The lie-based Xinjiang Act comes into effect. Here is how it will cripple global trade and hurt the US itself

Illustration by Kou Jie/People's Daily Online

Most companies prefer to reap the benefits of free trade and globalisation rather than trying to undermine them. The so-called “Uyghur Forced Labour Prevention Act (UFLPA)”, which the US President Joe Biden signed into law in December 2021 and took effect on June 21, is leading many to do the opposite. Like their foreign competitors, American businesses may find international trade to be increasingly in a state of disarray and escalating strife.

The "Xinjiang forced labour" lie, which has long been a selling point for the US in smearing China, but often a source of scepticism for the international community, has now formed the basis of a law that may cripple global trade. The UFLPA bans the importation of Xinjiang-made products into the US by establishing a "rebuttable presumption" that they are "tainted by forced labour." Companies importing from Xinjiang must provide "clear and convincing evidence" that no “forced labour” was used in producing their goods. Furthermore, companies outside of Xinjiang that are found to be using “forced labour” will be placed on a blacklist.

In response to the law’s implementation, Wang Wenbing, spokesperson of China’s Foreign Ministry, told the media on June 21 that the legislation is “a clear indication that the US is seeking to engender forced unemployment in Xinjiang through legal form of actions, and to make the world decouple with China.”

“It fully exposes the US’ hegemonic nature -- a country that violates human rights and breaks rules in the name of preserving them. China strongly condemns and firmly opposes these acts and will act forcefully to uphold the lawful rights and interests of Chinese companies and nationals,” said the spokesperson.

"The US government uses human rights as a scapegoat to stifle free trade and make American companies submit to its biased ideology. The law also infringes on Americans' right to know the truth about Xinjiang and China," Zhu Ying, a professor at the Baize Institute of the Southwest University of Political Science and Law, told People's Daily Online.

“It is blasphemy against real democracy, human rights and free trade,” he further added.

Malicious intention

Graphic Design by Kou Jie/People's Daily Online

Creating a "rebuttable presumption" that the goods of other nations are made with forced labor is nothing new for the US government. The "Countering America's Adversaries Through Sanctions Act," which former US President Donald Trump signed into law in 2017, placed sanctions on Iran, Russia, and the Democratic People’s Republic of Korea. The Act explicitly prohibited the importation of any commodities made by DPRK nationals and its citizens worldwide on the presumption that they were acquired through forced labor.

"Given China's importance to international commerce, the UFLPA might harm free trade far more than the presumption against North Korea. The law's title may give some the impression that it only affects Xinjiang, but in reality, it could disrupt the world supply chain, forcing US companies to cut ties with China," Li Ye, a Hong Kong-based lawyer on international trade and the laws and regulations of the World Trade Organization (WTO), told People’s Daily Online.

Li claims that the new law may be used to easily target any Chinese-made products as long as they contain even the most basic raw materials from Xinjiang. Even if such goods are exported to a third country and used to make downstream items bound for the US, US Customs can still detain them.

“The US has once again utilised domestic legislation to impose unilateral sanctions on foreign nations, taking advantage of its economic and technological superiority. It's like a war without actual weapons, but the consequences for global trade and supply chains are unfathomable,” Liao Fan, a senior fellow at the Chinese Academy of Social Sciences, told People’s Daily Online.

China is not the only victim of the UFLPA. With ambiguous instructions and inadequate legislation, the law has shifted the burden to importers to verify that no “forced labour” was used in their products, causing uncertainty and discontent among US businesses.

Siva Yam, president of the Chicago-based U.S.-China Chamber of Commerce, said in an interview with POLITICO in January that "I don't know how they're even going to implement [the law] and I think it's very difficult for people to independently verify [compliance] one way or the other."

Eugene Laney, president of the American Association of Exporters and Importers in Washington, D.C., concurred with Yam, telling POLITICO that "[Congress] just brought down the hammer … so there's more of an enforcement environment and not an informed compliance [environment]."

“Adding ambiguity to the legal landscape gives the US government more leeway in applying the UFLPA. It may target certain key businesses in Xinjiang with pinpoint accuracy, including agriculture and technology while letting through essential products for the United States. In either case, the US government benefits,” said Zhu.

According to Zhu, the UFLPA will increase companies' costs and force them to pull Made-in-Xinjiang goods out of their supply chains. The US is forcing transnational corporations to decouple with China and it is using its domestic laws to wantonly set non-trade barriers, which severely violate the rules of the WTO and undermine the rules of the market.

“The UFLPA is a tool to hijack US companies’ interests in free trade, and force them to kneel down to the US’ ideological bias, as well as sabotaging China’s global exportation and whole industrial chain, it has nothing to do with justice or human rights,” Zhu said.

A bill that will backfire

The UFLPA, which was created to undermine Chinese exports, has also hurt the interests of US corporations. According to a Global Times report, the US shoe business Skechers has suffered considerable financial losses after US customs officials seized a shipment of its items made in China and demanded a third party make an independent inquiry.

An investigation company was paid by Skechers to prove that there was no use of “forced labor” in its sporting gear products, and it has already requested that US customs release the company’s products and remove its Chinese partner from the blacklist, according to Global Times.

“Although it is theoretically conceivable for importers to ask for an exception to the rebuttable presumption during detention, the expenses associated with compliance and time will be too high for most businesses,” said Liao.

Not all businesses have the resources to conduct self-reviews and costly investigations like Skechers has. Li disclosed that several American businesses he knew had been required to return Chinese-made goods to US Customs within 30 days, despite the fact that some of the goods had already been released by Customs and used in downstream manufacturing. They may never get their items back.

"It's merely the beginning," said Li, "many American businesses have already experienced supply chain interruptions and massive compliance costs as a result of the UFLPA."

The insurmountable financial loss has prompted big US corporations and their influential trade associations to delay the passage of UFLPA by more than a year through a comprehensive lobbying effort. Coca-Cola, Nike, and Apple, among others, sought to alter the legislation last year due to concerns about its impact on their supply chains, according to POLITICO.

In addition to US companies, many other nations have also expressed their discontent over the US’ unilateral sanctions. On June 14, 47 countries – mostly consisting of developed European countries, the US and its other allies – signed a joint statement attacking the human rights situation in China's Xinjiang, Tibet and Hong Kong regions at the 50th session of the Human Rights Council (HRC).

In response, on behalf of nearly 70 countries, a representative from Cuba made a joint speech to oppose using human rights as an excuse to interfere with China's internal affairs, saying that human rights issues should not be used as political tools. Moreover, more than 20 countries made separate speeches at the HRC in support of China, making it nearly 100 countries in total that had voiced their understanding and support toward China's stance.

“As a result of the UFLPA, the United States could potentially encourage more countries to join the witch-hunt for Xinjiang products in the future, which is a very worrying development. However, doing so will negatively affect the United States and its allies, including more international protests,” said Liao.