US Ban on Chinese Cotton from Xinjiang and Unforeseeable Consequences for Bangladesh Garments Industry -Md. Nazir
US enactment of the Uyghur Forced Labor Prevention Act (UFLPA) has come into effect on June 21 this year after a lengthy debate and discussion taking place since Trump’s presidency. USA has been rhetorically accusing China for using forced labor in Xinjiang province by compelling thousands of Uyghur Muslims to work in cotton industry in the name poverty alleviation scheme. Consequently, US Customs and Border Protection authority has been given the supremacy to confiscate and fine any products having connection with forced labor in Xinjiang entering US markets. Beyond the rivalry between the US and China, the US ban on Chinese cotton will have a significant effect on the global supply chain for a variety of reasons, especially for nations that produce apparel, like Bangladesh, where millions of people directly depend on this industry for their livelihood.
The Covid-19 and recent Ukraine war have placed an unprecedented strain on the world economy. Global inflation coupled with increasing cost of raw materials is also giving a hard hit for many industries. The clothing industry was among the industries most severely affected by Covid-19, but it quickly recovered and experienced an impressive boom, particularly in Bangladesh providing hope for recovery and flourishment. Unfortunately, the US ban on Chinese cotton from Xinxiang is putting stress on global manufactures as substitution is a hard choice. USA has clearly noted that products entering US market must prove that they are not having any substance partially or fully made in Xinjiang using forced labor. So, it creates a huge amount of pressure and risk for both manufacturers and US buyers since the whole apparel industry has tightly evolved around China for decades. China alone accounts for the 22% cotton production in the world. Notably Xinjiang province contributes almost 91% share in total Chinese domestic cotton production. It is easily understandable that it would not be an easy going process for the garments manufacturers to outsource cotton from other destinations overnight.
Western world under the pioneering leadership of USA has been promoting a liberal world order since the end of the Second World War. Different national barriers have been fallen apart in the face of market liberalization. Rise of global division of labor has created an integrated world supply chain where a finished goods comes after processing in different nations with materials from variety of origins. Global garments industry has also developed in a similar pathway. US efforts to distinguish the source of origin in the name Uyghur human rights violation is the departure of its long held liberal belief. These policies basically demonstrate the inability of USA to match Chinese impressive growth in international market by adhering rule of law and healthy competition. Attacking Xinjiang serves the vicious purpose of USA to weaken its efforts to rise peacefully. Paralyzing the economy of Xinjiang through naïve accusations will surely benefit own US cotton industry economically and give political opportunityby destabilizing Chinese internal cohesion. However, identifying the origin of cotton would not be a simple task as cottons from different areas get mixed up in primary yarn and fabric production stage. Existing inspection measures are also faulty as there has been no effective mechanism to identify the origin. Suggested technological companies like SupplyShift, TrusTrace and TextinGenesis are trying to develop a block chain method based on Artificial Intelligence (AI). But these technologies are already being doubted that they would become commercial certificate giving outlets. It is true that manufactures would not be interested in such measures without incentives as they add further cost since the profit margin is already proportionately down. However, previous instances during trade war between USA and China has proven that it would be nearly impossible to stop the global supply flow of goods. Recently US apparel imports from Vietnam, Thailand and Bangladesh notably expanded by replacing Chinese market. But interestingly, cotton imports of these countries from China have dramatically increased. This shows the complex interdependence in global international system. Recent US efforts might not be able to destroy the Xinjiang’s cotton industry but have immitigable negative consequences for garments exporting countries like Bangladesh.
It is not unfamiliar that the Bangladesh garments industry has strong connection with its growing economy. Importantly this sector provides over four million employment which makes it crucial for Bangladesh. But imprudent US sanction on the cotton from Xinjiang poses Bangladesh in difficult situation. It is noteworthy that Bangladesh does not import much cotton from China as India and USA are the top sources for the raw cotton. But Bangladesh garments industry has high reliance on China for importing its around 60-70% yarn and fabric which are more finished to manufacture high-end materials. US restriction leaves Bangladesh with no viable alternative for this category of goods. It has been believed that India would capture the Chinese position in providing raw and finished materials for global garments industry but its capability seems irreplaceable China. Consequently, Bangladesh garments industry is likely to fall in the foul of US policy. In fact, various right groups in USA and Europe are already creating noise that Bangladesh is involved in ‘cotton laundering’ by importing the cotton of Xinjiang under different labels. Such accusations may become very detrimental for Bangladesh garments industry. USA may use such card to play other political game in Bangladesh. However, excluding Xinjiang’s cotton from world market would definitely push the price high for cotton. It would leave Bangladesh highly vulnerable to switch to new markets as dollar crisis is mounting in Bangladesh for importing goods. Beside, Bangladesh will lose competitiveness in distance, cost, short notice purchasing from China. Increasing cost of raw materials may bring unimaginable horror for this industry.
Business and politics cannot practically be separated in world politics but the engagement of human rights politics makes the situation more volatile. It is not sure to what extent the USA would be successful in achieving its goal by squeezing the cotton industry of Xinjiang to punish China and preserve so called humanities but it is certain that millions of people who are engaged in different layers of garments industry would suffer the consequences in meeting their daily needs badly resulting different layer of human rights violation. Global supply chain disruption will also be detrimental for both USA and the world.
Author of this article is an international political economy analyst.