VZCZCXRO0699
RR RUEHCN RUEHGH RUEHVC
DE RUEHGZ #1278/01 3470831
ZNR UUUUU ZZH
R 130831Z DEC 07
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 6730
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAIIA/CIA WASHDC
RUEKJCS/DIA WASHDC

UNCLAS SECTION 01 OF 02 GUANGZHOU 001278 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT PASS TO USTR 
 
E.O. 12958: N/A 
TAGS: ELAB ECON EINV CH
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. 
 
--------------------------------------------- -------- 
Labor Officials: New Law Builds on the Current System 
--------------------------------------------- -------- 
 
¶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. 
 
--------------------------------------------- ------ 
U.S. Experts Question China's Arbitration Framework 
--------------------------------------------- ------ 
 
¶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. 
 
--------------------------------------------- ---- 
Labor Arbitration Reform Still Debated Internally 
--------------------------------------------- ---- 
 
¶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. 
 
--------------------------------------------- ---- 
Guangdong Labor Officials Unsupportive of Strikes 
--------------------------------------------- ---- 
 
¶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 
 
GUANGZHOU 00001278  002 OF 002 
 
 
"didn't care for their country's economy." 
 
--------------------------------------------- ---------- 
U.S. Companies Pessimistic on Law's Reducing Labor Disputes 
--------------------------------------------- ---------- 
 
¶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