The opportunities that the rising costs to manufacture in China offer manufacturers in mature markets like Europe and the U.S. are real. The low valuation of the dollar, eliminated VAT rebates, and rising labor and fuel costs all are motivating enterprises to look at other countries - many closer to their base - to supply their products.

We'll say it again - this is a perfect time to engage former customers or new prospects to sell the attractiveness and adorability of your business as a viable alternative to China sources. As they explore new options to manage these rising costs, they're more likely to listen to options they wouldn't have thought about 2 years ago.

But it looks like things are getting even more "perfecter."

This past week, a story by David Barboza in the New York Times announced "China Tells Businesses to Unionize." The ramifications for businesses currently embedded in China may be even more dramatic than the rising costs of the past year and a half.

The gist of the article is that the Chinese government is strongly pressuring corporations in China - both foreign owned and domestic - to allow the state-approved unions in their businesses. Some of the largest companies like Wal-Mart and others have until September 30th to accept the union. Mr. Barboza writes:

Lawyers and analysts say that demands of the All China Federation of Trade Unions, the only union the Communist Party allows, could sharply alter business practices of foreign companies in China, including giving lower-level workers the power to bargain over anything from pay raises to whether a Chinese headquarters should be moved elsewhere in the country.
+ "This will dramatically change the landscape here," said Andreas Lauffs, a lawyer at Baker & McKenzie's Shanghai office who is an authority on China's labor laws. "At the very least, company management must now consult, and in many cases bargain, with employees and unions on a wide range of matters, whereas in the past they enjoyed almost unlimited autonomy."+
+ The union push is coming at a time when global corporations are already facing rising labor and commodity costs in China, which is struggling to contain inflation.+

Of course, there are definately direct costs to be concerned with as the union moves into an organization:

Forming unions could be costly, lawyers and labor experts say, because a union could fight for higher wages and benefits and because companies are required to pay 2 percent payroll dues. The dues could amount to millions of dollars in additional costs for big companies. Yum Brands, for instance, has about 160,000 employees in China.
Manufacturers are already coping with soaring labor costs, which have jumped by 30 to 40 percent in some coastal manufacturing zones over the last four years. Also, a new contract labor law and stricter enforcement of older labor rules means some companies can no longer avoid paying overtime costs, which can be substantial because many factories insist that some employees work six days a week.

And in case you think this only impacts the big boys:

Union officials say they are focusing on global companies, but Chinese companies make up the bulk of the manufacturing work force and they are also expected to face audits and pressure to unionize.

But the concern - from Fortune 500 corporations to SMB manufacturers with a Chinese manufacturing presence - should be over the intangibles that come with collective bargaining and a strong union: work stoppages, and leveraging for better pay, benefits and conditions. In other words, it's not the bill on the table, but what comes for desert.

"Some foreign companies in China haven't behaved well in dealing with their workers' interests and rights," Wang Ying, an official at the All China Federation of Trade Unions in Beijing, said in a telephone interview this week. "As the economy and society develops, China needs to improve workers' legal rights and interests, which is a demand of a civilized society."

China's resolve should not be questioned here. Its aggressive approach to reducing pollution and redirecting resources prior to the Olympics should offer all the proof you need. And the natural progression to a modern society has to include an emerging, powerful middle class that wields influence and power. Look at the U.S. 100 years ago for more proof of that.

The costs of progress are always significant. China and its people are beginning to discover its potential and invest to make it reality. But the insertion of the union into Chinese manufacturing will absolutely increase costs and the need to improve margins much more quickly.