A Chinese Label on Your Shoes, Wine or Socks May Mean ‘Made in Prison’--and That’s a Violation of U.S. Law.

CHUI FENG STRAIGHTENS HIS THICK, ORANGE-FRAMED GLASSES TO get a closer look at China. With one hand, he flattens out the tattered map, while the middle finger of his other traces a road through Guangdong province. The finger comes to rest between two towns southeast of Canton. He drums his nail on the map--hard.

“This is where I was,” Chui says, his voice bright and animated. “This is where I almost died in prison.”

From 1968 until 1970, Chui Feng was a prisoner in China’s gulag. Each day, from 7 a.m. to 6 p.m., he and 100 other convicts sat cross-legged on the concrete floor of a large room, weaving thin strips of bamboo into small, round condiment baskets. Twice a day, Chui received his rations: a fist-sized ball of rice, pale vegetables, a one-inch square of salted fish.

After a few weeks in the camp, the six-foot-tall teen-ager had dropped to 130 pounds. At night, he slept in a cell so cramped that to turn over, he had to ask his neighbor to move as well, causing a domino effect on the cell floor. With no blanket between his body and the bare floor, Chui kept one arm folded beneath him to reduce the sores caused by his jutting bones rubbing against the cold concrete.

Chui Feng--a pseudonym--was one of millions of men and women held in China’s vast laogai , or “reform through labor” prison system. His crime was being the son of “black bloods”--his parents were intellectuals, themselves imprisoned at the beginning of the Cultural Revolution in 1966. On the day of their arrest, when Chui was 14, authorities took away his identity papers. Caught on the streets without them, he, too, was taken into custody and, as was customary for “orphaned” children, he was sent to a work farm.

Time and again, Chui escaped from the farm. Time and again, he was apprehended and sent back. Finally, his repeated escape attempts earned him the status of “criminal traitor,” and he was sentenced to Shiqiao laogai-dui , a disciplinary forced-labor camp 20 miles south of Canton.

Chui’s task, weaving baskets, was relatively easy compared to other prison chores, such as chopping or stripping bamboo. However, to equalize the suffering, guanjo , or “punish teachers,” walked behind the lines of basket weavers and randomly hit them with wooden batons. Chui remembers the beatings and the sharp bamboo cutting his hands as he wove. And as each basket was finished, he remembers tagging it with a small white label that read--in English--”Made in China.” “Every time we saw the labels,” Chui says, “we thought of the West--of freedom.”

In 1970, when he was 17, Chui Feng finally escaped. He traveled by night to China’s southern border and swam to freedom in Hong Kong. Seven years later, he made his way to San Francisco. There, in import stores, five-and-dimes and Chinese restaurants, Chui finds constant reminders of his life at Shiqiao: “I’ve seen so many of those baskets, just like the ones I made in camp.”

The baskets that Chui and his fellow prisoners made were destined for sale, and their labels earmarked them for export to the West. Moving through Hong Kong or other legal trading ports, the baskets would have traveled to America, Canada or Great Britain. Each time they changed hands, from the Shiqiao camp to a San Francisco restaurant, someone profited from a prisoner’s misery.

ON APRIL 22, REP. FRANK R. Wolf, a Republican from Virginia, dangled a pair of socks before the Senate Foreign Relations Committee in Washington. Wolf had just returned from a weeklong human-rights fact-finding trip to the People’s Republic of China. One stop on his group’s itinerary was Beijing Prison No. 1, where 40 pro-democracy demonstrators--arrested after the 1989 Tian An Men protests--were still in custody.

“We were given a tour of the prison’s textile- and plastic-products manufacturing plants,” Wolf testified. “I have with me several socks made at the prison and pictures of prisoners working there.” Wolf also showed the committee a photograph of other socks manufactured at the prison--some featured writing in English; others, pictures of pandas or golfers.

Wolf said he strongly suspected that the stockings were aimed at the United States market. “How would the average American feel to learn that he was wearing socks made by a Tian An Men demonstrator?” Wolf asked.

