Wall Street Journal: Unions Are Good for Business in China

06 May 2011
CLB Director Han Dongfang contributed this op-ed to the Wall Street Journal

A mechanism for collective bargaining could have resolved the Shanghai truckers' strike quickly
May 6 2011


For a long time it seemed to some that China's lack of independent labor unions was an advantage. Wages stayed low, and Chinese industry didn't have to worry about strike disruptions. This was always a disadvantage for workers. But now the costs of this strategy for employers and the government also are coming more sharply into focus, thanks to a four-day truck drivers' strike in Shanghai last month.

The conflict stemmed from rising costs for the container transport industry. Companies are passing on an increasing portion of those costs to truck drivers, who constitute the lowest rank in the shipping industry hierarchy. The truckers were angry and frustrated at increased fees and charges, which had in some cases reduced their income to 100 yuan ($15) or even just 50 yuan per container. About 80% of the drivers supplying Shanghai's ports stopped working, delaying the shipment of tens of thousands of cargo containers and disrupting industries across the Yangtze River delta and the interior.

The lack of a formally recognized independent union didn't stifle this discontent or avert the strike. The drivers were well organized. Strike instigators used text messages and emails to rally support, and drivers took violent action against the vehicles of those who refused to strike.

Instead, the fact that the truck drivers didn't have a union created big headaches for the Shanghai government. Despite the fact that the truckers were well-organized, the government could not find any representatives with whom to negotiate. They weren't even members of the state-sanctioned umbrella union. And perhaps in part because the legality of such strikes is a gray area, individual truckers were reluctant to stick their heads above the parapet and act as representatives for their colleagues because they feared reprisals at a later date.

Ultimately the government announced some concessions, such as requiring logistics companies to reduce the fees they charge drivers. But although the drivers did go back to work, many remain dissatisfied, telling reporters that the measures would have a limited impact on their incomes. There is a real possibility of another strike.

In a complex business like shipping, with many different competing interests, grievances such as the drivers' will never be resolved by stop-gap measures imposed by one side. New issues and conflicts will always arise. And when that happens, both the industry and the government will be hobbled in their effort to reach a lasting resolution, because they have no permanent mechanism whereby disagreements can be discussed by all interested parties—a mechanism known elsewhere as "collective bargaining."

A better model is the Yantian dockyard in Shenzhen. In the spring of 2007, crane operators at Yantian and other dockyards in the city went on strike over pay and working conditions and the right to form a trade union. A union was duly formed, under the umbrella of the official All-China Federation of Trade Unions (ACFTU), and a collective bargaining agreement was negotiated with Yantian management. There has not been a crane drivers' strike there since.

The same pattern held after workers at the Nanhai Honda automotive plant in Foshan went on strike last year for higher pay. A trade union at the plant was reorganized in an attempt to better represent the employees, and on March 1 this year, it negotiated a 611 yuan pay raise for production-line workers.

It might sound counterintuitive that organized unions lead to more stable labor relations. If the union cannot negotiate a deal with management, striking is still an option. But absent a union that can engage in collective bargaining, striking becomes the workers' only option.

The Chinese government is finally starting to recognize this, and dozens of initiatives to boost wages through collective agreements have already been announced by government and union officials across the country. To stave off social unrest and boost domestic consumption, the wages of the lowest-paid and most vulnerable have to be increased. The government also knows the financial and manpower costs of managing strikes and maintaining social order are skyrocketing.

Business, however, is still reluctant to get on board. The major Hong Kong manufacturers, for example, spent vast amounts of time and money last year to lobby the central government in Beijing and provincial government in Guangdong, and even took out a full-page ad in a Hong Kong newspaper, in a bid to stall a bill designed to establish a collective bargaining system in Guangdong.

Many multinational companies also seem scared by the idea of collective bargaining, having come to view the absence of unions in China as a cost advantage. But the reality increasingly is that unless you are willing to talk to workers on an equal footing, more strikes will occur and business will suffer.

China is rapidly transforming into a market economy. And unless you want to revert to a planned economy, you need a mechanism to resolve conflicts between different interest groups. For employers and employees, collective bargaining is that mechanism.

Mr. Han is director of the Hong Kong-based labor rights group China Labour Bulletin.
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