VZCZCXRO0443
PP RUEHCN RUEHGH
DE RUEHBJ #7771/01 2370015
ZNR UUUUU ZZH
P 250015Z AUG 06
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 5012
RUEHC/DEPT OF LABOR WASHDC
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RUEHSH/AMCONSUL SHENYANG 6750
RUEHGH/AMCONSUL SHANGHAI 5639
RUEHCN/AMCONSUL CHENGDU 7006
RUEHGZ/AMCONSUL GUANGZHOU 1301
RUEHIN/AIT TAIPEI 5900
RUEHHK/AMCONSUL HONG KONG 8034
RUEHGV/USMISSION GENEVA 1288

UNCLAS SECTION 01 OF 02 BEIJING 017771 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
DEPT FOR EAP/CM AND DRL/ILCSR 
DEPT PASS USTR FOR KARESH, A. ROSENBERG, MCCARTIN 
LABOR FOR ILAB - CARTER, OWENS, HELM, ZHAO, SCHOEPFLE 
TREAS FOR OASIA/ISA-CUSHMAN 
USDOC FOR 4420/ITA/MAC/MCQUEEN 
GENEVA FOR CHAMBERLIN 
 
E.O. 12958: N/A 
TAGS: ELAB ECON EINV PGOV CH
SUBJECT: WAL-MART ACCEPTS CHINESE LABOR UNIONS 
 
Ref: Guangzhou 25215 
 
(U) SENSITIVE BUT UNCLASSIFIED: NOT FOR INTERNET 
DISTRIBUTION 
 
¶1.  (SBU)  Summary: Since July 29, The All China Federation 
of Trade Unions (ACFTU) has established unions in at least 
five of Wal-Mart's 60 Chinese stores (ref).  ACTFU has been 
talking for several years about expanding its representation 
in foreign-invested enterprises (FIEs), Wal-Mart in particular. 
Suddenly they have succeeded.  Local ACFTU officials told 
Wal-Mart that they received instructions to organize Wal-Mart 
from their national (Communist Party-dominated) leadership. 
This is consistent with press reports that Chinese President 
Hu Jintao issued an instruction in March to "do more to build 
Party organizations and trade unions in FIEs."  Wal-Mart has 
now publicly agreed to cooperate with the ACFTU, and will pay 
the ACFTU a legally-mandated two percent of its payroll in 
each unionized store.  While some outside observers may 
consider this a victory for ACFTU, it is not a worker-driven 
process, and ACFTUQs track record on protecting workersQ rights 
is poor in any case, due to its conflicting allegiance to the 
Party and various levels of government.  The Wal-Mart unions 
have more to do with the role of politics in the ACFTU than 
with advancing workersQ rights. 
End summary. 
 
¶2. (SBU)  Since the end of July, at least five of Wal- 
Mart's 60 stores in China have established unions.  The 
ACFTU, China's only permitted labor federation, has vowed 
to organize them all.  After a shaky initial public 
relations response, Wal-Mart issued a press release on 
August 10, stating it would work "collaboratively with 
leadership from the ACFTU and union organizations at all 
levels to create a model working relationship."  Joe 
Hatfield, of Wal-Mart's head office in China, told laboff 
on August 14 that Wal-Mart decided to issue the statement 
after consulting with both its headquarters in Arkansas and 
ACFTU leaders in Beijing.  Hatfield said Wal-Mart's usual 
policy is not to engage with labor unions or other "third 
parties" in dealing with its employees, but that Wal-Mart 
decided to be proactive in this case. 
 