Wolf’s testimony was just one recent airing of what might be called China’s--and America’s--dirty little trade secret. Although U.S. law bans the importation of goods produced by convict labor, evidence is mounting that among the billions of dollars’ worth of Made in China products sold annually in this country, a sizable percentage has been made by prisoners in forced-labor camps.

About the same time that Wolf was addressing the Senate committee, Asia Watch, a human-rights group based in New York, released its latest report on the laogai system and its connections to the West. The group had gained access to a “restricted circulation” journal for Chinese prison officials. In this document, in the cheery, upbeat language of Chinese officialdom, there is strong evidence that China’s prisons are becoming an important factor in its export drive.

“Can a reform enterprise develop a foreign-oriented economy?” muses Ding Banghua, an officer of a provincial prison bureau, in one article. “The answer must be affirmative. . . . Some enterprises have already done so with flying colors. . . . After 30 years and more of hardship of getting started and vigorous development, the laogai enterprises throughout the country have great potential for . . . earning foreign exchange. Nearly every province has its own sizable community of labor-reform enterprises.”

The timing of such revelations is no accident. President Bush formally announced last month that he will renew China’s most-favored-nation status, an economic privilege that grants a country the right to export goods to the United States subject to the low tariffs that apply to most other U.S. trading partners. Congress will have three months to ratify or block the President’s request. Ratification is not assured, at least not without conditions. The issue of convict-produced goods is just one of many alleged Chinese sins that Congress will take into consideration. China has been charged with exporting missile technology to developing countries. It has been accused of pirating U.S. computer software. And, because Beijing has substantially reduced its imports from the United States, China now has a trade imbalance with this country that is expected to reach $15 billion this year.

Beijing vehemently denies any connection between its prison system and the Chinese-made goods flooding Western markets. But Chinese officials have a credibility problem, particularly when a government publication, the 1989 “Law Year Book of China,” records that in 1988 alone, the value of products for export made by forced labor increased by 21% and reached $800 million. “The laogai ,” as one China expert neatly phrased it, “is the Soviet gulag with a profit motive.”

“There’s a major scandal here,” says a senatorial aide. “American corporations are profiting, and the Administration doesn’t want China embarrassed. In my opinion, George Bush would give most-favored-nation status to China if Premier Li Peng urinated, in public, on the American flag.”

IN 1989, HANS RENSTROM, Volvo’s director of international communications, received the following letter:

Dear Sirs,

We are representing Chinese Reform of Criminals Bureaus of all the provinces along the coast of China. We heard that your esteemed firm has intention to establish factories in Asia.

All the Bureaus can provide many existing factories for your choice. . . . They have also many lands to rent. Besides they can provide large numbers of criminals, who received already basic technical training as very cheap labour(er)s on lease basis. The number of labour(er)s and the security are fully guaranteed. We are ready to show you all the relative information. If you are interested in our proposal, please don’t hesitate to call upon us.

Looking forward to hearing from you, we remain,

Truly Yours,

Charles H. J. Chi

“Normally,” Renstrom says, “I would have thrown a letter like that in the wastebasket. But I received this only three or four weeks after the massacre on Tian An Men Square. I found it so remarkable that the Chinese would send a letter like this on an official basis under those circumstances.”

Renstrom showed the letter to a visiting journalist, and it made a media splash all over the world. But neither private awareness of what was going on nor the smoking gun made public by Renstrom seems to have had any effect on the way the United States conducts business with China.

For more than 100 years, as part of legislation designed to protect American jobs--such as the Smoot-Hawley Tariff Act of 1930--the United States has banned the importation of convict-made goods that compete with U.S.-produced merchandise. But proving violations of the law has been virtually impossible. According to the U.S. Customs Service, which is charged with enforcing the ban, an item taken directly from a prison assembly line must be matched exactly with an item sold in the United States.

Consider Wolf’s souvenir socks. They will be sliced, diced and scrutinized by every measure known to modern science. Laboratories in Washington will perform thread counts, chemical dye tests and neutron-activation analyses to determine whether the socks match any sold here.

If test results prove a match and customs cracks down on the socks’ importation, it will be a rare occasion. Only twice in the 61 years since the current law went on the books has the customs service succeeded in enforcing it (one case involved Soviet canned crab meat; the other, Mexican wicker furniture). Penalties are not severe: The merchandise is seized, and if the importer knowingly broke the law, he can be fined up to $1,000 or imprisoned for a year.

