TESTIMONY OF EDWARD FIRE
PRESIDENT
INTERNATIONAL UNION OF ELECTRONIC, ELECTRICAL, SALARIED, AND FURNITURE WORKERS DIVISION OF THE COMMUNCATIONS WORKERS OF AMERICA (IUE-CWA)

BEFORE THE UNITED STATES-CHINA COMMISSION
ON U.S. TRADE AND INVESTMENT RELATIONS WITH CHINA

August 2, 2001


Mr. Chairman and distinguished members of the Commission: My name is Edward Fire, and I am the President of the IUE Industrial Division of the Communication Workers of America (IUE-CWA), AFL-CIO. On behalf of the more than 125,000 electronics workers represented by our union, I would like to thank you for this opportunity to present our views regarding current U.S. trade policies toward the People's Republic of China and their national security implications. IUE-CWA represents production workers from a broad spectrum of industries, including consumer electronics, automotive electrical equipment, power generating equipment, telecommunications, aircraft engines, electrical motors, lighting, and household appliances. Our members are employed by some of the largest multinational in the world including General Electric, GM/Delphi Automotive Systems, Phi lips Electronics, and numerous other companies with significant business interests and investment in China.

As Richard Trumka, Secretary-Treasurer of the AFL-CIO, testified before this Commission in June, our economic relationship with China in one of the most controversial and complicated relationships we have with any country in the world. The corporations for which our members work already have trading relationships and investments in China and they will continue to do so regardless of U.S. policy. We recognize that in today's global economy our employers will continue to be economically engaged with China. We believe, however, it is the responsibility of U.S. foreign policy to manage that engagement so that it occurs in ways that strengthen rather than weaken our nation.

The trade policies of the United States should not sacrifice the viability of our domestic electrical and electronics sectors to narrow foreign policy objectives that may or may not undermine the long-term interests of America. First and foremost, American trade policies should serve the interests of Americans- not just corporations chartered in America, but American citizens who live, work, pay taxes, and serve in our countryís armed forces. Our trade policies should be designed to make sure that trade with other nations will not result in downward pressure on American wages and living standards. Yet, that is precisely the impact U.S. trade with China has created, and will continue to create if the terms of trade with China are not changed radically.

Another crucial issue is how the U.S. should regulate the investment in China by U.S.-based companies. American investment in China should promote human and labor rights for Chinese employees. Unfortunately, in the absence of such regulations imposed by the U.S. in international trade agreements and in the WTO, these U.S.-based multinational corporations are given incentives to exploit the abysmal human and labor rights environment in China, rather than act to improve it. Indeed, some would say that the primary motivation behind investment in China is the knowledge that human and labor rights standards can be abrogated at will, without any accountability or any financial repercussions.

Last week, on the eve of U.S. Secretary of State Colin L. Powell's visit to Beijing, China convicted another American scholar of espionage and sentenced her to ten years in prison. At least six U.S. citizens and permanent residents have been detained by Chinese police in the past year alone. China has clearly shown us that it will continue to repress human rights and democracy with an arrogance that is staggering. But the U.S. has responded to this arrogance with acquiescence. The U.S. has not insisted that China establish a policy of responsible engagement. Indeed, the Bush Administration and many in Congress reject any linkage between human rights abuses and economic relationships with China. China is emboldened by their views.

Once China's accession to the World Trade Organization (WTO) is complete, our nation will have even fewer tools available to address violations of human rights and unfair trade practices in China. Nor is there any reason to believe the claims of the Administration that unfettered free trade with China will lead to an improvement in the situation. On the contrary, a China free to act without international pressure will act as it has in the past.

Secretary Powell's visit to China has brought to mind the 1994 U.S. delegation to China led by Secretary of State Warren Christopher. Secretary Christopher's effort to promote the Clinton Administrationís human rights agenda was rejected by the Chinese and in fact led to the suppression of political dissidents on the eve of his visit. What is worse, and even more damning is that fact that the Chief Executive Officer of General Electric, Jack Welch, helped undermine our government by publicly criticizing Mr. Christopherís efforts, and arguing that linking U.S. policy on democracy and labor rights interfered with the free-market. An unrestricted investment environment for American companies came first for Mr. Welch, and democracy and U.S. foreign policy be damned.

As Members of the Commission know, the IUE-CWA has joined with other international unions and the AFL-CIO in opposition to permanent normal trade relations between the United States and China precisely because the U.S. has not required the terms of trade to include standards on human and labor rights. Similarly, the rules of the World Trade Organization (WTO) provide no protection of labor rights in the global trading system. The Chinese government continues promote an economic environment in which universal human rights, defined in the ILO Declaration of Fundamental Principles and Rights at Work as including freedom of association, the right to organize and bargain collectively, the right to reject child labor, refuse forced labor, and to be free from discrimination in the workplace, are systematically denied.

