Policing global labor practices

The debate on free trade versus protectionism has taken a sharp turn - from a focus on the price of imports, to the conditions under which imports are produced.

For one, labor standards of overseas producers have become a major bone of contention. A new poll by the University of Maryland reports an overwhelming majority (93 percent) want to see trade agreements that include global standards on working conditions.

At the same time, Nike terminated its contract to provide hockey equipment to Brown University. The company objected to being held to the code of conduct of the Workers' Rights Consortium (Brown is a founding member).

A protracted battle is developing between unions and human rights groups and companies opposed to outsiders telling them how to do business.

The activists want to ensure that companies maintain high standards overseas, especially when they export to the United States.

In turn, many companies view the activists, especially unions, as favoring protectionism in disguise.

Before the decibel level of the debate skyrockets, let us consider a third alternative - voluntary responses by the private sector. It turns out that many American companies operating overseas voluntarily adopt enlightened working practices above those prevailing in the areas where they do business. Some of these companies include Boeing, DaimlerChrysler, and Ingersoll-Rand.

Another case in point is the Mattel Company's Global Manufacturing Principles, adopted unilaterally in 1997. The principles govern Mattel factories and vendors worldwide. They require workers to be paid at least the minimum wage or a wage that meets local industry standards, whichever is higher.

In addition, no one under the age of 16 or the local legal age limit (whichever is higher) may work in a factory that produces products for Mattel. The company also pledges not to use manufacturers or suppliers employing forced or prison labor. Its environmental, health, and safety standards are based on those of the American Conference of Government Industrial Hygienists.

Because of skepticism that standards may not be enforced, Mattel set up an independent monitoring council. It audits the factories of the company and its suppliers on a regular basis, and has complete discretion to make its findings public. I serve on the council, which has completed its first round of audits. These covered eight factories in four countries, accounting for 70 percent of Mattel's production.

The work of the council was supported by auditors from PriceWaterhouseCooper, who inspected the payroll records, and a team of interviewers from a nongovernmental organization, Verit. The latter held confidential meetings one-on-one with hundreds of employees.

The council concluded that the audited plants are in general compliance with country laws and Mattel's principles.

However, some shortcomings were noted, none involving immediate danger to employee health or safety. The plant managements have initiated remedial action - if they hadn't, Mattel's central management likely would have come down hard on them.

The audit process uncovered instances of inadequate ventilation, chemical odors, excessive variation in in-plant temperatures, and inadequate use of safety equipment. In several facilities, the auditors were unable to verify that the workers were paid according to the formal pay structure, because accounting systems were difficult to understand.

The accounts will have to be reconstructed before a positive report can be presented. The council is planning follow-up inspections to determine whether the problems identified have been corrected.

The interviews revealed an overwhelming consensus that there was no harassment or intimidation of employees for any union-related or other type of organizational activity. Nor did they report discrimination in hiring or promotion decisions based on gender, race, or national origin. In some cases, such as the Barbie doll factory in China, the plant followed above-average standards, such as a minimum age of 18 years for new hires.

These initial findings are tentative. Nevertheless, they seem to indicate that companies can establish reasonable standards for their overseas operations and can set up monitoring devices that, without government or interest-group pressure, can provide an independent check.

A voluntary response along the lines of Mattel's standard-setting and independent monitoring process may be an effective way of obviating the need for a uniform system of global standards, either mandated by government or forced by outside interest groups.

*Murray Weidenbaum is chairman of the Center for the Study of American Business at Washington University in St. Louis.

(c) Copyright 2000. The Christian Science Publishing Society

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