To combat forced labor, the US needs more trade with developing countries, not less
On Aug. 5, the United States trade representative tweeted out that public comments on its “first-ever trade strategy to combat forced labor” were due. I know this is a few weeks late, but I can quickly get to the point: To help curb abuses of worker rights abroad, the U.S. needs more trade with developing countries, not less.
Labor standards have been a part of U.S. trade policy since the McKinley Tariff Act of 1890. At the time, the concern was to make sure that American manufacturers would not have to compete with cheap “convict labor” abroad. The 1930 Tariff Act went further still, calling on the government to ban “All goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part by convict labor or/and forced labor or/and indentured labor ….”
These bans, known as “withhold release orders” (WROs), were rare through 2016. In fact, only 10 were issued from 1930 on, and none from 2000 to 2016. The conventional wisdom is that this was due to a provision on “consumptive demand,” which waived those imports that couldn’t otherwise be sourced.
Section 307 got a makeover in the mid-1980s. The provision on consumptive demand was dropped. WROs began to target whole countries, not just specific suppliers. Then, in 2017, a WRO was slapped on all North Korean imports, based on a “rebuttable presumption” that forced labor is the norm in that country. This reversed the burden of proof, so that businesses sourcing things “wholly or in part” from North Korea had to disprove the charges. The Uyghur Forced Labor Disclosure Act of 2020 assumes the same thing about the Xinjiang region of China.
Back in 2012, the U.S. International Trade Commission surveyed the empirical evidence on whether enforcing labor standards through trade works. It found that Section 307-type measures can help. More importantly, it found that developing countries do not lower their labor standards to derive an advantage in trade. On the contrary, those more fully engaged in the global economy typically pursue higher labor standards.
Congress clearly didn’t get the memo. It started talking about the need to revamp Section 307 as if the International Trade Commission had found the opposite of what it actually reported.
It shouldn’t be surprising that developing countries are skeptical of the link between trade and labor standards. In 2001, for example, India opined to the World Trade Organization that this link is a Trojan horse of protectionism.
One concern is that labor standards are morphing into yet another trade remedy, like an antidumping or countervailing duty. Rival U.S. firms, for example, can file for WROs to harass each other’s supply chain across different countries, or if they buy from different suppliers in the same country.
Another concern is that labor standards are more about raising audit costs than delivering on worker rights. Like other standards, the many requirements for verification and recordkeeping are daunting under the best of circumstances, let alone where there is a rebuttal presumption of forced labor.
Developing-country suppliers, and American companies that buy from them, need a clear and empirically-grounded methodology so they can prove their compliance with labor standards. Otherwise, Section 307 will increasingly be used as a Trojan horse of protectionism.
Marc L. Busch is the Karl F. Landegger Professor of International Business Diplomacy at the Walsh School of Foreign Service at Georgetown University. Follow him on Twitter @marclbusch.