VZCZCXRO7583
RR RUEHCN RUEHGH
DE RUEHGZ #0573 2730559
ZNR UUUUU ZZH
R 300559Z SEP 09
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 0965
INFO RUEHGZ/CHINA POSTS COLLECTIVE 0275
RUEHBJ/AMEMBASSY BEIJING 0757
RUEHGH/AMCONSUL SHANGHAI 0213
RUEHHK/AMCONSUL HONG KONG 0284
RUEHCN/AMCONSUL CHENGDU 0214
RUEHSH/AMCONSUL SHENYANG 0223
RUEAIIA/CIA WASHDC 0262
RUEKJCS/DIA WASHDC 0258
RHHMUNA/HQ USPACOM HONOLULU HI
RUEHC/DEPT OF LABOR WASHINGTON DC 0032
UNCLAS GUANGZHOU 000573
SENSITIVE
SIPDIS
STATE FOR EAP/CM, DRL
E.O. 12958: N/A
TAGS: ELAB PHUM EINV ECON CH
SUBJECT: Nike Facing Old Child Labor Allegations Anew in Jiangsu
1. (SBU) SUMMARY: A disgruntled former employee of a Nike supplier
in east China has alleged that his company and others supplied Nike
with soccer balls made with child labor 2003-2007. Nike said it
investigated identical allegations in 2007 but, after failing to
substantiate the claims, concluded that the balls in question were
fakes, and thus outside of Nike's supply chain. Nike is engaging
with the Fair Labor Association and intellectual property
specialists to again review the allegations, which Nike says contain
factual errors. The supplier is considering legal action against
China Business Journal, a periodical publishing the allegations.
END SUMMARY.
Soccer Balls and Child Labor
----------------------------
2. (SBU) The China Busines Journal reported that an individual fired
from Nike supplier Shanghai Wanda in July alleged that, between 2003
and 2007, suppliers providing hand-sewn soccer balls to Nike used
child labor in their supply chains. The allegations, which
originally came to light in 2007 but according to Nike could not be
substantiated at that time, are, as before, accompanied by
photographs in a recent article in China Business Journal showing
young-looking kids in school kerchiefs in a home-work environment
assembling what appear to be Nike-branded soccer balls.
Balls could be Fakes
--------------------
3. (SBU) During the initial 2007 investigation, Nike established
only that one production center in Jiangsu Province had abnormally
high output. According to a Nike representative based in Guangzhou,
high output levels could indicate off-the-books workers or
additional subcontracting in the supply chain. Nike was
subsequently unable to identify any evidence of child labor or other
illegal labor practices, and production levels at the outlying
production center returned to normal following the investigation.
4. (SBU) The 2007 Nike investigation also concluded that the soccer
balls in the photographs were probably counterfeit goods produced
outside Nike's supply chain. The Nike representative noted that
identical balls were available in Guangzhou counterfeit goods
markets at the time.
5. (SBU) While Nike said it has no information that these new
allegations have merit, it nonetheless has involved the Fair Labor
Association and a third-party intellectual property protection firm
to work with Nike's brand protection office in this case. Nike
claims that certain aspects of the allegations -- such as the number
of workers producing soccer balls during a specific period of time
-- are factually incorrect. The Nike representative noted that some
of the suppliers from the 2007 allegations no longer exist or no
longer have a relationship with Nike, though the rep said none of
these relationships were ended because of suspicions of child labor.
Nike also claims that its process for hand-sewn soccer balls in
China is currently such that there is "no chance" of child labor
making its way into the supply chain.
An Axe to Grind
---------------
6. (SBU) According to the Nike representative, the latest child
labor allegations did not arise until after the former employee was
fired for poor performance in July. Since his separation from
Shanghai Wanda, the individual has repeatedly sought an improved
severance package while attempting to bring pressure on both his
company and Nike, according to the Nike representative. Shanghai
Wanda, which currently is still a supplier to Nike and other
international brands, is reportedly contemplating legal action
against China Business Journal, the periodical that published the
former employee's allegations online, with a print version expected
early this week.
7. (U) This cable was cleared by ConGen Shanghai and Embassy
Beijing.
GOLDBECK