The potential consequences of doing business with PRC firms for Belgian and European companies

20 May 2022

EU Reporter, 20 May 2022

by EU Reporter Correspondent / Photo credits: EU Reporter

A new report has urged Belgium and EU to do much more to combat forced labour. The policy paper on “the Potential Consequences of Doing Business with PRC Firms for Belgian Companies” by the European Foundation for Democracy, a highly respected Brussels-based policy institute, makes several recommendations on how this might be achieved.

The paper, authored by Pieter Cleppe, vice president of Belgian think tank Libera,  warns that those enterprises that continue to trade with regimes with a poor record on labour rights risk “reputational damage” and “legal issues”.

The paper says the “suffering” of the Uyghur minority in China and testimonies demonstrating that they are victims of forced labour on a “massive scale” have triggered assorted policy reactions in the West.

This includes “due diligence” obligations being imposed on companies that are trading with Chinese firms to make sure that there is no forced labour benefitting their supply chains.

The International Labour Organization defines victims of forced labour as people that are “trapped in jobs which they were coerced or deceived into and which they cannot leave”

Worldwide, there are estimates of up to 40 million victims of forced labour.

According to the report, France has been the first country to act followed by the Netherlands, Germany and the United States. A legislative proposal has also been submitted in Belgium and, earlier this year, the European Commission presented its proposal for a directive.

The author states there is increasing focus on the importance safeguarding human rights in the context of trade and production and companies now face regulations imposing “due diligence” requirements on them.

Often, he explains that this involves requirements to provide a degree of transparency in a company’s supply chain.

Forced labour in China is cited by Cleppe as a particular challenge given its prominence as a manufacturing hub.

The Belgian researcher says many countries have criticized China for its treatment of the Uyghurs, including the UK, Canada, Australia, Japan as well as the EU and its member states.

The United States has accused Beijing of having “carried out a mass detention and political indoctrination campaign against Uyghurs, who are predominantly Muslim, and members of other ethnic and religious minority groups in the Xinjiang Uyghur Autonomous Region (Xinjiang), a large autonomous region in western China”.

One estimate puts the number of victims at one million people, detained under the pretext of “vocational training” and to counter “terrorism.”

The EU has stated that it “is gravely concerned about the arbitrary detentions, unfair trials and unjust sentencing of human rights defenders, lawyers, and intellectuals.” Many, including EU citizen Gui Minhai, have been “unjustly convicted, arbitrarily detained, or forcibly disappeared” and the EU has demanded the “immediate and unconditional release of these and other prisoners of conscience.”

Human rights groups have also long complained about forced labour.

The report, called “The Potential Consequences of Doing Business with PRC Firms for Belgian Companies”, says the business sector of at least one member state – Belgium - is deeply integrated into global supply chains meaning that its companies’ activities in the global market may be impacted by new “due diligence” obligations regulations, whether they are Belgian, EU or even U.S. rules.

The report concludes by saying that in a relatively short period of time – less than five years – doing business with China has been “complicated with all kinds of policy action” intended to prevent and counter forced labour.

Cleppe says, “On top of this, increased awareness about the Uyghur issue has created reputational risks for companies, not only in the West but also in China where consumer boycotts against firms seen to be accusing China of forced labour have troubled multinationals.”

New legislation, he points out, already imposes due diligence obligations on companies “as they could be convicted for being aware of forced labour in their supply chains and not doing enough about to prevent or counter it.”

The document demands, “It is therefore of the utmost importance for companies trading with China to pre-empt more legislation or to avoid falling into trouble from U.S. regulation, by ensuring that there is no forced labour in their supply chains.”

Publication of the document is particularly timely as it comes amid growing demands for a crackdown on forced labour and what has been called the “systematic persecution” of native Uyghurs, something that is increasingly being recognised internationally as genocide.

An estimated 500,000 Christians and Tibetans have also been sent into forced labour, it is alleged.

Earlier this year, the European Parliament’s committee on international trade voted in favour of a new trade instrument to ban products made by forced labour.

China’s response at the time was to blacklist MEPs and others including the leader of the Parliament’s China delegation, Reinhard Bütikofer, who, at the time, said, “We must break off business relations with Chinese partners if they manufacture their products in labour camps."

The German deputy urged the EU to “put the Chinese leadership in its place for human rights abuses against the Uighur population in Xinjiang.”

Recently, the Commission presented a communication on “Decent Work Worldwide” that reaffirms the EU's commitment to champion decent work both at home and around the world and the elimination of forced labour.

Latest figures show that decent work is still not a reality for many people around the world and more remains to be done: 160 million children – one in ten worldwide – are in child labour, and 25 million people are in a situation of forced labour.

The Commission is also preparing a new legislative instrument to effectively ban products made by forced labour from entering the EU market. Its President Ursula von der Leyen said: “Europe sends a strong signal that business can never be done at the expense of people's dignity and freedom. We don't want the goods people are forced to produce on the shelves of our shops in Europe. This is why we are working on a ban of goods made with forced labour.”


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