Beyond Trade: A Contest for Economic Influence: Over the past three decades, the global economy has undergone a profound transformation, reshaping production beyond national borders and giving rise to highly integrated, multi-layered supply chains. Today, the processor inside a smartphone may be designed in Taiwan, its battery manufactured in China, its rare earth minerals sourced from Africa, and the final assembly completed in another Asian economy. Likewise, products ranging from automobiles and textiles to solar panels and electric vehicle batteries reach international markets through complex production networks spanning dozens of countries.

In the first three installments of this series, we explored the less visible dimensions of global supply chains from multiple perspectives. The opening chapter examined China’s strategic manufacturing capacity—particularly in East Turkistan (Xinjiang)—and the region’s significance in global production of cotton, polysilicon, tomatoes, and critical minerals. The second installment reviewed allegations of forced labour documented in reports by international human rights organizations, academic institutions, and government agencies, examining both the evidence cited and the broader international response. The third focused on the growing compliance pressures facing multinational corporations, rising expectations for supply chain transparency, and the increasing importance of Environmental, Social and Governance (ESG) standards in corporate decision-making and investment.

Taken together, these developments demonstrate that the debate extends far beyond labour conditions in a single region. What began as a discussion centred on China’s domestic policies and production practices has evolved into a broader conversation about the future of global trade, national economic security strategies, corporate legal responsibilities, and the changing dynamics of international competition.

The disruptions caused by the COVID-19 pandemic, the impact of the Russia–Ukraine war on global energy and commodity markets, intensifying geopolitical rivalry, and the growing emphasis on economic security have fundamentally reshaped how Western governments assess global supply chains. Increasingly, policymakers are looking beyond cost and production capacity. Questions about where products are manufactured, under what conditions they are produced, and whether they comply with internationally recognised legal and ethical standards have become integral to modern trade policy.

One of the earliest and most consequential policy shifts came from the United States. Citing allegations of forced labour linked to products originating from East Turkistan (Xinjiang), Washington strengthened import enforcement and introduced new legislative measures aimed at restricting their entry into the U.S. market. The policy shift, however, did not remain confined to the United States. The European Union has since adopted a similar trajectory, introducing legislation that requires companies to conduct more comprehensive due diligence across their supply chains while establishing a legal framework intended to prevent products associated with forced labour from entering the European market.

As a result, what initially appeared to be a bilateral dispute between Washington and Beijing has evolved into a much broader international issue. With the European Union joining the debate, questions surrounding international trade law, corporate accountability, human rights standards, and global economic competition have become increasingly interconnected.

Beijing, meanwhile, has categorically rejected both the allegations raised by Western governments and the trade measures adopted in response. Chinese authorities maintain that employment policies in East Turkistan form part of broader poverty alleviation initiatives and vocational education programmes. They argue that Western trade restrictions reflect economic protectionism, political pressure, and broader efforts to constrain China’s economic rise. Consequently, today’s debate extends beyond the credibility of competing human rights reports. It also encompasses fundamental questions about the interpretation of international law, the extent to which governments may impose trade-related restrictions, and the principles that are likely to shape the next phase of the global trading system.

This chapter examines the European Union’s legislative response to forced labour, the new legal obligations imposed on companies, and the potential implications of these measures for global supply chains. It also presents the Chinese government’s official position, Beijing’s principal arguments before the international community, and the key legal debates emerging between these competing approaches. Throughout, the objective is to provide readers with a balanced and evidence-based assessment that reflects the perspectives of the principal stakeholders.

1. Why Did the European Union Develop a New Trade Policy?

From Economic Partnership to Value-Based Trade

For decades, the European Union shaped its trade policy primarily around economic efficiency, open markets, and global competitiveness. As globalization accelerated throughout the 1990s, European businesses increasingly shifted manufacturing to lower-cost production centres, particularly across Asia. China’s accession to the World Trade Organization (WTO) in 2001 marked a defining moment in this process. Supported by competitive manufacturing costs and rapidly expanding industrial capacity, China became one of the principal hubs of global supply chains serving European companies.

Over the past two decades, however, a growing consensus has emerged within Europe that international trade cannot be assessed solely through economic indicators. Increasing attention has been paid to the conditions under which goods are produced, whether workers’ fundamental rights are protected, whether environmental standards are respected, and what broader social impacts multinational companies generate throughout their global operations. These considerations have gradually become central to policymaking within European institutions.

Importantly, this policy evolution cannot be attributed solely to concerns surrounding China. Industrial disasters in Bangladesh’s garment sector, allegations of child labour in African mining operations, growing concern over deforestation in South America, and criticism of labour rights violations in Southeast Asia have all contributed to calls for stronger oversight of global supply chains. Against this broader backdrop, the European Union’s emerging regulatory framework should not be viewed simply as a policy directed at a single country, but rather as part of a wider effort to establish more comprehensive governance standards for global production networks as a whole.

Human Rights at the Centre of Global Supply Chain Governance

In recent years, global supply chains have come under increasing scrutiny not only for their economic efficiency but also for their human rights implications. The complex production networks that often span dozens of countries before a product reaches consumers make it difficult to identify and address potential rights violations occurring at different stages of the manufacturing process.

For years, the International Labour Organization (ILO), the United Nations (UN), the Organisation for Economic Co-operation and Development (OECD), and numerous independent research institutions have argued that companies should be accountable not only for conditions within their own operations but also for human rights risks throughout their entire supply chains. They have consistently urged businesses to identify, assess, and mitigate such risks through comprehensive due diligence.

This evolving framework has brought several issues to the forefront of international debate, including:

• Allegations of forced labour
• Child labour
• Modern slavery
• Restrictions on freedom of association and collective bargaining
• Workplace discrimination
• Occupational health and safety deficiencies
• Environmental impacts linked to production

Within the European Union, these concerns are increasingly viewed not solely as ethical considerations but also as matters of fair market competition. European policymakers have argued that companies gaining a cost advantage through practices that fail to meet internationally recognised labour standards may distort competition within the Single Market. As a result, human rights compliance has become closely linked to broader discussions surrounding market integrity and sustainable economic governance.

Growing Momentum in the European Parliament

The European Parliament played a central role in shaping the EU’s recent legislative agenda. Over the past several years, lawmakers from across the political spectrum have called for stronger oversight of alleged human rights abuses within global supply chains and stricter controls over products entering the European market.

Parliamentary debates have not focused exclusively on China. Legislators have also highlighted labour rights concerns in numerous regions around the world, reflecting a broader effort to strengthen corporate accountability across global production networks.

Through a series of resolutions and policy initiatives, Members of the European Parliament urged companies to increase supply chain transparency, conduct systematic risk assessments, and establish preventive mechanisms capable of identifying and addressing human rights risks before they materialise.

Responding to these political initiatives, the European Commission began drafting new legislation that would extend corporate responsibility beyond financial performance to include the human rights and environmental impacts of business operations throughout global value chains.

The Influence of Civil Society and Academic Research

Another important driver behind Europe’s evolving regulatory framework has been the work of civil society organisations, academic institutions, and independent policy research centres.

Reports published by Amnesty International, Human Rights Watch, the Helena Kennedy Centre for International Justice at Sheffield Hallam University, the OECD, and other research organisations have significantly influenced public debate by highlighting human rights risks associated with global supply chains.

Some of these studies have focused specifically on allegations concerning production linked to East Turkistan (Xinjiang), while others have examined comparable risks in industries and regions across the world, reinforcing the view that supply chain governance is a global rather than country-specific challenge.

Impact assessments prepared by the European Commission and the European Parliament have frequently cited academic research, international organisation reports, and sectoral studies as important reference materials during the legislative process.

At the same time, the methodologies and conclusions of some of these reports have been challenged by several governments. Chinese authorities, in particular, have argued that certain studies rely on selective evidence, reflect political bias, or are intended to support broader geopolitical objectives.

Changing Expectations Among European Consumers

Consumer attitudes across Europe have also evolved considerably over the past decade.

Growing numbers of consumers—particularly younger generations—as well as institutional investors increasingly consider not only a product’s price and quality but also the conditions under which it is produced, its environmental footprint, and the social responsibility practices of the companies involved.

