Let's recount. Wal-Mart contracts with Chinese factories and tells them to make stuff as cheaply as possible. The factories start violating labor laws in order to cut corners and keep costs down. People get upset at all the worker abuses. So Wal-Mart announces that it will start inspecting its factories. But in the end, the factories just find ever more creative ways to conceal their abuses:

Wal-Mart had already on three occasions caught Beifa paying its 3,000 workers less than China's minimum wage and violating overtime rules, Tang says. Under the U.S. chain's labor rules, a fourth offense would end the relationship.

Help arrived suddenly in the form of an unexpected phone call from a man calling himself Lai Mingwei. The caller said he was with Shanghai Corporate Responsibility Management & Consulting Co., and for a $5,000 fee, he'd take care of Tang's Wal-Mart problem. "He promised us he could definitely get us a pass for the audit," Tang says.

Lai provided advice on how to create fake but authentic-looking records and suggested that Beifa hustle any workers with grievances out of the factory on the day of the audit, Tang recounts. The consultant also coached Beifa managers on what questions they could expect from Wal-Mart's inspectors, says Tang. After following much of Lai's advice, the Beifa factory in Ningbo passed the audit earlier this year, Tang says, even though the company didn't change any of its practices.

The audits aren't working? Shocking. So now some American companies are experimenting with other methods, such as banding together to create a single set of labor standards, or giving factories more time to become compliant so as not to "drive violations underground," but the constant pressure to cut costs, along with the lack of decent labor enforcement in China, all but guarantees that these things will accomplish very little, although here's an interview with one official at the ILO who seems to think brand-name companies really can reform labor practices in China on their own. I don't buy it, but that's the pro-corporate side of things.