Buy American Becomes Buy Chinese: Wal-Mart Dumps The Walton Legacy

For Immediate Release
Tuesday, February 27, 2007

Washington, D.C. – Wal-Mart Watch executive director David Nassar today releases the following statement in response to Wal-Mart’s announcement that it has purchased a 35 percent stake in Bounteous, one of China’s biggest retailers:

Today’s news is just the latest nail into the coffin of Sam Walton’s ‘Buy American’ program. ‘Buy American’ has become ‘Buy Chinese,’ as Wal-Mart dumps American jobs and the Walton legacy in favor of cheap goods manufactured in parts of the world with weak labor standards and non-existent environmental regulations.

Background on Wal-Mart and China

Buying American takes second place to the bottom line – and foreign suppliers benefit:

  • Abandons Buy American Program. In February 1985, Walton wrote 3,000 American manufacturers and wholesalers to announce that the chain wanted to buy more American goods. Walton said: “We cannot continue to be a solvent nation as long as we pursue this current accelerating direction. Our company is firmly committed to the philosophy by buying everything possible from suppliers who manufacture their products in the United States.” Today, however, over 80 percent of Wal-Mart’s 6,000 global suppliers are based in China. [Wal-Mart Press Release, 3/13/85; Wal-Mart Literature, 1994; PBS Frontline, 11/16/04]
  • China’s Eighth Largest Trading Partner. In 2004, almost 10 percent of everything imported to the United States from China was imported by Wal-Mart—making the company, if it counted as a sovereign nation, China’s eighth-largest trading partner. [BusinessWeek, 10/7/05; Charles Fishman, The Wal-Mart Effect, 2006]
  • Internal Report Exposes Wal-Mart’s Lack Of Commitment To International Workers Rights. In a 2005 study, Wal-Mart audits its international factory inspection program and the results are not promising. Only 20 percent of inspections are unannounced and 89 percent of all inspections find medium to severe violations. With only 200 associates covering five regions around the globe, it appears workers will have to suffer under poor working conditions for years to come. [Wal-Mart’s 2005 Report on Ethical Sourcing, 7/31/06]

Hurting American Manufacturers

Wal-Mart works to keep the green flowing – even if that means red ink for American suppliers:

  • Ruining Rubbermaid. In 1994, Rubbermaid won accolades as the most admired company in the United States—but five years later, its fortunes fell so hard that the company sold itself to a competitor. When the price of a key component of its products went up, Rubbermaid asked Wal-Mart for a modest price increase—but Wal-Mart said no, and stopped sales of Rubbermaid products. At a Rubbermaid factory in Wooster, Ohio, that meant the loss of 1,000 jobs. [PBS Frontline, 11/23/04]
  • Advises Supplier: ‘Open a Factory in China.’ To land a supply contract with Wal-Mart, the Lakewood Engineering and Manufacturing Company—a Chicago fan manufacturer—had to locate manufacturing operations in Shenzhen, China. Workers there make $.25 an hour—while the company’s Chicago workforce earned an average hourly $13. [Los Angeles Times, 11/23/03]
  • Advises Mr. Coffee to Move Overseas. Mr. Coffee—which won awards for moving manufacturing operations back to the United States—faced pressure to shift production to China even at the height of Wal-Mart’s ‘Buy American’ program. After Wal-Mart demanded a $1 reduction in the wholesale price of a brisk-selling four-cup coffeemaker in 1985, Mr. Coffee executives scouted for factory sites in China—and executives say Wal-Mart encouraged offshore production even as it promoted its ‘Made in the USA’ campaign.” [Memphis Commercial Appeal, 6/8/01; Cleveland Plain Dealer, 11/14/04]
  • Forces Huffy Bikes to Brake US Production. Despite decades of making bicycles in the United States, Huffy was forced by Wal-Mart price pressures to close three factories and lay off thousands of workers. The mayor of Celina, Ohio—where Huffy closed a large factory—said Wal-Mart’s “demand for cheaper bicycles drove Huffy out of Celina.” [Mansfield News Journal, 12/8/03]

Minimal Social Responsibility

Suppliers pay subpar wages – but Wal-Mart pays little mind:

