Dongguan Factory Does Damage Control after Labor Abuse

UNCLAS SECTION 01 OF 03 GUANGZHOU 000131 SENSITIVE SIPDIS STATE FOR EAP/TC, EAP/CM, S/P, INR/EAP STATE PASS USTR CHINA OFFICE E.O. 12958: N/A TAGS: ELAB ECON ETRD TW CH SUBJECT: Dongguan Factory Does Damage Control after Labor Abuse Report ¶1. (SBU) Summary and Comment: Executives at Meitai Plastics and Electronics, criticized in a recent report by the U.S.-based National Labor Committee, acknowledged to Congenoff that some of its labor practices were not in compliance with global standards set by the industry. They were at pains to give us a detailed breakdown about how they were working on correcting these. Comment: Congenoff observed conditions and practices at Meitai, a maker of keyboards for several major U.S. computer brands, which certainly are not in accordance to the standards American industry holds them to. Meitai could plead that its workplace environment is not substantially worse than ones we've observed at other factories in South China that export products to the United States, but the company is in a vulnerable position. You don't produce for the American market without extra added scrutiny. End summary and comment. Working to Correct Non-Compliance -------------- ¶2. (U) The National Labor Committee (NLC),a U.S.-based NGO that advocates for worker and human rights, released a report earlier in February that accuses Meitai of numerous labor abuses. The report identifies Meitai as a supplier for HP, Microsoft, Dell, and Lenovo. Meitai was founded in Taiwan in 1986 and opened its plant in Dongguan in 1999. The NLC allegations against Meitai include, but are not limited to, prohibiting workers from talking, listening to music or raising their heads while they work; forcing them to sit on hard wooden stool and perform repetitive work for excessively long periods of time; underpaying workers and fining them for minor violations of company policies; severely limiting bathroom breaks; requiring mandatory overtime work; not paying for work injury insurance, health insurance or the national social security program; and providing over-crowded living quarters and sub-standard food. (Note: The NLC's report is posted on U.S. Consulate-General Guangzhou's Intelink-U blog, South China SEZ at http: //www.intelink.gov/communities/state/southchi nasez/. End note.) ¶3. (SBU) Meitai is working to counter the public relations problems caused by the report. The company agreed to allow us to visit the day after we first contacted it. Company executives told us that, the morning of our visit to the factory, it had just completed a week-long audit by several clients. In addition, Wei Renkai, the firm's vice president, said that it had released a report titled "Action Plan on NLC Finding" within 24 hours of the NLC report's release. The Action Plan acknowledges 10 areas of noncompliance with global industry labor standards set by the Electronic Industry Citizenship Coalition (EICC),an organization composed of multinational electronics manufacturers. The Action Plan includes corrective measures for the areas of noncompliance. Some are already in place; others are in process. Wei estimates these will cost the firm RMB 500,000 (about US$ 74,000) to implement. (Note: the Action Plan is also available on South China SEZ. End note.) ¶4. (SBU) Wei complained of inaccuracies in the NLC report. For example, the NLC report describes workers manually snapping keys into keyboards. Wei claimed that this process was automated 4 years ago. In addition, Wei said that contrary to the NLC allegations, workers are not forbidden from discussing factory working conditions with outsiders. Instead, they are told only not to divulge product specifications. Wei also pointed out that NLC never approached the company or requested an interview with management. Work Hours and Pay -------------- ¶5. (SBU) However, Wei admitted that employees had worked excessive amounts of overtime that violated EICC standards as alleged in the NLC report. He said that corrective measures had been taken and that workers would have at least one day off every week. But he insisted that regular wages were not deducted from employees who refused to work overtime. ¶6. (SBU) Wei also acknowledged that in the past workers had been fined for breaking factory rules. According to Wei, the violations that warranted fines included spitting on the floor and wasting food in the cafeteria. However, he emphasized that fines went into an GUANGZHOU 00000131 002 OF 003 "employee welfare fund" and said that fines had been returned to workers since the publication of the NLC report. Insurance and Social Security -------------- ¶7. (SBU) Only since the publication of the NLC report has Meitai taken steps to pay work injury and medical insurance on all its employees, according to Wei. One hundred percent coverage will begin in March; previously only half were covered. Only 12 percent of workers are covered by the government pension scheme (unemployment insurance and social security). The Meitai executives explained that workers themselves are required to pay a percentage of earnings (with the company contributing a larger amount) to the pension program, so management would have to discuss with the workers whether they would accept an equivalent wage reduction. Factory Conditions -------------- ¶8. (SBU) Physical working conditions at Meitai's factory appeared to be not substantially worse than most other factories that we have visited in South China. Almost all molding and painting functions are automated and performed by robots, as is a significant portion of the assembly, which is the most labor-intensive area and was most criticized in the NLC report. Management identified two alternate workers present on the assembly line to fill in for workers requiring a bathroom break. ¶9. (SBU) During Congenoff's visit, the cafeteria appeared clean and similar to those in other factories or even university campuses in South China. Workers are allotted only 30 minutes to eat as the NLC report claims, but cafeteria lines moved quickly and in an orderly fashion. There appeared to be sufficient seating to handle the staggered dining shifts. Wei confirmed the NLC report claim that workers receive a complimentary chicken leg or fruit on Fridays but said that each meal has two meat dishes and one vegetable dish. Dormitory Conditions -------------- ¶10. (SBU) The dormitories were similar to those in many other factories in the Pearl River Delta. According to the firm's executives, approximately 1,200 workers reside on the factory campus, with an additional 700 -- mostly married -- living outside in housing they secure independently. Three nights a week workers may come and go at will; on the other nights, they must get a supervisor's written approval. Management claimed this was a mere formality, but was unable to give a thorough explanation for why the policy was necessary. Wei confirmed that workers are charged for water and electricity they use in the dormitories, but challenged the NLC report's claim that air conditioners go unused because workers can't afford the charges. He said that the company allows workers to use the air-conditioners for nine hours a day free of charge from July to October. Not the Bottom of the Barrel -------------- ¶11. (SBU) Comment: Metai is a comparatively small factory, with only about 2,000 workers. Even allowing for improvements and corrections since the report's publication, it does not appear to have been substantially worse than most factories in the Pearl River Delta. NLC's apparently dated information on the need for line workers to manually press each key into a keyboard, calls into question the currency of some of its unnamed sources. It is likely that a key attraction of targeting Meitai is its connection with major U.S. multinationals. This case shows that China's export-oriented factories remain sensitive to public opinion and eager to show they are complying with CSR standards, despite a climate of declining orders, rising unemployment and relaxed government enforcement of labor regulations. ¶12. (U) This cable was cleared with Embassy Beijing. GUANGZHOU 00000131 003 OF 003 GOLDBERG