China's Foreign Business Blame Game, Part II

The other day, I posted on a Washington Post article noting an increase in the Chinese government blaming foreign companies for China's pollution. I talked about how foreign companies can avoid Chinese legal problems within and outside the environmental arena by becoming sticklers on following Chinese law. I also talked about how foreign companies are held to higher legal standards than Chinese companies in such areas as the environment, taxes, unionization, and wages.

That post drew a slew of comments, many either disputing or justifying the scapegoating of foreign companies in China. Foreign companies are always going to be more susceptible to legal problems than domestic companies; all that varies between countries is the extent to which this is true. You can spend time complaining about the unfairness of this, or you can protect your company by buckling down and complying with the law. Foreign companies doing business in China have no choice but to address this inequality of enforcement from a practical, as opposed to a moral or political perspective.

Some environmentalists in the West are now seizing on the idea that Multinational Corporations (MNCs) are causing much of China's pollution. A reader sent me an e-mail linking over to an article, entitled, "Multinational Corporations Violating China's Environmental Laws and Regulations" that does exactly this. This article is on the Worldwatch Institute's site, which describes itself as "Independent research for an environmentally sustainable and socially just society." This reader accused me of having claimed the Chinese government had no basis for blaming Multinational Corporations (MNCs) for China's pollution and cited to this article as proof otherwise.

I never said the Chinese government had no basis for blaming MNCs for pollution and I never said MNCs never violate Chinese environmental laws. MNCs sometimes violate Chinese environmental laws (did anyone ever doubt this?), but blaming them for China's environmental problems is both wrong and counterproductive. This Worldwatch Institute article is an excellent example of why it does not make sense to scapegoat MNCs.

The article notes that over the last three years, "the Chinese government has punished 33 multinational corporations for violating the nation's environmental laws and regulations" and goes on to say this "came as a surprise to many, as the Chinese public has tended to assume that multinational companies abide more strictly by the law than some in fact do in this heavily polluted country." Those guilty of engaging in illegal environmental activities include the "subsidiaries of world-renowned corporations such as American Standard, Panasonic, Pepsi, Nestle, and 3M."

The article then quotes Ma Jun, a former "environmental consultant for multinationals in China" to the effect that MNCs have "been talking about corporate responsibility, yet they could not even abide by the law.' The article notes that Mr. Zhao [no other name given], a purported "authority with the Jilin Provincial Environmental Protection Bureau" agrees that, MNCs "have relaxed their environmental standards in China' and Lo Sze Ping, "campaign director of Greenpeace China, who says the 'words' of multinationals are often better than their deeds.

This article's only factual support for blaming MNCs is the statistic that 33 MNCs have been punished for environmental violations in China over the last three years. The article never tells analyzes this fact nor does it ever put it in any context. Is there an upward or a downward trend in these violations? Were any of these violations major ones? How does this number compare to Chinese domestic companies? How does this number compare to environmental violations in the United States or in some other country?

I actually am shocked at how low this number is and I see it as indicating the incredible weakness of Chinese environmental enforcement, not that MNCs are out there wildly polluting. With all the big MNC factories in China, MNCs have to be violating Chinese environmental laws every day. There are hundreds, maybe thousands, of environmental violations every year in my tiny home state of Washington, a non-industrialized state of less than six million. In certain industries (of which there are very few such companies in Washington, but huge numbers of them in China) even the most careful companies get cited nearly every year. An average of 11 environmental violations a year is impossibly low.

The China Hearsay blog also does not see MNCs as the problem and writes that "blaming foreigners for the current state of China's environment is an astoundingly weak argument." China Hearsay goes on to say that MNCs in China have a pretty good and improving environmental record in China, and gives as a reason for this "that information flows around the world are constant and immediate" and if you "do something wrong, everybody is going to know about it." This tracks my April post on how foreign companies in China are starting to realize they must strive to meet the highest international environmental standards, not just those in China.

Focusing on the MNCs in China for their 11 yearly environmental violations ignores the big picture and implicitly condones China's lack of environmental action. I am not calling for completely ignoring MNC pollution in China, but painting MNCs as the problem ignores the reality on the ground and prioritizes politics over environmental progress.

Comments

As always, the simplest advice is always the best - "...foreign companies can avoid Chinese legal problems within and outside the environmental arena by becoming sticklers on following Chinese law." In business I make it a priority to always obey the laws of China, 100%. Quite simply, don't give the b@$tards even the slightest sniff of a chance to catch you out as they are just waiting and watching for the chance to make an example of foreigners. Even as they peer through the fumes created by local companies all they can see is the mess made by others. If your cat dumps in your garden you don't care but if the neighbours dog takes a piss your reaching for your gun.

Posted by: PiPi | December 7, 2006 10:27 PM

PiPi --

Thanks for checking in. You say it more colorfully than I would, but I completely agree. Why give anyone the chance to put you under, be it the government or your competition? I have had companies that were operating completely illegally come to me for assistance when the government shuts them down and they want us to go to the US Embassy to enlist US governmental assistance. I have to tell them there is no way the US government is going to stand behind a company that was operating illegally.

Posted by: China Law Blog | December 8, 2006 6:07 AM

I am doing a little research for a university project, and want to know if anyone can provide me with some information regarding North American firms taking advantage of relaxed environmental laws in foreign countries (or even just ignoring the laws). Any help would be appreciated.

Kind Regards,

Posted by: WB | February 19, 2007 3:33 PM

WB --

Sounds like an interesting, but very difficult to research and quantify, project. Good luck.

Posted by: China Law Blog | February 19, 2007 6:20 PM