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Transcript: The Uyghur Forced Labor Prevention Act's impact in China, explained
Your host is excited to announce that Beijing Channel is launching a podcast as a new year project. The plan is to bring in an expert who is really at the top of their game in each episode to explain a hot topic in China.
For the first episode, Professor Zha Daojiong, an authoritative voice on China’s foreign trade in the context of foreign relationships is here to discuss the Uyghur Forced Labor Prevention Act.
You can listen to the episode here. Please be generous in sharing your comments, suggestions, and ideas for future episodes by writing to email@example.com
Below is the transcript of the episode.
On December 23, 2021, U.S. President Joe Biden signed into law the Uyghur Forced Labor Prevention Act, a move China says amounts to interference in its internal affairs and is dangerous.
Days after the bill was signed, U.S. carmaker Tesla announced it is opening a showroom in Urumqi, capital of Xinjiang, drawing criticism back home but winning applause in China.
The drastically different response to Tesla’s commercial decision underscores the tense atmosphere and uncertainties for businesses in the wake of the U.S. bill.
This episode of the Beijing Channel will address those concerns and examine the bill’s possible implications for businesses operating in China, whether the bill would be effective, and China’s potential responses.
Today I'm pleased to be joined by Peking University, Professor Zha Daojiong.
His work focuses on non-conventional security issues in international relationship, such as energy, food, maritime, public health, and cross-border water resource management.
He has taught in universities in China, Japan, Australia, Singapore, and Hungary.
Hello, professor Zha. Thank you very much for taking your time to share your insights on this so-called Uyghur Forced Labor Prevention Act that has recently been ratified by Washington. First off, I'd like to ask who would this piece of legislation affect and how would they be affected?
President Biden signed this legislation into law, and this is going to have a long-term effect. Different from a presidential decree whereby the white house has the authority to override, this law does not have a clause of the so-called sunset clause. In other words, it may last forever unless the US Congress takes action to change its application in terms of time and in terms of other conditions. So structurally speaking, this has a damping effect on trade-related to Xinjiang as a side of production and more broadly related to relation to China as a source of supply in the global supply chain, especially that between China and the United States. There is no doubt about the adversary (adverse) effect this is going to have. And here China, within China, the act when it's implemented by US companies or by companies of third countries, they would have to comply with this particular US law.
They have to either certify themselves to be in compliance, or they would have to probably form some sort of alliance with other companies that procure parts of finished product from Xinjiang to say they are in compliance with US laws. At the same time, these companies will have to face the requirement of complying with the Chinese legislation as well. As you know, and that our listeners know, China has its own legislation against the implementation of foreign sanctions on China. I do believe this particular US legislation fits into that Chinese law. It does put the traders, including American ones, like I said, those of third countries in a unique position. At least it's going to drive up the cost for these companies to comply with laws and regulations, both here in China and over there in the United States.
And obviously, with the trade between two countries becoming ever more intertwined I think it is logical to assume that this piece of legislation will impact every party on the supply chain from farmers in Xinjiang to consumers in the United States. I'm wondering if you could maybe make a more granular assessment of how each of those parties may be affected by this legislation.
The impact of this particular legislation on consumers in the United States is probably minimal, or it's not going to be something average consumers in the US would experience so long as the product is imported into the United States from a foreign source. And if you think about the middle class or American workers being both workers and the contributors to the overall US economy, they may face temporary change in the prices or increase in price, but their access to products will not be affected. And like I said earlier, as long as a final product is imported its part of the dynamics of the US job market. But the legislation when it's implemented is going to have a much more direct impact on China.
More specifically on all companies and all individuals in Xinjiang, not just The Uyghurs. Xinjiang is a place that has a multitude of nationalities. And how do you differentiate, for example, a company that employs one particular person who is Uyghur by ethnicity, or it has a large number of Uyghur employees, but one or two may be complaining or one or two may feed into the American network of intelligence gathering, right? And then there was that claim of forced labor and then the entire company or all the workforce of that company gets punished. And I have actually on a daily basis experienced situations even here in Beijing, whereby a store or a restaurant that employs someone from Xinjiang, they are just apprehensive. In other words, since I go to these restaurants on a fairly frequent basis, they would be asking me as a scholar of international studies, whether or not such legislation would affect them, because you know, and this whole idea of forced labor is subject to interpretation.