The U.S. Customs Service is tight-lipped about its current investigations of Chinese-made goods. Items under review are rumored to include blue jeans, portable stereos, electrical generators and refined coal. Senior Special Agent Thomas Galligan, reached by telephone in Washington, allowed only that he was engaged in investigations “probably more widespread than others we’ve conducted in the past.

“We can’t name the products under investigation because we want to get in to see the factories,” he said carefully. “If people are aware of the commodities we’re interested in, they may be reticent to let us into the factories or mines or into middleman facilities in other countries.”

Galligan’s caution is well-advised. Even if authorities catch the scent of prison labor on a product, the laogai-dui may still be able to avoid detection. The factories can change the brand name of goods by changing the label, and some are alleged to have gone even further, tagging Chinese items as made in Macao, say, or Taiwan.

The serpentine byways of the China trade may present formidable obstacles to the customs service, but they also make it easy for companies to deny that they are using convict labor.

The fact is, few companies, whether they simply import goods or contract for goods to be made to their specifications, deal directly with China. About 80% go through middlemen in East Asia--mostly Hong Kong. The Hong Kong companies, in turn, buy from or subcontract the business to legitimate Chinese factories. So far, so good, but here the trail of official documentation ends. The Chinese companies are now free to farm out their own contracts--and those subcontractors may employ other subcontractors.

The making of athletic shoes is a good example. On the surface, the manufacture of such shoes seems pretty straightforward, but consider the steps involved: rubber-sole production, manufacturing of laces, sewing, insole forming, printing. Tasks like these often are subcontracted to individual small factories--and there’s little doubt that prisons will give the lowest bid.

Saving a few cents per item by using forced labor doesn’t give U.S. companies much advantage, especially when the practice can damage their reputations, says Dinah Lee, a Hong Kong-based Business Week correspondent who recently completed an investigation of forced-labor practices in China. “But it’s extremely important to the Chinese factories that are farming work out to the prisons. Those pennies really make a difference to them.”

Because the trail leading to the laogai-dui is so convoluted, many companies are likely to be unaware of the illegal pedigree of their goods. And if a company tries to untangle the trail by directly checking out Chinese factories, it may be misled. An article from the restricted prison-bureau journal explains how the system protects itself.

“We made it an explicit rule,” a laogai textile-mill official wrote, “that whenever foreign businessmen come to the workshops . . . they must be accompanied by a special person. Prisoners are not allowed to have direct contact or talks with foreign businessmen. No secret has ever been leaked, and other incidents involving foreign contact have been effectively prevented from happening.”

Between the difficulty of tracing goods to the laogai and the difficulty of enforcing the convict-labor import ban, most U.S. companies with ties--witting or unwitting--to China’s forced-labor camps will face no reckoning. But for a few luckless others, scalding publicity, at least, can come hard and fast.

A few months ago, a delegation of lawyers from the American Bar Assn. visited a Shanghai prison. During the tour, Mary Curtin, wife of ABA President John Curtin, spied a stack of printed cartons. They proved to be six-pack containers for Seagram’s wine coolers, assembled by the prisoners.

Confronted with news of Curtin’s discovery, Seagram--Canada’s leading distillery--expressed shock and disillusionment. “We’re an innocent party,” claimed Philip Leung, manager of Shanghai Seagram Ltd. He explained that the job of making the cartons had been contracted out to a China-Singapore joint-venture printing firm, which had farmed out the gluing and assembly tasks--to prison laborers. Leung assured reporters that none of the cartons was bound for export (Seagram’s wine coolers also are sold in Shanghai) and that the practice of employing prisoners would be halted.

Seagram’s profession of ignorance--and innocence--is typical of most American companies. Thomson, an Indianapolis-based company, manufactures components for General Electric consumer products, and about 5% of its materials comes from China. Thomson’s spokesman, Dick Knopf, says his company has not checked out its Chinese labor. “We’ve never seen a need. To the best of our knowledge, we have no risk in this regard. However,” he adds, referring to recent publicity, “with all this attention, I’m sure we’ll take a closer look.”

