Jeff Gelles: For Apple, trouble in China

Even if you love your iPhone, and are eagerly awaiting this week's expected announcement of the iPad 3, maybe you've also been noticing a stream of stories describing some discomfiting aspects of the empire that Steve Jobs built.

Apple's state-of-the-art engineering, and the elegant designs that Jobs advanced with his legendary single-mindedness, are largely products of the United States. But the products themselves are now almost entirely manufactured in Asia, with final assembly by contractors such as Hon Hai Precision Industry Co. Ltd. - a Taiwanese company, better known as Foxconn, that operates more than a dozen factories in China.

Apple is anything but alone in this. Foxconn, which last year leaped to 60th on Fortune magazine's Global 500 ranking of the world's largest corporations, has produced for many of the biggest names in technology, including Dell, Hewlett-Packard, Sony, and Toshiba, according to news reports.

But Apple's phenomenal success and profitability have sharpened the focus of those concerned about sweatshoplike labor practices in China, and have raised a quandary for some consumers: Does it matter to you whether the products you love are made by workers subject to conditions that Americans or other Westerners would find appalling?

From a perch in the United States, it's impossible to verify or dispute some of the more disturbing reports, such as the account on This American Life from Mike Daisy, a self-described "Apple fanboy" who visited a Foxconn factory - if that word can possibly apply to a facility that Daisy says employs about 430,000 people - in Shenzhen, China.

Daisy tells of meeting workers as young as 12 or 13, well below the legal minimum age of 16 that China sets for such work. He talks about workers whose hands are ruined by their mid-20s, and a worker blacklisted and then fired for the misdeed of demanding overtime pay.

How has Apple answered its critics? Largely as it has in the past, by referring to its unusual degree of transparency regarding "supply-chain" practices - warts and all. But this time, Apple also took a new step: It joined the Fair Labor Association, a so-called social-auditing organization that is expected to issue a report on Foxconn practices this month.

Only time will tell whether the FLA's involvement will make a big difference. At least one veteran social auditor - Heather White, now a fellow at Harvard's Edmond Safra Center for Ethics - has raised concerns about conflicts of interests affecting such auditors and the companies they examine.

It's worth considering the extraordinary scale of the problems Apple has already acknowledged - albeit in much drier language than the news reports - in a series of annual "supplier responsibility" reports issued since 2007, the year of the iPhone's introduction.

Despite Daisy's account, Apple says it has almost succeeded in eliminating child labor throughout its supply chain - at least 156 companies it identifies on its website. And it says it has done so completely at final-assembly facilities such as Foxconn's.

In its 2012 supplier responsibility report, Apple said it had discovered a total of six active and 13 historical cases of underage labor at five unidentified facilities.

Chief executive officer Tim Cook has plainly made the issue a priority, and he emphasizes Apple's policy of requiring that violators return underage workers to school and pay for their education.

"We think the use of underage labor is abhorrent. It's extremely rare in our supply chain, but our top priority is to eliminate it totally," Cook said at a Goldman Sachs Group Inc. investors conference last month.

Overtaxed workers are also an obvious problem, even if Apple has quietly questioned Daisy's account that a Foxconn worker died "after working a 34-hour shift" while Daisy was visiting.

Apple's "Supplier Code of Conduct" limits workers to 60 hours per week, and requires at least one day off out of seven - hardly a high bar by Western standards. Yet its 2012 report said that more than half of the workers at each of 93 facilities had labored more than 60 hours during at least one week in a 12-week sample. And more than half the employees at 90 plants had worked more than six days in a row at least once per month.

Even indentured labor - formally vanquished long ago in the West - still poses a problem for Apple. Migrant workers hired from countries such as the Philippines, Thailand, and Indonesia sometimes owe months of pay to recruiters. Apple says it prohibits charges of more than one month's pay, and considers anything beyond that to be "debt-bonded labor" or "involuntary labor."

Apple clearly deserves credit for transparency, and for self-scrutiny that has improved over time. Its first supplier report, in 2007 and before a rash of worker suicides drew attention to Foxconn, essentially suggested that some of today's problems didn't exist.

"Our audits found no incidents of child labor at any audited facility," Apple said back then. "In addition, our audits found no incidents of forced, bonded, indentured or prison labor at any facility."

To Heather White, the new spotlight on Apple should help illuminate two broader problems.

One is a flaw in social auditing, which she says suffers from a basic conflict of interest: Since both the suppliers and the auditors are paid for their services by corporations such as Apple, she says, they are less likely to expose problems than outsiders such as the Hong Kong anti-sweatshop group, Students and Scholars Against Corporate Misbehavior, that has helped bring Foxconn's problems to light.

"This is all voluntary," says White, who has cofounded two social-auditing groups, Verité and New Standards. "The factories are under no real obligation to answer questions."

But the bigger problem White sees is more fundamental: China's dramatic swing from a flawed worker's paradise under communism to a flawed capitalist dynamo since the 1980s - an era defined by Deng Xiaoping's oft-quoted slogan, "To get rich is glorious."

Fluent in Chinese, White began her career in 1980 as an import agent for Williams-Sonoma Inc. and other companies seeking inexpensive suppliers for products such as glassware and porcelain. Production occurred on communes, and everybody wore Mao suits.

White says that in its unbridled enthusiasm for entrepreneurship, China has abandoned respect for workers' rights. She says Chinese workers have no enforceable rights to join unions, organize, bargain collectively, or even to present grievances.

"If you get together with a group of workers to discuss grievances, they can call security and have you carted away. That's considered insubordination," she says.

To its credit, Apple says one of its priorities is ensuring that workers understand their rights. If White is correct, Apple needs to start by training Foxconn - and speaking more forcefully to China's government.

It may mean that Apple prices have to rise a bit, or that its profits slightly suffer. But if a company as smart as Apple can't solve these problems, who can?