For instance, a restaurant worker is asked to work a bit over time, and sometimes especially in small restaurants, they may not be able to pay up in time, but then this worker can turn around and claims his labor service or his rights are being abused. And you have to bear in mind as well, there is a language issue here. Uyghurs, or the other ethnic minorities in Xinjiang, don't just speak Chinese or English, sometimes there is miscommunication. And I have heard about incidents whereby some companies just want to "for self-protection". They proactively lay off ethnic minorities from Xinjiang and this in reality, penalizes legitimate labor practices. It penalizes in a very ironic, but factual way. It actually denies the right to work for many Uyghurs because this whole legislation is, the way it's produced, the way it's being implemented is so pervasively damaging. And I do understand some in the United States, especially those who are in support of the legislation, they would say wonderful, right? The greater the impact, the more pervasive the better. But what would be the main challenge here in China or what would be the real impact on the very people that the law says is meant to "protect"? There are real questions here.
So if I understood this correctly, even though some in the United States may claim this legislation is for a good purpose or for a good cause, but because of this very vague interpretation of what forced labor is on the ground, you are observing, that it may have adverse effects of what it claims it wants to do.
Yes, this happens. The kind of pervasive adverse effect on legitimate labor practices and also on a lot of other labor-related activities that are in compliance with Chinese laws. You have to bear in mind, China has its own laws on employment. Worker protection is not just something that's so exceptionally American, right? It would take a lawyer and it would take a legal process to go to clarify many of those terms. And many of those terms are written in a foreign language. Luckily I speak English, but what exactly does that particular foreign language mean? If, for example, I were a company in China, I feel my company's products somehow wrongly fall victim to this law. And if I were going to make a case, I would have to go to the US court.
I would have to ask US lawyers or lawyers who are familiar with that. I cannot expect to have a fair hearing because the so-called rebuttable presumption is that it does quote-unquote, give me a right to rebuttal, but the presumption is on the other side. And the other side can always claim, you know, there are many, it's a built-in opinion already, and it literally throws a lot of these legitimate practices here in China. These things have nothing to do with "forced labor" into a very difficult situation. And it emotively would generate a lot of indignation about how this law is being done.
In other words as a Chinese company, you are guilty until proven innocent.
Well, I'm guilty just by association with geography or by association with a particular ethnic group, and whose definition is diverse in the first place. And then I would have to follow standards that are prescribed elsewhere to mount an effective defense, I would have to be familiar with what my accuser was basing his or her judgment on in the first place. And it leaves a situation whereby I would basically be defenseless.
And I think this leads to my next question, that if we were to leave all of these adverse effects aside. Based on your experience studying international trade and especially trade between China and the outside world, do sanctions like these usually work, why or why not?
There are two types of sanctions, one type of sanctions called trade sanctions. In other words, the beginning of this would be some things like erroneous reporting or subsidies of costs or the anti-dumping is part of this. That's trade sanctions. So one party feels that its industry or its companies are being injured due to those kinds of practices by the exporting party. But the Xinjiang issue we are talking about, I mean, the Xinjiang legislation we're talking about falls into a different category of sanctions. These are economic sanctions. Economic in this case means you use economic means to sanction for political purposes.
In other words, the so-called self-defense or the so-called rebuttal would still be of a political nature. Again, if we go back to a scenario where a Chinese company is involved, we're not talking about a US company, we're talking about a Chinese company. It feels the impact. It suffers from whoever applies that law here in China. It just doesn't give these companies a fair opportunity to say, number one, you know, for a company, I leave the issues of sovereignty, the issues of high politics to the government, but how, and why do I have to pay the price for a piece of legislation that's made abroad?
Right. But going back to the original question, do you think this legislation will work or serve Washington's stated goal of promoting human rights in Xinjiang?
I don't know what this law is really meant to do. If you want to promote human rights, but human rights have a huge range of references, a person's right to employment. That's a right. Now human rights should not be narrowly defined to be a person's right to protest against the government. Right? In this particular case even if you have complaints about labor conditions. Let's think about a scenario, a company in Xinjiang or anywhere in China that treats Uyghurs and non-Uyghurs equally, but anybody an Uyghur person or a (Han) Chinese person can self-perceive to be mistreated. Then you have a matter of fair judgment. You have a matter of due process. But the damaging part of this whole legislation, the so-called basis for this is that it exclusively relies on the so-called intelligence that whoever produces.
But then of course the nature is politics. Who was here to verify those claims?
