Europe Eyes a Forced Labor Trade Ban
Can it improve on an American Original?
In October of this year, the European Parliament revised & advanced a proposal from the European Commission to adopt a version of the forced labor import ban that is currently in force in the United States. This is a significant step in the parliamentary process, and a strong indication that the EU may soon join the United States in its quest to end trade in slave-made goods.
For several years, the Europeans have favored a contrasting—but, to the casual observer, obviously related—approach to challenge of modern slavery in global supply chains. Until now, the prevailing European paradigm was exclusively focused on something called mandatory human rights due diligence. The obligation of mandatory HRDD, as it’s known, is advancing in the EU under the auspices of the Corporate Sustainability Due Diligence Directive, following national-level due diligence laws having been enacted in France, Germany and (outside the EU) Norway.
On paper, there’s a lot of overlap between a forced labor import ban and mandatory human rights due diligence. After all, the former requires companies to engage in due diligence. And the latter is certainly quite concerned with forced labor. But these approaches are about as similar as a zebra and a cobra. A mere two letters apart! If you’d never encountered them in the wild, you’d be forgiven for mistaking them for close cousins.
Like zebras, mandatory human rights due diligence attracts ardent supporters of different stripes.
By which I mean, it’s popular with both the NGO / activist community, and with the “business and human rights” community. According to the human rights-focused arm of the business community (the Business & Human Rights Resource Center), “almost half (46.2%) of the largest companies in the world analysed in the latest Corporate Human Rights Benchmark failed to show any evidence of identifying or mitigating human rights issues in their supply chains.” At the same time, a prominent human rights activist told me, with respect to the advent of mandatory HRDD in the EU: “it's more than most of us ever thought we would see in our lifetimes.” Noted! Who doesn’t love a color-block horse.
A forced labor import ban, on the other hand? Let’s just say cobras aren’t really as beloved as people claim. People are all like “we love cobras!” “My friend’s daughter had a birthday party, and they rented a cobra and gave kids rides in the front yard!” Nope, that was a zebra. Or more likely, a pony with face paint.
Like a cobra, a forced labor import ban has a certain transfixing quality. Making trade in slave-made goods illegal? Veritably elegant. But also, no one wants to get intimately acquainted with / fall into a pit of them. As between mandatory HRDD and a forced labor import ban, only one of these laws could inadvertently disemploy 35,000 employees in the Philippines, as a result of commercial transactions they had nothing to do with, many tiers removed into the upstream supply chain. (Hint: it’s not the zebra.)
In these pages, I’ve catalogued at length both the merits and the shortcomings of the present U.S. approach to forced labor trade enforcement. But so far, my attempts to tease out a robust policy debate over how to structure a trade law that incentivizes the identification and eradication of forced labor have largely been for naught.
Most activists don’t understand how trade laws work. But even those that do are eager to defend the vagaries of U.S. forced labor trade enforcement. No one would defend a tax regime devoid of rules by telling taxpayers the sine qua non of the regime is to “just pay the right amount of money”, so get with the program. And yet, that’s precisely what defenders of the UFLPA’s “broad and flexible enforcement powers” are saying.
Respectfully, I think that’s wrong. Rules matter, and the law matters. Enforcement discretion without a framework for executing it will be unequally and arbitrarily disbursed. Justice is not self-executing. A rules based regime is not a threat to vigorous, fair, and effective enforcement. It is the only means through which it can be achieved.
All of this is why I’ve been so interested to dial in to what the EU is cooking up for its own forced labor trade ban. As an American lawyer, clicking through European legislative proposals fills me with existential dread. But say what you will about legislating concurrently in 24 languages, our friends across the pond have a democratic legislative process that actually produces thoughtful, and often-times industry-shaping laws, from data privacy to AI regulation. I don’t know if their proposal will strike the optimal balance for forced labor trade enforcement (or, for that matter, ever become law), but they’re genuinely invested in trying. And that’s remarkable.
What Should A Forced Labor Import Ban Do?
Before I dive into exactly what the EU is planning, I want to briefly explain what I think “optimal balance” looks like for a forced labor import ban. In a nutshell, I think it’s a law that structures incentives, in order to achieve the identification and eradication of forced labor from global supply chains. It does this in the interest of protecting both workers (in producer markets, from being subjected to forced labor) and consumers (in destination markets, from buying things made with forced labor).
