American Businesses Are Responding to the Crisis in Xinjiang

COMMENTARY Trade

American Businesses Are Responding to the Crisis in Xinjiang

Mar 9th, 2021 3 min read
COMMENTARY BY
Tori K. Smith

Jay Van Andel Senior Policy Analyst in Trade Policy

Smith provides the conservative true north on free trade through her research and writing.
An Uyghur man and his daughter and listening the speeches, during the demonstration “Freedom for Uyghurs” in The Hague, Netherlands on August 20th, 2020. Romy Arroyo Fernandez / NurPhoto / Getty Images

Key Takeaways

Evidence has emerged that individuals in these camps are subject to various forms of forced labor, among other human rights violations.

Businesses are facing three key challenges as they review supply chains and look to move out of China if a connection to Xinjiang is discovered.

Open trade and investment through trade agreements promote innovation and lead to better products, new markets, and greater investment.

Over the last three years, Americans have learned of the unprecedented assault on the civil liberties and freedoms of ethnic Uyghurs in China. It is estimated that between 1.8 million and 3 million Uyghurs have been collectivized and interned in political re-education camps in China, primarily in the Xinjiang region.

In recent months, evidence has emerged that individuals in these camps are subject to various forms of forced labor, among other human rights violations. The evidence is so overwhelming that in January the U.S. issued an atrocity determination stating China had committed crimes against humanity and genocide against Uyghurs, a move recommended by Heritage Foundation analyst Olivia Enos and others in the human rights community for months.

The U.S. government has responded to this crisis by ramping up customs efforts to detain goods produced with forced labor in Xinjiang. A new Heritage report details what more the U.S. government could be doing to enforce the law, such as issuing an order assuming that all goods made in re-education camps are produced with forced labor.

Utilizing forced labor is both illegal and morally reprehensible, which is why many American businesses are taking the situation in Xinjiang seriously.

In a letter to Congress, a coalition of retail industry associations made absolutely clear that they “do not tolerate the use of forced labor or other human rights abuses within our supply chains.” Moreover, the letter identifies the crisis in Xinjiang as “a top operational and public policy priority for us and our members.”

The notion that businesses are just chasing profits by having supply chains that pass through China is simply false. Retailers actively review their supply chains to ensure that products made with forced labor are not present. Today companies are not only aggressively reviewing their direct contracts, but also those of suppliers indirectly involved in producing their goods.

Businesses are facing three key challenges as they review supply chains and look to move out of China if a connection to Xinjiang is discovered.

The first challenge is that this tracing is expensive and takes time. Supply chains are complicated, and a major U.S. retailer only has contracts with the first or second layer of the chain.

For example, a shirt sold at a major retailer might be made in Bangladesh, but the fabric comes from China. The cotton used to make that fabric may be of U.S. origin. It is also common for cotton to be sourced from China, India, or Brazil. Xinjiang, China is estimated to be home to 80 percent of Chinese cotton production and 20 percent of the global cotton supply.

The U.S. retailer seldom has a direct contract with the cotton company, so tracking the supply chain to this level can be challenging. However, despite the expense and effort, companies have been trying to do just that in recent months.

Second, when companies find connections to Xinjiang in their supply chains, they are having trouble auditing the facilities. Some auditors say they are unable to conduct credible investigations to determine the extent to which forced labor is present in supply chains in Xinjiang. If auditors cannot access factories, American companies are stuck between a rock and a hard place.

The natural next step would be for these companies to look at changing their suppliers for the goods that may be produced in factories that auditors cannot access. But businesses face their third challenge here.

Apparel and textile products are subject to incredibly high tariffs and stringent regulations in the U.S. and around the world. The average U.S. tariff rate for shoes, fabric, and clothing products is more than 11 percent. Many of the countries where textile production is common do not have trade agreements with the U.S. that would eliminate or lower these barriers, making it costly to move production.

As companies review their supply chains and U.S. customs enforces the law, the Biden administration and Congress could be taking additional steps to ensure that apparel and textile products remain affordable for American families.

A trade program called the Generalized System of Preferences eliminates tariffs for certain goods from developing countries. Currently, most apparel and textiles products do not benefit from this program. Congress should expand this program to eliminate tariffs on apparel and textile products.

The Biden administration could also promote more open trade in this sector by expanding America’s network of free-trade agreements. Open trade and investment through trade agreements promote innovation and lead to better products, new markets, and greater investment. America and all countries stand to gain from expanding markets and greater trade.

This piece originally appeared in Inside Sources