In other words, what's so excruciating about this whole business of coming to a conclusion about what happened in Xinjiang is that you have a dedicated campaign that simply said it assigns itself, the role of the accuser and the investigator and the final judge and executioner. This is just pure politics. It doesn't really have much to do with human rights. As I said earlier on, when you have Chinese companies or any companies in China, that in order to avoid the cost of having to deal with this process on the US side, they would just stay away from not just operations in Xinjiang, from people migrating out of Xinjiang to other parts of China, because who knows? You always have to go back to the issue of the claims about the Uyghurs as a group, there is an ethnic or religious, or even racial element to that.
There is a language issue. And in the age of social media, the verification of such claims is extremely difficult. I recall just two days ago, I believe there is a news report by AFP (a French news agency) that came out and said there was that one photo that originally was circulated with an account based in Sydney, Australia, that said a fire in one of those cities in Xinjiang, in Karamay I believe, and said, a girl was very badly burnt because local Chinese police or guards or authorities refused to save her. But later it turned out that a very photo actually came from a fire accident in Vietnam several years back and showed a girl who luckily survived. So in other words, the whole thing is like, what I went back on, what really is the basis for the US? You know, it's not just president Biden. Of course, he acts on the advice of others. These so-called congressmen to be so riled up. Have they ever double-checked? Have they ever thought that there may be problems in the so-called evidence that's presented to them, right? What I'm really trying to say is that we need to leave some space for disputes, for dialogue, for continuous conversation with each other about these right issues, human rights certainly the right choice. Nobody issue should be denying anybody basic human rights.
If anything, here in China, one way to assure human rights protection of whoever in Xinjiang, partly because that area is less developed, that area is not that well connected with the rest of society here in China, is to promote integration, is to work out opportunities and routes for individuals in that region to integrate themselves into the rest of the society and also to promote exchange between provinces outside Xinjiang and into Xinjiang. Xinjiang should not be treated as a place somehow preserved in the form of isolation. No, that's the damaging effect of this economic sanction, like this particular act is that in, in a very destructive way works to promote de facto acts of segregation here in China, this is not right. It's not right at all. We need to be quite aware of this.
I think one of the points that you have just made is that from a technical point of view, this legislation would place a very challenging demand on Chinese businesses because they are burdened with the task of proving themselves innocent. So the question is, if you were a business owner in China, in face of this legislation, how would you mitigate the risks down the road, if you still want to trade with the United States?
Well, fundamentally you cannot. Why? It's because you know, US many US companies, including Intel, Costco, a Walmart, have come out with their routes of compliance and to the management of these companies, they are doing their best to comply with both US and Chinese laws, because at least as of now, or in the near future, they're not planning to terminate their business presence here in China, right? And US companies have an advantage of knowing the US system. Now you ask me about Chinese companies, let me take one more minute. Even for the US companies, they cannot be assured that their case will be treated fairly. Why? Because the border protection bureau (The CBP), the customs authority of the United States has its own way of gathering intelligence on this supply chain related to the issues of labor.
Remember several months ago, a US customs decision to deny the import of a load of fish products out of Dalian, because that authority said they had their own way of getting evidence from the high seas of how the fishing fleets made use of labor on their ships, right? So the US border control authorities have their own so-called intelligence or what they would insist as evidence, to counter the evidence that's provided by the companies, US companies as well. But then it also leaves the question, how is that collected? So long as you have this sort of legislation, you have this mechanism of saying independent verification by a government authority. That does open the space for elements, Chinese and non-Chinese, to profiteer from the situation, to feed into that hunger for that so-called evidence of wrongdoing in the whole production chain.
Could you elaborate a bit on that?
I think it's a bit of an extreme application of technology. I read through the media, there was this one company that said it had that particular technology, a particular niche in technology that can analyze the genetic data of the cotton fiber. In other words, that company may be having in front of its desk a pair of woven jeans, but it could go back and piece all the cotton fiber, and eventually could trace the geographic origins of that cotton. While you may have a scientific theory that could see the salt level in that cotton fiber, and that can indicate the distance from the ocean, for example
The Americans would love to talk about check and balance. They would love to talk about due process, but this is not the case. This is politics, this is going all the way, regardless of what.
One of the aspects that are really attracting people's attention is polysilicon products. We all know that Xinjiang is a major manufacturer of these kinds of products and exported quite a lot of them to the United States, according to official figures. With this so-called, Uyghur Forced Labor Prevention Act, poly Silicon exports are bound to take a hit. But on the other hand, they are essential to renewable energy development, so do you think this law will undermine the Biden administration’s own goal of battling climate change?