Over the last couple of years in the United States, the first half of the incentive structure (forced labor identification) has been built out rather robustly. Folks who want to go out, find and document where forced labor is happening have a powerful incentive to do so. No longer are they relegated to producing reports, hunting for headlines, and hoping the world takes notice. Now, if they play their cards right, they can reap a trade enforcement action for their efforts. But the second half of the incentive structure—which involves actually eradicating forced labor from the supply chain—remains largely an afterthought.
And that’s a real shame. Because—don’t miss this point—only a company can make changes to a supply chain. A government can’t do it. An NGO can’t do it. After all, supply chains are just the network of commercial relationships that give rise to traded goods. So, if there’s an enterprise deep in some such network that is engaged in forced labor, or if materials emanate from a territory where forced labor proliferates, there is no incentive to terminate such behavior that is more compelling than the threat of losing one’s customer(s). The customer is always right.
This is an important point. Because for all the accolades and attention showered on the activist & NGO community (glamour shots in the Washington Post, etc.), and all the honor that’s rightly due to the no-nonsense government border-enforcers (CBP - I salute you!), and all the scorn heaped on companies for alleged complicity in genocide, it’s worth remembering. Companies too are an indispensable partner to ending supply chain links to forced labor. Decoupling global trade and forced labor will not be achieved by anyone else.
In my view, too little thought has been given to this. As a result, a lot of what we talk about as “goals” of forced labor trade enforcement aren’t really that, either because they’re just inchoate steps towards this true goal, or because they’re so aspirational that they hurtle clear over the *difficult but achievable* and land belly-up in a patch of fantastic.
For example, a lot of times we talk about the goal of forced labor trade enforcement being to get companies to map their supply chains, or to conduct due diligence. True, if you’re going to navigate enforcement effectively, you’re gonna have to have mapped both direct and indirect suppliers and to have conducted due diligence on them. But creating a map and conducting due diligence isn’t the point.
By the same token, saying that the point of the law is to end forced labor, well okay. Just remember there’s a lot of forced labor that happens outside the goods-producing economy (let alone international supply chains), and a forced labor trade law isn’t focused on any of that, at all.
A forced labor trade ban can incentivize the eradication of forced labor from cross-border global supply chains by establishing proven traceability as the condition for continuing to engage in cross-border trade, when doing so is warranted by the evidence.
For the law to work in this way, the government has to commit to defining—publicly, and on the basis of evidence—where it observes forced labor to be occurring. This might entail specifying goods or materials from certain producers, or certain places. Then the government has to commit—publicly, transparently—to how it’s going to identify which goods crossing the border contain (or might contain) the problematic content (because, if the whole supply chain is in scope, this is far from obvious). And then, companies importing such goods should have a pair of options. They can either prove they don’t use the problematic content, or they can try to prove the content itself isn’t problematic (“rebut the presumption”, or “remediate the forced labor”, as it were). The umbrella term we use for either of these types of proof is: “traceability”.
I can’t say I fully understand all the dimensions of mandatory human rights due diligence that will ultimately materialize through the CSDDD in Europe (that is, the “zebra”). But I can say that the terms “trace” and “traceability” don’t appear in the text of the current proposal.
While the American model of a forced labor import ban (the “cobra”) has tremendous potential to incentivize traceability at scale, the failure to grasp the irreplaceable role of companies as an essential partner in delivering the desired solution is that the system is designed to obscure understanding of where enforcement is focused, and to sequester billions of dollars of trade in an unprecedented, unending paper-chase purgatory. While this cannot be The Goal, it is, at present, The Reality.
And so, rather than launching a quiet revolution in product traceability, the current American approach has left companies guessing. And hoping—quite rationally, I might add—just not to get sucked into the vortex.
What Europe Is Proposing
As an American lawyer, I don’t think it’s my place to try and offer a definitive analysis of the European proposal for a forced labor trade ban. Such analysis would be premature in any event, as (*glances at cheat sheet on EU parliamentary procedure*) the European Council still must weigh in before final negotiations take place. But I will offer a few (mostly positive) reactions, a couple observations about notable differences, and just one bigger (somewhat more concerning) question, which I won’t attempt to answer.
First, the good stuff. The Europeans seem to understand that rules are essential, and the European approach is nothing if not rules forward. Coming from a world where the aggregate legally-operative language codified in U.S. law is just a few hundred words, that seems like a positive step. Not because more statutory text is inherently better, but simply because if you take the time to spell out everything you expect to do in the context of enforcement (over 30+ Articles across 5 Chapters) you’re bound to have a more coherent theory of the case. Hopefully, by writing everything out in advance, this detailed, carefully crafted approach will help the EU avoid mistakes like the colossal original flub of the UFLPA (which was assuming that CBP can just *spot* goods with a supply chain link to Xinjiang as they sail into port).