The AFL-CIO has received reports from China over the past year of increased labor protests, arrests, and violence, which indicate that the human rights situation is worsening, rather than improving for the vast majority of Chinese workers. Our GE members have also heard reports over the years of labor rights violations and the existence of horrendous working conditions within the Companyís Chinese production facilities. But when the IUE attempted to arrange a delegation to China in 1998 to meet with GE workers and local management to discuss our concerns about the Companyís Asian business operations and labor practices, we were denied access to the plants. What does GE have to hide in China?

Current U.S. trade and investment policies and relationships with China are having a profound impact on our own economy and on our national security. Despite the long period of economic expansion in the United States over the past decade, the U.S. trade deficit has grown larger. Employment and real wages for production workers in many electrical and electronics industries are lower today than they were at the beginning of the 1990ís. Today, when non-represented workers attempt to organize, they are routinely threatened with plant closure and job loss to China and elsewhere. When unionized workers attempt to bargain for better wages and benefits, they are threatened with plant closure and job loss to China and elsewhere. When unions lobby the U.S. Congress and the Executive branch for increases in the minimum wage and other social benefits, we are denied as a price for keeping companies in the United States.

The overall 2000 U.S. trade deficit with China increased by 20 percent over 1999, to more than $80 billion. In fact, the largest single bilateral U.S. trade deficit is now with the PRC. The most immediate effect of this trade imbalance is the loss of U.S. manufacturing jobs. Our experience shows that American companies are moving out of the U.S. to manufacture advanced electrical and electronic products in China and export them back into the U.S. Electronics and electrical goods make up the largest single category imported goods from China. While the U.S. global trade deficit in the ìElectrical Machinery, Sound Equipment, TV Equipment and Partsî sector increased 267% to $19.1 billion from 1990 to 2000, the deficit has actually declined by more than $3 billion since 1995. Over the same time period, however, the U.S. trade deficit with China in this industrial sector grew 915% to $16.9 billion. The deficit with China increased by more than $10 billion over the past five years. The U.S. imported by than $19 billion worth of goods from this category in 2000.

When U.S. consumer demand for these electronic commodities is met by Chinese imports instead of domestic production, existing U.S. jobs are lost and new manufacturing jobs are not created. From the Chinese perspective, this trade balance makes them heavily dependent on the U.S. economy and its consumers. The question before this Commission is how the U.S. government can use the leverage created by this bilateral trade imbalance to promote basic labor rights and democracy in China, rather than simply opening up the Chinese labor market for further exploitation.

Since the beginning of 1990, total employment in the United States grew by more than 21 percent to 132.4 million (Appendix I). Net U.S. employment in manufacturing, however, fell by 883,000. Over the past twelve months alone, manufacturing job losses have totaled more than 500,000. In April 2001, manufacturing employment fell below 18 million for the first time since 1965.
The overall expansion in the U.S. economy has masked the adverse trends occurring in key manufacturing sectors in the United States. In the Electronic and Other Electrical Equipment Industry (SIC 36), total employment of production workers fell from 1,077,000 in January 1990 to 1,063,000 in January 2001. If the Electronic Components and Accessories sub-sector (SIC 367) is removed, employment in the rest of the industry fell by 93,500, or 12.6%, over this eleven-year period. Because the Electronic Components sector, which includes the production of semiconductors, is essentially non-union, these employment shifts resulted in a significant decline in union density in the overall electronic and electrical equipment industry in the 1990s.

The effect on U.S. wages from globalization and has been even more pronounced than the employment effect (Appendix II). For U.S. production workers in manufacturing, real average hourly wages increased by just 0.7 percent to $14.54 from January 1990 to 2001. Because this inflation-adjustment increase is far less than increases in labor productivity over this period, there has been a worsening in the distribution of income and wealth between labor and stockholders. For production workers in the Electronic and Electrical Equipment Industry (SIC 36), real wages grew 1.9 percent to $14.07 per hour over this same period. Real wage changes in individual sub-sectors of the industry have varied widely. Wages in Household Appliances (SIC 363), Motors and Generators (SIC 3621), Communications Equipment (SIC 366), Electron Tubes (SIC 3671), Storage Batteries (SIC 3691), and Engine Electrical Equipment (SIC 3694), for example, have fallen over the past 11 years. These statistics reflect the fact that globalization and our trading relations with countries such as China have led to a disproportionate loss of well-paying jobs in our economy. Our experience with individual employers within the electronics industry confirms that it is not just low-paying jobs that are threatened by unrestricted trade.

