Wall Street Journal: Levi's Faced Earlier Challenge in China

27 June 2019
China Labour Bulletin appears in the following article. Copyright remains with the original publisher.

Jeans Company Walked Out 17 Years Ago, But Today Has 501 Stores


SHANGHAI—Google Inc.'s challenge to Beijing is not a first: Levi Strauss & Co. 17 years ago walked away from China.

Today, Levi's brand jeans are produced in China, and in Beijing last November the company opened its 501st store in the country.

What happened in between?

In 1993, the iconic San Francisco maker of dungarees declared it would end relationships with contractors in China because of what it called that country's "pervasive violation of human rights."

At the time, multinational corporations were pouring into developing countries, looking for cheap labor. Not far behind were human-rights activists, confident that Western companies were a vehicle for social change: Campus demonstrations demanding big U.S. companies sever ties to South Africa had just helped dismantle that nation's apartheid policies.

Two decades ago, as now, China was attractive for its fast growth, cheap work force and huge population. But in China, activists had leverage: disgust at the 1989 Tiananmen Square massacre. Few foreign companies were making money in China in those days and fewer still were ready to shout down activists wielding evidence of dangerous working conditions, prison labor and other workplace abuses.

Family-controlled Levi's had branded itself a company with a conscience. Robert Haas, its chairman and chief executive at the time, ordered a review of human rights in 40 countries, which determined that only China and Myanmar had rights violations so troublesome that pulling out made the most sense.

"They were at the forefront of all the compliance issues," said an American executive in the textile business who at the time worked with Li & Fung Ltd., a Hong Kong trading firm.

Everyone in the industry was aware, he said, that the U.S. company's strategies helped make it "a big deal" in the rag trade to consider a factory's lighting, ventilation, toilets and cafeteria on par with prices and production quality.

Parallels between Levi's and Google are strong. Each is defending a brand steeped in American values. Also, Levi's was small in China, buying only $50 million of trousers and shirts, while Google is the runner up in Internet searches in China after Baidu Inc. Each of the U.S. companies was plugging China into pre-existing global networks—Levi's with its supply chain and Google via the World Wide Web. Their actions sparked political storms.

In the spring of 1993, Levi's announcement hit a Washington embroiled in its annual debate on the renewal of Most Favored Nation trading status, a wrenching review that linked Beijing's record on human rights to U.S. tariff policies. President Bill Clinton, who campaigned talking of the "Butchers of Beijing," found himself playing down human rights to promote China's trading status.

"If you look at the Levi Strauss and Google situations ,it's important to see there are similarities but there are differences," said Sharon Hom, a spokeswoman for the group Human Rights In China. "The impact is much bigger today because it is making it into a public debate in China. Not everyone needs a pair of jeans but everyone needs information."

Mr. Haas, who led Levi's pullback from China, defended the company's human-rights positions. In a speech quoted in the book "Levi's Children: Coming to Terms with Human Rights in the Global Marketplace," Mr. Haas said "decisions which emphasize cost to the exclusion of all other factors don't serve the company and its shareholders' long term interests."

China's reaction to Levi's move, the book stated, was to argue human rights had nothing to do with it. A foreign ministry spokesman boasted, "There are tens of thousands of foreign companies in China."

How much difference Levi's stand made to factory conditions in China is hard to quantify; the company itself was comfortable enough to return in 2008.

"Conditions in many multinational-affiliated factories have improved because the focus has been put on them," said Geoffrey Crothall, editor of China Labour Bulletin in Hong Kong. "But conditions in Chinese factories as a whole haven't."

From the beginning, Levi's said it hoped one day to return to China. When it announced plans to do so five years after its pullout, it drew fierce criticism from the human-rights community. "At no time did we believe or did we intend to influence the human-rights practices across China," a Levi's spokesman said at the time. "All we can do is try to improve the conditions in factories that work on our behalf."

Today, the Levi's name appears across urban China. On Shanghai's main shopping street, Levi's shops stand blocks from each other and dozens of flags with the company name flutter from the avenue's lampposts. Levi's advertises on televisions in the city's taxis and has its name plastered onto the sides of city buses.

See also. CLB quoted on Google in Bloomberg.
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