¶3.  (SBU)  Hatfield told Laboff that ACFTU was making 
approaches to workers in at least half of Wal-Mart's 
Chinese stores, often furtively or after hours.  ACFTU's 
own accounts in the Chinese press make the same claim, but 
cite workers' fear of company retaliation as the reason. 
Hatfield said Wal-Mart wants to bring this organizing 
activity out into the open.  Under the agreement they have 
reached with ACFTU so far, Hatfield said Wal-Mart will 
allow ACFTU representatives into its stores to make 
presentations to workers, and will respect duly registered 
unions.  Wal-Mart will also begin paying ACFTU a legally 
mandated "union fee" of two percent of its total payroll 
in all unionized stores, to be shared 60/40 between the 
store union and local ACFTU office. (ACFTU unions normally 
do not deduct dues from members wages, although they can 
legally do so.)  Many non-unionized FIES already contribute 
2 percent of their total payroll to workers' social funds. 
 
¶4.  (SBU)  ACTFU has been talking about expanding its 
representation in FIEs for several years, hoping to raise 
union density in FIEs from 20-25 percent to 60-80 percent. 
Hatfield acknowledged that Wal-Mart resisted ACFTU in the 
past, but said there has been a political change.  He said 
local ACFTU officials told Wal-Mart that they were 
specifically instructed by their national, Communist Party- 
dominated, leadership to intensify their push in FIEs in 
general, and at Wal-Mart in particular. 
 
¶5. (SBU)  An August 15 article in the Xin Jing Bao, a 
Beijing daily newspaper, may offer an explanation.  The 
article, citing ACFTU sources, reported that Chinese 
President Hu Jintao ordered more effort to be put into 
 
BEIJING 00017771  002 OF 002 
 
 
building Party and Trade Union organizations in FIEs in 
March, after reading a Government report on "Factors for 
Instability in Foreign-Invested Enterprises in China's 
Coastal Regions."  According to the article, ACFTU national 
vice-chairman Xu Deming followed up by leading an ACFTU 
study mission to Quanzhou in Fujian Province, where ACFTU 
failed to create a Wal-Mart union in 2004.  ACFTU created a 
Wal-Mart working group in Quanzhou in May, which 
spearheaded a renewed organizing effort.  The Quanzhou 
store formed a union, which was registered on July 29, the 
first at Wal-Mart (reftel).  Hatfield noted, and press 
accounts corroborate, that the number of union members in 
each unionized store so far is relatively small, e.g., 25- 
30 workers out of 500.  In one store, Hatfield said, about 
30 of 40 workers who signed the union petition were not 
even Wal-Mart employees, but vendor representatives. 
 
¶6.  (SBU)  Hatfield said Wal-Mart does not consider the 
formation of ACFTU chapters in its stores a bad thing. 
Through its cooperation with the ACFTU, Wal-Mart hopes to 
showcase what a good employer it is, and hopes to eliminate 
some of the "hard knocks" it has received in the local and 
foreign press.  Hatfield said Wal-Mart abides strictly by 
local law, even eschewing side agreements with local 
governments that some competitors use to evade legally- 
mandated labor standards. 
 
¶7.  (SBU)  Comment:  Under China's Trade Union Law, 
establishing a union is not difficult.  Twenty-five workers 
(or only ten in Guangdong Province) merely need to petition 
the local ACFTU office for registration.  Employer 
agreement is not required.  What is interesting in this 
case is not that the unions have been formed, but that it 
has taken so long.  ACFTU blames employer resistance for 
their low level of representation in FIEs.  In fact, it has 
more to do with lackluster organizing efforts, and ACFTU's 
inability to convince workers that they are relevant.  Now, 
thanks to some direction from the top, the situation has 
changed, but no well-informed observer of the China labor 
situation expects ACFTU unions at Wal-Mart or any FIE to 
effectively represent their members.  By law and in 
practice, ACFTU unions are subservient to local Government 
and Party officials, who generally place a higher priority 
on attracting investment and maintaining a business- 
friendly environment.  While some observers may consider 
the creation of these ACFTU unions in Wal-Mart a victory 
for labor over an intransigent multinational, this case has 
more to do with the role of politics in the ACFTU than with 
advancing workers' rights. 
 
Sedney