This article first appeared in CNBC TV-18 on March 01, 2021 and can be accessed here.
What do Gap, Nike, Calvin Klein, and Uniqlo all have in common? These are all clothing brands that are forced to confirm that their products are not being made by forced labour. The US sanctions against China have now taken a public face as fashion consumers worldwide are weighing up the ethics of their clothes. The United Nations even called for the Human Rights High Commissioner to visit the region after reports of systematic rape.
For years, human rights groups have been pointing to increasing suppression in Xinjiang, including the construction of re-education camps, mass internment, and mass employment. Last year, the outgoing Trump Administration intensified sanctions against China, particularly under the Uyghur Human Rights Act in July. On his last day at the office, former US Secretary of State made a strong statement as he argued that the Chinese government’s actions against Uyghurs were genocide. And then, in January 2021, the United States Customs and Border Protection Agency announced a blanket ban on Xinjiang cotton when it said that it would seize goods from the Xinjiang Production and Construction Corps. This has hit companies across the world because of the entangled nature of global supply chains.
China produces 20 percent of the world’s cotton, and 85 percent of that cotton is sourced from Xinjiang. Often the products are shipped to other countries like Vietnam or Bangladesh, where they are made into finished products. The European Union is also facing pressure from parliamentarians, although the EU and China recently concluded an investment deal in December.
It is not just the fashion industry that is facing the heat of the US sanctions. Huawei, hard-hit by US sanctions, is expanding into new areas including electric vehicles and even pig farming. Companies from across the solar industry have pledged not to use forced labour. Though Xinjiang is not mentioned, it is implied as 45 percent of solar-grade polysilicon in the world comes from the province.
China is not impervious to how sanctions are affecting its image and its economy. The Chinese government’s narrative continues to be that there is nothing amiss in Xinjiang and that Western criticism is overhyped. Concerning the sanctions, the Chinese government has been straddling a response that would save face without escalating tensions. In January 2021, the Chinese Ministry of Commerce issued a ‘blocking statute’ that would support Chinese companies rather than allowing them to comply. The Chinese Communist Party also sanctioned several outgoing officials in the Trump Administration.
The Chinese economy is either in dire straits or set to recovery depending on which narratives you choose to read. The reality is far more nuanced. The economy did grow by 2.3 percent, and the Chinese government, which will hold its annual 'Two Sessions' meeting next month, needs to answer some tough challenges of the middle-income trap as it ushers in its 14th Five Year Plan. The Biden administration has not removed any of the sanctions imposed by the Trump administration before him but has ordered a review of them. But sanctions as much a signal to domestic audiences as they are to foreign audiences.
In India's case, the government is slowly allowing investment to trickle in after the disengagement at Pangong Tso. The Indian government is arguing that the economic moves were one reason that pushed the Chinese government to disengage. However, it is essential to remember that sanctions are just one in a toolbox of foreign policy instruments. What will make them successful is a clear-outcome setting. Otherwise, it will become only another spent option that reduces the space for cooperation.