These changing expectations have accelerated the rise of ethical consumption and responsible investment throughout Europe. Major investment funds and financial institutions now integrate Environmental, Social and Governance (ESG) criteria into investment decisions, while many European companies have introduced voluntary auditing and traceability mechanisms designed to improve supply chain transparency.

These developments have, in turn, reinforced political momentum for stronger regulation. Consequently, the EU’s legislative initiatives can be understood not only as government policy but also as a response to evolving consumer preferences and changing corporate practices.

Value-Based Trade: The European Union’s Emerging Trade Philosophy

One of the defining concepts underpinning the European Union’s external trade policy in recent years is “value-based trade.”

The concept reflects the view that international commerce should generate more than economic growth alone. According to the European Union, free trade should also reinforce respect for human rights, the rule of law, sustainable development, internationally recognised labour standards, and environmental protection.

As a result, many of the EU’s recent and ongoing free trade negotiations increasingly incorporate provisions relating to:

• Human rights
• Labour standards
• Environmental protection
• Sustainable development
• Corporate transparency and responsible business conduct

The European Commission maintains that this approach is not intended to target any specific country. Rather, it argues that these measures are designed to strengthen the long-term resilience, sustainability, and predictability of the global trading system.

Where the European Green Deal Meets Human Rights Policy

The European Union’s evolving trade strategy is also closely linked to the broader objectives of the European Green Deal.

While the Green Deal seeks to accelerate decarbonisation, promote circular economic models, and enhance environmental sustainability, European policymakers increasingly argue that environmental objectives cannot be separated from social responsibility.

Consequently, environmental sustainability and human rights have become mutually reinforcing pillars of the EU’s external economic policy. From this perspective, it is no longer considered sufficient for a product merely to have a low carbon footprint. Policymakers increasingly argue that production methods should also comply with internationally recognised labour and human rights standards.

A Changing Global Trade Paradigm

Taken together, these developments point to a significant shift in the European Union’s approach to international trade.

Traditional trade policy—primarily centred on cost efficiency, productivity, and competitiveness—is gradually giving way to a broader framework that seeks to balance economic performance with human rights, environmental sustainability, corporate accountability, and economic security.

This transformation, however, remains the subject of considerable international debate.

The European Union presents its regulatory initiatives as a natural extension of internationally recognised human rights principles and responsible business practices. China, along with several other countries, argues that such measures risk politicising trade, expanding protectionist policies, and undermining the neutrality of the global trading system.

As these competing visions continue to shape international policymaking, the future governance of global supply chains is increasingly likely to be determined not only by economic considerations but also by evolving legal norms, geopolitical competition, and differing interpretations of responsible global commerce.

2. The EU Forced Labour Regulation (FLR)

How the European Union Plans to Police Global Supply Chains

One of the European Union’s most far-reaching initiatives on global supply chain governance is the Regulation on Prohibiting Products Made with Forced Labour on the Union Market, commonly referred to as the Forced Labour Regulation (FLR).

Adopted by the European Parliament and the Council of the European Union, the regulation has become a cornerstone of the EU’s human rights-based trade agenda. Its stated objective is to prevent products determined to have been manufactured using forced labour—as defined by the International Labour Organization (ILO)—from being placed on, made available within, or exported from the EU market.

More than simply introducing another trade measure, the FLR establishes a comprehensive enforcement framework that has the potential to fundamentally reshape how companies manage and oversee their global supply chains.

Why Was the Regulation Introduced?

According to the European Commission, reports published by international organisations indicating that millions of people remain subject to various forms of forced labour demonstrate the need for stronger regulatory tools within the global trading system.

The Commission argues that while existing EU legislation contains detailed rules governing product safety, consumer protection, and environmental compliance, there has been no harmonised European mechanism specifically designed to remove products linked to forced labour from the internal market.

The regulation therefore pursues several key objectives:

• Prevent products made with forced labour from circulating within the European Union.
• Encourage companies to conduct more rigorous due diligence throughout their supply chains.
• Integrate internationally recognised human rights standards more fully into EU trade policy.
• Establish a harmonised enforcement framework across all Member States.

The Commission also emphasises that the regulation is intended not only as an enforcement instrument but as a preventive measure, encouraging companies to identify and address risks before products reach the European market.

Which Products Are Covered?

One of the regulation’s defining characteristics is its broad scope.

Unlike sector-specific legislation, the FLR applies to virtually all products placed on the EU market if there are substantiated findings that forced labour was used during their production.

These may include:

• Textiles and apparel
• Cotton and textile inputs
• Electronic devices
• Automotive components
• Solar panels
• Batteries
• Agricultural products
• Seafood
• Toys
• Mining products
• Construction materials

Importantly, the regulation is not limited to finished goods.

Intermediate products, raw materials, and individual components incorporated into final products may also fall within the scope of an investigation.

In practice, this means that regulators may examine not only the assembly of an automobile but also the production of its batteries, electronic components, aluminium, steel, cotton, or other materials used throughout its manufacturing process.

Which Countries Does It Apply To?

From a legal perspective, the regulation is deliberately country-neutral.

According to the European Union, it applies equally to:

• Products manufactured within EU Member States;
• Goods imported from any third country;
• Companies producing within the European Union; and
• Foreign manufacturers placing products on the EU market.

Neither China, East Turkistan (Xinjiang), nor any other country is specifically named in the legal text.

In practice, however, much of the international debate surrounding the regulation has focused on China because many reports concerning alleged forced labour have centred on production linked to East Turkistan. Nevertheless, legal experts note that the same enforcement mechanism could equally apply to allegations arising in any other country should comparable evidence emerge.

Is the Regulation Targeting a Particular Country?

This remains one of the central questions surrounding the legislation.

The European Commission consistently maintains that the FLR is risk-based rather than country-based.

Under this approach, investigations are triggered not by a country’s identity but by credible information and objective indicators relating to a particular product, company, production facility, or supply chain.

Chinese authorities, however, have argued that although the regulation appears neutral on its face, it is likely to disproportionately affect Chinese exports and could serve as a political instrument directed against China.

As a result, an important distinction exists between the regulation’s legal design and the broader geopolitical debate surrounding its implementation. While the legislation itself avoids naming any country, discussion continues over which economies may ultimately be most affected in practice.

How Will Investigations Be Conducted?

The regulation establishes a two-stage investigative process.

During the preliminary assessment, competent authorities may examine publicly available information, reports issued by international organisations, academic research, company disclosures, and other credible sources to determine whether further action is warranted.

Authorities may consider questions such as:

• Are the allegations credible and sufficiently substantiated?
• Does the available information indicate a significant risk?
• How widely is the product distributed within the EU market?
• Has the company demonstrated appropriate due diligence?

Where reasonable grounds for concern exist, authorities may open a formal investigation.

During that stage, companies may be required to provide extensive documentation relating to their supply chains, including audit reports, traceability records, risk assessments, supplier information, and evidence of mitigation measures.

The Role of the European Commission

The regulation establishes a coordinated enforcement model involving both the European Commission and the competent authorities of Member States.

The Commission plays a leading role in coordinating investigations involving production outside the European Union, while national authorities remain responsible for enforcement within their respective jurisdictions.

Among its responsibilities, the Commission may:

• Coordinate information-sharing among Member States;
• Develop common databases;
• Conduct or support risk assessments;
• Facilitate consistent enforcement across the Union; and
• Issue guidance aimed at reducing differences in national implementation.

Customs Controls and Product Detention

Once competent authorities determine that a product has been manufactured using forced labour, customs authorities become responsible for implementing the decision.

Products may then be:

• Prevented from entering the European Union;
• Denied release for free circulation;
• Barred from export from the Union; or
• Blocked from distribution within the EU internal market.

Customs authorities are required to enforce decisions issued by the competent enforcement bodies.

Import and Export Restrictions

One of the regulation’s most significant features is that it extends beyond import controls.

Products determined to have been made with forced labour may be prohibited not only from entering the European market but also from being exported from the European Union to third countries.

The objective is to prevent the EU from serving as a distribution hub for products found to be linked to forced labour.

Market Withdrawal and Disposal

The FLR is not limited to border enforcement.

If an investigation concludes that products have been manufactured using forced labour, competent authorities may order:

• Their withdrawal from retail outlets;
• Their removal from warehouses;
• Their delisting from online marketplaces; and
• A prohibition on placing them back on the market.

