A Letter To Jiang Zemin

Bruce Klatsky was on the phone, talking fast, eager to keep the plan secret. The boss of the Phillips-Van Heusen shirt company was one of three American CEOs on a mission to change China. Klatsky, Paul Fireman of Reebok and Robert Haas of Levi Strauss wrote to President Jiang Zemin in April 1999, requesting an urgent meet. Under fire from campus activists for making clothes and sneakers in "sweatshops," the CEOs warned Jiang that they face tough questions about staying in China. They offered to "work together" to improve labor rights, a point of some delicacy in the world's largest workers' state. They had promised the Chinese discretion, and Klatsky was alarmed when a reporter obtained the letter. "Look, I don't want you to think I'm a flake. We don't think this is likely to work," said Klatsky. "But if this does work, we have a chance to do great things."

This was not Kissinger's secret trip to China, but it appears to be the first attempt by corporate executives to open a diplomatic back channel to Beijing. NEWSWEEK interviewed company executives and diplomats and reviewed their correspondence, reconstructing a quixotic odyssey that shows the intensely personal pressure on American executives to be "good corporate citizens" in China. Now, after 13 months of phone calls, letters and "bizarre" meetings with Chinese diplomats, the CEOs despair of seeing Jiang, and don't even know if he's seen their missive. "We got the big brushoff," said one executive, summarizing a March 10 letter from Beijing's ambassador in Washington. "He said, 'Jiang is busy for the rest of his life. Mind your own business'."

The story won't end there. "These three CEOs have crossed a line that needed to be crossed, directly challenging a government on human rights," and more will follow, predicts an officer at Human Rights Watch. Perhaps. But on the eve of the permanent normal trade relations vote in Congress, China's rebuff undercuts those who say the best way to change China is from the inside. Together the three CEOs generate $500 million in annual exports and tens of thousands of jobs. "If China slaps these three very powerful companies in the face, what does that say?" asks Dara O'Rourke, an MIT expert on garment-factory conditions. "It's a very interesting test case."

In the early 1990s, Haas, Fireman and Klatsky won brief praise as the first three CEOs to sign corporate codes of conduct pledging to honor workers' rights abroad. But soon they were pilloried by the "anti-sweatshop" movement as "hypocrites" for staying in China, which recognizes only one toothless union. For CEOs who see themselves as good guys--PVH staffers call Klatsky "Dudley Do-Right"--this stung. Thus the unlikely drama: three leaders of an industry historically hostile to unions in America, pushing China to broaden union rights for an estimated 4 million workers who toil in 44,000 garment factories, making as little as 13 cents a day.

This was novel. In 1998, activists protested at Levi Strauss offices when the company returned to China after a six-year pullout. Privately, they urged Levi Strauss to make amends through "quiet diplomacy" on behalf of jailed Chinese unionists, says activist Medea Benjamin. "Their response was, 'No way. We're not a human-rights group. We're a company'."

But activists had come to hold corporations accountable to the same covenants as nation-states, so it was "only a matter of time" before CEOs would be pushed into do-gooder diplomacy, says a company insider. In February 1999, Levi Strauss hired Gare Smith, a former acting U.S. assistant secretary of State for Human Rights. He became its point man on the China mission. The company's board of directors was fully briefed and "very supportive" of the idea of CEO diplomacy, says the insider. With campus activists threatening to boycott famous apparel brands, the business calculus had changed.

As had the personal one. Battered by criticism of a PVH plant in Guatemala, Klatsky had joined the board of Human Rights Watch. It didn't help. At a recent human-rights gathering, unions lampooned Klatsky with a giant inflatable rat--in front of his wife and son, Peter. Once, a radical young woman regaled Peter with tales of "Kratsky," an evil boss who cows workers in Guatemala by firing his pistol in the air. That stuff miffed Klatsky, who calls himself "an old liberal from the '60s." "I want to show my son I can be a boss and do the right thing."

Still, the CEOs had to weigh the risks. "The best scenario: Jiang meets us and allows unions to organize--ha, ha, ha," says one executive. "The worst: Jiang gets pissed off and throws us out." The CEOs figured they would be safe if they banded together, promised the Chinese to keep the talks secret and suggested to Jiang "that he was not just speaking to us three, but to millions of American consumers" who buy their products. "I admire the guts of these CEOs," says a diplomatic veteran of Nixon's opening to China. "But I don't see how Jiang could possibly respond. The Chinese hate to be seen to be yielding to pressure."

The CEOs saw it differently. Pulling out of China, where one third of the world's clothing exports come from, was not a serious option. Typically, the companies hire Asian brokers, who subcontract factories in China, where workers live in barracks and labor long days in tough conditions. Shoe factories are regimented, often sparkling-clean camps of up to 60,000 workers, and the toughest jobs are in the sweltering din of boiler rooms, activists say. By all accounts, the three CEOs try harder than most, but only on-site unions could police such far-flung networks of subcontracted factories. "Beneath all the activism and the nonsense, we all provide a lot of good jobs," says Klatsky. "And the Chinese understand that our codes of conduct pledge to honor unions, and that we're in a legitimate bind."

The CEOs wrote to Jiang with some hope for relief. On April 22, 1999, three deputies delivered their letter to U.N. Ambassador Qin Huasun, figuring him a softer touch than the "hard-liner" in Washington. But the meeting was soon "headed off in a crazy direction," as Qin "became amazed, just amazed" to hear unionists are arrested in China, says one executive. Qin seemed not to recall covenants he had signed. "It was bizarre," says another executive. "I almost thought he was mocking us."

Yet Qin left the executives hopeful their letter would reach "the highest circles" in Beijing. Then, nothing. The deputies followed up by "making a nuisance" of themselves until the Chinese responded--seven months later. Ambassador Qin referred the CEOs to the Washington ambassador they hoped to avoid. Discouraged, the deputies went in February to China's Washington embassy, where they met counselor Chen Ligang, who "changed the subject" every time they tried to raise union rights, says one exasperated executive. "I can't waste any more time on this," he adds. "I've got a company to run." Chen, however, found his first formal meeting with American businessmen "very useful." So will the CEOs ever see Jiang? "I can't predict the future," says Chen with a laugh. "But why not come back to the embassy and talk?"

Why not? "When you're doing international diplomacy on human rights with a country that hasn't respected them in 1,000 years, this is a success," says one executive. "No company has tried this before, and China has set a precedent for talks." A Reebok spokesman says the CEOs are still "working quietly" to meet a high official, if not Jiang. And they did score one victory. Peter Klatsky, 23, is on the mailing lists of groups that attack his dad as a rat. The young activist says he normally would agree with skeptics who will see the whole thing as a corporate PR ploy. "But I know my father," says Peter, who thinks the effort was "totally cool, totally against the usual corporate interest in China." "My father is really my hero, in a totally trite way, for how he's tried to use his authority." One secret mission, accomplished.