China's New Labor Mediation Law Gets Mixed Reviews

By WW Staff

Reference ID: 07GUANGZHOU1278

Created: 2007-12-13 08:31

Released: 2011-08-30 01:44

Classification: UNCLASSIFIED//FOR OFFICIAL USE ONLY

Origin: Consulate Guangzhou


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SUBJECT: China's New Labor Mediation Law Gets Mixed Reviews


(U) This document is Sensitive But Unclassified. Please protect accordingly.


1. (SBU) SUMMARY: A new national draft law on labor dispute mediation and arbitration will significantly improve labor-employer relations, Guangdong provincial labor officials and lawyers told officials from the U.S. Federal Mediation and Conciliation Service (FMCS). AmCham South China members disagreed, warning that the law would have little actual impact and worrying that labor disputes and continuing labor shortages would only get worse. AmCham company representatives asked FMCS Director Arthur F. Rosenfeld for additional training resources for what was termed a "huge gap" in Chinese labor mediation capabilities. END SUMMARY.


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Labor Officials: New Law Builds on the Current System

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2. (U) The new draft labor mediation law, as described by Guangdong Provincial labor officials, will overcome four main limitations of China's current arbitration system: 1) the process takes too long, 2) arbitration costs are too high, serving as a barrier to entry for workers, 3) the system is inefficient, with many cases still ending up going to litigation, and 4) limited integration with the existing court system. Zhu De Jiang, Director of the Labor Dispute Arbitration Office of the Guangdong Provincial Labor and Social Security Department, said that mandatory time limits on each part of the process, a complete waiving of arbitration fees, and a clearer role for the courts under the new law would address the four limitations.


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U.S. Experts Question China's Arbitration Framework

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3. (U) Following Zhu's explanation of the arbitration framework under the draft law, FMCS Acting Deputy Director Scot Beckenbaugh pointed out that mediation and arbitration in China differ significantly from labor mediation in the United States. Beckenbaugh suggested that arbitration commissions in China, with members drawn from Labor Department, union, and company management ranks, might not be perceived as neutral, and that the new law did not have sufficient incentives to encourage cases from going to the more costly and time-consuming litigation process. American mediators and arbitrators, on the other hand, are typically independent, third-party entities, and arbitrations decisions in the United States are usually final.


4. (U) Chinese Labor and Social Security Department officials provided the FMCS delegation with conflicting statistics, suggesting that they do not have a firm understanding of the efficiency of their own arbitration process. While Zhu said that 80 percent of "all cases" were resolved at the arbitration stage, other officials had previously said that only 50 percent of cases were resolved in arbitration, with the rest going to court.


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Labor Arbitration Reform Still Debated Internally

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5. (U) The draft mediation law is in its second review by the Standing Committee of the National People's Congress (NPC) and will likely receive final approval by mid-January 2008, according to Guangdong Provincial Lawyers' Association Labor Law Commission Director Xiao Sheng Fang. The first review of the draft law began on August 26, 2007. Xiao indicated that the NPC had accepted many of the revisions requested by Guangdong lawyers, who had significant experience in labor disputes.


6. (U) Zhu stated that NPC legislators were still split into two camps over the new draft law. Legislators favoring an American-style arbitration system, where arbitration decisions are legally binding, are opposed by those who believe that the relevant parties should be allowed to appeal arbitration decisions, to "protect workers' rights." Zhu indicated that the final law would likely preserve this right of appeal.


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Guangdong Labor Officials Unsupportive of Strikes

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7. (SBU) Guangdong labor officials were not sympathetic to workers who strike. Stating that his Department closely tracks major labor disputes around the world, Zhu said that he and his colleagues "admired" President Bush's decision to break the 2002 U.S. West Coast longshoremen's strike. Zhu also referred to the recent public transportation strikes in France, saying that the French workers


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"didn't care for their country's economy."


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U.S. Companies Pessimistic on Law's Reducing Labor Disputes

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8. (SBU) Presenting a much less optimistic picture about the draft law's chances for success, AmCham South China representatives from Disney, Adidas, and Nike emphasized a strong need for alternative mediation training opportunities. Disney Asia's Regional Director for International Labor Standards Jim Leung described a huge gap in the abilities of Chinese arbitrators and labor officials, stating that while multinational companies would welcome effective formal mediation processes, Chinese mediators lacked the perceived neutrality and arbitration experience of American negotiators. Without effective legal mediation, Leung said, American companies were turning to private human resources consulting firms and NGOs for labor conflict resolution training. All of the company representatives expressed great interest in possible USG-sponsored or NGO-supported mediation training opportunities, saying that the demand for arbitration skills was considerable.


9. (SBU) In south China's existing factory workplace culture, mediation could not happen naturally and labor disputes would continue to fester, according to the AmCham representatives. Specifically, a dearth of overall management skills, traditional top-down company structures, and a lack of employee feedback mechanisms all contributed to fraying labor-management relationships. All three companies confirmed that workplace abuses were rampant in south China, directly affected their own manufacturing supply chains, and presented the companies with serious labor compliance challenges. Noting that labor shortages and labor disputes had increased dramatically since 2004, Leung guessed that China's new labor regulations would take at least 20 to 30 years to significantly change China's existing culture of labor-management relations.


10. (U) This cable was cleared by the FMCS delegation.


GOLDBERG

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