Depending on the circumstances, products may be recycled, repurposed, or otherwise disposed of in accordance with applicable legislation. Where continued circulation is deemed incompatible with EU law, products may ultimately be destroyed or permanently removed from commercial use.

The overarching objective is to eliminate products determined to have been made with forced labour from the European marketplace.

Corporate Rights and Procedural Safeguards

The regulation also establishes procedural protections for companies subject to investigation.

Businesses are entitled to:

• Respond to allegations;
• Submit additional information and supporting evidence;
• Present their defence before competent authorities; and
• Challenge administrative decisions through available legal remedies.

Accordingly, the regulation seeks not only to establish an enforcement mechanism but also to ensure that administrative decisions remain subject to judicial review and fundamental principles of due process.

The European Union states that investigations will be conducted on the basis of objective criteria and that decisions will respect the principles of proportionality, legal certainty, and the right of defence.

More Than a Trade Measure

Although formally adopted as trade legislation, the implications of the Forced Labour Regulation extend far beyond market regulation.

By influencing corporate sourcing strategies, investment decisions, customs enforcement, regulatory compliance, and even diplomatic relations, the FLR has the potential to reshape global supply chains. More broadly, it reflects a growing shift in international commerce, where human rights considerations are becoming an increasingly important element of trade governance alongside traditional concerns such as price, efficiency, and market access.

3. Corporate Sustainability and Due Diligence

The European Union Expects Companies to Deliver More Than Profit

The European Union’s transformation of global supply chain governance is not driven solely by the Forced Labour Regulation (FLR). A second landmark initiative—the Corporate Sustainability Due Diligence Directive (CSDDD)—introduces a broader legal framework that requires companies to identify, prevent, mitigate, and account for human rights and environmental risks throughout their value chains.

Often described as the EU’s “Supply Chain Law,” the CSDDD is widely regarded as one of the most significant corporate accountability reforms adopted by the European Union in recent years. Rather than limiting corporate responsibility to a company’s own operations, the directive extends expectations to suppliers, subcontractors, and business partners across global value chains.

In practical terms, the European Union is signalling that corporate success will no longer be measured solely by financial performance. Large companies are increasingly expected to demonstrate accountability for the social and environmental consequences of their business activities.

What Is the Corporate Sustainability Due Diligence Directive (CSDDD)?

According to the European Commission, the directive is designed to:

• Prevent adverse impacts on human rights;
• Reduce environmental harm;
• Promote responsible corporate conduct throughout global value chains; and
• Encourage more sustainable and transparent business models.

Rather than requiring companies to respond only after violations have occurred, the directive obliges them to identify and address potential risks before harm materialises.

Consequently, the CSDDD is built primarily around preventive corporate governance rather than punitive enforcement.

What Does “Due Diligence” Mean?

The concept of due diligence has long been established in both legal and financial practice.

Broadly defined, it refers to the process of identifying foreseeable risks, assessing their potential impact, and taking reasonable measures to prevent or mitigate them.

The European Union applies this principle to global corporate operations.

Under the CSDDD, companies will find it increasingly difficult to rely on arguments such as:

“Production was outsourced, so we are not responsible.”

or

“We were unaware of where our raw materials originated.”

Instead, businesses are expected to conduct reasonable investigations, identify material risks, and implement effective measures to reduce or eliminate those risks throughout their value chains.

New Obligations for Companies

The directive introduces a wide range of obligations for companies that fall within its scope.

These include requirements to:

• Identify actual and potential human rights risks;
• Assess environmental impacts;
• Regularly review supply chains;
• Implement preventive and corrective measures;
• Establish grievance and complaints mechanisms;
• Publish periodic reports; and
• Maintain documentation demonstrating compliance with due diligence obligations.

These responsibilities apply not only to companies established within the European Union but, under certain conditions, also to non-EU companies conducting substantial business within the European market.

Risk Assessment Becomes a Legal Requirement

One of the directive’s most significant innovations is that supply chain risk assessment becomes a legal obligation rather than a voluntary corporate practice.

Companies are expected to address questions such as:

• Where do raw materials originate?
• In which countries does production take place?
• Are workers’ rights adequately protected?
• Is there a risk of child labour?
• Are there allegations of forced labour?
• Are environmental harms being caused?
• Could local communities be adversely affected?

Importantly, these assessments are not intended as one-off exercises. Companies are expected to review and update their risk analyses periodically as business operations and external conditions evolve.

Mapping the Entire Supply Chain

Under the EU’s emerging regulatory approach, it is no longer sufficient for companies to know only their direct suppliers.

Large businesses are increasingly expected to map, as comprehensively as reasonably possible, the broader value chain, including:

• First-tier suppliers;
• Second-tier manufacturers;
• Raw material providers;
• Logistics companies;
• Processing facilities; and
• Manufacturing partners.

For multinational corporations managing thousands of suppliers across multiple jurisdictions, this represents a complex and potentially costly transformation of supply chain governance.

Monitoring Subcontractors

A substantial share of global manufacturing is carried out through subcontracting arrangements.

Many internationally recognised brands rely not on company-owned factories but on:

• Independent manufacturers;
• Contract production facilities;
• Local subcontractors; and
• Outsourced suppliers.

The CSDDD therefore expects companies to extend their oversight beyond primary suppliers and, where reasonably possible, monitor these wider subcontracting networks.

This is particularly significant in industries such as textiles, electronics, automotive manufacturing, and mining, where supply chains often involve multiple production tiers spread across different countries.

Child Labour and Forced Labour Risks

Among the directive’s central priorities is the identification and mitigation of risks associated with child labour and forced labour.

Drawing upon the core conventions of the International Labour Organization (ILO), companies are expected to assess risks relating to:

• Child labour;
• Forced labour;
• Debt bondage;
• Human trafficking;
• Modern slavery; and
• Discriminatory labour practices.

A notable feature of the directive is that it does not focus on any particular country. Instead, it assumes that such risks may arise anywhere within global supply chains and requires companies to adopt a risk-based approach irrespective of geographic location.

A Broader Human Rights Perspective

The CSDDD extends beyond labour-related issues.

It adopts a wider human rights framework that encourages companies to consider internationally recognised standards relating to:

• Freedom of association and collective bargaining;
• Non-discrimination;
• Safe and healthy working conditions;
• Fair remuneration;
• The rights of local communities;
• Forced displacement;
• Indigenous peoples’ rights; and
• The protection of privacy.

This approach closely reflects the principles contained in the United Nations Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct.

Environmental Risks Also Fall Within Scope

The directive addresses environmental sustainability alongside human rights.

Companies are expected to evaluate risks associated with:

• Deforestation;
• Biodiversity loss;
• Water pollution;
• Air pollution;
• Hazardous waste management;
• Greenhouse gas emissions; and
• Climate change impacts.

For this reason, the CSDDD is widely regarded as one of the principal corporate governance instruments supporting the objectives of the European Green Deal.

The Role of Corporate Boards

The directive also reflects a broader evolution in corporate governance.

Responsibility for managing human rights and environmental risks is no longer viewed solely as the responsibility of legal or compliance departments.

Corporate leadership is increasingly expected to:

• Develop sustainability strategies;
• Strengthen enterprise-wide risk management systems;
• Allocate adequate financial and operational resources; and
• Monitor implementation on an ongoing basis.

As a result, sustainability is becoming an integral component of corporate governance rather than simply an element of voluntary corporate social responsibility programmes.

Financial Penalties and Regulatory Enforcement

The CSDDD is not merely aspirational.

Member States are required to establish national enforcement regimes providing for effective, proportionate, and dissuasive penalties.

Potential enforcement measures may include:

• Administrative fines;
• Orders requiring companies to adopt compliance plans;
• Corrective measures aimed at addressing identified violations; and
• Public disclosure obligations.

When determining financial penalties, authorities may take account of a company’s global turnover, with sanctions intended to reflect both the seriousness of the infringement and the size of the undertaking.

Civil Liability and Compensation

One of the directive’s most consequential provisions concerns civil liability.

Where a company has:

• Failed to conduct appropriate risk assessments;
• Neglected to implement reasonable preventive measures; or
• Otherwise breached its due diligence obligations,

and that failure contributes to preventable harm, it may face civil liability under the applicable national legal framework.

