Issues ranging from forced labor in the Chinese cotton sector and U.S.-China tariffs to CPTPP and Trade Promotion Authority were key focal points of the “The Next Chapter: U.S.-Asia Trade” panel at the Sourcing Journal Hong Kong Summit last week.
“This is a very challenging time for the sourcing community,” said Sally Peng, managing director in the Export Controls & Sanctions practice at FTI Consulting, responding to a question from moderator Pete Sadera, editor in chief of Sourcing Journal, on the furor over forced labor allegations centering on Uyghurs in China’s cotton industry.
“We’re seeing an end-to-end supply chain disruption, from the China cotton side all the way to the U.S. Customs entry,” Peng said. “Along the way, you have a transportation problem, as well.”
She noted pending legislation in Congress that would increase enforcement and penalties for importing goods from the Xinjiang region that has been identified as the focus on forced labor allegations in cotton cultivation.
“This is a time for companies to look at their supply chain end to end and really know their supply chain and took a very close look at the risks,” said Peng, who is based in Hong Kong.
Jonathan Gold, vice president for supply chain and customs policy at the National Retail Federation (NRF), said the Biden administration and Congress are putting a lot of attention on U.S.-China issues.
“Human rights are front and center,” Gold said. “We’ve seen enforcement actions by Customs & Border Protection with the Withhold Release orders that have been issued on cotton and cotton products, and those actually extend beyond China because it could be something that comes from anywhere else that potentially has Chinese cotton in it.”
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He said it’s also difficult to trace those goods accurately back to the source, but companies are looking more closely at technologies that make it possible.
“There’s an expectation by the U.S. government and Congress for importers to know their supply chain all the way through,” Gold said. “We know how difficult and complex that already is and companies are trying now to do those mapping exercises and do some of the tracing using new technologies, but we know those are kind of in their infancies.”
Discussing the Biden administration trade policies, Gold said it is “trying to chart its own path.” It has been quite public about wanting to have a worker-centric trade policy, he noted, and “obviously, (organized) labor is going to be a big part of that, and they want trade to work for everybody.”
Gold said NRF’s message to the White House is that imports are important to the economy and the jobs they create, and shouldn’t be “demonized.” He stressed that NRF would like to roll back the China tariffs and supports the administration in conducting a thorough review to determine its next course of action.
Peng said in the meantime, trade doesn’t stop and there are other issues in play. For example, she said a lot of people are asking if the U.S. would consider joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which came about in the aftermath of the original TPP negotiated by the Obama administration and then rejected by President Trump. It includes Canada, Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
“It’s a 21st century trade agreement with a lot of protections for labor and the environment, and [a strong dispute mechanism],” Peng said. “More importantly, for the sourcing community, we’re looking at Vietnam as a strong place for a lot of products and that’s why so much effort was put into it.”
Gold said there is discussion about the U.S. rejoining–Biden hasn’t ruled it out–but “it would have to be on U.S. terms.” He said NRF’s hope is that the U.S. would look at rejoining the pact because it would improve the country’s trade leadership and help deal with China trade-related issues.
Also critical, Gold and Peng, agreed, is renewal of Trade Promotion Authority (TPA). This would enable Biden to negotiate trade deals from a position of strength, since it allows a president to present agreements to Congress for an up or down vote, without the ability to add amendments.
“We certainly hope the Biden administration will ask for TPA to be renewed and that Congress will grant TPA, so that we can get back into negotiating trade agreements, which we think are incredibly important right now,” Gold said.
Also integral in forming trade policy is new U.S. Trade Representative (USTR) Katherine Tai, who Gold called “one of the most qualified people to have this job,” and “the best person to have this job for what’s needed right now at USTR,” while Peng said “it’s too soon to say” what her impact and success will be.
On the other hand, Gold noted efforts in Congress and by the White house to bring more jobs back to the U.S., generally by incentivizing companies to do so.
“There might be some strategic industries to bring back to the U.S., but it’s not going to happen overnight,” he said. “It’s going to take time for those initiatives to develop.”
Peng noted that the pandemic has highlighted the need to onshore critical supplies like personal protective equipment (PPE), and urged companies to change their supply chains to meet those needs beyond just cost.
In Case You Missed It: All of the sessions from this year’s Sourcing Journal Hong Kong Summit: “Recovery & Reinvention” are available to purchase and view on-demand. Click here for access.