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EU Proposes Forced Labor Ban as Nike Rejects China Exit Plea

Brussels is set to announce plans to ban products made with forced labor as early as Tuesday as European lawmakers grapple with the increasing urgency of addressing the Uyghur crisis in China’s Xinjiang region, according to people familiar with the matter.

But unlike the Uyghur Forced Labour Prevention Act (UFLPA) which essentially outlaws all Xinjiang products from the United States, the European Union’s draft law will be jurisdiction agnostic to avoid running afoul of the World Trade Organization’s non-discrimination rules. This means it will also extend to products such as clothing, footwear, cocoa, fish and timber made and sourced within its own 27-member bloc.

The rules will home in on larger economic operators such as importers, manufacturers, producers and product suppliers because they carry the biggest risks of forced labor, Reuters reported on Friday. Smaller companies are also understood to have less wherewithal to influence suppliers or conduct in-depth due diligence.

“Such prohibition should apply to products for which forced labor has been used at any stage of their production, manufacture, harvest and extraction, including working or processing related to the products,” a document obtained by the outlet said. “The prohibition should apply to all products, of any type, including their components, and should apply to products regardless of the sector, the origin, whether they are domestic or imported, or placed or made available on the Union market or exported.”

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Despite its wider scope, the EU law is poised to be less strict than its U.S. counterpart, Reuters noted. While the UFLPA creates a rebuttable presumption that all goods in Xinjiang are manufactured with forced labor and therefore barred from entry, the EU measure will lay the onus of proof on national authorities to prove that forced labor was involved in a product’s manufacturing or processing. Preliminary investigations must also take no longer than 30 working days. As in the United States, offending shipments can be blocked by customs bodies from circulation or made to withdraw from the market.

Although the proposal does not cite individual countries because the bloc did not have time for a “fully fledged” impact assessment, Reuters noted that a database of forced labor risks in specific geographic areas or specific products made with forced labor imposed by state authorities will be established and made public.

The Financial Times said Monday that the EU will adopt the International Labour Organization’s definition of forced labor, meaning “all work or service which is exacted from any person under the threat of a penalty and for which the person has not offered himself or herself voluntarily.” In new estimates released Monday, the United Nations agency said that 27.6 million people toil in situations of forced labor on “any given day.” Women and girls make up 11.8 million of that number, and children more than 3.3 million.

The Financial Times said that officials acknowledge that obtaining proof could be challenging, especially if countries are uncooperative. If there is a “good likelihood” that forced labor is being used, however, member states will be able to seize or ban imports. An EU official told the outlet that the bloc has lowered “the burden of proof” to help enforce the ban.

The EU was among the governments that spoke up after the UN human-rights office published a report earlier this month denouncing China’s mistreatment of Uyghurs and other ethnic minorities as “serious human-rights violations” that could “constitute international crimes, in particular crimes against humanity.”

“As the report states, the human-rights situation in the Xinjiang Uyghur Autonomous Region requires urgent attention by the Chinese government, the United Nations, in particular, its human-rights bodies, as well as the international community more broadly,” the bloc’s foreign policy chief Josep Borrell said on Sept. 1. “The EU joins the call by UN experts reporting to the Human Rights Council to closely monitor, report, and assess the human-rights situation in China.”

China, which continues to vigorously deny any abuses in Xinjiang, has slammed the UN report as “completely illegal, null and void.”

Last week, however, a group of independent UN experts said that “profound concerns” over “systematic human rights violations and their widespread effect on individuals and minorities” in Xinjiang “cannot, and should not, be ignored by the international community.” They repeated a call for the Human Rights Council to convene a special session on China.

“China’s policies and practices have limited the legitimate exercise of the right to freedom of religion or belief, the right to family life including reproductive rights for women, freedom of opinion and expression, the right to assemble and associate peacefully, the right to privacy, the right to cultural life and the right to live free from arbitrary detention, forced labor as well as freedom from any violation of the right to life and from torture, inhuman and degrading treatment and from enforced disappearance as well as the right of religious and ethnic minorities to enjoy their own culture, to profess and practice their own religion or to use their own language,” they added.

Not doing it

Meanwhile, Nike shareholders have denied a motion to pause all sourcing and production in China until the U.S. government lifts or rescinds its advisory about the heightened risks for businesses with supply chains in Xinjiang.

Speaking to shareholders at a virtual meeting on Friday, Laura Murphy, a professor of human rights at Sheffield Hallam University’s Helena Kennedy Centre for International Justice, said that a vote for the proposal was critical to “ensuring that Uyghur forced labor does not taint Nike product.”

“As public awareness grows and legislation protecting consumers from forced labor expands, the unacceptable financial, legal, ethical and reputational risks increase for both Nike and its shareholders,” she said on behalf of Domini Impact Investments, the women-led investments advisor that authored the proposal.

The Just Do It company has declared that it does not source products from Xinjiang. Nor does it use textiles or spun fabric from the region.

“But what does Nike know about where the yarn and thread and cotton and polyester and leather and fabric that goes into those final products come from?” Murphy said. “Eight-five percent of China’s cotton comes from the Uyghur region and is farmed and processed by Uyghur forced labor. This forced-labor-tainted cotton is stored in China’s reserves and sold all over the country. It is then often spun into yarn and woven into fabric by Uyghur forced laborers.”

In an opposition statement published alongside the motion, the Jordan maker said that it runs its business in an “ethical way,” and “that commitment extends to the contract manufacturers who make our products.”

“We collaborate with suppliers who share our commitment to responsible manufacturing, as measured by compliance with the standards laid out in our supplier code of conduct and code leadership standards, and our current initiatives help to drive changes throughout Nike’s supply chain and promote human rights and responsible manufacturing,” it added, noting 15-year relationships with the “majority” of its footwear suppliers.

When the subject of China was raised again during a Q&A segment moderated by Nike, president and CEO John Donahoe spoke not of its human-rights risks but of the country’s growth potential. Echoing similar statements he’s made before—and ignoring last year’s state-sanctioned consumer boycott, whose impact continues to reverberate through its bottom line—China remains an “important market with significant potential to unlock,” Donahoe said. ”Nike has very strong growth equity with Chinese consumers.”

In June, Nike reported that sales in Greater China fell by 19 percent to $1.6 billion for the fourth quarter, marking the only region to post a loss, though the company blamed Covid-induced lockdowns, elevated freight costs and other supply-chain headaches for affecting 60 percent of its business in the area.

“We’re taking a medium- to long-term view, and we’re as confident today as we ever have been,” Donahoe said at the time. “Coming out of this lockdown we’re seeing increased energy from the Chinese consumer.”