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International relations

China-EU investment deal caught in Xinjiang sanctions crossfire

European Parliament head says Chinese tit-for-tat response will have 'consequences'

Uyghur demonstrators in Istanbul protest China's treatment of Uyghurs in Xinjiang on International Women's Day this month.   © Reuters

BRUSSELS/LONDON/TOKYO -- Rising tensions over alleged Chinese human rights abuses in Xinjiang risk spilling over into global trade, with supply chains and an investment deal between Beijing and the European Union hanging in the balance.

The European Union cited alleged abuses against the Uyghur Muslim minority population in its decision Monday to impose sanctions on China for the first time in three decades, followed the same day by similar steps by the U.S., the U.K. and Canada.

This follows mounting pressure on companies in these markets to end or scale back business with suppliers in Xinjiang.

Beijing responded to Monday's measures with travel bans on people and organizations in the EU, including members of the European Parliament, that "severely harm China's sovereignty and interests."

European Parliament President David Sassoli said the sanctions are "unacceptable and will certainly have consequences," and posted photos with the targeted parliamentarians on Twitter in a show of support.

The acrimony comes as the body deliberates on ratifying the Comprehensive Agreement on Investment reached by Brussels and Beijing late last year.

The deal would make it easier for EU companies to enter the Chinese market, which observers hope will support the recovery of industries battered by the coronavirus pandemic. But the escalating friction over the Uyghur issue has further clouded prospects for its approval.

The European Parliament's second-largest political group, the center-left Progressive Alliance of Socialists and Democrats, said in a statement Monday that the "lifting of sanctions against MEPs is a precondition for us to enter into talks with the Chinese government on the investment deal."

Parliamentarians with a tougher stance toward China are pushing for further sanctions in response to Beijing's clampdown on pro-democracy activism in Hong Kong.

The clash with Beijing over human rights has already started to ripple though international supply chains, as the U.S. and European countries step up oversight to keep out products made with alleged forced labor in Xinjiang.

The region is a major production center for apparel and electronics, and companies including Nike and Adidas have been suspected of sourced products made though forced labor there. The Donald Trump administration in December banned imports of cotton made by the Xinjiang Production and Construction Corps into the U.S. The Communist party secretary of this body was among the officials sanctioned by the Biden administration on Monday.

The U.K. and Canada in January announced new rules to prevent companies from becoming complicit in human rights abuses in Xinjiang.

The measures "will help make sure that no British organizations, government or private sector, deliberately or inadvertently, are profiting from or contributing to human rights violations against the Uyghurs or other minorities in Xinjiang," said U.K. Foreign Secretary Dominic Raab.

London will fine midsize and larger companies that fail to disclose steps they take to prevent "modern slavery" in their supply chains, as well as bar businesses suspected of involvement in forced labor from public procurement. Germany's cabinet approved legislation this month requiring companies to undertake human rights-related due diligence, without naming China directly.

A March 2020 report from the Australian Strategic Policy Institute, a think tank, named more than 80 major companies with factories in their supply chains that employ Uyghurs "under conditions that strongly suggest forced labor." International human rights groups have launched campaigns urging boycotts of businesses on the list.

Some of the companies, including France's Lacoste and Sweden-based Hennes & Mauritz, have said they would end relationships with suppliers accused of employing forced labor. Others, including Nike, have been probing their supply chains for human rights risks.

In Japan, which lacks a strong legal framework for human rights-related sanctions, companies have been moving on their own to address the problem.

Mitsubishi Electric, which was on the Australian institute's list, has stepped up due diligence for its supply chain. Fast Retailing, operator of the Uniqlo casualwear chain, said in a statement that it has no business ties to the Xinjiang factories to which it was linked in the ASPI report.

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