“It may very well be that a lot of American companies who are purchasing this stuff really don’t know that it’s coming from slave labor,” Rep. Wolf says. “If you’re getting a good price, you don’t focus on it.”

“I’d say there’s three types (conducting business with China),” muses a staff member of the Senate Foreign Relations Committee. “There are those who know, those who don’t know and those who are like the three monkeys: See nothing, hear nothing, say nothing. I’d say that most people tend to operate in that final group.”

HARRY WU IS A VISITING scholar at Stanford’s Hoover Institute and the foremost expert on China’s prisons. He has spent more than a decade studying the laogai , and when he was a citizen of China, he spent 19 years on the inside, as a prisoner.

In the late 1950s, while a student at Beijing College of Geology, Wu mildly criticized the Soviet Union’s invasion of Hungary. His dutiful classmates informed authorities, and he was found guilty of counterrevolutionary activity. He was sentenced to life in prison and served in 12 laogai-dui .

Then, in 1979, Deng Xiaoping emerged as China’s leader and traveled to the United States to improve Sino-American relations. To show his good will, Deng released thousands of prisoners jailed for political crimes. Harry Wu was among them.

At his home in Milpitas in Northern California, Wu--a youthful-looking 53--offers tea and reclines in a chair. Behind him hangs a wooden plaque framed by bright red macrame and emblazoned with the equivalent of “Don’t Worry; Be Happy” in Chinese. At times when he tells his story, his voice lowers to a whisper.

Like Chui Feng, Wu was underfed and pressured to meet strict quotas. Quotas are common in the laogai-dui , but Wu’s camps had a particularly insidious doctrine: “linked implication.” If one prisoner underproduced, others in his group were expected to inform on him--or all were punished.

Wu admits, painfully, that he informed on other prisoners. “I was tortured into it,” he says softly. “I was sent to solitary confinement: a box three feet high, three feet wide and six feet long, made with cement, and no light. I lay in there without blanket or straw, the first three days without food. After three days, they gave me a ball of rice.”

When Wu got to the United States in 1985, he made the documenting, and denouncing, of forced-labor camps his personal crusade. Wu has sought out and analyzed Chinese publications; he has interviewed ex-prisoners such as Chui Feng, and he has pieced together a detailed picture of the system. This fall, his book, “Laogai: The Chinese Gulag,” is scheduled for publication.

The laogai system, Wu explains, was developed by Mao Zedong 40 years ago. Following Stalin’s lead, Mao’s government created three categories of detention for the newly minted People’s Republic. Laogai , which ultimately gave its name to the system as a whole, applies to formally convicted criminals and “traitors” such as Chui Feng. Laojiao , “re-education through labor,” applies to intellectuals, who can be sentenced without judicial review, and juiye , “forced job placement,” applies to ex-convicts, who often are required to remain in forced-labor camps, working for very low wages, after they have completed their sentences. All three kinds of prisoners work side by side in China’s laogai-dui .

By Wu’s estimate, 50 million Chinese have been held in laogai-dui since the system was created. Although exact figures are impossible to obtain, Wu claims that currently between 16 million and 20 million prisoners are in 5,000 to 6,000 such camps. The largest camps, some with nearly 200,000 prisoners, lie in remote, sparsely populated western regions such as Qinghai, Tibet and Xinjiang. Prisoners in these poor provinces work under the harshest conditions--quarrying stone, clearing timber and mining lead and coal. At other camps, workers build dams, railroads and highways. Along with agriculture, such heavy industry has been the traditional focus of the laogai system.

But, Wu says, China has now shifted laogai labor away from domestic projects and into the high-rolling world of international export. The chosen targets are Europe, Japan and the United States. Beijing’s own documents offer the best proof, Wu says. A training manual admonishes laogai administrators to “come to grips with the complexity of the international market.” Specific camps and their products are presented as success stories; a 1989 Chinese periodical called Legal Developments boasts that Jinzhou Prison (the Xinsheng Dye Factory) has “earned $8.49 million in foreign currency.”

“The communist government refers to the laogai-dui as ‘special state-run enterprises,’ ” according to Wu, “and they have full-scale departments for production planning and financial planning, and they are under the central direction of the Bureau of Production.