The directive also creates a pathway under which affected individuals or other eligible parties may, under specified conditions, seek compensation for damages. Whether liability ultimately arises, however, depends on the facts of each individual case and the implementation of the directive within Member States’ domestic legal systems.

Europe’s Message to Business

The Corporate Sustainability Due Diligence Directive represents one of the clearest manifestations of the European Union’s evolving approach to international trade and corporate governance.

The directive signals that companies operating within the European market will increasingly be evaluated not only by their commercial performance, but also by their ability to respect human rights, minimise environmental impacts, and manage risks throughout increasingly complex global supply chains.

The European Union presents the CSDDD as an instrument for raising global standards of responsible business conduct. Critics, however, argue that the directive may significantly increase administrative burdens for multinational companies, raise compliance costs, and create legal uncertainty during its implementation. The long-term effectiveness of the directive will therefore depend not only on its legal framework but also on how consistently it is applied across the European Union and how businesses adapt to its far-reaching requirements.

4. How Are European Companies Being Affected?

The New Rules Are Reshaping Factory Floors and Boardrooms Alike

The European Union’s Forced Labour Regulation (FLR) and Corporate Sustainability Due Diligence Directive (CSDDD) are far more than legislative texts. Together, they are widely viewed as the beginning of a structural transformation that is reshaping how thousands of European companies manage supply chains, design procurement strategies, and organise global production.

For decades, cost efficiency, production capacity, and delivery speed were among the primary considerations driving corporate sourcing decisions. Increasingly, however, those commercial priorities are being balanced against a broader set of factors, including human rights risks, environmental impacts, supply chain transparency, and regulatory compliance.

The implications extend well beyond companies sourcing products from China. Any multinational enterprise operating within the European market—or exporting goods into it—may ultimately be affected by the EU’s evolving regulatory framework.

A New Era in Supply Chain Management

For much of the past three decades, global manufacturing has been organised around a simple principle: maximise efficiency while minimising costs.

Rather than manufacturing products themselves, many multinational brands outsourced production to extensive networks of suppliers spread across multiple countries. While this model generated significant economic efficiencies, it also made it more difficult to identify labour rights abuses and environmental risks occurring deeper within supply chains.

Under the EU’s new regulatory approach, companies are increasingly expected to look beyond their direct contractual relationships. They are encouraged to develop greater visibility across the entire value chain—from mines extracting raw materials and spinning mills producing yarn to component manufacturers, processing facilities, and final assembly plants.

For businesses operating in sectors such as automotive manufacturing, textiles, electronics, chemicals, and energy, this represents a substantial operational shift requiring new governance structures and compliance systems.

Volkswagen: Managing One of the World’s Most Complex Supply Networks

German automotive manufacturer Volkswagen operates one of the world’s largest and most sophisticated supplier networks.

A single vehicle may incorporate steel, aluminium, semiconductors, wiring systems, batteries, textiles, and hundreds of additional components sourced from suppliers located across multiple continents.

The company has stated that it has strengthened supply chain transparency through supplier codes of conduct, risk-based due diligence programmes, and enhanced compliance mechanisms. Particular attention has been given to improving traceability for battery raw materials and critical minerals, reflecting broader industry concerns surrounding electric vehicle production.

BMW and Mercedes-Benz: Traceability as a Strategic Priority

Germany’s other major automotive manufacturers—BMW and Mercedes-Benz—have similarly expanded programmes aimed at improving supply chain traceability.

The transition towards electric mobility has placed increased scrutiny on the sourcing of strategic raw materials, including:

• Lithium;
• Cobalt;
• Nickel;
• Graphite; and
• Rare earth elements.

In their publicly available sustainability reports, both companies describe initiatives designed to strengthen supplier human rights standards, expand independent audits, and enhance risk assessment procedures throughout their supply chains.

BASF: Risk Management in the Chemical Industry

As one of the world’s largest chemical producers, BASF relies on an extensive global network of suppliers providing thousands of different raw materials.

Given the geographic diversity of its sourcing activities, the company reports that it has implemented sustainable procurement programmes and supplier assessment systems aimed at identifying and managing environmental and human rights risks.

BASF’s published sustainability framework places particular emphasis on:

• Supplier evaluations;
• Risk classification systems;
• Independent audits; and
• Compliance with internationally recognised standards.

The Apparel Industry: Adidas, H&M and Zara

Among the sectors expected to experience some of the most significant impact from the EU’s new regulations is the textile and apparel industry.

Global garment production typically involves multiple stages, including:

• Cotton cultivation;
• Yarn spinning;
• Fabric manufacturing;
• Dyeing and finishing;
• Garment assembly; and
• International logistics.

Companies such as Adidas, H&M, and Inditex (the parent company of Zara) have for years published supplier lists and implemented social compliance programmes.

More recently, these companies have reported measures including:

• Expanding independent social audits;
• Providing supplier training programmes;
• Conducting enhanced assessments in higher-risk regions; and
• Investing in digital traceability technologies.

Industry representatives nevertheless acknowledge that achieving complete visibility across supply chains involving thousands of independent manufacturers remains a significant operational challenge.

IKEA: Oversight from Timber to Textiles

Furniture retailer IKEA manages a broad international supply network spanning furniture, textiles, household products, and home accessories.

The company has long operated its own supplier code of conduct and states that it conducts monitoring programmes covering sustainable forestry, labour conditions, and environmental performance.

The EU’s evolving regulatory framework is expected to reinforce and formalise many of these existing systems by embedding them within legally enforceable compliance obligations.

Siemens and Bosch: New Compliance Expectations in Advanced Manufacturing

Industrial technology groups Siemens and Bosch also operate highly complex global supply chains involving electronic components, semiconductors, industrial metals, cables, and specialised manufacturing inputs sourced from numerous countries.

Both companies have publicly outlined policies addressing sustainable procurement, human rights due diligence, and enterprise-wide risk management.

The EU’s new legislation increasingly transforms these practices from voluntary corporate commitments into legally relevant compliance responsibilities.

Why Independent Audits Are Becoming More Important

Under the emerging regulatory environment, corporate self-reporting alone may no longer be considered sufficient.

Many multinational companies are therefore expanding their use of:

• Independent third-party auditors;
• International certification organisations;
• Social compliance assessors; and
• Environmental verification bodies.

These reviews typically examine issues including:

• Working conditions;
• Wage practices;
• Occupational health and safety;
• Environmental performance;
• Child labour risks; and
• Forced labour indicators.

Experts caution, however, that significant debate continues regarding audit methodologies, frequency, scope, and reliability. Independent audits remain an important compliance tool, but they are not universally regarded as capable of identifying every potential risk within highly complex global supply chains.

The Search for Alternative Manufacturing Locations

One of the most visible corporate responses to recent geopolitical developments has been the diversification of manufacturing locations.

Following pandemic-related supply disruptions, heightened geopolitical tensions, and expanding regulatory requirements, many companies have sought to reduce excessive dependence on any single production base.

Countries frequently identified in international analyses as alternative manufacturing hubs include:

• Vietnam;
• India;
• Türkiye;
• Mexico;
• Poland;
• Romania;
• Hungary; and
• Czechia.

Most analysts, however, emphasise that this trend should not be interpreted as a wholesale departure from China. Instead, many companies are seeking to distribute production across multiple jurisdictions in order to improve resilience and reduce geopolitical, legal, and logistical risks.

The “China Plus One” Strategy

This broader shift is commonly described as the “China Plus One” strategy.

Rather than abandoning manufacturing operations in China altogether, companies seek to retain a significant presence while relocating selected production activities to additional countries.

The strategy has become increasingly visible across sectors such as electronics, textiles, automotive components, and consumer goods.

Despite these adjustments, China continues to occupy a central position in global manufacturing due to its advanced industrial infrastructure, highly developed supplier ecosystem, skilled workforce, and unparalleled production capacity.

For many multinational companies, analysts argue, no single alternative manufacturing location is currently capable of replicating the full scale and integration of China’s industrial base in the near term.

A New Strategic Balance for Global Business

The European Union’s latest regulatory initiatives are prompting companies to do more than simply comply with new legal requirements. They are encouraging businesses to reassess their global production strategies, supplier relationships, and long-term investment decisions.