Well, that's a fair question. I would think the nature of this decision to include Polysilicon does not really have much to do with labor. After all, in Polysilicon, you have a long duration of the production line and at each stage, labor standards need to be in place. In a pure scenario without the wrangling of diplomacy between China and the United States or between any set of countries, production of polysilicon, or other similar products, does have a labor issue? But in comparison with cotton production, the use of manual labor is probably less intensive in the polysilicon process. But I think the including of polysilicon does not really have that much to do with the labor issue. That has to do with US geostrategic interest in building up its own supply chains or to build up so-called value-based supply chains, meaning it would rather source from countries whereby it shares political values, Australia being a primary collaborator in this.
I would see this is just part of the competition in that sense. No. Climate change in this context is secondary if it does have relevance at all. The situation is very much like rare earth elements, right? There is no real shortage of that. The supply chains are working, but the US decided that it would be safer for itself to create its own supply chains of rare earth elements. And Polysilicon falls into that, it is more geostrategic or geo-political in that sense, it does not have much to do with climate change as an issue. Although rationally, if you have these products made here in China, if in terms of quality, in terms of standards, and in terms of price, they may contribute to the fast deployment of renewable energy in the United States. But that's not the concern of the United States at this point on this particular issue.
And now we move on to possible reactions from China and divide this into two parts. First is by the Chinese government, the Chinese foreign ministry has signaled that China is contemplating countermeasures. What sort of measures do you think are in Beijing's toolbox against this legislation?
This is a difficult question. I don't speak for the government authorities here, nor do I have any inside knowledge about it, but if I were asked to give advice to the Chinese government, it would be two. One is to observe, to study, how the US implemented similar situations in other countries. You name some, right, Venezuela, Korea, North Korea, of course, Iran, Russia. And you will have to be prepared that this is going to escalate rather than deescalate because sanctions earlier you asked me about the effectiveness of sanctions. Ever since there were sanctions, debates in the United States have been ongoing. And usually, you have two schools. One said, well, sanctions did not quite work achieving those, whatever designed target, because they were not tough enough.
In other words, let's double down on that. And this is what's being done to China at this point in time. The other school says, mainly by economists and say, sanctions don't work. You can never achieve the designed target. The targets keep changing. That's one thing secondly the targeted party can innovate in dealing with so many other actors around the world. So that's what would be one thing. Don't hope for the US to quote-unquote, relax on this. The second point of advice is that really there's not much of a point to be so fixated on this particular act and how it's going to be implemented.
The Americans have been doing this to just about anyone for a long time, and it just so happens. The US is a large importer and we will have products that we want to export to the United States. As I discussed earlier to make your case or to get your case heard and accepted, I don't think the US even invited you to present your case, to be heard, much less accepted in the first place. And then we need to implement our own laws. In other words, the very minimum we should be doing is that those companies that do trade with China or those companies that do invest in China, follow Chinese laws. They're not much of a point in quote-unquote retaliating because at the end of the day, what really matters is economic vitality in Xinjiang, in other parts of China. There are other countries and companies of other countries that do not feel it right to follow these particular acts of the United States. We can work with many other actors around the world.
And aside from the Chinese government, I think the Chinese market is already also responding to this legislation. I mean, I've read in the news and you've alluded to this earlier as with, is that with the case of Walmart and Sam's club. There are news reports saying that Sam's club has already pulled their Xinjiang produce from the shelves. And this has angered a lot of their customers. Do you think this legislation will potentially create risks for US companies that are operating and hoping to profit in China?
Well, actually this is a very serious issue. In terms of the corporate legal entity, it at least has double entities. One is Chinese because it operates in China has to observe Chinese jurisdiction, right? You have to be subject to Chinese jurisdiction, certainly. Its headquarters are in the United States, or it has significant sources of finance from places like the New York stock exchange. But don't forget, these are entities that have dual identities. What I'm really trying to say is that I don't quite get it. Intel or Costco, are multi-national corporations. They should understand the basics.
What I'm trying to say is that sure, they need to demonstrate to American customers based in the US, whatever you buy from Costco in the United States is free of Xinjiang, I'm complying with US laws, but its stores here in China, does it have to do that? Does it not have to observe Chinese laws? These are serious, very basic issues of jurisdiction. Very basic. These corporate managers, the management has to really go back to the basic textbooks. It does not meet the basic test of common sense.
And on that, I think we're about time to end this episode of Beijing Channel. Thank you for listening in and thank you, professor Zha for sharing your insights. And we hope to have you back again on this show. Thank you.
Thank you for having chatted with me. Thank you.