Opinion | US stringent law on Xinjiang becomes existential dread for businesspeople
By Augustus K. Yeung
Introduction
"Ever since US President Joe Biden signed the Uygur Forced Labour Prevention Act into law last month, the apparel industry in the manufacturing hub of Guangdong province has been engulfed in a haze of uncertainty and, for some, panic." Report Ji Siqi and He Huifend for the Post. ("US law on Xinjiang puts businesses in tough spot". South China Morning Post. Thursday, January 20, 2022)
Even though they are located about 3,300km away from Xinjiang—China's far-west region that has become embroiled in international controversies in recent years—exporters and factory owners in the province are already bearing the brunt of this stringent law, which looks to have sweeping implications for global trade.
The Ban is a Double Bind for Participants Involved
Apparel exporters have told the Post they received requirements from their foreign customers to provide a paper trail documenting the entire supply chain of their goods—from the origin of the cotton at the bale level to the final production of finished product—and showing that it did not involve forced labor in Xinjiang, which the US government will require the American importers to disclose after the ban on Xinjiang import takes effect in June.
"If we ask the upstream suppliers for such proof, it'd seem like we are endorsing the law, and we would face great public pressure in China--if we were to be reported or exposed, so no one wants to do it," a cross-border e-commerce company manager based in Guangdong said.
"But if we don't request such certification, we will face great uncertainty on the US side, too."
Large multinationals will not be the only ones caught up in the political maelstrom resulting from the new law, according to industry insiders. An increasing number of small exporters – most of them with little to no resources to cope with the political risks – are finding themselves caught in the crossfire and forced to take sides.
Analysts Say the US Law will Strangle Exporters
Analysts say the US law will strangle exporters in various industries, forcing foreign companies to move their whole supply chain away from Xinjiang, or perhaps from China entirely.
Cotton farming in Xinjiang is at the center of many forced-labor accusations – allegations that Beijing has repeatedly denied – and it is an agricultural pillar in the region. Xinjiang's annual cotton output is about 5.13 million tons, accounting for 89 percent of China's total cotton production last year, according to the National Bureau of Statistics.
As a result, the region is a key source of raw material for China's entire textiles industry, and the complexity of the supply chain makes it difficult to trace goods to their exact origin.
"Apparel exporters must prove to US importers where the fabrics come from, the fabric factories need proof from greige fabric factories, the greige fabric factories need proof of the origin of the yarn, and the yarn factories need proof of the origin of the cotton," said a manager at a cotton factory in central Xinjiang.
And each step involves numerous businesses taking sides, forcing them to juggle political considerations and economic needs. These decisions can affect the livelihoods of many people.
As the most upstream player, the cotton industry in Xinjiang had been under pressure since the forced-labor allegations started to ferment in 2020, the manager said.
Exporters Pressured into Not Using Xinjiang Cotton
For some makers of apparel products such as sportswear, it is easier to entirely avoid using Xinjiang cotton, as the major component in those clothes is polyester, not cotton.
"But for products such as jeans, cotton is the predominant raw material, it would be very hard to entirely cut off from Xinjiang," the manager said.
Another textiles exporter in Guangdong said a British customer had already asked that the company present signed declarations that no component of their goods was related to forced labor in Xinjiang.
"The basic principle is the company must not sign it," a company employee said. "And then verbally reply to the guests that we can't sign and try to convince them."
But even though it is sensitive and risky decision, signing such self-declaration and providing proof of step-by-step source tracing might be the only option for exporters looking to keep their business afloat once the law is strictly enforced.
Exporters Hope Foreign Customers Will Continue to Lobby
For textiles and apparel exporters in Guangdong, many are still hoping that their foreign customers will continue to lobby the government on the issue, while others are seeking alternative export destination.
"All textiles and garment exporters are facing the problem," said a Chinese analyst familiar with the sector's export supply chain. "The value of China's textiles exports already fell by about US$15 billion last year, and this year is expected to be even worse."
Regardless of whether more countries would follow Washington's lead, observers say the worst outcome would be a mass exodus of foreign companies moving their operations out of Xinjiang, or out of China altogether. ("US laws on Xinjiang puts businesses in tough spot". South China Morning Post. Thursday, January 20, 2022.)
Conclusion
The honey-glazed so-called Uygur Forced Labour Prevention Act (UFLP Act) that was signed into law last month has already created uncertainty, anxiety and even panic among businesspeople of various nationalities in China's apparel industry.
Since American announced that it is pivoting to Asia, which is fast becoming a kind of battlefield: First, there is the formation of the Aukus pact, forcing future Australian navy to become nuclear-powered, seriously harming China-Australia bilateral relations; and now this newly signed law is fermenting fears and tormenting businesspeople in the apparel industry.
Now, and perhaps in the future, their only salvation is pinning hope on lobbying US hawkish lawmakers and voicing their discontent against this US-induced existential dread/oppression. What else can these Chinese and American business globe-trotters do?
The author is a freelance writer; formerly Adjunct Lecturer, taught MBA Philosophy of Management, and International Strategy, and online columnist of 3-D Corner (HKU SPACE), University of Hong Kong.
The views do not necessarily reflect those of DotDotNews.
Read more articles by Augustus K. Yeung:
Opinion | How to beat American-imposed bans and sanctions which hurt Asia-Pacific companies
Opinion | What more could the United States desire of China?
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