NOW WE ARE ROBBING OURSELVES CHINA IN THE POST MULTI-FIBRE AGREEMENT ERA In this article Au Loong-Yu, editorial board member of Globalization Monitor, Hong Kong, analyses the impact of the ending of the Agreement on Textiles and Clothing (ATC) in 2005 after thirty years. What is at stake for working people around the world with the phasing out of MFA? How does the 'rise of China' relate to this? Is it a zero-sum game or a win-win situation for other developing countries?
espite the World Trade Organisation's (WTO) promotion of neo- proved to be far from easy.' In January 2005, the US and EU used the protectionist clause in China's WTO accession agreement to restrain China's surging textile exports, deferring the end of quotas to 2007. There is still no agreement between China and the US. Although there is a basic common interest between the ruling elites and business sector of these three areas over the issue, friction can be expected in coming years. China - the biggest winner of MFA phase out? The Multi-Fibre Agreement was always regarded as a protectionist attempt by the developed countries to bar the textile products of developing countries, one of few industrial sectors where the latter have comparative advantages. Though many developing countries had sought to eliminate the MFA, it is ironic that on the phasing out of the MFA, in July 2004, some developing countries like Mauritius, faced with the prospect of China seizing the lion's share of world export of textile goods, called for its extension. The quota system was protectionist for the developed countries, but it also helped spread out textile exports across 200 countries. According to a WTO report, the result of eliminating will leave only 30 developing quotas strong countries. Among them China's share of exports may be as high as 50 percent (currently 16 percent), while India's is projected at 15 percent (currently four percent). Imp Mexico, Philippines, and Indonesia will see textile exports halved, and Mexico will drop to three percent from the current 10 percent. In developed Wate countries like the US and EU, over the past four years the US has lost 350,000 garment and textile jobs, and probably more than half the remaining 700,000 are at risk.? The International Textile, Garment, and Leather Workers' Federation (ITGLWF) also called to extend the sha MFA, in order to save textile and te garments jobs in both developed and developing countries. In a press release, they said that since the elimination of the quota system on 31 December 2004, serious plant closures and jobs losses were reported in Kenya, Cambodia, Sri Lanka, Mauritius, Philippines, and Tunisia. When its call failed, the ITGLWF came close to following the EU's policy to restrict exports from China. The US labour federation the AFL-CIO along with US conservatives are even more aggressive in their attack on the surge of cheap imports from China, holding it responsible for plant closures and job losses in the US. In 2000 the AFL-CIO fought in vain to stop the Clinton administration granting Permanent Normal Trade Relations status to China, and its demands to improve workers' rights as a condition of China's WTO accession also failed. In 2004 the AFL-CIO called on the imposition of trade remedies (like raising tariffs) on China, responsible for the disappearance of 2.5 million manufacturing jobs. Recently it joined the Chinese Currency Coalition to press the Chinese government to revalue the yuan. It seems that the AFL-CIO sees trade protectionism as a good way to keep jobs. Ironically, when it comes to free trade promoted by the North American Free Trade Agreement (NAFTA) and the WTO, the AFL-CIO does not support protectionism and instead of opposing NAFTA and the WTO was content to try and append a labour clause on free trade agreements. To identify China as the main winner and the US and EU as losers over the end of the MFA is far from the truth. Firstly foreign textile companies account for a quarter of all Chinese export earnings from textile products; they, not Chinese companies, benefit from expanding Chinese exports. Chinese companies do reap the remaining three quarters of export earnings but generally Chinese average profit rates are low, since the majority of them subcontract to foreign brands, often only just 10 percent of value added. Importers like Wal-Mart and brand companies pocket the major share of profit. Secondly, the more China exports textile products, the more it needs to import textile machines from developed countries, including from Germany, the top textile machine exporting country. In fact China has become the world's biggest textile machine importer, and is one and a half times higher in money terms than the second country -Turkey." In the exchange of labour-intensive products (Chinese textile) for capital-intensive products (US and EU machinery), the latter get most value added. Therefore, the rise of China as a textile products exporter benefits Chinese, US, and EUcompanies. It is in the interests of all three to see the end of the MFA, despite episodic frictions. Though textile manufacturers in developed countries may lose market share, benefits can be ten times the losses to US capitalists as a whole by forcing open the capital goods market and services of developing countries, with China ranked number one. Textiles production is a sunset industry in developed countries anyway, and stopping China's imports will not save jobs there, because Wal-Mart will simply shift sourcing from China to India. However China also is losing textile and garment jobs. To drive others out of business, Chinese textile and garment sectors shed 52.5 percent and 28 percent of jobs respectively between 1996 and 2001, amounting to 3.3 million and 0.5 million jobs. Twenty-six million