Copyright 1996 The Journal of Commerce, Inc.
Prime Target Nike Runs Own Course Through Maze Of Labor Practices
by Joe Studwell
October 24, 1996, BEIJING In a year that has seen many top retailers tarred in headlines for exploiting underpaid workers and relying on sweatshops, one of the biggest targets has been Nike Inc. of Beaverton, Ore.
Here in China, the company uses the same locally controversial strategy it follows in other Asian countries - manufacturing inexpensively through subcontractors while looking to push its expensive trademark products on the local market.
Exactly how Nike manufactures, organizes its business and makes its money in China is difficult to determine.
Nike is elusive about its style of business, mainly because it is so roundly and routinely criticized. Most recently, social activist Jesse Jackson alleged that the company was running sweatshops in Indonesia.
Asian headquarters spokeswoman Martha Benson cites a more prosaic reason: ''We are operating in an intense environment where any commercial information is of great use to our small number of global competitors.''
However, in a nod to growing international concerns about sweatshop labor, Nike announced this month that it has established a labor practices department and that the company would allow independent third-party observers to visit Nike contractor facilities during the coming year.
In a written statement, Nike said its labor practices department would work closely with production staff and with production partners worldwide.
The department will focus on Indonesia , China and Vietnam, which together account for 75 percent of Nike's worldwide athletic footwear production, the statement said.
Nike inspectors and monitors will provide ''dedicated monitoring'' and make recommendations in areas such as compensation, benefits, work environment, recruitment and hiring, overtime, worker-management relations and supervision of independent monitoring systems.
China is an important production base for the global Nike machine. The company sourced 32 percent of its shoes from China in 1995, up from 27 percentin 1994. Nike produces low- to medium-value shoes here as it does in Indonesia, which produces the highest number of Nike's shoes at 36 percent.
Nike likes the cheap labor in China and - as Peter Mangione, president of the Footwear Distributors and Retailers of America says - the country has excellent infrastructure for getting finished goods from factories to ports.
Nike is cautious about over-exposing itself to China, not because of rising costs, but because of the perennial stress of listening to its home government making noises about most-favored-nation trading status.
If the threats ever became real, tariffs would rise from 6 percent to 60 percent in some categories - a serious move given that three-fifths of all shoes made in China are exported to the United States.
Donna Gibbs, director of corporate communications, says that in the event of MFN withdrawal, Nike could ship China-made goods to Asia and Europe and, at the same time, send more product from Indonesia and other producing nations to the United States.
Nike does not enter into joint ventures to manufacture and distribute shoes and apparel in China. It subcontracts these functions, thus avoiding any significant direct investment and need to deal with partners.
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