Mix Business and Rights in China

By , Timothy A. Gelatt teaches Chinese and East Asian law at New York University and is of counsel to the firm of Reichler & Soble, representing US companies in China and East Asia.

IIN the debate over using most-favored-nation (MFN) status to effect human rights progress in China, the American business community agrees that United States business presence in China, which MFN institutes, is vital to achieving changes in that country.

Though the MFN debate is in a temporary lull, another piece of legislation offers the business community a way to put that position into practice. A "code of conduct" for US businesses operating in China, introduced by Rep. John Miller (R) of Washington, has already passed the House as part of the Omnibus Export Amendment Act of 1991, and is awaiting Senate attention.

This legislation does not seek to impose sanctions on China for failure to meet human rights standards, nor does it in any way discourage American businesses from investing. Rather, the bill asks companies with a significant presence in China to follow a list of basic human rights principles, on a best effort basis, in the course of their operations.

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The principles include "seeking to ensure" that employment decisions in China are not discriminatory in terms of sex, ethnic origin, or political belief; refraining from knowingly using prison labor; "undertaking" to protect freedom of assembly and expression, and "discouraging" compulsory political indoctrination on business premises; and "attempting to raise" with relevant agencies cases of individuals detained for the nonviolent expression of their views.

There are no penalties for "failure" to comply with the principles, though the bill asks companies to submit an annual report to the Secretary of State describing their efforts. The secretary, in turn, would report annually to Congress on American companies' adherence to the principles.

Given the professed desire of the business community to contribute positively to China's reform, the level of objection to the suggested code of conduct from American business representatives in China with whom I discussed it recently was surprising. Some concerns relate to Congress in effect telling American companies what to do. But US business people in China also seem reluctant to adopt the code's principles without congressional involvement - on the model of the Sullivan principles for South Africa.

They say waving a "red flag" on human rights would jeopardize their position in China and potentially prevent them from exerting the positive influence they already have by being there. Some businesses say adherence to the principles violates Chinese law.

THESE concerns seem way out of proportion, given the simple principles the proposed code of conduct suggests the companies follow.

American representatives are not being asked, after all, to demonstrate on the streets of Beijing for the overthrow of the Communist Party. Rather, they are being requested to endeavor, as best they can, to promote basic international standards in their business activity in China.

While Americans' efforts to uphold the code of conduct may bring about some raised eyebrows and uncomfortable stares from Chinese officials, those efforts will not get them thrown out of China and will ultimately win them respect from the Chinese and promote their long-term position in the country. Nor does Chinese law contain any provisions that observance of the principles in the proposed code of conduct would violate.

As China pushes its economic reform process full speed ahead in the wake of the recent apparent triumph of Deng Xiaoping's "liberal" line, it has an overwhelming need for the investment, technology, and managerial skills that the US (China's second largest foreign investor, with close to $5 billion worth of concluded projects) can provide. American companies have demonstrated their support for China's modernization by calling for continued MFN status. Now they are in a unique position to extend their imp ortance to China by making low-key efforts for change at the grass-roots level through the vehicle of the code of conduct.

It is not enough for business people to say that their mere presence in China helps to inculcate the values incorporated in the proposed code. It does. But American companies owe it to themselves - and to the Chinese people - to make more active use of their significant influence in China to further the progress of human rights. Making a good faith effort to honor the proposed code of conduct by standing up for the protection of rights in their China operations would be an important step in that directio n. It's time for American business to put its mouth where its money is.

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