Competitive advantage is increasingly measured not only by production costs and manufacturing efficiency, but also by supply chain transparency, effective management of human rights risks, environmental performance, and regulatory resilience.

This transformation, however, comes with substantial operational and financial challenges. Monitoring thousands of suppliers across multiple jurisdictions, expanding independent verification systems, strengthening due diligence procedures, and developing alternative production hubs all require significant long-term investment. For many companies, adapting to this new regulatory landscape will become not merely a compliance exercise, but a fundamental component of corporate strategy in an era where sustainability, resilience, and responsible business conduct are playing an increasingly prominent role in international trade.

5. China’s Official Position

How Beijing Responds to the Allegations

As international scrutiny over labour conditions, human rights practices and global supply chains in the Xinjiang Uyghur Autonomous Region (XUAR) continues, the Chinese government has consistently rejected allegations of forced labour and systemic human rights abuses. Beijing argues that claims made by Western governments, international non-governmental organisations and several research institutions are politically motivated and unsupported by factual evidence.

According to China’s official position, policies implemented in Xinjiang are designed to combat terrorism and extremism, alleviate poverty, expand employment opportunities and promote long-term economic development. Chinese authorities maintain that employment programmes and vocational training initiatives in the region fall within the sovereign right of the state to pursue security, social stability and economic development in accordance with domestic law.

The positions presented in this section are drawn from official statements issued by the Ministry of Foreign Affairs of the People’s Republic of China, the State Council Information Office (SCIO), the government of the Xinjiang Uyghur Autonomous Region and other official Chinese institutions.

Official Statements from China’s Ministry of Foreign Affairs

China’s Ministry of Foreign Affairs has repeatedly described allegations of forced labour in Xinjiang as “groundless”, “fabricated” and part of an anti-China disinformation campaign.

During regular press briefings, ministry spokespersons have consistently argued that:

• there is no forced labour in Xinjiang;
• all ethnic groups enjoy constitutionally protected employment rights;
• labour transfer and job placement programmes are based on voluntary participation;
• some Western countries are using human rights as a political instrument to contain China; and
• external actors are interfering in China’s internal affairs.

The ministry also argues that import restrictions and trade sanctions imposed by several countries violate international trade rules and undermine the principles of the World Trade Organization (WTO).

The Xinjiang White Papers

In recent years, the State Council Information Office has published a series of White Papers outlining China’s policies in Xinjiang.

These documents address topics including:

• the region’s historical development;
• ethnic policies;
• economic development strategies;
• security measures; and
• education policies.

The White Papers consistently maintain that:

• all ethnic groups enjoy equal legal rights;
• freedom of religious belief is protected by the Constitution;
• employment programmes operate on a voluntary basis;
• economic development is essential for long-term social stability; and
• poverty alleviation remains a central policy objective.

Chinese authorities state that these publications are intended to provide the international community with an accurate understanding of developments in Xinjiang.

The State Council’s Perspective

Official statements issued by agencies under China’s State Council describe long-term social stability as the primary objective of Xinjiang policy.

Government communications emphasise:

• accelerating economic development;
• improving educational attainment;
• expanding employment opportunities;
• reducing poverty; and
• promoting shared prosperity among all ethnic groups.

According to Beijing, these policies are implemented in accordance with China’s Constitution and relevant domestic legislation.

Vocational Education and Training Centres

Facilities that have attracted significant international attention have long been described by Chinese authorities as Vocational Education and Training Centres (VETCs).

According to official Chinese statements, these institutions were established to:

• provide vocational skills training;
• teach Standard Mandarin;
• offer legal education;
• improve employability; and
• reduce the influence of religious extremism.

Chinese officials reject descriptions of the facilities as prisons or detention camps, instead portraying them as educational institutions aimed at rehabilitation and skills development.

Authorities also state that these programmes have concluded and that participants have graduated and returned to normal employment.

Counter-Terrorism and Counter-Extremism

Beijing consistently frames its Xinjiang policies within the broader context of national security.

According to the Chinese government, security measures were strengthened following a series of violent incidents in the region during the 1990s and 2000s.

Official policy identifies what Beijing refers to as the “Three Evil Forces”—terrorism, separatism and religious extremism—as the principal threats to national security.

Vocational training, employment initiatives and security programmes are presented as preventive measures designed to reduce radicalisation and maintain long-term stability.

Poverty Alleviation Policies

Poverty reduction is one of the central themes in China’s official narrative.

According to Beijing, employment programmes in Xinjiang have:

• increased rural incomes;
• encouraged industrial investment;
• improved infrastructure; and
• lifted millions of people out of poverty.

Chinese authorities argue that employment initiatives are intended to generate stable incomes while supporting regional economic development.

Employment Policies

China characterises labour mobility in Xinjiang as a voluntary employment policy.

Official statements describe programmes including:

• job placement initiatives;
• vocational training;
• factory recruitment;
• technical education; and
• industrial development.

According to Beijing, individuals retain legal freedom in employment decisions, and all labour relationships operate under Chinese labour law.

The Development Model

Chinese authorities frequently cite Xinjiang’s economic performance as evidence supporting the effectiveness of government policies.

Official statistics highlight:

• expanded transportation infrastructure;
• increased industrial investment;
• growing export volumes;
• new industrial parks; and
• rising per capita income.

According to Beijing, economic growth has improved living standards while strengthening long-term social stability.

Narrative of Ethnic Equality

Chinese officials regularly reference the Constitution and the Regional Ethnic Autonomy Law to argue that all ethnic groups enjoy equal legal rights.

Government statements maintain that Uyghurs, Kazakhs, Kyrgyz, Hui communities, Han Chinese and other ethnic groups have equal access to education, healthcare, employment and public services.

Official policy presents ethnic unity and shared development as fundamental pillars of national cohesion.

China’s Position on Cotton Production

Xinjiang accounts for the majority of China’s cotton production.

Chinese authorities reject allegations that cotton production relies on forced labour.

Official statements argue that:

• cotton harvesting has become highly mechanised;
• modern agricultural technologies are widely used; and
• production follows normal market principles.

Beijing further contends that sanctions targeting Xinjiang cotton unfairly harm local farmers and producers.

Solar Panels and Polysilicon Production

China is among the world’s largest producers of solar panels and polysilicon.

The government also rejects allegations of forced labour within these industries.

Official statements emphasise that:

• production is highly technology-intensive;
• manufacturing processes are extensively automated;
• facilities operate according to international industrial standards; and
• China remains a global leader in renewable energy manufacturing.

Tomato Production and Agricultural Exports

Xinjiang is also one of China’s major tomato-producing regions.

According to Chinese authorities, tomato production relies on modern agricultural techniques and lawful employment practices.

Officials argue that the region maintains strong agricultural productivity and remains internationally competitive.

Criticism of Western Reports

Chinese authorities have repeatedly challenged reports frequently cited by Western governments and advocacy organisations.

Official criticisms include assertions that:

• some reports lack on-the-ground field research;
• open-source intelligence has been misinterpreted;
• satellite imagery cannot by itself establish definitive conclusions;
• witness testimony has not been independently verified; and
• certain think tanks operate with political bias.

Beijing further argues that parliamentary resolutions and trade restrictions adopted by several countries are inconsistent with the principles of international law and World Trade Organization rules.

Beijing’s Official Framework

China’s official narrative presents its policies in Xinjiang as part of a broader strategy focused on national security, counter-terrorism, poverty alleviation, economic development and ethnic unity. Beijing continues to reject allegations of forced labour and systematic human rights abuses while characterising trade restrictions and sanctions imposed by Western governments as politically motivated measures that unfairly target China’s economic development.

This position stands in contrast to assessments published by numerous governments, international organisations and human rights groups, illustrating the deep divisions that continue to shape international debate over Xinjiang, supply chain governance and the relationship between human rights and global trade.

7. International Legal Debates

Seeking a New Legal Balance Between Human Rights, Trade and State Sovereignty

The debate surrounding global supply chains extends well beyond economics and geopolitics. In recent years, new legislation adopted by the European Union, the United States and several other jurisdictions has created a new area of legal debate at the intersection of international trade law and international human rights law.