Given the intrinsic diversity of the electronics and telecommunications industry, assessing the economic impact of the bilateral trade and economic relationship between the United States and China on the electrical and electronics sector is difficult. The effect on consumer electronics and household appliances, for example, is quite different than on power generating equipment. Even with CWA-represented firms such as General Electric, Delphi, and Lucent Technologies, changes in our trade relationship with China will vary in their effects depending on the current location of production facilities and on the relative importance of domestic versus Chinese markets for these goods and services. In the case of GE, the analysis is further complicated by the fact that it is the worldís largest non-bank financial institution and changes in the rules for financial services and insurance are likely to have a significant impact on the corporationís investment and acquisition strategies. It is our understanding that negotiations over the treatment of existing insurance holdings by foreign corporations is one of the few remaining open issues in the discussions over Chinaís entry into the WTO.

Thus, the complete examination of the effects of unrestricted trade with China on electrical and electronics workers requires an analysis at the company level. This is not simply because we generally bargain and interact directly with individual employers in the industry, but because these firms exert a great influence over the global economy, including the economic relationship with China. GE and its globalization strategy illustrates the detrimental effects of free-trade and investment policies. Indeed, for the IUE-CWA, GE is the corporate face of globalization. Global revenues of this one multinational electrical corporation are more than one-eighth of the entire gross domestic product of China.

Over the past decade, GE has moved production and employment out of the United States to China from each of its major business segments, including lighting, power systems, electrical distribution and controls, medical equipment, and financial services. Jack Welch was quoted a few years ago as saying: "Ideally, you would have every plant you own on a barge." The implication of this statement is clear: One of Americaís largest and perhaps its most powerful corporation is not loyal, economically, to any one country or workforce. Its globalization strategy is to move its capital, advance technology, and employment continually around the world to exploit workers. Chinaís entry into the WTO will make it easier to do just that. Over the past decade, GE has shut down dozens of plants in the United States, including those doing U.S. government work, not because they were unprofitable, but because they were not profitable enough for GE. GE closed them so it could make even higher profits by operating in China and elsewhere, where wages are low and unions virtually non-existent. Although GE made more than $12 billion in net profits last year, it wants to continue the ìrace to the bottomî game of global exportation of jobs and global exploitation of workers. It is looking toward China to help it achieve that goal.

In the absence of meaningful labor rights standards in the rules of the WTO and regional free-trade agreements, unions in the United States have attempted to collectively bargain international codes of conduct that would apply to all of the global operations of a company, including those in China. In the case of GE, management has refused to discuss this type of proposal claiming that it is not a "mandatory subject of bargaining". Over the past three years, GE workers have also submitted stockholder resolutions at the GE annual meetings seeking a similar code of conduct. This past year in Atlanta, GA, the GE Board of Directors argued that it "does not believe that the code of conduct suggested in the proposal is necessary and recommends a vote against the proposal." The proposal would have restricted GE's ability to use child labor, prison labor, or to discriminate on the basis of race, color, sex, religion, political opinion, age, nationality, or social origin. GE management claims such provisions arenít needed because it already meets the labor standards in affect everywhere it does business. But even if this were true, this policy relieves the company of meeting these minimal standards in countries such as China that lack internationally-recognized labor rights and protections.

Unfortunately, our experience with smaller corporations in the industry has been similar to that of General Electric. Hundreds of IUE members, for example, recently lost their jobs when General Cable Corporation moved work out of its Williamstown, MA (IUE-CWA Local 299) and Montoursville, PA (IUE-CWA Local 123) locations to China. In 1996, Rotorex-Fedders forced the 500 members of IUE Local 133 in Walkersville, MD out on strike, and then moved most of the existing production to China. While we prevailed in the ensuing legal battles and forced the company to pay damages to our members, the majority of the lost jobs have not returned to the United States from China.

In conclusion, we believe that it is in the interest of the United States to promote a stable economic relationship with China. However, the promotion of free-trade and investment policies with China without meaningful and enforceable labor and environmental protections will not lead to equitable, sustainable, or democratic development in China. We urge this Commission to develop and recommend new policy tools directed at fostering a engagement with China based on the respect for fundamental democratic and labor rights. Thank you.

