Analysis Of The Week: Chinese Cotton Intertwines With Diplomacy​

By Alison Catchpole​

The Story

“Doing business in China can be challenging,” states the UK government’s Overseas Business Risk website, with no hint of irony. The world’s second-largest economy – which even grew 2.3% in 2020 – is too large to ignore, though its human rights record is somewhat less glowing. As the Financial Times puts it, China “is forcing brands into choosing between social responsibility and sales to one of the world’s biggest consumer markets”.

The Background

China faces mounting criticism of its treatment of the inhabitants of the area officially named Xinjiang Uighur Autonomous Region (XUAR). Rugged and mineral-rich, the XUAR lies at the heart of President Xi Jinping’s ‘Belt and Road’ flagship initiative, that aims to promote trade between the East and West. The XUAR borders eight countries (including Pakistan, Afghanistan, Kazakhstan and Kyrgyzstan), covers one sixth of China’s landmass, and is China’s largest natural gas-producing region. It has clear strategic and economic importance.

The Uighurs are a Turkic-speaking (similar to Turkish) ethnic group of mainly Sunni Muslims. About 12 million of them live in the XUAR, though less than half the region’s population is Uighur.

The United Nations (UN) defines genocide as "intent to destroy, in whole or in part, a national, ethnical, racial or religious group". With evidence that up to a million Uighurs are being separated from their children, interned in camps to ensure loyalty to the Communist Party, and forcibly sterilised (BBC), several countries have accused China of genocide. A UN panel has blamed China for turning Xinjiang into “a ‘no rights zone’” (Reuters). Forced labour is integral to the ‘re-education’ program.

In the US last year, Congress passed the Uyghur Human Rights Policy Act of 2020, condemning “gross human rights violations of ethnic Turkic Muslims in Xinjiang, and calling for an end to arbitrary detention, torture, and harassment of these communities inside and outside China”. By September 2020, The Uyghur Forced Labor Prevention Act passed through the House of Representatives, including a rebuttable presumption that ALL goods made in Xianjing use forced labour and therefore cannot be sold in the US.

On 22 March 2021, the EU, UK, US and Canada announced co-ordinated actions including asset freezes and travel bans against individuals and entities alleged to be involved in serious human rights violations against Uighurs and other minority groups in the XUAR. UK Foreign Secretary Dominic Raab applied measures under The Global Human Rights Sanctions Regulations 2020, referring to "appalling violations of the most basic human rights" (BBC). China immediately retaliated, in the UK sanctioning nine individuals and four entities including five MPs, the Conservative Party Human Rights Commission, Doughty Street’s Helena Kennedy QC and chair of the Uighur Tribunal Geoffrey Nice QC. Essex Court Chambers, which had a Xinjiang-related statement on its website, was also named.

What It Means For Businesses and Law Firms

Thanks to the internet, brands have global accountability.

Xinjiang produces 85% of China’s cotton and 20% of the world supply (BBC). As many as one in five cotton garments is likely to contain some fibres produced in Xinjiang (SupplyChainDive).

However, unsustainable sourcing practices can erode consumer confidence and destroy brand reputation. On 25 March 2021, the Communist Party’s “People’s Daily” newspaper named Nike, Adidas, Burberry, H&M, New Balance and other members of the Better Cotton Initiative and called for broad boycotts of the brands it had identified as spreading misinformation (CNN).

Law firms are well aware that trade tensions, especially between the US and China, will continue to affect practical and strategic decisions and the advice businesses need, as “the Internet knows no borders” (Bird & Bird). Freshfields Bruckhaus Deringer LLP highlights the reputational risks of failing to carry out due diligence on its website, while Covington & Burling notes that its public policy teams are ready to support clients considering sponsorship of the Beijing Olympics.

But self-censorship is also a reality. Within days of the sanctions, Essex Court had lost a QC to 7 Bedford Row and all four members of their Singapore practice. As Helena Kennedy QC told the Financial Times, “sets of chambers and law firms…will be very anxious about people speaking out in relation to China”.

Image Credit: Arnaud Brian / Shutterstock.com