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

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"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.


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GOLDBERG