The Xinjiang Act will backfire on the US

By Yi Xin 

On June 21, the "Uyghur Forced Labor Prevention Act (UFLPA), " claimed to be the "the most sweeping" act against Xinjiang, went into effect in the United States. Unlike previous administrative moves, such as the blacklisting of Chinese companies, issuing of the Withhold Release Orders (WROs) and the imposing of economic sanctions and visa restrictions, the act took one step further in requiring "clear and convincing evidence" from importers to prove the goods are not produced by "forced labor. "

Despite all the hype in the West, "forced labor" is never the real question. Disguised as a human rights legislation, the act is but another handy instrument to squeeze Chinese industries out of global markets and contain China's development.

As one of the major agricultural and industrial powerhouses for the country, Xinjiang is a leading producer of cotton, tomato sauce and polysilicon, respectively accounting for one fifth, one quarter and more than 40 percent of global output. By identifying the above three products as "high-priority sectors for enforcement, " the UFLPA is orchestrating a clamp down on Xinjiang's industrial competitiveness, and most notably, to suppress China's photovoltaic industry, now the world's largest.

With the new act taking effect, the United States is attempting a miniature version of economic decoupling. Dubious labels of "forced labor" or "genocide" are fabricated not only to dent economic vitality of Xinjiang, but also to rehearse for a complete exclusion of China from global supply chains, a new method of "decoupling" following the failed tariff-based policies of the previous administration.

Surely, such an act will send ripples across markets. But at the end of the day, the United States will find itself, not China, paying the bitter price.

First of all, China will not budge. Over the years, China has developed an effective legal toolbox to counter unwarranted sanctions, interference and long-arm jurisdiction, a prominent example of which is the Anti-Foreign Sanctions Law adopted in June 2021.

China's mega-market also has a strong traction in the seesaw between Beijing and Washington. While some companies try to erase traces of Xinjiang from their supply chains, the last thing they want is to be perceived as "tough" and "unfriendly" by Chinese consumers. After all, there is no shortage of dangerous precedents. Due to consumer outrage to their boycott on Xinjiang cotton, the sales and market shares of several multinational garment brands have spiraled downward in China.

The legal risks involved and the potential impact on sales may well dissuade foreign businesses from one-sided compliance of U.S. regulations.

Second, the act will hurt the U.S. business community more than anyone else. According to the act, "goods mined, produced, or manufactured wholly or in part in Xinjiang or by an entity on the UFLPA Entity List are prohibited from U.S. importation" unless granted exception.

Transactions subject to U.S. customs inspection as mandated by the UFLPA are estimated to soar to $11.5 million after the act became effective, from less than $1 million before. The increased enforcement workload, coupled with heightened compliance and logistical costs, will mire small- and medium-sized American companies in chaos and dismay. Some analysts believed a million enterprises worldwide will be affected.

The act will not bode well for the Biden administration either, as it will only further dampen economic prospects amid the combined crises of COVID-19, Ukraine, unabated inflation and supply chain disruptions. Just like how things turned out with Trump's tariff hikes, U.S. businesses and consumers will bear the brunt.

Last but not least, the idea of cutting Xinjiang off will be ineffective, if not impossible. With China being the top trading partner to 120 plus countries and regions, Xinjiang has long been deeply integrated with manufacturers from across the globe. As U.S. Trade Representative Katherine Tai admitted, the United States is 85 percent reliant on China as a producer of solar panels and the supply chain runs right through Xinjiang. Data released late last year showed that the vast majority (89 percent) of global polysilicon production is still expected to take place within China.

That means international buyers simply cannot bypass Xinjiang when it comes to photovoltaic products. Xinjiang also produces 15 percent of the world's hops, about 10 percent of walnut, chili and artificial fiber, and 13 percent of wind turbines, not to mention the more irreplaceable products, including certain ingredients for anti-cancer agents.

Simply put, by imposing the UFLPA, the United States has shifted the burden of proof to importers, which is almost a mission impossible given how modern manufacturing works. Instead of deterring "forced labor, " the UFLPA will only add more disruptions to the already struggling global supply chains, and increase the burden on the American people and the people of the world.

Yi Xin is a Beijing-based observer of international affairs.