By Kenneth Rapoza, CPA Industry Analyst
Labor and human rights move to the fore in dealing with China. Sourcing cotton or computer equipment from Xinjiang? Look out.
This week, Customs and Border Protection issued orders to block imports from five new companies stationed in Xinjiang, the infamous Western China province that is home to “re-education camps” for Uyghur Muslims.
In any normal time, the world’s No. 2 economy would be wholly condemned by multinationals and governments for its detention of ethnic minorities, let alone using them for free labor sold to ketchup makers and clothing brands exported worldwide. But, while the world continues to do business in Xinjiang – with Disney the latest to film a princess movie there – Customs and Border Protection is taking action to make it a little more difficult.
The five Withhold Release Orders on September 14 includes an actual detention facility believed to be using forced labor for exported products; Yili Zhuowan Garment Manufacturing Company and Baoding LYSZD Trade and Business Company; all cotton produced and sold by Xinjiang Junggar Cotton and Linen Company; hair extensions made in a place called Lop County Hair Product Industrial Park and a computer company called Hefei Bitland, which was written about by The Intercept as being a contract manufacturer and shipper for Asus, Lenovo and our very own Google Chromebooks, the ubiquitous, low cost laptop used by public school systems for their students. Hefei Bitland is already on the Entity List.
“This is the start of the WROs and there will be more,” says Michael Stumo, CEO of CPA. “This is a continuation of the China decoupling process. We are rooting out illegitimate and unlawful imports.”
Last week, a group of human rights and labor activists petitioned Customs and Border Protection to ban all cotton and tomato products coming from Xinjiang. Their claim was based on forced labor issues, which is what gets the CBP to act on its WRO import blocking tactic.
The CBP does not usually issue a WRO on individual regions of a country, but it has outright banned imports from a country such as diamonds from Zimbabwe and tobacco from Malawi. A ban on Xinjiang cotton, for example, would totally disrupt the apparel industry in China, which gets a lot of its cotton from there.
The WRO is limited to banning goods that are produced “in whole or in part” from forced labor. In part, in this case, would include clothing made from Xinjiang cotton.
If multinational companies are all against China tariffs, then the best place to bring them on board is on human rights issues. Disney has been hit with boycott threats over Mulan and ticket sales for the movie, the live action version of its first Asian Disney princess, have been lackluster even in China. The more companies who are exposed for doing business with Communist China, or with Xinjiang forced labor, the better, as the Uyghur Human Rights Project stated in its petition to Customs in August.
Earlier this summer, CBP issued four WROs against certain products from the Xinjiang region, but nothing sufficiently sweeping to dissuade Beijing to close its detention centers, or to discourage major clothing brands from importing cotton linked to forced labor and exporting them. Industry groups have repeatedly requested clear guidance from the US government and a regional WRO would provide it.
The recent application of Global Magnitsky sanctions to certain entities and individuals in Xinjiang, including the Esquel Group and the Xinjiang Production and Construction Corps have only resulted in Beijing applying counter sanctions against Senators Marco Rubio and Ted Cruz and no other apparent change in behavior.
The United Nations has been particularly useless. They have had no discernable impact despite the usual joint statement issued by 51 UN Special Rapporteurs on the human rights situation in China.
The only solution will come from decisions by multinationals and American importers. But, if like Disney, they cede the moral high ground to whatever Beijing says it is, then the pressure will have to come from Washington to make sure that free labor is not one more way China is running circles around US manufacturing, while shaking hands with pliable companies either knowingly or blindly going along with them.