“The products of forced labor have become an indispensable component of the national economy.”

FINDING ONE LAOGAI-DUI PRODuct headed for the Western market is like finding one flea in a carpet. Few observers believe the practice is limited to panda socks and a pair or two of running shoes.

“South China is a giant export processing plant, with a big arrow aimed at the U.S.,” says a Senate staff member. Guangdong province, bordering Hong Kong, alone is the site of 133 known laogai-dui . Neighboring provinces contain at least 182. Even these numbers are conservative; they may account for only 15% to 20% of the existing labor camps in south China.

“I think, frankly,” the Senate aide concludes, “that anything coming out of south China has got to be considered suspect.”

In early 1990, North Carolina Republican Sen. Jesse Helms embraced the issue of Chinese convict labor. He had gotten wind of an article in the Financial Times that reported that Dynasty Dry Rose Wine, a Chinese product sold in the United States, was made with prison labor. On the Senate floor, Helms waved a label above his head and demanded that his fellow senators boycott the wine. He also suggested that legislation be introduced to sanction China trade and investment.

Helms’ interest in the issue resulted in Foreign Relations Committee hearings on June 6, 1990. Harry Wu was called to testify and described the human-rights abuses being committed in the gulag. Asian Studies Director Steve Mosher of the Claremont Institute in California presented a paper exposing the camps as sources for Western products and detailed the kinds of laogai-dui products being exported. Of the 99 categories of Chinese imports listed by the Department of Commerce, Mosher and Wu had tracked 65--including artificial flowers, live animals, perfume oils and radioactive materials--to laogai production. “In most cases,” Mosher told the senators, “we are able to identify specific camps that produce these commodities.”

They also detailed laogai-dui connections to two brand-name products. One of these was Dynasty Dry Rose Wine. Produced by Remy Associates (of cognac fame), it sold in this country for about $6 a bottle, and, as Remy had admitted to Financial Times, it was made from grapes cultivated at the Tuanhe forced-labor camp. “Yes, we get grapes from the prison farm,” said the company’s manager for northeast Asia. “I went there a few years ago. It’s a well-disciplined place.” Remy later pulled the wine from U.S. shelves.

Another product with an ugly past is Golden Sail tea, which is still found in American markets. The tea is produced by the Yingde Tea Co. in Guangdong province, which, according to Wu, is also known as the Yingde Laogai Camp.

For the most part, it’s possible to identify products, but not specific brands, made in the laogai-dui . Blue denim is a good example. In another article from the prison-bureau journal obtained by Asia Watch, Qin Guishan of the New Life Cotton Cloth Mill, a laogai-dui in Jiangsu province, boasts, “Our indigo-blue denim . . . won the title of ‘quality product’ awarded by the Ministry of Textiles. In the last six years, we exported . . . 10.37 million meters of cotton cloth. . . . We won good will and praise from customers in such developed countries as Japan, the United States and West Germany.”

Sometimes, the clues come from this side of the Pacific. In April, a Timex legal-department employee called Asia Watch. “He said it was well-known that watch movements are manufactured in China, put in casings in Hong Kong and sold abroad,” says an Asia Watch director. “Timex had long suspected that some of these movements were built by prison labor and had asked customs to look into it, but they weren’t able to track it down.”

The caller told Asia Watch that Timex had never purchased such movements but that other watch companies had. He would not name them.

HELMS’ VITRIOL, ALONG WITH Wu’s and Mosher’s testimony, sparked a brush-fire of interest in the convict-labor issue, but no specific sanctions were passed barring trade with China, and no conditions were attached to the renewal of China’s most-favored-nation status. As U.S. troops were sent to the Middle East, the issue of China’s human-rights record sputtered and died. Now, as debate begins for the 1991 most-favored-nation vote, the Asia Watch report and Wolf’s testimony are fanning the embers.

At least five pieces of legislation have been introduced to revoke or add conditions to the renewal of China’s most-favored-nation status, including the demand that China cease exporting laogai-dui products. Separate actions also have been taken to strengthen and broaden the law banning imports of convict-made goods.

