Next Step : U.S. Firms ‘Work’ for China Workers : Americans are trying to export good labor standards along with capitalism, with mixed success.

Deng, a 20-year-old from Hunan, makes about $2.30 a day stitching the Nike logo onto shoes, and she thinks she’s lucky. Compared to the conditions at other factories in this industrial region in southern China, the Nike plant is a workers’ paradise.

Until last month, Deng worked in a nearby Taiwanese-owned shoe factory, stitching shoes from sunrise until after midnight for 76 cents a day--and no overtime pay. Supervisors kept workers locked in the factory compound, except for one hour each Sunday, when Deng would slip through the open gates to look for another job. When the Nike plant hired her, she left her salary and belongings at the old factory rather than risk going back.

“It was like a prison,” she says, peering through her bangs. “The workers cried on the production line every day.”

Change may be coming to the long hours, low wages, and dismal safety conditions behind China’s economic miracle. And, ironically, it is the purveyors of capitalism--U.S. corporations--who are bringing the fastest labor reform to what was once known as the land of the worker.

Nike and rival Reebok are among a handful of U.S. corporations that are trying--with mixed success--to export U.S. standards to the developing countries where they do business. Their global codes of conduct forbid forced labor and underage workers, guarantee minimum wage, health and safety conditions, and proclaim concern for the environment.

The idea of a code of conduct for U.S. businesses overseas got a boost from President Clinton last month. In his decision to renew China’s most-favored-nation trade status, he pushed a voluntary “set of principles” for U.S. companies doing business there.

“The idea behind it was we can’t change China’s attitude toward human rights, but we can change ours,” said a Washington official.

China’s headlong rush into international markets has made its government officials more interested in making money than monitoring human rights or labor conditions, critics say. Factory collapses, fires and injuries are common hazards for workers in China’s booming industrial areas like Dongguan, just north of Hong Kong.

A constant flow of job-seekers from China’s poor hinterlands guarantees a steady supply of cheap labor, giving employers great leverage over disgruntled workers. The message is clear: If you don’t want your job, 100 other people do. Wages are rock-bottom, and safety standards can be even worse: Nearly 60,000 workers died in industrial accidents last year, many at foreign-owned companies, according to the China Daily newspaper.

“Both sides are at fault,” said Wong Wai-ling, a labor researcher at Hong Kong’s Asia Monitor Resource Center. “China is not enforcing rules and foreign businesses are ignoring them.”

After the most recent incident, a factory collapse that killed 76 workers in June, Chinese President Jiang Zemin visited survivors in the hospital, and local officials vowed to place permanent safety officers in large factories. But labor activists say that lasting improvements are unlikely to happen until workers can demand better conditions through independent unions, which are illegal in China.

The most active leaders of change, then, may come from outside the country. Enterprises overseen directly by American companies already have a good reputation in China, compared to Hong Kong, South Korean and Taiwanese competitors. The key, say labor activists, is to create uniform, industrywide pressure.

Henry Ching is part of Reebok’s human rights audit team in Hong Kong. Every three months he formally inspects subcontractors’ plants in China, and walks the factory floors frequently in between, checking fire extinguishers and the storage of chemicals, and letting the workers know he’s there to look out for them.

“We look for things the management might be hiding from us,” said Ching. “We go where they tell us not to go. We talk to the workers alone in their dorms.”

By Western standards, the conditions at many U.S.-connected factories here are not great; by the standards of a developing country, they are. “Our workers get paid twice as much as local schoolteachers,” said John Baratta, the production manager at Nike’s Dongguan plant.”Supervisors make more than a surgeon with 20 years’ experience.”

But even the Americans have their problems. Speaking out of management’s earshot, workers at the Nike plant in Dongguan say they work up to 15 hours a day--five hours longer than the legal maximum--to finish their quotas. Nurses in the company clinic say young women often faint on the production line because, trying to catch a few more minutes of sleep, they skip breakfast.

Nike at least has a representative on its subcontractor’s premises every day. Most U.S. companies that produce or buy in China act solely through subcontractors or middlemen, a practice that can shield them from responsibility for poor conditions.

Says Gary Edwards of the Ethics Resources Center, which provides ethical training to U.S. corporations: “They deliberately don’t ask questions they don’t want to know the answers to.” But other American firms are making changes.

Sears, whose shelves are also stocked with many made-in-China products, passed a resolution in response to shareholder pressure in March, 1992, to avoid buying products made by prison labor. That stance placed Sears in the company of Levi-Strauss, Timberland, Phillips-Van Heusen, Nike and Reebok: corporations that have established global codes of conduct.

The implementation of these well-intentioned statements can be difficult. Subcontractors inevitably use materials from other sources, and labor camps can have innocuous sounding names.

“How technical do you get?” asks Nike’s Baratta. “I don’t know how you can trace back every component that comes to us.” Levi-Strauss is phasing out of China precisely because it couldn’t.

The corporations who do follow through to enforce their codes of conduct have noticed a positive, if limited, impact.

Frank Tseng, a director of Taiwanese manufacturer Yu Yuen, which makes sport shoes for Converse, Nike, Reebok and others, said Reebok’s requirements spurred his firm to upgrade its other factories as well.

Aside from altruism, treating workers well makes good sense, say some business people. Reebok’s Ching said some suppliers initially balked at improving quality and conditions. “But now they’re seeing it can help them too,” he said. “They see the benefit of maintaining a steady work force.”

But as momentum grows in Washington for a voluntary corporate code of conduct overseas, the business community is less enthusiastic. “I am tired of being told that business is morally responsible for the human rights situation in China,” said Robert Kapp, the president of the U.S.-China Business Council, the backbone of the lobbying effort to retain China’s favored trade status. “It is fallacious and needs to be resisted.”

Frank Martin, the president of Hong Kong’s American Chamber of Commerce, said most of the 200 U.S. businesses based in Hong Kong already have general policies to protect employees. Executives, he says, simply don’t want more interference from the U.S. or Chinese governments.

If the idea that “doing good is good business,” is not persuasive enough for U.S. corporate leaders, fear of bad publicity might be the deciding factor.

The recent spate of disasters across the border are making Hong Kong-based executives take a closer look at what goes on behind factory doors. The American Chamber of Commerce is creating a model code of conduct and just established a working group on worker-safety education.

To be linked to an industrial tragedy, said Martin, would be “a public relations nightmare.”