Sweatshop Toys? China's Goods Find U.S. Homes

With a spate of safety recalls already drawing scrutiny to the multibillion dollar toy industry and products manufactured in China, a Senate panel heard grim testimony Thursday on another aspect of toy production -- the plight of workers in China who work in toy factories.

A panel of international labor activists said workers in toy factories are forced to work 14-hour shifts for six or seven days a week, with no job security and for extremely low pay -- as little as 53 cents an hour.

Sen. Byron Dorgan, D-N.D., who is pushing legislation that would make it illegal to import or sell goods in the United States that are made abroad in sweatshops or by prisoners, said American consumers should consider the working conditions in foreign countries just as they consider the safety of products made abroad.

"It seems to me, after what we've done to pull ourselves up and create a middle class and insure working conditions in this country," Dorgan said, "we should not allow the products of sweatshop labor to be brought into America and sold on our toy shelves."

Billions in Profit, Hours of Sweatshop Labor

Americans are preparing to spend billions on toys during the holiday season.

The largest toy distributor in the United States is Wal-Mart, and Bama Athreya, director of the activist group International Labor Rights Forum, claimed the discount chain will sell $7 billion worth of toys this year.

It is that company's ability to demand lower costs, she argued, that has contributed to some of the poor working conditions in China.

"Wal-Mart bears a lion share of responsibility for pushing the toy industry to a place where worker health and safety are basically nonexistent," Athreya testified to Congress.

She also criticized toy companies like Mattel, Hasbro and the Walt Disney Company, the parent company of ABC News.

Dorgan said he invited representatives for Mattel and the toy industry to take part in the hearing but they declined.

But present at the hearing was Peter Eio, who is a past chair of the Toy Industry Association and now sits on the board of the International Council of Toy Industries, a toy industry funded group that works with Wal-Mart and certifies toy factories for compliance in ethically treating workers.

The group has given its seal of approval to 669 factories worldwide. But Eio said it will be a years-long process to get all of the thousands of toy factories certified.

China Dominates Toy Market

In China alone there are an estimated 8,000 factories that manufacture toys, according to Athreya.

The base wage in Shenzhen, China, where many toy factories are located, is just 53 cents an hour, said Charles Kernaghan, the director of the National Labor Committee.

Kernaghan held up a Barbie doll during the hearing and asserted to senators that it costs around $9 to manufacture, but retails for more than $29.

"There's enough money here to make the toys safe and treat the workers fairly," Kernaghan said, waving the pink Barbie toy package above his head.

A spokesperson for Mattel, which manufactures Barbie, said after the hearing that the company is looking into allegations by Kernaghan that the working conditions in the Xen Yi factory are poor.

But while she could not speak to the working conditions in that factory, Mattel spokesperson Jules Andres denied Barbie dolls are made there, pointing out that Mattel, for proprietary reasons, makes all of its Barbies in Mattel-owned factories, of which there are two in China and one in Indonesia. That factory, she said, makes toys for a company that licenses the Barbie name.

Kernaghan dismisses the distinction and argued that he said has photographic evidence of toys legally sporting name "Barbie" in the factory.

Kernaghan asserts the distinction is that the toy was Barbie accessory and not technically a Barbie doll, but still sold by Mattel. He said he has photographic evidence of the Barbie toys in the factory.

Andres defended Mattel's record insisting on ethical workplaces, pointing to independent reviews that Mattel has sponsored of their factories and posted on their website.

"We try to be very transparent," said Andress in a telephone interview. "Obviously we do face issues like every company, but we try to face them responsibly."

Kernaghan called this "putting lipstick on a pig," insisting he got some of the information for his testimony from those independent reports and the conditions they exposed in one Mattel plant in particular.

Working Below Minimum Wage

Athreya claimed fines levied by Chinese employers against workers can take a worker's wages below the minimum wage.

She said her group has discovered factories where workers are forced to sign two contracts -- the public, legal one shown to government and industry compliance officials and the real contract, which she said is not public and treats the worker much worse.

Both Athreya and Kernaghan said they obtained their information about the dismal conditions for workers, often in contravention of Chinese law, through smuggled pictures and pay stubs and from anonymous toy factory informants.

At the same time, she said fewer companies would manufacture their products in China if the labor practices there were more labor friendly.

"China would not be as attractive a production destination to us companies if workers were treated fairly," she said.

Free Trade vs. Fair Trade

Dorgan, who is ardent in his supporter of American manufacturing and critical of free trade agreements, seized on the difference between free and fair trade.

"No American worker should be told you lost your job because you can't compete with a sweatshop," Dorgan said.

In addition to sweatshops, the committee heard from Harry Wu, who spent 19 years in a Chinese jail and now runs a U.S.-based China watchdog group.

Wu alleges that it is not just factory workers who are treated unfairly.

Goods made by prisoners, he said, can find their way into the pipeline of products sold to American companies and imported to American stores.

Wu implored American consumers: "They have to think about who made these products and under what kind of condition."

It is unclear how much appetite there is on Capitol Hill for Dorgan's legislation.

The only other senator to attend the hearing was Bernie Sanders, the liberal independent from Vermont who, like Dorgan, is outspoken on the issue of trade.

ABC News' Tom Shine contributed to this report.