manufacturing jobs were lost in the same period, accounting for 40.5 percent of all manufacturing jobs." Such a sharp decline in manufacturing jobs over such a short period was unheard of. Those retaining jobs in Chinese textile ters Like and garment wages cut and intensity of labour rise. In July 2005, 3,000 textile Mart and workers in Guangzhou went on against wage cuts. They were defeated. However, neither brand companies the AFL-CIO nor the ITGLWF ever mention Chinese job losses when calculating job losses in textile pocket the mejor garment in particular or manufacturing as a whole. The notion that China wins and of progue the US loses by ending the MFA is thoroughly flawed. If we think in class terms, it is obvious that Chinese, US, and EU companies are all winners, while workers in all lands are losers, albeit to different degrees under different time frames. Targeting China and letting the US government off the hook, or worse supporting US protectionism, cannot benefit US workers. For there is no essential link between protecting the market from cheap imports and keeping jobs. What links exist are weak, never direct, and dependent on many factors that labour cannot control - employers, not employees, control investment and the distribution of profit that directly affect labour. While in the short-term, protectionism may produce positive side effects keeping jobs in certain sectors, in the long run there is no basic correlation between the two. In this era of globalisation, the link between trade (protectionist or free trade) and job creation, or more generally, the link between growth and job creation, is weaker than ever. To argue otherwise only helps the ruling elite pit workers in all countries against each other. US labour should first and foremost hold the US ruling class responsible for job losses. China 'race to the bottom' There are dissenting voices both inside and outside the AFL-CIO against the flawed argument against China. However, some may leap to the other extreme, embracing the Chinese government as, 'defender of the interest of developing countries'. The logical conclusion of this is that we can criticise the US government and business class, but not China.° In differentiating themselves from those criticising China, they overemphasise engagement with China, some even promoting China's official trade union, the ACFTU. The notion that China is a defender of developing countries against US hegemony is simply a fairy tale. It denies the fact that in the name of free trade, China, exporting immense quantities of goods at ever-lower prices at the expense of her workers and weaker developing countries, has become a powerful engine driving the global race to the bottom 23
for working people across the world. Rather than opposing them China serves both the interests of her elites and those in the US, EU, and Japan. They are a grand alliance to exploit labour, despite occasional squabbles over the spoils. Deng Xiaoping laid out his programme for a new course in March 1989, three months before the massacre in Tiananmen Square saying, 'China cannot allow demonstrations to happen too easily........or else foreign investment will stop flowing in. Our strict control over these events will not deter foreign investment. Quite the opposite, they will be more relaxed [in investing]'. Foreign investors agreed with Deng and poured increasing capital investments into China after the massacre. Recently The Economist drew the following balance sheet, The integration of China's 1.3 billion people will be as momentous for the world economy as the Black Death was for 14th-century Europe, but to the opposite effect. The Black Death killed one- third of Europe's population, wages rose and the return on capital and land fell. By contrast. China's integration will bring down the wages of low-skilled workers and the prices of most consumer goods, and raise the global return on capital. '(Emphasis added) To argue that China defends the interests of developing countries is to exaggerate her spasmodic and tactical support for them, while downplaying her fundamental ambition of carving ever-greater world market share at any human and environmental cost. While the media mainly focus on negotiations between China, the US, and the EU, they ignore the fact that developing countries like Brazil are also announcing restrictions on China's textile imports. For Mexico, China's threat is more pronounced. By 2003 China had overtaken Mexico to become the second exporter to the US after Canada.' Mexican President Fox said that Chinese pirates were stealing their jobs.'° We need not endorse Fox's position, but it contradicts the rosy picture of 'China defending developing countries': the opposite is the case. In order to access the WTO the Chinese government made huge concession to the US and the EU, concessions that many developing countries like India had resisted. She voluntarily gave up the 10 percent domestic support in agriculture that developing countries are entitled to and accepted 8.5 percent instead. Her tariff cut is much deeper than India's." In the current General Agreement on Trade in Services negotiations the US and EU are delighted that China is opening up her services sector. Recently, Bo Xilai, the commerce minister, proudly told his audience that while developed countries have opened 80 percent of 160 service sectors (specified by the WTO), and developing countries have opened 20-40 percent, China has opened 62 percent of her service sectors to foreign competitors. ' China's cutthroat competition helps the US and EU press developing countries to follow China's example. China's competitiveness is based on appallingly low wages and effective state control over everything. State despotism denies workers and farmers the basic right