OCTOBER 1995 · VOLUME 16 · NUMBER 10

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U N D E R C U T T I N G    W O R K E R    S A F E T Y

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HUMAN RIGHTS ACTIVIST Harry Wu's Milpitas, California-based Laogai Research Foundation (LRF) has uncovered evidence that raises disturbing questions about links between Dow Chemical and China's infamous laogai gulag system.

A 1989 reference book, the Liaoning Economic and Statistical Yearbook, contains two pages of photographs about Shenyang Xinsheng Chemical Works, which is also known as Shenyang No. 1 Laogai Detachment. The photos illustrate the double life of the Shenyang facility that its two names suggest: a chemical factory and a forced labor prison camp. They also reveal a mysterious link between this laogai and Midland, Michigan-based Dow Chemical.

Dow's undercover agent

In one snapshot in the reference book, Shenyang director Ren Shurao, dressed in a suit, stands next to a Western businessman above a caption that says, "Talks between the plant's leaders and foreign businessmen (American Dow Chemical Ltd. Co.)." Another photo in the book reveals the more shadowy side of Shenyang. In this photo, Ren Shurao appears dressed in his prison official garb. Another shot shows a model of the factory complex -- surrounded by watch towers and tall walls.

To find out what business Dow was pursuing with a laogai, Franklin Research and Development Corporation, a Boston, Massachusetts-based socially responsible investment firm, filed a stockholders' resolution calling on Dow to provide a full accounting. "We use our influence to get companies to answer questions," explains Franklin analyst Simon Billenness. "We are in a position to open a few doors."

But prison doors are hard to spring. Initially, Dow claimed that it had no record of company officials visiting this plant in the industrial city of Shenyang, which is 500 kilometers north of Beijing near the North Korean border. In separate February 1994 letters to the Securities and Exchange Commission and to Billenness and Jeff Fiedler, the co-director of LRF, however, Dow acknowledges that two sales calls were made to the plant in 1988 and 1989 but says "no business relationship developed." One of the letters says that, "none of the participants can recall the second visit, even after the written report was found." Dow claims that "the first visit took place in a conference room of an office building and no tour of the factory facility was made."

Critics say Dow's explanation is lacking. "Shenyang is a long way from everywhere; you don't go up there just to meet in an office," says Fiedler, who is also the secretary-treasurer of the AFL-CIO's Food and Allied Service Trades department. "The reason that they were probably saying that they did not visit the place is because they want to continue to make everybody believe that they had no idea that it was a prison." Fiedler says this fact is hard to miss because "there are plenty of people running around the office building in police uniforms."

To fill out the picture, Fiedler presented Dow representatives in January 1994 with 50 questions about the company's policies and its relations with Chinese laogai. Dow officials declined to answer any of the questions.

Activists also sought to talk with the Dow employee who had his picture taken with Shenyang director Ren Shurao. As far as we know, "this is the closest a major company got to the laogai," Billenness says. "It would be interesting to see how a company got drawn in." But Dow refused to disclose the employee's name. "Initially [the LRF] said it was Michael Lung, a country manager. We said 'no, not him,' " says Dow spokesperson Vicky Swezo.

Maximum security

Shenyang Chemical Works is part of a larger forced-labor complex broken down into five camps encircled by high walls, watch towers and electrified barbed wire. The 2,500 prisoners that are estimated to be in this laogai are distributed among several different production facilities: the Shenyang Xinsheng ("New Life") Chemical Works, Shenyang Xinsheng Rubber Plant (producing rubber boots), the Shenyang Xinsheng Aromatics Factory (cosmetics), the Shenyang Xinsheng Grease Products Factory (soaps) and the Shenyang Xinsheng Reclaimed Rubber Factory.

The 500,000-square-meter chemical works is the largest Chinese producer of chemical accelerators, which are inputs used to produce rubber. The plant accounted for 50 percent of China's accelerator market in 1989, a market share that has been growing. Chemical accelerators are used to produce such products as boots, kitchenware, athletic shoes, tires, toys and sporting goods. These Chinese products -- typically made from laogai inputs -- are exported to more than 60 countries, according to company brochures.

Under the U.S. Tariff Act of 1930, products made wholly or in part with prison labor cannot legally be imported into the United States. "Taking a conservative view, upwards of half of all Chinese exports to the United States of rubber and rubber-related products are illegal," says Fiedler.

Over the last 45 years, China's laogai gulag system has used tens of millions of prisoners, including many prisoners of conscience, to produce goods for domestic and export markets. "Every totalitarian regime must have a suppressive mechanism for sustaining its absolute control," says Harry Wu. "For the Communist [regime] in China, the laogai is its terrorizing tool. Millions have perished and millions more continue to struggle for survival under extremely inhumane conditions." Laogai prisoners produce stuffed animals, tools, textiles, rubber boots, plastic flowers, asbestos and tea. LRF estimates that approximately 1,000 Chinese forced-labor camps hold 10 million prisoners.

The term laogai, meaning "reform through labor," was invented by the Chinese Communist Party that came to power in 1949. During internment, laogai prisoners are routinely subjected to "thought-reform" or brainwashing. Under fear of being tortured or killed for not achieving production quotas, prisoners are forced to work under hazardous conditions for between 12 hours and 16 hours a day.

Harry Wu was detained by Chinese authorities from June 19, 1995 until August 24 after entering China for an undercover laogai fact-finding mission. Interviewed shortly after he was released and returned to the United States, Wu remembers the labor conditions of the Beiyuan Chemical Factory in the city of Dewaitucheng near Beijing where he was imprisoned in the 1960s. "There was no worker protection there. I still have a scar on my left leg due to chemicals. Prisoners' eyes and lungs were damaged due to chemicals," he says. "Every day I saw inmates get burned."

Wu says conditions in laogai chemical plants have not changed. "There is no doubt that they are extremely hazardous," he says. "Often labor camps produce goods that other factories don't want to because they are dangerous."

Franklin Research's stockholder resolution calls on Dow to take certain steps to isolate laogai from markets and foreign investment. Franklin urged Dow to cross-check potential business partners against an LRF list of forced labor camps, to talk regularly with the LRF and, in Billenness' words, to "be open about how they ensure compliance." Dow spokesperson Swezo says the company has uncovered no substantive dealings with laogai after "extensively" reviewing the situation. But Billenness and Fiedler say Dow only checked for 40 factories, a small fraction of the almost 1,000 camps listed in LRF-supplied documents.

Dow failed to adopt any code of conduct "until after Jeff [Fiedler] and Harry [Wu] did a press conference in Washington," Billenness says, adding that "setting standards is 5 percent of the work, ensuring compliance 95 percent."

Questions about Dow's compliance linger. "I don't have any faith in multinationals policing themselves, [they] haven't got a great history about that," Fiedler says.

Questions also linger about what Dow was doing at Shenyang Xinsheng Chemical Works if it was not there to sell chemicals. "Selling goods to the laogai is not illegal by American law, [but] of course this is immoral because it is supporting the laogai system," says Wu. In this moral sense, "there is no difference in profiting from sales" over exports, he says.