On his way out the door, president Donald Trump went on a spree of pardoning white-collar criminals and coddling carbon polluters. But he also took one set of midnight actions that human rights campaigners have no problem with: a week before departing the White House, Mr Trump banned the import of any product made with Xinjiang cotton or tomatoes. And on his last day in office, Mr Trump declared China’s treatment of Uyghurs a genocide.
These moves capped a surprising record of progressive continuity in this one policy sub-area: from an anti-trafficking compliance guidance for the Obama-era Federal Acquisition Regulation, to a business advisory setting out best practices to avoid the taint of Xinjiang forced labour in the supply chain. To be sure, when it came to African conflict minerals, Trumpists impeded enforcement of the Dodd–Frank Act, but xenophobia trumped free-market ideology on China, where they advanced the transatlantic centre-left agenda on process-based business human rights regulation. That agenda now has room to run.
Probably the most popular of the many environmental, social and governance (ESG) bills pending in Congress is the Uyghur Forced Labor Prevention Act. Passed in the House of Representatives by a vote of 406–3, it even garnered the support of the hapless Republican Matt Gaetz, who is known for casting a lonely anti-trafficking vote, and is now caught up in a sex trafficking investigation himself. The Uyghur bill would create a presumption that any import from Xinjiang falls afoul of the Tariff Act ban on forced labour, unless the customs commissioner reports clear and convincing evidence to the contrary. But even if it never becomes law, the supply chain guru Michael Littenberg of Ropes & Gray predicts that US customs will continue to aggressively enforce the ban on forced labour when it comes to goods sourced in Xinjiang.
A combination of legal, consumer and shareholder pressures is now driving several major Western apparel brands to advertise that they steer clear of Xinjiang. But the backlash from China — notably conveyed by the suspicious disappearance of H&M from the Alibaba platform — has inspired numerous Chinese brands (and a few nervy Western outliers) to wave the flag of genocidal cotton. Assuming no Western brand stays with the skull and bones, the trend will be toward regionalisation.
Beyond China, the Biden administration promises considerably broader regulation of supply chains by Congress — and vastly broader disclosure demands by securities regulators. Several pending bills would create an American answer to the Modern Slavery Act model pioneered in Britain, Australia and at a US state level in California (with Canada moving along a parallel track). Other congressional bills, embraced by Democrats in both houses of Congress, would create an ambitious new system of ESG disclosure. Similar measures are being debated in the EU. With or without legislation, however, the US Securities and Exchange Commission shows every sign of embracing non-financial disclosures that would create a framework for ESG due diligence.
While transatlantic human rights regulation is converging, the judicial trend lines have never been farther apart. The US Supreme Court, in Doe v. Nestlé, is considering only whether to widen its rejection of corporate liability and hostility to extraterritoriality. Meanwhile, Dutch and English courts have handed down a series of decisions, in Millieudefense v. Shell, Okpabi v. Shell and Begum v. Maran, that accept foreign direct liability by parent companies for their subsidiaries — or, in Begum’s case, for their supply chain partners. The result is sadly predictable. The US and Europe will end up with ESG regulatory regimes that look similar on paper, but Europe’s will have more bite.
Michael D Goldhaber has been tracking the world’s largest disputes since the turn of the millennium. Email: firstname.lastname@example.org
This article first appeared in the April/May print edition of fDi Intelligence. View a digital edition of the magazine here.