The trouble with doing business in China

MARY REICHARD, HOST: Coming up next on The World and Everything in It: doing business with China.

In 2017, reports began to emerge that the Chinese communist government was building concentration camps. China then forced Uyghur Muslims into the camps for re-education to adopt Chinese culture. The government said this was necessary to combat Muslim extremism.

NICK EICHER, HOST: Part of this so-called “re-education” includes forced labor—making imprisoned Uyghurs produce products exported around the world. And that has some Western companies rethinking how they do business in the country. WORLD’s Sarah Schweinsberg reports.

SARAH SCHWEINSBERG, REPORTER: Today’s clothes are made from a range of materials. Some are synthetic, like nylon. Others are supplied by animals such as wool and leather. But a fifth of the world’s jeans, T-shirts, and socks still come from one of the oldest-used fibers in the world: cotton.

COMMERCIAL: The touch, the feel, the fabric of our lives. The touch the feel of cotton….

One-fifth of the world’s cotton comes from China. And nearly all of the country’s fluffy, white fibers grow in Xinjiang (SZinJung). That’s the northwestern province where China has incarcerated up to 1-and-a-half million Uyghur Muslims.

IBRAHIM: Xinjiang produces 85 percent of China’s cotton.

Azeem Ibrahim (Eebraheem) is a scholar at the Newlines Institute for Strategy and Policy. In a recent report, he and his team reviewed hundreds of internal Chinese government documents. Ibrahim says there’s overwhelming evidence that Uyghur Muslims are being used as slave labor to pick cotton by hand.

IBRAHIM: The Chinese government simply cannot deny this. This is their own documentation in terms of what's going on in these areas.

But the government isn’t only forcing imprisoned Uyghurs to labor in the fields. Those living outside the camps are also forced to work.

A U.S. Customs and Border Protection investigation found this forced labor is coerced through debt bondage, restriction of movement, and withheld wages.

IBRAHIM: So essentially all the Uyghurs are one way or another, are victims of this. But, you know, Western companies, the onus is on them to make sure that their supply chains are clean. And they're not contaminated in any way.

Many human rights advocates agree. Last summer, nearly 200 organizations in more than 30 countries asked clothing companies to cut ties with China within the next year.

Governments and business investors are also adding pressure. In January, then-President Trump banned all imports of cotton or cotton products from Xinjiang. The United Kingdom and Canada have similar bans.

And last month, a group of investors contacted more than 40 companies asking them to stop sourcing cotton from China. Those businesses include retail giants H&M, Hugo Boss, and Zara parent company Inditex.

But companies are often slow to make changes to their supply chains, says Clare Carlile. She’s a researcher at Ethical Consumer, an organization that researches company supply chains.

CARLILE: So, a lot of companies put out statements, but it's not really clear how robust those actions are.

But the Chinese government and Chinese consumers are taking the statements seriously.

Last month, the United States, Great Britain, Canada, and the European Union announced sanctions against Chinese officials coordinating the camps.

In response, Chinese customers and e-commerce sites called for boycotts of H&M and Nike. Chinese celebrity brand ambassadors also dropped clients like Tommy Hilfiger, Adidas and Calvin Klein, saying their online statements lied about China’s Uyghur policies.

In response, some companies deleted their statements or told Chinese customers they do use Xinjiang cotton. Ethical Consumer’s Clare Carlile says that’s a disappointing capitulation.

CARLILE: So some people are actually taking backward steps on the issue.

Harry Haney is the director of the supply chain and sustainability Center at Loyola University, Chicago. He says companies face several challenges in removing Chinese cotton from their clothing lines. First, it takes time to move factories or find new supply sources. The Workers Rights Consortium estimates that American retailers import 1.5 billion garments using Xinjiang cotton every year.

HANEY: You think, well, just stop sourcing there and go somewhere else. And it's not always quite that easy. Trying to avoid cotton out of that region is very difficult, and to say, well, let's just move out of China and entirely go somewhere else—it can take time to do it.

Then, there’s unintended consequences of blacklisting a region in any part of the world. In Xinjiang, what happens to the people who actually make a legitimate living growing and selling cotton?

HANEY: It's not just as simple as, you know, just eliminate it, and wipe it out. You've got to come at this more systemically to provide other options for these people to earn a living to be able to sustain themselves. If you kind of blacklist a region, one of the risks is that you just push the abuses further underground, you know, and they just get, they get harder to find. So, no easy solutions here.

Other supply chain analysts see these challenges with China as a wake-up call for companies.

Felicitas Weber audits supply chains at the Business and Human Rights Resource Center. She says many companies aren’t aware of where all of their materials come from. Increasing public scrutiny is changing that.

WEBER: We've seen now, a lot more effort recently, from companies rushing to trace their supply chains, which is really exciting, and which actually also shows what is possible.

George Magnus is researcher at the China Center at Oxford University. He says he’s hopeful that growing public awareness will play a bigger role in pushing clothing companies to sever strong trade ties with China.

Magnus says it will become increasingly difficult for companies like Nike and Adidas to claim the human rights high ground at home if they disregard them abroad.

MAGNUS: The more that the public generally finds out about the sort of the darker side of China, the more I think their brands will be at risk if they are not seen to be either categorical about we do not use forced labor. Or just say they’re moving their business, you know, we're going to, we're going to buy our cotton somewhere else. But I think that the status quo—it's very, very tenuous.

Reporting for WORLD, I’m Sarah Schweinsberg.

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