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Jack L.B. Gohn: Pirates, iPads and the end of extraterritoriality

Sometimes it’s hard to believe how contrapuntal two current news stories can be. Such, for my money, are the tales of Apple’s Chinese factories and Hollywood’s at least temporarily failed effort to persuade Congress to pass anti-piracy legislation.

The Apple story is fascinating, if a little fuzzy around the edges. It’s no news to anyone paying attention that our consumer economy depends upon underpaid and endangered workers, whether we’re talking juvenile Uzbeki cotton-harvesters, conflict diamond miners, sewing-machine operators in maquiladoras along the Mexican border, migrant farm workers picking our fruit, or the toiling Asian hordes who handcraft our cheap consumer electronics. Without laborers working long hours in unsafe conditions for subsistence wages, we cannot stock our Wal-Marts or our Best Buys.

Apple just announced record profits, but the rumble about the Chinese factories where most of its hardware is made has been gradually increasing and threatens to drown out the rejoicing. The story largely got its start through the amateur reporting of monologist Mike Daisey in his show The Agony and the Ecstasy of Steve Jobs, which as of this week is back from touring the country for an extended run in New York. Daisey claims to have penetrated the wall of secrecy surrounding the factories where iPods and iPads are made – and much of what he tells tends to puncture the Apple mystique.

Daisey speaks of visiting the factory of Foxconn (Apple’s biggest supplier) in Shenzhen, which employs 430,000 workers, many of them as young as 12, working 12-to-16-hour shifts as the standard. Bona fide unionization is criminalized. The workers sleep in dorms with bedspace arranged in honeycombs. Some of them work with neurotoxins that make their hands tremble. And of course when the American companies they make things for come in to inspect working conditions, the factory always knows in advance and gets the underage workers and the dangerous chemicals out of sight.

At least, this is the story according to Daisey. Some have questioned whether he has his facts right. But a long investigative report out last week in the New York Times confirms a lot of them.

Apple itself lent at least partial confirmation to Daisey and the Times with the 2012 version of its annual “Supplier Responsibility Progress Report.”

Reading it, one wades through a fair amount of self-congratulation about Apple’s standards, its inspection program, and it remediation program; but there seems to be a lot, even by Apple’s admission, to remediate: only 38 percent of the factories stayed within acceptable working hours, only 69 percent (representing at least 90 factories) paid adequate wages, and there were a lot of other problems, like fatal and injurious explosions owing to improper ventilation, toxic chemicals dumped in wastewater, and unabated noise, at various plants.

It’s harder to get a fix on how accurate or comprehensive all this is because almost no individual factories are named, and Apple has both a generalized culture of secrecy and a particularized PR need in this instance to deny leads to reporters who might be inspired to check Apple’s facts. The Progress Report is half mea culpa, half damage containment.

And Apple, I strongly suspect, is one of the “good guys,” comparatively speaking. We are totally dependent on Asian electronic manufacturers, and they are totally dependent upon a workforce that can almost be characterized as slave labor. Manufacturers can’t easily or lawfully get away with that in the U.S. To their benefit and that of the American consuming public hooked on gizmos, that kind of behavior is either legal or the laws against it aren’t enforced elsewhere.

Free content

Live by the sword, die by the sword. American “content providers,” i.e. purveyors of movies, TV, music, and books (including Apple), recently relearned that adage. They have benefited just as we American consumers have by having “content” disseminated and enjoyed on many of those cheap gizmos. However, they have discovered to their consternation over the last few weeks that consumers are adamant about preserving the option of getting the content for free, courtesy of that very same absence of law enforcement in foreign climes that makes the cheap gizmos possible.

Think of the Stop Online Piracy Act (SOPA) and the Protect Intellectual Property Act (PIPA), derailed last month by a popular uproar, as attempts to subject to U.S. substantive law and U.S. court jurisdiction foreign pirate websites and the advertisers and payment intermediaries who service them. Both acts would have enabled courts to cut off consumer access to foreign pirate sites, order search engines to disable links to them, and force advertisers and payment agencies to stop dealing with them.

As gratifying as it might be to attribute the groundswell of popular resistance that has at least temporarily stopped SOPA and PIPA to concern about overweening extraterritoriality, freedom of speech (a search engine’s providing links is certainly speech), or the intellectual freedom of Web users, I suspect that this is less a matter of principle, and more a case of consumers “wanting their MTV” — and for free.

It’s not as if SOPA and PIPA aren’t part of something sinister; they are. The aggressive pursuit of extraterritoriality by all levels of the U.S. government, for instance bullying bankers around the globe, is a great untold story. And restrictions on Internet freedom are the kind of thing one expects from the Chinese government or the ancien regime in Egypt, not Uncle Sam. But the alliance between the Apples and the Foxconns of the world is pretty sinister, and American consumers aren’t rushing to remedy it. Nobody’s shutting down any websites over it.

And here consumers and government are as one. The U.S. government, for all its willingness to interfere with foreign sovereignty to enforce tax laws or fight Muslim fundamentalists, is doing nothing serious to better the working conditions in the factories of China, Inc.

The funny thing, of course, is that the average American consumer would be far better off if the priorities were different. Imagine if we tried tactics akin to those of SOPA and PIPA to force Asian electronic factories to adhere to U.S. standards of pay, safety, environmental responsibility and industrial hygiene.

Supposing, for instance, we forbade Best Buy or Apple Stores to stock anything made at factories like Foxconn’s, denied manufacturers like Foxconn access to U.S. payment channels or banks, and made it impossible for retailers who dealt with such manufacturers to use the Web to advertise their wares. (Not saying all this would be consistent with our treaty obligations; just thinking out loud.)

That would deprive Asian sweatshops of the economic advantage, and make it profitable to move many of those factories to America, putting more Americans to work, and putting more money in American pockets. Yes, the price of the resulting goods would go up a lot. But with much more money in our pockets, we consumers could afford those prices.

We might even be less inclined to troll the Web in search of free content. Win-Win.

Jack L.B. Gohn is a partner with Gohn, Hankey & Stichel LLP. The views expressed here are solely his own. See a longer version, with links to his authorities, at www.thebigpictureandthecloseup.com.