of free association, 13 robbing them of the elementary tools of self-defence. Few countries are so complete in suppressing workers' rights as China. The Chinese government removed the right to strike from the constitution in 1982. She only allows the existence of the (fiercely pro-business) officially run trade union, the ACFTU, which effectively denies workers the right to free association. The official press often admits that the ACFTU practically allows capitalists to set up 'trade union branches' with no China's cutthroat competition helps the US and EU press developing countries to follow Chinas example 'chairpersons', and collective bargaining at all. In addition to this, the government imposes exert severe social control over workers, especially the peasants and migrant workers, making them work like slaves. For instance, the household registration system acts as a kind of social apartheid, which systemically discriminates against migrant workers, barring them from enjoying public provisions in the cities. Outside the factories and dormitories, they simply cannot survive in the cities. It is an effective way to force them to accept starvation wages, appalling working conditions, and forced overtime. When workers spontaneously strike against these hellish conditions, they meet repression. In colluding with the government, employers squeeze the maximum labour within the shortest time possible from the workers. It is this effectiveness in exploitation as a whole, rather than the single 24 element of low wages, which makes China so competitive. That is why US garment buyers are abandoning Vietnam, though it has lower wages, to source from China: the four weeks it takes to produce 100,000 pairs of trousers in Vietnam is reduced to one week in China. Atomised Labour and Absolute State One of the main advantages of capitalist China in the global market is her absolutely atomized labour in face of an absolute state. The 1949 revolution was a genuine mass mobilization of peasants for modernizing and democratizing China. While the former task did achieve something significant, the latter task failed miserably. Instead of democracy we have a bureaucratic state free of all people's control. In the early period of the Peoples' Republic of China, the workers, although hailed as the 'leading class', did not even have the liberty of choosing jobs or occupations or the particular workplace, let alone the freedom to form a trade union or take part in free elections. " This contributed to their absolute fragmentation. No layer of activists and organizers ever formed. The union cadres, repeatedly purged, were long ago transformed into pro-management officials. Thus, long before the Communist Party changed its course in 1980s, the relationship of forces between state and labour was entirely unfavorable to the latter. That is why the Communist Party could safely change its course without resistance from below. Deng Xiaoping actually tested his strength in the Tiananmen crackdown, where workers were singled out to be harsh.: suppressed. One could say the massacre laid the social foundatic- of turning China into a great sweatshop. Recently, Prasenjit Duara an American scholar, remarked that, the Communists made t= workforce docile and organized labour to be a managed entity tr=: could be continuously mobilized. A Marxist might see China under Na: as producing the conditions of capitalism. "5 Last but not least, China has a unique advantage in the big leap fon: = : to embrace global capitalism, namely having Hong Kong, Macau = : Taiwan as doors to the world. The three areas have provided imm=:: support to Deng's market reform from the very beginning.
ideological resources to financial and managerial personnel. Hong Kong acts as the chief financial centre for China, raising billions of dollars for mainland corporations every year. Neither Russia nor India has such an advantage." 'What is 'the factory of the world' anyway? It is simply using our own resources to produce low end products at the expense of polluting ourselves, and what we get in return is only a small profit. ' It looks like China bashing from some overseas Chinese dissident, but it is not. The quote is from Pan yue, the deputy director of the Chinese government's environmental protection department." His colleague Yang peng is even more radical, 'The West robbed the world (in the colonial period), now we are robbing ourselves: the cities rob the rural areas, the power elites rob the powerless. And when all public resources are robbed to the last penny, there we enter a period when the alliance of the elites split among themselves. '18 There are inbuilt crises in the Chinese model, of course. It is may blow up in the near future, though the opposite is also possible. In either case, it spells disasters for the working people of China as well as Asia. Supporting Chinese workers on a class base China's model is no model for labour. China's suppression of workers' rights, her embrace of fiercely export-oriented growth, and her cutthroat competitiveness, is an unholy trinity. It is these things which sustain the profitability of business classes in both China and The cities rob the rural areas other countries, at the expenses of the power elites rob the powerless. working people across the world. It is the duty of the world labour And when all public resources movement to oppose the ruling elites inside and outside China. It are robbed to the last penny, is particularly urgent because today there we enter a period Chinese labour is still in bondage and cannot even make its voice heard. We must do this independently, through the labour and movements, the mobilization of union members, not by following trade policy as defined by governments and Trans National Corporations, be it