On one side of the debate is the argument that governments have the sovereign right—and, in some cases, the responsibility—to ensure that products entering their markets are manufactured in accordance with internationally recognised human rights standards. On the other, critics argue that such measures may conflict with established principles of international trade, interfere with the sovereign authority of other states and function as unilateral economic restrictions under the guise of human rights protection.

As a result, discussions surrounding allegations of forced labour have evolved far beyond any single country or industry. They now raise broader legal questions concerning the World Trade Organization (WTO), international human rights law and the extent of governments’ regulatory authority in global commerce.

World Trade Organization (WTO) Rules

Established in 1995, the World Trade Organization (WTO) is the principal international institution governing the rules of global trade. Its primary objective is to ensure that international commerce is conducted under predictable, transparent and non-discriminatory rules.

The WTO framework is built upon several core principles, including:

• non-discrimination;
• the Most-Favoured Nation (MFN) principle;
• National Treatment;
• the limitation of unnecessary trade barriers; and
• transparency and legal predictability.

Within this framework, government decisions to restrict or prohibit imports of particular products may be subject to legal scrutiny under WTO rules.

GATT and Trade Restrictions

One of the cornerstone agreements of the WTO system is the General Agreement on Tariffs and Trade (GATT 1994), which establishes the principal legal framework governing international trade in goods.

As a general rule, GATT seeks to prevent arbitrary import bans and discriminatory trade practices. At the same time, it recognises that governments may, under specific circumstances, adopt trade-restrictive measures in pursuit of legitimate public policy objectives.

In particular, Article XX of GATT (General Exceptions) provides legal grounds under which certain trade restrictions may be justified.

Whether these exceptions apply, however, depends on strict legal conditions and must be assessed on a case-by-case basis.

Trade Restrictions Based on Human Rights Concerns

One of the most actively debated issues in international law is the extent to which trade restrictions justified on human rights grounds are legally permissible.

The European Union and other jurisdictions with comparable legislation argue that restricting products believed to have been produced through forced labour is consistent with their international human rights commitments.

Conversely, some governments contend that such measures risk creating new barriers to international trade and may encourage the politicisation of global commerce.

International law provides no single or universally accepted legal approach to this issue. Each regulatory framework must be assessed individually, taking into account its legal basis, implementation mechanisms and compatibility with existing international obligations.

The Principle of State Sovereignty

State sovereignty remains one of the foundational principles of international law.

Under this principle, every state possesses the sovereign authority to:

• establish its own legal system;
• determine its economic policies;
• regulate labour and employment relations; and
• organise its public administration.

China, among other countries, argues that trade restrictions introduced on the basis of alleged forced labour constitute interference in matters falling within its domestic jurisdiction.

The European Union, by contrast, maintains that determining which products may enter its internal market is itself an exercise of sovereign regulatory authority.

Consequently, the debate increasingly reflects a legal tension between competing interpretations of state sovereignty.

The Debate Over Unilateral Sanctions

The legal status of unilateral economic measures has long been a contentious issue in international law.

There is no universal consensus regarding economic restrictions imposed without authorisation from the United Nations Security Council.

Some legal scholars argue that governments retain broad discretion to regulate imports as part of their sovereign trade policy. Others caution that unilateral measures may contribute to the fragmentation of the international trading system and undermine multilateral trade rules.

The European Union, however, argues that its forced labour legislation should not be regarded as a traditional sanctions regime but rather as a product-based market regulation mechanism designed to uphold fundamental rights within its internal market.

International Labour Organization (ILO) Conventions

International Labour Organization (ILO) conventions form one of the principal legal foundations underpinning international discussions on forced labour.

Particularly significant are:

• ILO Convention No. 29 on Forced Labour (1930); and
• ILO Convention No. 105 on the Abolition of Forced Labour (1957).

These conventions establish internationally recognised definitions of forced or compulsory labour while also identifying specific legal exceptions.

The European Union has stated that its recent trade legislation largely adopts the ILO’s internationally accepted definitions when assessing allegations of forced labour.

UN Guiding Principles on Business and Human Rights

Adopted by the United Nations Human Rights Council in 2011, the UN Guiding Principles on Business and Human Rights (UNGPs) have become one of the most influential international reference frameworks defining corporate responsibility for human rights.

The Guiding Principles are built upon three foundational pillars:

• the state’s duty to protect human rights;
• the corporate responsibility to respect human rights; and
• access to effective remedies for victims of human rights abuses.

Although the UNGPs are not legally binding under international law, they have significantly influenced national legislation, corporate governance standards and international best practices worldwide.

They also served as one of the principal reference frameworks in the development of European Union legislation such as the Corporate Sustainability Due Diligence Directive (CSDDD).

Beyond Trade: A Contest for Economic Power

Global Supply Chains at the Crossroads of Human Rights, Corporate Responsibility and Geopolitics

The transformation of the global economy over the past three decades has fundamentally reshaped the way goods are produced. Manufacturing has expanded beyond national borders, giving rise to highly integrated and multilayered supply chains that connect producers, suppliers and consumers across continents. Today, a smartphone processor may be designed in Taiwan, its battery manufactured in China, its rare earth minerals sourced from Africa and its final assembly completed elsewhere in Asia. Similar cross-border production networks underpin industries ranging from automotive manufacturing and textiles to solar panels and electric vehicle batteries.

In the first three instalments of this series, we examined several dimensions of these increasingly complex supply chains. The opening article explored the strategic importance of China’s production capacity—particularly that of the Xinjiang Uyghur Autonomous Region—in sectors such as cotton, polysilicon, tomatoes and critical minerals. The second examined allegations of forced labour documented in reports by international human rights organisations, academic researchers and government agencies, assessing both the evidence cited and the broader international response. The third focused on the growing compliance pressures facing multinational corporations, including heightened expectations regarding supply-chain transparency and the expanding influence of environmental, social and governance (ESG) standards.

Taken together, these developments demonstrate that the debate extends well beyond labour conditions in any single region. It is no longer solely a question of China’s domestic policies or the production model of a particular province. Rather, it has evolved into a broader discussion encompassing the future architecture of global trade, national economic security strategies, corporate legal obligations and the balance of international economic competition.

The COVID-19 pandemic exposed the fragility of global supply chains, while Russia’s invasion of Ukraine highlighted vulnerabilities in energy and commodity markets. At the same time, intensifying geopolitical rivalry has elevated economic security to a central policy priority across many advanced economies. As a result, governments increasingly assess not only the cost and availability of imported goods, but also where and under what legal and labour conditions those goods are produced.

The United States was among the first major economies to translate these concerns into trade policy. Citing allegations of forced labour linked to products originating from Xinjiang, Washington introduced stricter import controls and enacted new legislation governing supply-chain compliance. The European Union subsequently followed with its own legislative initiatives, requiring companies to conduct more comprehensive due diligence throughout their supply chains while creating a legal framework intended to prevent products associated with forced labour from entering the European market.

Consequently, the issue has moved beyond a bilateral dispute between Washington and Beijing. With the European Union’s involvement, the debate now sits at the intersection of international trade law, corporate governance, human rights standards and global economic competition.

Beijing, however, firmly rejects both the allegations and the trade measures adopted by Western governments. Chinese authorities maintain that employment programmes in Xinjiang are designed to alleviate poverty and expand vocational training opportunities. They characterise Western restrictions as politically motivated measures rooted in economic protectionism and efforts to contain China’s rise. The discussion has therefore expanded beyond competing factual narratives to encompass broader questions concerning the interpretation of international law, the scope of states’ authority to impose trade restrictions and the principles that will shape the future international economic order.

This chapter examines the European Union’s new legislative framework aimed at addressing products allegedly linked to forced labour, the legal obligations imposed on businesses, and the potential implications for global supply chains. It also outlines the Chinese government’s official position and analyses the principal legal and policy debates arising between these competing approaches.

1. Why the European Union Adopted a New Trade Policy

From Economic Integration to Values-Based Trade

For decades, the European Union largely based its trade policy on economic efficiency, market liberalisation and international competitiveness. As globalisation accelerated during the 1990s, European manufacturers increasingly shifted production to lower-cost regions, particularly across Asia. China’s accession to the World Trade Organization (WTO) in 2001 marked a watershed moment in this process, establishing the country as one of the world’s principal manufacturing hubs thanks to its competitive costs and expanding industrial capacity.

