good source of revenue.



7. (SBU) To date, ACFTU has declined all of Laboff's
requests to discuss its organizing campaign.
Randt