Western brands caught between US and China over human rights

Western companies are being forced to choose between supporting human rights and profits from China, caught up in a battle the US and its allies are waging with Beijing over its persecution of Uyghur Muslims.

As China comes under scrutiny ahead of the 2022 Beijing Winter Olympics, human rights activists are urging companies to take a stand over the repression of Uyghurs, which the US this week formally declared was “genocide”.

Meanwhile, the US Congress is considering legislation that would force companies to ensure their supply chains use no forced labour from Xinjiang.

The rising pressure comes as Beijing has begun whipping up nationalist opposition to brands such as Nike and H&M that have voiced concerns about Xinjiang or vowed to eliminate the use of forced labour from the northwestern Chinese region from their supply chains. 

They just have to decide which side of history they’re on

While some companies have stood their ground, others have removed criticisms from their websites.

In one example, VF Corporation, which owns The North Face brand, removed a statement about Xinjiang that referenced the use of forced labour.

It now has a section on its website about forced labour that does not mention Xinjiang and a separate section on the region that does not refer to forced labour. It said its policy had not changed but did not respond to requests to explain the recent change.

PVH, whose brands include Calvin Klein, also removed a statement that it was “deeply troubled” about coercive labour in Xinjiang. The company said its policies were unchanged but did not explain why it removed the section.

Jewher Ilham, an activist whose father Ilham Tohti, a Uyghur rights advocate jailed for life by China on widely-denounced separatism charges, said it was “extremely concerning” that some brands were emboldening Beijing.

“They’ll have to realise that they’re doing the wrong thing,” said Ilham, who works at Worker Rights Consortium, a labour rights monitoring group. “This is a moral test that will be remembered by history.”

Can they ‘feel at peace’?

While apparel companies face particular pressure because Xinjiang is the dominant source of Chinese cotton, concerns extend to other sectors where the region is a critical supplier, such as polysilicon used to make solar panels.

Sophie Richardson, China director at Human Rights Watch, said she was receiving a deluge of calls from companies as pressure mounts.

“I’ve gotten more calls since the beginning of this year than in my previous 15 years at Human Rights Watch,” she said. “Banks, manufacturers, investment firms, textile companies are all asking the same question — in light of all the information . . . about Xinjiang, can they maintain their business there and feel at peace with it?”

And concern has now turned into “blind panic”, she said, as China last week mobilised boycotts of some western brands after the US, EU, UK and Canada put sanctions on Chinese officials for their role in Xinjiang policy.

There is a complicated calculation of risk being conducted by sectors subject to, or on the periphery of, US sanctions

In the wake of the sanctions, a months-old statement from Nike, the US sportswear company, that expressed concerns about reports of forced labour in Xinjiang was circulated by state-run media, sparking anger from Chinese social media users and the company’s local commercial partners.

H&M was accused by China’s Communist Youth League of “boycotting” Xinjiang cotton, after which the Swedish retailer stopped appearing in search listings on major ecommerce platforms.

Bennett Freeman, a former state department human rights official who has advised multinationals and activists, said companies “feel like they’re in a war zone right now”.

“These apparel brands are . . . in a nearly impossible place and they just have to decide which side of history they’re on,” Freeman said. “There are no easy outs.”

Rising pressure in Washington

A bipartisan group of US senators has introduced a bill that would ban imports unless companies can certify they are not using forced labour.

Marco Rubio, a Republican senator who is helping drive the bill, called on Ed Bastian, chief executive of Delta Air Lines, to speak out about “genocide” in Xinjiang after the airline commented on voting rights in the US.

“Far too many multinational corporations are too eager to make their voices heard on the woke issues of the day in the US, but remain stunningly silent, or in Delta’s case, complicit, in real, ongoing atrocities in countries like China,” Rubio wrote in a letter to Delta. “One can only conclude that you believe standing up to the Chinese Communist party would be bad for Delta’s business in China.”

Support for the bill — which is similar to one that easily passed the House of Representatives last year — highlights rapidly growing concern in Congress about China that matches rising investor focus on social and geopolitical risks.

“Companies are frozen like rabbits in the headlights,” said Alison Taylor of New York University’s Stern business school. “The supply chain oversight nightmare is coming to a head.” 

In December the Coalition to End Forced Labour in the Uyghur Region asked Amazon, Apple, Coca-Cola and others to “come clean” on where they stood on the bill after reports that some had lobbied to water it down. Some companies are pushing lawmakers to give them more time to make sure that they are complying with any changes.

Jennifer Bisceglie, chief executive of Interos, a supply chain consultancy, said businesses wanted help identifying their exposure but struggled with the many tiers of suppliers on which they depend.

Sanctions and Beijing’s response

Adding to the supply chain challenges, Ashley Craig, a partner at Venable, a law firm, said companies were grappling with sanctions that the Trump administration imposed on the Xinjiang Production and Construction Corp, a paramilitary group involved in using forced labour in cotton production.

“There is a complicated calculation of risk being conducted by sectors subject to, or on the periphery of, US sanctions,” said Craig, adding that unwinding supply chains at the speed urged by the government was hard.

The Trump administration also issued “withhold release orders” that require US Customs and Border Protection to block imports of cotton and tomato that use forced labour from Xinjiang. But companies have raised concerns about not receiving adequate guidance from the US government about complying with the restrictions.

Craig said that beyond the other challenges, China had a new statute that lets Chinese companies sue foreign companies with business in China that comply with US sanctions. “It’s kind of a perfect storm,” he said.

Follow Demetri Sevastopulo and Andrew Edgecliffe-Johnson on Twitter