Over the past two decades, however, policymakers across Europe have increasingly concluded that trade cannot be assessed solely through economic indicators. Greater attention has been devoted to the conditions under which goods are produced, the protection of workers’ rights, environmental standards and the broader social impacts of corporate activity.

Importantly, this policy shift has not been driven solely by developments concerning China. Industrial disasters in Bangladesh’s garment sector, allegations of child labour in African mining operations, concerns over deforestation in South America and reports of labour rights abuses in Southeast Asia have all reinforced calls for more robust oversight of global supply chains. Consequently, the European Union presents its new regulatory approach not as a country-specific measure, but as part of a broader effort to establish more responsible global production standards.

Human Rights at the Centre of Global Supply Chains

In recent years, global supply chains have come under growing scrutiny not only for their economic efficiency but also for their human rights implications. The complex production process behind modern consumer goods—which frequently spans dozens of countries—makes it increasingly difficult to identify potential labour abuses occurring at different stages of production.

International organisations including the International Labour Organization (ILO), the United Nations and the Organisation for Economic Co-operation and Development (OECD), alongside numerous independent research institutions, have consistently argued that companies should identify and mitigate human rights risks throughout their entire supply chains rather than limiting oversight to their own facilities.

The principal issues attracting international attention include allegations of forced labour, child labour, modern slavery, restrictions on trade union rights, workplace discrimination, occupational health and safety deficiencies, and environmental impacts.

The European Union increasingly views these issues not only as ethical concerns but also as matters of fair competition. European policymakers argue that companies should not gain commercial advantages by operating under labour standards that fall below internationally recognised norms.

Growing Political Momentum in the European Parliament

The European Parliament has played a central role in advancing the EU’s legislative agenda. Members from multiple political groups have called for stronger investigations into alleged human rights abuses across global supply chains and more rigorous oversight of goods entering the European market.

Parliamentary debates have addressed labour rights concerns extending well beyond China, highlighting similar issues in multiple regions worldwide. A series of parliamentary resolutions has urged companies to enhance supply-chain transparency, conduct comprehensive risk assessments and establish effective mechanisms for preventing human rights abuses.

Responding to these calls, the European Commission began developing legislation designed to hold companies accountable not only for their financial performance but also for the human rights and environmental impacts of their global operations.

The Influence of Civil Society and Academic Research

Reports produced by civil society organisations, universities and independent think tanks have significantly influenced the European policy debate.

Research published by Amnesty International, Human Rights Watch, the Helena Kennedy Centre for International Justice at Sheffield Hallam University, the OECD and numerous research institutes has drawn attention to human rights risks within global supply chains. While several studies have focused on allegations concerning production in Xinjiang, others have examined comparable risks in different regions, framing the issue as a global challenge rather than one confined to a single country.

These reports have been referenced in impact assessments prepared by both the European Commission and the European Parliament. At the same time, the methodologies and conclusions of certain studies have been challenged by various governments, with Chinese authorities arguing that some reports are politically motivated or methodologically flawed.

Changing Consumer Expectations

Consumer behaviour across Europe has also evolved significantly. Many consumers—particularly younger generations—now increasingly consider not only product quality and price but also production methods, environmental performance and corporate social responsibility when making purchasing decisions.

This trend has strengthened the concepts of ethical consumption and responsible investment. Major institutional investors increasingly incorporate ESG criteria into investment strategies, while numerous European companies have introduced voluntary auditing and transparency initiatives aimed at improving oversight of their supply chains.

Accordingly, the EU’s new legislative agenda reflects not only government policy but also broader shifts in consumer expectations and private-sector practices.

Values-Based Trade

One of the defining concepts underpinning the European Union’s current trade strategy is “Values-Based Trade.”

Under this approach, international commerce should advance not only economic prosperity but also respect for human rights, the rule of law, sustainable development, labour standards and environmental protection.

Consequently, many of the EU’s recent trade agreements include dedicated provisions covering human rights, labour standards, environmental protection, sustainable development and corporate transparency.

The European Commission maintains that this approach is not intended as a sanctions regime targeting individual countries, but rather as an effort to make the global trading system more sustainable, predictable and resilient.

The European Green Deal and Human Rights

The EU’s evolving trade policy also forms part of the broader European Green Deal.

While the Green Deal seeks to reduce carbon emissions, promote circular economic models and strengthen environmental sustainability, European policymakers argue that environmental objectives should be pursued alongside robust social protections.

As a result, environmental sustainability and human rights have become complementary pillars of the EU’s evolving trade framework. Products are increasingly evaluated not only according to their carbon footprint but also according to whether their production complies with internationally recognised labour standards.

A New Paradigm in Global Trade

Collectively, these developments represent a significant transformation in European trade policy. Traditional priorities centred on cost efficiency and competitiveness are increasingly being complemented by considerations of human rights, environmental sustainability, corporate accountability and economic security.

The new approach, however, remains contested internationally. While the European Union presents its policies as a natural extension of universal human rights principles, China and several other governments argue that such measures politicise international trade, promote protectionism and risk distorting global competition.

The Use of Satellite Imagery

Advances in satellite technology have significantly expanded the range of data sources available for human rights research in recent years.

Independent research organisations and academic institutions increasingly analyse satellite imagery to examine:

• the construction of industrial and institutional facilities;
• changes in industrial zones;
• security infrastructure;
• transportation networks; and
• the scale and physical expansion of production sites.

Such analysis has become an important research tool, particularly in areas where direct field access is considered limited.

The Chinese government, however, argues that conclusions drawn solely from satellite imagery may not accurately reflect conditions on the ground. According to Beijing, images alone cannot provide definitive evidence regarding production processes, labour practices or workplace conditions.

As a result, satellite imagery has become both an important investigative tool and a focal point of ongoing methodological debate.

The Role of Academic Research

A substantial body of academic research on Xinjiang and global supply chains has emerged in recent years.

Studies produced by universities, research institutes and independent scholars typically combine multiple sources of information, including:

• publicly available government documents;
• trade and customs data;
• satellite imagery;
• corporate records;
• field research;
• and witness testimony.

These studies have become important reference materials for policymakers. At the same time, their methodologies, source selection and conclusions continue to be debated within academic and policy circles.

Chinese authorities contend that some academic studies rely on insufficient field verification and are based on preconceived assumptions. Researchers, in turn, maintain that their methodologies conform to internationally recognised academic standards and employ established practices of evidence-based analysis.

Corporate Audits and Internal Compliance Reviews

Another important source of information comes from supply-chain audits commissioned by multinational corporations themselves.

Many companies conduct:

• social compliance audits;
• occupational health and safety inspections;
• human rights risk assessments; and
• supplier evaluations

to strengthen oversight of their production networks.

The effectiveness of these audits, however, remains a subject of debate.

Some experts argue that short-term factory inspections may not fully capture day-to-day working conditions. Companies, by contrast, maintain that regular audits, continuous monitoring and risk-based due diligence have contributed to meaningful improvements throughout their supply chains.

Reports by Civil Society Organisations

Reports published by organisations including Amnesty International, Human Rights Watch, the Helena Kennedy Centre for International Justice at Sheffield Hallam University, C4ADS and other research institutions are frequently cited in discussions surrounding global supply chains.

These reports draw upon a range of methodologies, including:

• open-source intelligence (OSINT);
• satellite imagery;
• public procurement records;
• corporate filings;
• international trade data;
• witness testimony;
• field investigations; and
• academic research.

Many legislative proposals and policy papers produced in Western countries cite such reports among their supporting sources.

Chinese authorities, however, argue that a significant proportion of these publications reflect political bias, contend that certain organisations adopt anti-China positions, and question the objectivity of some of their findings.

China’s Approach to Data Disclosure

Beijing maintains that it regularly publishes official statistics, economic indicators and development data relating to Xinjiang.

At the same time, international researchers have argued that access to more detailed datasets capable of facilitating independent verification remains limited in certain areas.

Chinese authorities state that restrictions on the disclosure of specific information may be justified on grounds including:

• the protection of personal data;
• commercial confidentiality;
• national security; and
• public order.

The scope and accessibility of available data therefore remain central issues in the broader debate concerning the reliability and verifiability of information used in international investigations.

What Constitutes Sufficient Evidence?

Underlying all of these discussions is a fundamental question frequently raised in both international law and policymaking:

What level of evidence is sufficient to justify changes in trade policy or the imposition of restrictive measures?