APPENDIX 1
U.S. EMPLOYMENT OF PRODUCTION WORKERS IN SELECTED INDUSTRIES
(in thousands)
1990
2001
Change
% Change
All Workers
108,946
132,428
23,482
21.55%
All Manufacturing Workers
19,140
18,257
-883
-4.61%
0
Electronic and Electrical Equipment (36)
1,077
1,063
-14
-1.30%
Electronic Distribution Eauipment (361)
69.6
57.7
-11.9
-17.10%
Transformers (3612)
35.9
25.8
-10.1
-28.13%
Switchgear and Apparatus (3613)
33.7
31.9
-1.8
-5.34%
Electrical Industrial Apparatus (362)
122.1
98.8
-23.3
-19.08%
Motors and Generators (3621)
68.0
50.5
-17.5
-25.74%
Relays and Industrial Controls (3625)
40.4
31.1
-9.3
-23.02%
Household Appliances (363)
102.1
88.7
-13.4
-13.12%
Household Refridgerators & Freezers (3632)
21.7
20.0
-1.7
-7.83%
Household Laundry Equipment (3633)
17.4
13.7
-3.7
-21.26%
Electric Housewares and Fans (3634)
25.6
16.0
-9.6
-37.50%
Electric Lighting & Wiring Equipment (364)
138.5
131.8
-6.7
-4.84%
Electric Lamps (3641)
21.0
14.5
-6.5
-30.95%
Current- Carrying Wiring Devices (3643)
48.2
43.3
-4.9
-10.17%
Non-current-Carrying Wiring Devices (3644)
13.1
14.6
1.5
11.45%
Residential Lighting Fixtures (3645)
18.3
14.0
-4.3
-23.50%
Household Audio and Video Equipment (365)
58.2
47.5
-10.7
-18.38%
Household Audio and Video Equipment (3651)
42.1
30.5
-11.6
-27.55%
Communications Equipment (366)
137.0
124.4
-12.4
-9.20%
Telephone and Telegraph Apparatus (3661)
74.5
60.8
-13.7
-18.39%
Electronic Components and Accessories (367)
333.3
412.8
79.5
23.85%
Electron Tubes (3671)
21.8
13.6
-8.2
-37.61%
Semiconductors and Related Devices (3674)
92.7
131.4
38.7
41.75%
Electronic Components (3679)
91.8
109.2
17.4
18.95%
Storage Batteries (3691)
24.3
20.1
-4.2
-17.28%
Engine Electrical Equipment (3694)
51.3
50.8
-0.5
0.97%
Aircraft Engines and Parts (3724)
77.5
49.2
-28.3
-36.52%
Source: US Department of Labor

APPENDIX 2
AVERAGE HOURLY EARNINGS OF PRODUCTION WORKERS BY SELECTED INDUSTRIES; JANUARY 1994-JANUARY 2001
1990
2001
Change
Real Change
Manufacturing
$10.59
$14.54
37.3%
0.7%
Electronic and Electrical Equipment (36)
$10.12
$14.07
39.0%
1.9%
Electronic Distribution Eauipment (361)
$9.90
$14.33
44.7%
6.1%
Transformers (3612)
$9.63
$13.02
35.2%
-0.9%
Switchgear and Apparatus (3613)
$10.19
$15.35
50.6%
10.5%
Electrical Industrial Apparatus (362)
$9.99
$13.67
36.8%
0.3%
Motors and Generators (3621)
$10.07
$12.76
26.7%
-7.1%
Relays and Industrial Controls (3625)
$9.89
$15.49
56.6%
14.8%
Household Appliances (363)
$10.31
$13.22
28.2%
-6.0%
Household Refridgerators & Freezers (3632)
$11.81
$15.59
32.0%
-3.2%
Household Laundry Equipment (3633)
$12.01
$12.67
5.5%
-22.6%
Electric Housewares and Fans (3634)
$7.79
$12.77
63.9%
20.2%
Electric Lighting & Wiring Equipment (364)
$9.93
$13.80
39.0%
1.9%
Electric Lamps (3641)
$11.43
$18.46
61.5%
18.4%
Current- Carrying Wiring Devices (3643)
$9.90
$14.28
44.2%
5.8%
Non-current-Carrying Wiring Devices (3644)
$9.47
$12.53
32.3%
-3.0%
Residential Lighting Fixtures (3645)
$7.42
$12.09
62.9%
19.5%
Household Audio and Video Equipment (365)
$9.09
$13.19
45.1%
6.4%
Household Audio and Video Equipment (3651)
$9.41
$12.81
36.1%
-0.2%
Communications Equipment (366)
$10.96
$14.30
30.5%
-4.3%
Telephone and Telegraph Apparatus (3661)
$11.39
$14.43
26.7%
-7.1%
Electronic Components and Accessories (367)
$9.81
$14.63
49.1%
9.4%
Electron Tubes (3671)
$11.58
$15.31
32.2%
-3.1%
Semiconductors and Related Devices (3674)
$12.07
$19.75
63.6%
20.0%
Electronic Components (3679)
$9.17
$12.21
33.2%
-2.4%
Storage Batteries (3691)
$11.94
$15.27
27.9%
-6.2%
Engine Electrical Equipment (3694)
$11.33
$12.51
10.4%
-19.0%
Aircraft Engines and Parts (3724)
$14.65
$20.12
37.3%
0.7%
Source: US Department of Labor (BLS)