Congressional members of the House Ways and Means Committee on Trade pressed witnesses on Tuesday on just how bad forced labor issues are worldwide, not just in China. The takeaway: it’s helped increase global disparity.
“If you displace the American worker and replace them with forced labor, doesn’t that affect income disparity in the United States?” Tom Rice (R-SC-7) asked the five witnesses today. “The corporate executive exploits labor in China and his income goes up, but the people who had a textile job in South Carolina or were a shrimp boat captain, or cotton producers in South Carolina, their income goes away. And what does that do to income disparity here? It grows, is that not correct?”
Congressman Tom Rice of South Carolina: pitting American labor up against forced labor creates income disparity at home.
Jennifer Rosenbaum, Executive Director of the Global Labor Justice-International Labor Rights Forum was first to respond. “The global supply chain model has increased global disparity,” she said, as if partially pressed to say so.
Rosenbaum is no softy on global corporations. She says forced labor is not merely the choice of a few bad actors in China and elsewhere. She said it was the result of governance gaps that rely on companies to police their behavior, and that of lower-tier suppliers, voluntarily. It’s a gnarly task.
“Forced labor is rooted in choices made in board rooms and governing halls not just on the factory floor so you have to focus your efforts in that direction,” she said.
The Biden administration has made “equity” and “inclusion” part of its socio-economic mantra since January. It is to Biden’s credit, at least, that the State Department and interagency partners have issued back-to-back warnings to American companies sourcing everything from cotton to polysilicon from Xinjiang, to American subsidiaries in Hong Kong that may be trading in, or financing those goods. They are not only subject to reputational risk, but they are now subject to sanctions fines in the millions. Overall, it’s a bad look for Corporate America, which has roundly taken up the cause of social justice at home, only to benefit from exploratory practices abroad. China is always the case in point.
Brian Lowry, Senior Vice President for Trade at the United States Council for International Business was the only pro-business voice on the virtual witness stand. The group’s members are all U.S.-based multinational corporations and professional services firms with global supply chains.
“We emphatically support efforts to identify and condemn forced labor globally,” he told the Committee. “Our member companies are deeply committed to eradicating forced labor and unrecognized labor rights are eradicated from their supply chains.”
Chairman Eric Blumenauer (D-OR-3) said he recognized that transparency issues can break down the deeper one goes into the supply chain.
Smaller to mid-sized contractors for big companies are often in a race to the bottom, put in these precarious positions by the likes of Walmart and others, to produce more at a lower cost. In some cases that doesn’t lead to forced labor, but it leads to other worker issues like long hours. The pricing pressure from the big retailers and original equipment makers often exacerbates the problem.
On deeper supply chains, Lowry said that companies are pretty well tuned in to their first and second-tier suppliers, but the third and lower-tier suppliers can be a black box. “Companies are working on getting that visibility in place. But not all companies can do that,” he said.
“I appreciate how tough that is…but this is how we are going to stop forced labor,” Blumenaur said.
Rep. Daniel Kildee (D-MI-5) singled out China during his time to question the panel. He said that China’s use of forced labor in polysilicon led to layoffs at Hemlock Semiconductor Operations, Michigan-based manufacturers of polysilicon for the solar panel industry.
Recently, the U.S. banned imported goods made from Xinjiang-based polysilicon giant Hoshine Silicon Industry Ltd.
More companies should be added to the ranks of Hoshine as the Biden-Harris administration is just nabbing the tip of the iceberg.
“They competed directly with these Chinese companies that benefit from forced labor of the Uyghurs,” Kildee said. “These are people I represent. They have been adversely impacted because of this unfair competition.”
Withhold Release Orders from Homeland Security, which stops goods at ports if suspected of forced labor, have been on the upswing. Asian companies are almost always the target of late. China dominates the list of recent WROs.
Rosenbaum said that recent WROs of imported seafood from Asia, where an increasing number of seafood sold in American grocery stores is sourced due to tight fishing regulations in North Atlantic and North Pacific waters, has gone after the $2.4 billion unregulated imported seafood market. But called the situation “egregious” to this day. “We need fleet-wide WROs. We are only tracking maybe 13% of the seafood that comes into ports here. Europe tracks 100%. We can do more,” she said.
Moving out of Asia may not exactly mean labor gets treated as well as it does in most of the Western world.
Rep. Thomas Suozzi (D-NY-3) wondered why garment makers don’t source cotton from the “Northern Triangle” countries of Guatemala, Honduras, and El Salvador.
Worker rights there are also violated, and relatively weak, but issues of Uyghur-style forced labor and internment camps are non-existent, at leas
“If you had better conditions there, people would not be migrating as much,” said Neha Misra a migration and human trafficking export from the Solidarity Center. She was one of the witnesses. “Forced labor is conducted by private actors and these private actors are throughout the supply chain, woven into the fabric of the global economy,” she said.
Congressman Suozzi, however, insisted that we encourage supply chains to move to Central America instead of reshoring part of it as well. We have already seen what price does to global supply chains – the race for the cheapest T-shirt, the cheapest solar panels – lead to undue pressure on workers, income disparity from replaced blue-collar workers in the U.S. forced into competition with $5 an hour and free labor, and Congress playing whack-a-mole against decades-old corporate supply chains.
Recognizing that Suozzi doesn’t represent cotton farmers on Long Island, the U.S. is the second-largest cotton producer in the world after India. No other developed country comes close to U.S. production. And clearly, the U.S. produces more cotton than the Northern Triangle states. It is a little disappointing that a member of Congress is quick to use forced labor restrictions to boost production in another country.
Genevieve LeBaron, Professor of Politics at the University of Sheffield said that European governments are tasking companies of a certain size to report on the efforts they are taking to detect forced labor in their supply chains.
“There has been concern over garment companies still sourcing from that region in China and even though European legislation has led to a lot of awareness, but it hasn’t changed much and we can see that in the ongoing sourcing of garments from there,” LeBaron said of Xinjiang.
Rep. Devon Nunez (R-CA-22) told LeBaron that Congress will look into any instances of ongoing sourcing in Xinjiang.
It’s been a busy week in the House with supply chain hearings. On the China front, it is clear that both parties see eye-to-eye on forced labor.
“This is an issue where there probably isn’t any daylight between parties,” said Blumenauer.