trade protectionism or trade liberalization. Until recently, mainstream labour organizations in developed countries saw trade policy of governments and big business as a way back to the welfare state and jobs security, especially through trade protectionism. But it does nothing of the sort. Soon you have Free Trade Agreements. Amazingly labour leaders shook their heads but decided to continue support, hoping they can impose a 'labour clause' and achieve a change of course. But at the end of the day job security is nowhere in sight. It is time to stop seeing ruling class trade policy as a strategy to a renewed welfare state. Appending labour rights to Free Trade Agreement like NAFTA or EU - the social clause • has proved to be a failure in defending jobs. It will not succeed for the WTO either. Nor is appending labour rights to trade protectionism a genuine alternative. It is simply not the responsibility of labour to help their own bosses to out compete bosses in other countries in this global market. However we do need to differentiate trade protectionism of developed countries from that of developing countries. Trade protectionism imposed by developed countries against weaker countries only serves to enhance world hegemonic powers, responsible for so much poverty in their homes and around the world. But we need a different yardstick for developing countries. Weaker countries have the sovereignty to decide their own trade policy, including the right to protectionism against those hegemonic powers. However, we must also bear in mind that even in developing countries trade protectionism is not necessarily pro-labour. nor necessarily effective as a development tool. 1950s and 1970s, many developing countries pursued protectionism and import substitutions, at a time when jobs were more secure than now. However, the fading away of this model of development is not accidental. The worldwide recession in 1974 put an end to the more self-reliant model of capitalist development for developing countries. Precisely because of the limitation of trade protectionism, labour in developing countries needs to avoid making labour rights an appendage of protectionism, but rather vice versa. It means that we have to judge protectionist policy case by case, and subject it to the scrutiny of the interests of small farmers and workers. Even when labour supports a particular protectionist policy, labour must maintain its independence and not allow itself to be used by its own ruling class to pit workers in different countries against each other. It is doubly true for Chinese labour activists. We are for protecting the livelihood of Chinese small farmers against the onslaught of TNCs and WTO. But it will be a different matter for protecting domestic market share of local manufacturers. There is no mechanism to allow workers to have a share of the profit being made by local manufacturers, or any employers. This is the ridiculous 'trickle down' theory. What we are witnessing is rather the opposite, that foreign capital and domestic employers alike know no bound in exploiting Chinese workers. It follows that it is not in the interest of labour to help their bosses to fight for market shares, at home or abroad. Therefore, we argue for the following: Oppose neo-liberalism our own country, and first and foremost hold the bosses responsible for plants closure. Labour, inside and outside China, must unite internationally to reverse the global race to the bottom, by independent mobilization rather than putting all hopes on trade policy of their respective government. Labour outside China should support Chinese labour's struggle, but in the language of labour movement, not in the language of trade policy nor the narrow nationalism of their elites. when the alliance of the elites fight for Chinese labour should its own rights independently, and split among themselves remain indifferent to the possible outcome that it may make Chinese employers uncompetitive in the world market. Author's Email: [email protected] 1. A longer version of this article is posted on the website of Globalization Monitor. www.globalmon.org.hk 2. David Moberg, 'Trading down', The Nation, 10 January 2005 3. Hong Kong Economic Journal, 17 Sept 2005 4. Ming Pao, Hong Kong, 8 June 2005 5. Wo Guo Zhong Chang Qi Shi Ye Wen Ti Yan Jiu., Research on medium- and long-term unemployment problems in China. Jiang Xuan, 2004, Publishing House of the Renmin University of China, pp179-181 6. Or as the US China Friendship Association puts it: supporting Chinese Socialism against US Imperialism 7. Deng Xiaoping wenxuan, Writings of Deng Xiaoping, vol III, People's Publishing House, Beijing, 1993, p. 286 8. 'The Dragon and the Eagle', The Economist, 30 Sept 2005 9. Some Mexican manufacturers, after traveling to China, were dispirited and had this to say: 'They [Chinese) have extremely aggressive tax incentives, low salaries, very aggressive worker training, and a supply chain that allows them to have immediate access to the latest technology.' Business Week, 22 December 2003 10. Erik Izraelewicz. Quand la Chine change le monde (When China changes the world). 2005. Chinese edition by CITIC Publishing House, p 146. 12. Hong Kong Economic Journal, 10 June 2005 13. ht:p: news.xinhuanet.com/focus/2004-09/27/content_2014769.htm 14. Andrew Walder's book Communist neo-traditionalism work and authority in Chinese industry gives a very interesting account of the authoritarian regime at plant level. 15. Ted C. Fishman, 'The Chinese Century', New York Times, 4 July 2004. 16. For more discussion of China's unique development please refer to the author's article, ibid. 17. Quoted from http://business.sohu.com/20050719/n226363226.shtml. 18. Quoted from http://www.liuhongzhi.com/news/show_article.asp?id=00001325 25