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Positions & Statements

Letter to Congress: China Human Rights and

Democracy Act 1997 and Codes of Conduct

The Honorable Benjamin A. Gilman

Chairman

International Relations Committee

2170 Rayburn House Office Building

Washington, DC 20515-6128

Dear Mr. Chairman:

I am writing on behalf of the U.S. Council for International Business (USCIB) to express our concerns over certain provisions of H.R. 2095, the China Human Rights and Democracy Act of 1997, which establishes principles governing the conduct of U.S. businesses in China. Our views are based on the USCIB's most recent policy statement on Codes of Conduct, which I enclose for your information.

This statement was prompted by a spate of proposals emanating from the legislative and executive branches of the U.S. Government, as well as from non-governmental organizations (NGOs), that seek to impose codes of conduct on multinational corporations with the objective of making such corporations the agents of political change abroad. H.R. 2095 is the most recent example. Such efforts would duplicate existing voluntary company, industry, national, and international codes of conduct. They could also prove counterproductive since they may contradict established principles of conduct long agreed to by businesses and governments, and place American citizens and companies in jeopardy of violating national laws in the countries in which they do business.

USCIB is the U.S. affiliate of the Business and Industry Advisory Committee (BIAC) to the OECD and of the International Organisation of Employers (IOE), which is part of the tripartite International Labor Organization (ILO). Both OECD and ILO have promulgated internationally accepted voluntary codes that address a broad array of business practices and social and environmental issues. These codes have the merit of maintaining a level playing field for U.S. companies, in that they apply to our major trading partners. The following observations on Section 6 of H.R. 2095 are drawn from our long experience with these instruments:

Both the OECD Guidelines for Multinational Enterprises and the ILO Tripartite Declaration Concerning Multinational Enterprises and Social Policy require companies to respect the sovereign rights of the States in which they do business, to obey national laws and regulations, and to give due consideration to local practices and economic and social priorities. Provisions in H.R. 2095 dealing with the promotion of political activity and demonstrations, the promotion of a variety of expressions of freedom of speech, and the inhibition of population control policies could confer obligations on U.S. companies to undertake political activities in violation of Chinese law, and to resist the implementation of Chinese social policies -- conduct that could entail serious personal risk to employees and threaten the viability of legitimate business activities.

The OECD Guidelines and ILO Tripartite Declaration enshrine the principle of freedom of association for workers employed by multinational enterprises, according to which companies should not inhibit the right of workers to organize. H.R. 2095 seems, however, to confer a positive obligation on companies to promote such activities, an obligation which runs counter to even U.S. labor law and practice.

Provisions in H.R. 2095 dealing with employee health and safety, environmental management, and environmental protection are laudable, but are already covered extensively in the environment chapter of the OECD Guidelines, the Safety and Health section of the ILO Tripartite Declaration, the ICC Charter on Sustainable Development to which thousands of multinational corporations subscribe, and numerous sectoral and corporate codes and guidelines.

Provisions in H.R. 2095 dealing with identification of goods produced under conditions of forced labor and data on political prisoners could be interpreted to confer on U.S. companies burdensome information gathering obligations that are in some cases beyond the legitimate scope of business activities.

In sum, seeking to enlist U.S. corporations operating abroad as agents of political or social policy is inappropriate and unlikely to promote the broader political objectives of this legislation. It exposes American citizens to personal danger and burdens American companies with business risks and obligations that threaten their competitiveness. Multinational companies have a duty to act as law-abiding and responsible corporate citizens in the localities in which they do business. In addition, they have long acknowledged their responsibility for good business practices in such areas as environmental management, occupational health and safety, employee relations, child labor, and general ethical standards. We continue to believe that the best way for U.S. companies to advance desirable political, social, and environmental goals is for them to continue on this voluntary and positive track. H.R. 2095 would be a step in the wrong direction.

Sincerely,

Abraham Katz





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