There is no universally accepted answer.

Some legal scholars argue that multiple independent sources producing mutually reinforcing findings may provide an adequate evidentiary basis for governments to adopt risk-based policy measures.

Others contend that decisions carrying significant legal and economic consequences require a substantially higher evidentiary threshold, including direct, independently verifiable and on-the-ground evidence wherever possible.

Moreover, the standards applied by policymakers and courts are not necessarily identical. The evidentiary threshold considered sufficient for a government to implement precautionary trade measures may differ from the standard required by a court when determining legal liability or awarding remedies.

The Global Significance of the Evidence Debate

The debate surrounding Xinjiang now extends far beyond the accuracy of individual reports or datasets. It increasingly raises broader questions about which forms of evidence should underpin global supply-chain governance, how far governments may rely on risk-based regulation, and what evidentiary standards should apply in international trade.

Consequently, the central issue is no longer confined to determining what happened, but also how it can be demonstrated and verified.

As governments, businesses and international institutions continue to develop new regulatory frameworks, questions concerning evidence, verification and due diligence are likely to remain among the most consequential issues shaping the future of international trade, corporate compliance and global human rights governance.

9. Is Global Trade Entering a New Era?

Human Rights, Geopolitical Competition, and the Future of Global Supply Chains

For more than three decades, the global trading system has largely been built upon the principles of free markets, cost efficiency, and production optimization. Companies primarily based their sourcing decisions on manufacturing costs, logistics infrastructure, access to raw materials, and international competitiveness. Recent developments, however, suggest that this model is undergoing a significant transformation.

The disruptions caused by the COVID-19 pandemic, the impact of the Russia–Ukraine War on global energy and commodity markets, intensifying strategic competition between the United States and China, and the growing adoption of human rights-based trade regulations have collectively signaled the emergence of a new phase in the international economic order.

Today, policymakers and businesses are increasingly asking not only “Where was this product made?” but also “Under what conditions was it produced?”, “Which supply chain did it pass through?”, and “Does it comply with applicable legal and human rights standards?”

This shift extends well beyond China or the European Union. It affects virtually every country and multinational company integrated into global manufacturing networks.

Are Human Rights Becoming a Core Criterion in International Trade?

As discussed throughout this series, the European Union has increasingly incorporated human rights, environmental sustainability, and corporate responsibility into its trade policy framework.

The Forced Labour Regulation (FLR) and the Corporate Sustainability Due Diligence Directive (CSDDD) represent two of the clearest examples of this evolving approach.

These measures require companies to assume responsibility not only for their final products but also for potential human rights and environmental risks throughout their entire value chains—from raw material extraction to final manufacturing.

As a result, human rights considerations are becoming an increasingly influential element of international trade policy. At the same time, legal experts, governments, and businesses continue to debate how these principles should be implemented and where their legal boundaries should be drawn.

New Costs and New Responsibilities for Businesses

The new regulatory framework introduces not only legal obligations but also substantial operational and financial challenges for companies.

For large multinational corporations, compliance increasingly requires:

• comprehensive mapping of supply chains;
• expanded independent auditing programs;
• systematic human rights risk assessments;
• environmental impact evaluations;
• digital traceability systems; and
• enhanced reporting and documentation procedures.

Although these requirements may significantly increase compliance costs in the short term, many analysts argue that greater transparency and stronger risk management could ultimately become important competitive advantages.

Manufacturing May No Longer Be Concentrated in a Single Country

One of the most significant trends in recent economic discussions has been the geographical diversification of manufacturing.

Supply chain disruptions during the pandemic and rising geopolitical uncertainties prompted many companies to reconsider the risks associated with excessive dependence on a single production hub.

Countries increasingly discussed as alternative manufacturing destinations include:

• Vietnam
• India
• Türkiye
• Mexico
• Poland
• Romania
• Hungary

Nevertheless, many experts emphasize that diversification should not automatically be interpreted as a complete withdrawal from China.

China continues to possess one of the world’s most advanced manufacturing ecosystems, supported by extensive supplier networks, sophisticated industrial infrastructure, highly developed logistics capabilities, and enormous production capacity. For many industries, these advantages remain difficult to replicate elsewhere.

Europe’s Pursuit of Strategic Autonomy

One concept that has become increasingly prominent within European policymaking is Strategic Autonomy.

Under this approach, the European Union seeks to reduce excessive dependence on single-country suppliers in strategic sectors, including:

• critical raw materials;
• semiconductors;
• battery technologies;
• clean energy;
• healthcare products; and
• digital technologies.

This strategy is driven not only by human rights considerations but also by broader concerns regarding economic security, resilience, and supply chain stability.

European institutions consistently emphasize that Strategic Autonomy does not seek to dismantle international trade but rather to build more diversified and resilient global supply chains.

China’s Alternative Perspective

The Chinese government approaches these developments from a fundamentally different perspective.

Official Chinese statements generally emphasize that:

• the global economy is built upon mutual interdependence;
• open international trade should be preserved;
• economic fragmentation weakens global growth;
• trade should not become politicized; and
• restructuring supply chains along ideological or geopolitical lines could impose significant costs on all participants.

At the same time, China continues investing heavily in advanced manufacturing, renewable energy, electric vehicles, artificial intelligence, and high-tech industries as part of its long-term strategy to strengthen its position within global supply chains.

Possible Future Scenarios

Current developments suggest several possible directions for the evolution of global supply chains.

The first scenario envisions human rights, environmental sustainability, and corporate responsibility becoming permanent components of international trade. Under this model, corporate compliance requirements would likely become increasingly comprehensive, while expectations for supply chain transparency would continue to grow.

A second scenario involves greater geographical diversification of production through models commonly referred to as “China+1,” “Friend-shoring,” and “Near-shoring.” Such strategies could result in manufacturing networks becoming more geographically dispersed across multiple countries.

A third possibility is that intensifying geopolitical competition leads to a more fragmented international trading system, with supply chains, investment flows, and technology transfers increasingly organized around competing economic blocs.

A fourth scenario envisions stronger international cooperation, with governments and multilateral institutions developing more harmonized legal standards that better integrate trade, environmental protection, and human rights. Achieving such consensus, however, would likely require extensive diplomatic negotiations and long-term political cooperation.

At present, it remains impossible to predict with certainty which of these scenarios will ultimately prevail. Future developments will depend on geopolitical dynamics, global economic conditions, and the continuing evolution of international legal frameworks.

Conclusion: A Multi-Dimensional Transformation

Throughout this fourth installment of our series, we have examined the evolving debate surrounding global supply chains from multiple perspectives.

We first explored the European Union’s emerging trade policies centered on human rights and corporate responsibility, including the Forced Labour Regulation (FLR) and the Corporate Sustainability Due Diligence Directive (CSDDD). We then examined how these measures are reshaping corporate compliance obligations and transforming supply chain management among European businesses.

Next, we presented the official position of the People’s Republic of China regarding Xinjiang-related policies, together with Beijing’s broader assessment of current developments in global trade. China’s arguments concerning economic protectionism, strategic competition, and the politicization of supply chains represent an important part of the broader international debate.

Finally, we reviewed the legal discussions surrounding World Trade Organization (WTO) rules, GATT exceptions, International Labour Organization (ILO) conventions, the UN Guiding Principles on Business and Human Rights, and the ongoing debate over evidentiary standards. These issues demonstrate that the subject extends far beyond politics and encompasses highly complex questions of international law.

One conclusion is increasingly evident: global trade is no longer viewed solely through the lens of economics. Human rights, environmental sustainability, economic security, corporate governance, and geopolitical competition have become integral elements of international trade policy.

At the same time, significant differences remain regarding how these principles should be implemented, what evidentiary standards should apply, how far governments may regulate international commerce, and how global production networks should ultimately evolve.

For that reason, the future of global supply chains cannot be understood solely through the policies of the European Union or the official positions of China. Rather, it represents a complex and evolving transformation situated at the intersection of law, economics, human rights, diplomacy, and geopolitical competition. The ultimate direction of that transformation will depend on future policy decisions by governments, corporate adaptation strategies, and the continued development of international cooperation mechanisms.

East Turkestan Bulletin News Agency / NEWS CENTER