Additionally, I’m pleased to see the notion of a publicly available database of information that will be used to animate enforcement. The U.S. has also maintained various lists in various contexts related to forced labor (for example, the list of goods made with forced and child labor), but enforcement is essentially untethered to such lists. In a general sense, if you’re going to enforce a law on the basis of information, the more that information can be public knowledge, the better it is for everyone involved.
Third, I’m also very keen to see that the EU approach is product-focused. You might think that a law focused on goods “made” wholly or in part with forced labor would naturally be focused on the goods. But the U.S. has shown that’s not necessarily the case. It matters, because a law that’s fundamentally focused on how goods were made is a law that’s equipped to incentivize traceability as the ultimate objective. (However, I will note that the word “traceability” only appears once in the EU proposal.)
The European proposal also has a couple key differences from the American approach. One, the EU isn’t strictly proposing a forced labor “import ban”. Rather, it’s a forced labor “can’t sell it on the common market” ban, which means, notably, it’s multi-directional. In other words, if there were a hypothetical expose on forced child labor in European goods production (like there was in the U.S. earlier this year), you could envision commercial consequences for the companies involved. When it comes to forced labor, I truly think that reciprocity in the rules is nothing to fear. The Europeans seem to agree.
Another major difference in the EU and American approaches—and one with potentially much further reaching consequences—is that the U.S. forced labor import ban is unilateral and carte blanche. In other words, it doesn’t depend on an enforcement action to take effect. As best I can tell from reading the EU proposal, the European approach is exactly the opposite. It’s only if an enforcement action is initiated (via investigation by a national-level authority, or the European Commission itself) and successfully completed that any goods end up being banned from the common market.
By contrast, any company that imports goods made wholly or in part with forced labor into the United States is in violation of a provision of U.S. customs laws (codified in Title 19 of the U.S. Code), full stop. If a company does this as a result of negligence or gross negligence (let alone if does so knowingly or intentionally) it could be extremely vulnerable to a wide range of undesirable legal outcomes. That unilateral prohibition also serves as a potential hook for all sorts of legal ornaments that might be designed for the purpose of penalizing true bad actors, once you’ve figured out who they are. Which is not to say that the focus of U.S. enforcement is irrelevant; quite the contrary. But the unilateral prohibition enacted by the U.S. (and Canada, I might add) is a distinctive feature of the law that Europe is not currently poised to emulate.
All of which leads me to my final point about the current EU proposal. Any time you’re drafting a law, it seems to me you owe it to yourself, your stakeholders, and society at large to ask: what’s going to happen when this thing turns out into the wild? That can be a very difficult thing to assess (see, e.g., the UFLPA), but it strikes me as the paramount question in the creation of laws.
In the case of the EU ban on products made with forced labor, the simplest answer seems to be: there’s going to be high-stakes investigations, maybe a lot of them, which will no doubt be heavily lawyered, and fiercely contested, and may or may not result in certain goods being banned from the EU common market. And the question I’d ask in response to that is: is this what we want from a forced labor trade ban?
How you answer that question is probably determined mostly by how you conceive of companies, and their role vis-à-vis forced labor in the global supply chain. Are they a bunch of treacherous profiteers, intent on exploitation? Or do they hold a unique position of power and influence that you hope to incentivize toward right action?
If you think, as I do, that forced labor proliferates in global supply chains predominantly because those supply chains are vast and opaque, and that most companies at the top of the food chain (/ end of the supply chain) are rational economic actors that want to comply with laws in all jurisdictions where they do business and will do whatever they’re required to do to meet the conditions of market access, and if you think that it’s almost 2024 and we have smartphones and ChatGPT, and come to think of it, comprehensive product traceability does seem like a reasonable ask for the largest and most sophisticated economic actors the world has ever known, and besides, comprehensive product traceability delivers untold commercial benefits in any event, and yeah, why wouldn’t we establish an open and transparent process to consider the evidence of forced labor, such as it is, and define what content is problematic, and then set the standard for traceability and empower a tough-as-nails border enforcer to evaluate claims of traceability (because not everything that walks like a duck and quacks like a duck is really a fully-traced supply chain), and why wouldn’t we want to see what sorts of solutions the free market would produce for proving that traded products don’t contain prohibited content, and then set real penalties to catch the companies who try to cheat on the foregoing . . . if you think like that, then you’d want to build rules to deliver it, no matter your nationality.
Thank you for reading.