  • Dropped from Socially Responsible Investing Index. In 2001, Wal-Mart was removed from the nation’s largest “socially responsible” mutual fund, the Domini 400 Social Index, because of its human rights standards. The Domini Index is described as the “the first benchmark for stock funds to screen for social responsibility.” Kyle Johnson, the project manager for the index, stated “Wal-Mart is a market leader in retail, yet has not taken a leadership position on labor issues and has been unresponsive to calls for change from shareholders.” [Palm Beach Daily News, 6/12/05; International Shareholder, 4/17/01; Los Angeles Times, 5/18/01]
  • Wage Violations at Supplier Factories. According to Wal-Mart’s own audit, “several serious violations are still found consistently at the factory level, including problems with payment of overtime compensation, coaching of workers for worker interviews, and the use of `double-books’ to hide true numbers of hours worked or wages/benefits paid.” [Wal-Mart Stores Inc. 2005 Ethical Sourcing Report]

Sweatshop Labor

The drive for low prices produces another result: neglected human dignity:

  • Toys Built in South China Sweatshop. A China Labor Watch report detailed the mistreatment of workers in a factory making small toys for Wal-Mart. As of early December 2005, violations against workers at the Lungcheong factory were as follows: the systematic denial of maternity leave, work-related injuries leading to termination, illegally denying health insurance, mandatory overtime work, insane quotas and employing underage workers. [China Labor Watch, December 2005, China Labor Watch]
  • Sweatshops for Kathie Lee Gifford Products. Charles Kernaghan, director of the New York-based National Labor Committee, testified before Congress in 1996 that Kathie Lee Gifford’s clothing line was being produced in sweatshops around the globe. He reported that Global Fashion Plant in Choloma, Honduras—a Wal-Mart vendor that produces clothing for the Kathie Lee apparel line—employed pregnant women and children under harsh conditions and paid only 31 cents an hour. In 2000, The National Labor Committee reported that workers at Qin Shi Handbag factory in Zhongshan, China—which made handbags for Kathie Lee Gifford’s Wal-Mart line—were forced to work 14-hour shifts, seven days a week for little or no money. [Arkansas-Democrat Gazette, 5/24/96; National Labor Committee, “Made in China: The Role of U.S. Companies in Denying Human and Worker Rights,” 5/25/00]

Rock-Bottom Wages

Compared to Wal-Mart’s United States workers, laborers for overseas suppliers earn pennies on the dollar:

  • Low Pay Scales. The average full-time United States Wal-Mart employee earns $10.11 per hour. In Swaziland, a worker at a Wal-Mart subcontractor earns 53 cents per hour; in Indonesia, a worker at a Wal-Mart subcontractor earns 46 cents per hour; in Nicaragua, a worker at a Wal-Mart subcontractor earns 23 cents per hour; and in Bangladesh and China, workers at Wal-Mart subcontractors earn 17 cents per hour. [Institute for Policy Studies, “Wal-Mart’s Pay Gap,” 4/15/05]
  • Missing Overtime Pay. In 2004, the International Labor Rights Fund (ILRF) documented violations of overtime pay rules at Wal-Mart garment supply factories in Nicaragua, Indonesia, Bangladesh and Swaziland. In September 2005, ILRF filed a class-action lawsuit on behalf of workers in China, Bangladesh, Nicaragua, Swaziland, and Indonesia. Workers in these countries complained of being “kicked and beaten, locked in factories, fired for supporting a union and not paid the minimum wage or overtime.” [Institute for Policy Studies; New York Times, 9/16/05; Corporate Legal Times, 11/05]
  • Chinese Workers Earning Too Little to Afford Wal-Mart. The influx of cheap labor from the Chinese countryside allows Wal-Mart to produce its goods at extremely low prices. The Pearl River Delta, home to some of China’s newest and largest factories, is a breeding ground for poor working conditions, environmental destruction, and inadequate urban planning. With the help of the Chinese government, infrastructure improvements mean more and more workers will descend upon this area to toil away in horrible conditions. With wages around $100 dollars a month, most workers cannot even afford the products they produce. [BusinessWeek, 7/26/05; China Daily, 11/29/04; San Francisco Chronicle, 12/29/04]