[Global Focus] Xinjiang Uyghur, a Human Rights Battlefield... Could It Become a Trigger Shaking the Global Supply Chain?

At Least 82 Companies Linked to Forced Labor in Xinjiang Uyghur Region
Major IT and Manufacturing Firms Including Apple, Google, GM, Volkswagen
NYT: "Xinjiang Raw Material Industry Connected to Global Supply Chains"
Strong Opposition from US Business Community to 'Uyghur Forced Labor Prevention Act'

[Asia Economy Reporter Kim Suhwan] O-Film Technology, headquartered in Nanchang, China, is well known for producing key components used in Apple iPhone cameras. It is reported that not only Apple but also major corporations such as Dell, GM, Microsoft, and Google have cooperative relationships with O-Film. However, recently, as the issue of forced labor of Uyghurs in Xinjiang has come to the forefront, these companies have found themselves in a dilemma. According to a report released by the Australian Strategic Policy Institute (ASPI) in March last year, more than 2,000 Uyghurs are employed at O-Film alone. ASPI analyzed that "all of them may have been mobilized for forced labor."

Since U.S. President Joe Biden took office, placing human rights as the top priority in diplomacy, conflicts with China have intensified. After BBC recently exposed that cotton in the Xinjiang region is produced through forced labor of Uyghurs, Xinjiang has emerged as a new battleground for human rights between the Western world and China. The problem is that the items related to forced labor are not limited to cotton.

US-China ‘Human Rights War’... Global Companies Caught in a Dilemma

[Image source=EPA Yonhap News]

After global fashion companies including H&M criticized the forced labor issue related to Xinjiang-produced cotton, these companies became targets of a boycott movement by Chinese consumers.

Due to this boycott, global fashion companies are expected to suffer massive sales losses. According to a report by Bain & Company released last December, while the global luxury market, including the fashion industry, shrank by 23% last year, luxury market sales in China increased by 48%. Additionally, China’s share of the global luxury market reached 20% last year, nearly doubling from 11% the previous year. The New York Times (NYT) reported, "China is a very important sales hub for the global apparel industry," and said the damage to global fashion companies caused by this boycott is inevitable.

In fact, since the boycott intensified in mid-last month, the stock prices of H&M and Nike fell by 12.5% and 8.3%, respectively, suffering double-digit declines, while Burberry and Adidas also dropped by 7.8% and 5.8%, respectively.

It is expected that global companies will also find it difficult to respond. Previously, many companies apologized to Chinese consumers early in the crisis and waited for the situation to calm down.

However, in this boycott, such measures could backfire. A major foreign media outlet reported, "If foreign companies apologize to Chinese people in this incident, the situation could worsen," adding, "There is a high possibility of social criticism from their home country’s political circles and civil society." It is analyzed that companies face a dilemma where showing a submissive attitude toward the Chinese government could lead to condemnation at home.

A previous example of such backlash was when Activision Blizzard, a major U.S. game company, permanently banned a participant who expressed support for the Hong Kong protests during its game tournament amid the 2019 Hong Kong democracy protests.

Cotton Is Just the Tip of the Iceberg

In December 2017, Tim Cook, CEO of Apple, visited a factory of OFilm located in Nanchang, China, touring the iPhone X camera module production line.
[Image source=Australian Strategic Policy Institute (ASPI)]

There is also analysis that the current Xinjiang Uyghur issue will unfold differently from the existing human rights conflicts between the Western world and China. This is because the forced labor of Uyghurs is a problem deeply intertwined with global supply chains involving multiple companies and countries.

According to the ASPI report, more than 82 companies are linked to the forced labor issue of Uyghurs in the Xinjiang region. The list includes not only apparel companies but also major U.S. IT companies such as Apple, Microsoft, Google, Dell, and Amazon, as well as companies from various sectors like Nintendo, BMW, Volkswagen, and Toshiba.

[Image source=Australian Strategic Policy Institute (ASPI)]

The complexity of the issue stems from the Chinese government’s Uyghur relocation policy. Since 2017, under the pretext of ethnic integration and poverty alleviation, the Chinese government forcibly relocated more than 80,000 Uyghurs from the Xinjiang region to other areas. These relocated Uyghur workers are likely subjected to forced labor in factories across various industries. This is why foreign companies with production plants in China’s diverse industrial sectors cannot be free from the forced labor issue.

Strong Opposition from US Business Community to the ‘Uyghur Forced Labor Prevention Act’

Senator Marco Rubio reintroduced the 'Uyghur Forced Labor Prevention Act' in the U.S. Senate last January.
[Photo by Reuters Yonhap News]

Among these developments, the ‘Uyghur Forced Labor Prevention Act’ being promoted by the U.S. government to address the forced labor issue in Xinjiang has sparked strong opposition from the U.S. business community.

The bill, which passed the House last September, mandates that the U.S. government consider all products made in the Xinjiang region as the result of forced labor and issue a withhold release order when importing such products. U.S. companies importing products from Xinjiang can only bring them into the U.S. if they prove that the products were not produced through forced labor.

The bill is currently pending in the Senate Foreign Relations Committee. However, after BBC exposed allegations of mass rape in Uyghur detention camps in February, discussions on the bill have resumed. Twenty-seven senators, including Senator Marco Rubio, have reintroduced the Forced Labor Prevention Act.

If this bill is enacted and implemented, concerns are rising that it could disrupt global companies’ supply chains.

Tomatoes being cultivated in the Xinjiang region of China
[Photo source=Captured from China CGTN YouTube]

The NYT explained, "Tomatoes produced in Xinjiang are used in ketchup by the American food company Heinz, and sugar produced there is also used as an ingredient in Coca-Cola," highlighting that Xinjiang’s raw material industries are closely connected to global supply chains. Bloomberg reported, "China accounts for 40% of the world’s tomato paste trade volume," and "70% of tomato distribution within China comes from Xinjiang, Asia’s largest tomato production area."

In response, the U.S. business community is opposing the Forced Labor Prevention Act as an excessive regulation that does not reflect reality. The president of the U.S. Apparel and Footwear Association pointed out, "Xinjiang-produced cotton is often mixed with cotton from other countries, and it is difficult to trace the origin of cotton," adding, "It is irresponsible to require companies to prove the forced labor issue of imported goods."

Last September, the U.S. Chamber of Commerce criticized the bill as "very inefficient" in a letter to Congress. Richard Mojica, a lawyer at Miller & Chevalier law firm, told the NYT in an interview, "It will take companies several months just to identify forced labor issues in imported goods." Major U.S. companies such as Apple, Nike, and Coca-Cola are lobbying to amend the bill. It is reported that part of the $4.68 million Coca-Cola spent on lobbying from early last year through the third quarter was used to revise provisions of the Forced Labor Prevention Act.

This content was produced with the assistance of AI translation services.