The President has made clear his support of no-strings-attached trade benefits: “Some critics have said revoke MFN or endanger it with sweeping conditions,” he told the graduating class at Yale on May 26. “This advice is . . . not in the best interest of our country . . . and in the end . . . it is not moral.”

If Congress passes a joint resolution, and the President vetoes it--as it appears he would--Congress must come up with a two-thirds majority to make conditions stick. Most observers say such an override would be unlikely.

Even if Congress endorses the President’s recommendation, there is another wrinkle: A Palo Alto-based group called Support Democracy in China is promoting a boycott of toys made in China. The so-called “toycott” has targeted one of China’s biggest exports in an effort to protest not just the forced-labor camps but the full list of Chinese human-rights abuses.

“The United States,” says Linda Pfeifer, legislative liaison for SDC, “is the single-largest importer of toys from China. Fifty-five percent of all the dolls sold here, and 40% of all other toys, are manufactured there. The Chinese government made $1.6 billion in toy exports during the first six months of 1990 alone. Toys have become their largest export item.”

The toys mean billions of dollars for America’s retailers. The U.S. toy industry has lobbied hard--and emotionally--to uphold China’s trade status. At last year’s MFN hearings, for example, one executive went so far as to say that China could never be denied MFN status because if it were, the price of Teenage Mutant Ninja Turtle toys would quickly become prohibitive.

Last November, SDC passed out more than 50,000 flyers in front of Toys “R” Us stores nationwide. For the 1990 holiday season, the company reported an unprecedented 6% decline in profits. Pfeifer thinks her flyers had something to do with the result.

Pfeifer hopes that the toy boycott will send a strong message to Beijing: American consumers won’t let their children cuddle dolls that may be made by convict labor. She also hopes that soon all business relations with China will be seen as tarnishing to a company’s image--as was trade with South Africa just a few years ago.

“We met with David Miller, president of the Toy Manufacturers of America,” Pfeifer says. “We met with Michael Goldstein, the vice president of Toys “R” Us. Our request was that they divest from China.

“Their response,” she says, “was that they had an infrastructure in China that was lucrative. We gave them literature on forced labor--but the impression I got was that they didn’t want to know. There was no evil in the room; they were just being businessmen. Their top concern was the bottom line: profits.”

EVER SINCE REP. WOLF DISplayed the Chinese socks in Congress, Beijing has found itself struggling for damage control. “I really cannot understand,” the warden of Beijing Prison No. 1 declared on Beijing Radio, “why Mr. Wolf . . . ignored the facts and used the souvenirs we gave him as evidence for his rumors. It was the first time I have ever met a person as rude and unreasonable and with such ulterior motives as Mr. Wolf.” The socks, the warden insisted, were for the use of the prisoners themselves. He did not indicate which prisoners received the socks with golfers and which the pandas.

The warden’s statement echoed official promises to the effect that exports from the laogai-dui had never occurred but would stop immediately.

“They’re lying,” says Asia Watch spokesman Mike Jendrzejczyk. “Just as they’ve lied before. They’re terrified of losing most-favored-nation status.”

While Beijing cannot afford to lose MFN status, the Chinese government may also find itself unable to sacrifice the enormous economic benefits gained from exploiting the laogai-dui . No longer a merely punitive organ , the camps contribute substantially to China’s economy. Unlike the Soviet gulags--which always operated at a loss-- laogai-dui compete with each other for the highest profits.

The arrests following the Tian An Men protests and the 1987 Tibetan uprisings breathed new life into the gulag. When ex-labor-camp prisoner Zhang Langlang worked with U.S. attorneys in Beijing, he heard Ministry of Justice officials complaining about the poor quality of prison labor since the Cultural Revolution. Common criminals, they lamented, don’t have the spark that political prisoners possess. “The Ministry of Justice must be very happy now,” Zhang wryly reflects.

Exactly how many laogai-dui exist? How many prisoners do they hold? What percentage of China’s exports are produced in them? And what specific products sold here are convict-made? These are state secrets, closely guarded by the Chinese. The only thing certain is that the laogai system is thriving--imprisoning people like Chui Feng and Harry Wu--and meeting the western demand for cheap, durable goods.