Opinion | How the US uses arbitrary supply chain laws to undercut China

By Tom Fowdy

"The head of the US Senate Finance Committee has expanded an investigation of BMW after the carmaker was found to have imported vehicles to America that contained banned Chinese parts", reports the BBC. It is alleged that the vehicle, with BMW being a German firm, utilized apart from a company that has been linked to "Uyghur forced labor" and is therefore prohibited from entry to the United States via the "Uyghur Forced Labor Prevention Act (2021)" a highly arbitrary law which conveniently, broadly and opportunistically banned all imports from China's Xinjiang autonomous region on the assumption that unless proven otherwise, these products are made with forced labor. Companies in the region are requested to "prove a negative."

Using this law, US customs have the right to seize shipments of goods coming into the country if they "suspect" they originate from Xinjiang. This of course is designed, as calculated, to create an enormous business risk so that businesses, as intended, vacate the region, and remove it from their supply chains. It is little surprise that various consultancies sprung up attempting to offer this service. This is because the United States has sought to use this law to undermine China in several critical areas, namely in the production of renewable energy goods and Solar Panels. It is a deliberately cynical, vague, and opportunistic piece of legislation for this purpose.

In doing so, however, the US is subsequently able to utilize its premise to attack foreign businesses in China too and make life difficult for them, again to incentivize their removal from the Chinese market. For this reason, a US senator decided to target BMW and claim that its cars are using a part made with this "Uyghur forced labor." Again, this is enforced in an arbitrary way, the US can simply state, without substantiated evidence, that the parts were made in, or linked to Xinjiang and can subsequently seize the shipment at will. A few months ago, this was done to a shipment of Volkswagen Cars built at the plant in Xinjiang, something China hawks have been longing to close for a long time. The goal of course is clear, to get these companies to "decouple" from producing in China using the allegations of forced labor as a weapon.

There does not need to be specific proof of course, just the threat of monetary and reputational risk, which is of course how businesses think and make decisions. The law itself operates on a "guilty until proven innocent" business which means even if something is implicated or suspected by association, that is enough for the US to take action, and is this a risk worth taking for businesses? Ask yourself this. It is smearing on a grand scale. There may be some suggestion of late that these US sanctions are having an impact, which is unusual for China to admit, but I could only notice an op-ed that emerged on Xinhua the other day proclaiming that US policies were increasing "unemployment" in the region, had put Uyghurs out of jobs and accumulated billions in losses for regional companies in commodities such as cotton, etc after their markets were wiped out. China of course had always sought to downplay or even deny this, yet suddenly this came to the forefront.

It is therefore undeniable that the US through its arbitrary use of laws has toxified Xinjiang, as designed, and thus uses this on an "extra-regional basis" to place enterprises and products affiliated with other parts of China in doubt too. After all, BMW does not have a factory in Xinjiang, unlike Volkswagen, rather it is being implicated because the part "suspected" is linked to a firm in Sichuan, supposedly associated with the "Uyghur forced labor." Do you see how this works? It can be arbitrarily linked to anything, and therefore implicating anything, even on a direct basis. Thus, the law becomes a ruse in the name of human rights to undermine commerce in China as a whole. Why take the risk? Companies will ask, and of course, all it takes is one aggressive US senator or Congressman, who speaks in a language of lies, hyperbole and hysteria, rather than facts, to create a news report like this which then is placed as headline news by the BBC.

This might elaborate to us just how thin on facts this whole process is, yet how damaging it is for businesses, hence political risk is a real dynamic when deciding where to invest, not just because of moral issues such as this "forced labor" but also being in the crosshairs of politicians such as this who will make life difficult for you doing business with "the enemy."

The author is a well-seasoned writer and analyst with a large portfolio related to China topics, especially in the field of politics, international relations and more. He graduated with an Msc. in Chinese Studies from Oxford University in 2018.

The views do not necessarily reflect those of DotDotNews.

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