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What drives West's policy toward China: human rights or industry?

EU and US align against China's state capitalism

TOKYO -- The decision last month by German Chancellor Angela Merkel's cabinet to approve the new Supply Chain Act undoubtedly sent a chill down the spines of German companies.

The law puts the onus on businesses to ensure their suppliers, even those outside the country, do not use forced labor, with harsh penalties for those that fail to properly conduct and disclose their due diligence.

The measures are aimed at China, where local suppliers are accused of exploiting the forced labor of Uyghur Muslims in Xinjiang. And German companies are heavily reliant on Chinese suppliers.

Volkswagen operates an auto plant in Xinjiang while Adidas and Puma have used vast amounts of Chinese cotton, with about 80% to 90% of it made in Xinjiang.

Similar efforts are taking place across Europe. The European Union is working toward similar due-diligence requirements that would cover all companies in the bloc. The U.K. enacted the Modern Slavery Act in 2015, and fellow Commonwealth country Australia passed its own legislation with the same name a few years later.

"Slavery" is a heavy word. But human rights form a core value cherished by Europe, which has its own dark history of human trafficking and forced labor. And no matter how appealing China's market and supply capabilities may be, companies cannot go against that principle.

Employees work on assembling vehicles at a plant of SAIC Volkswagen in Xinjiang, China.   © Reuters

Japanese companies can ill-afford to brush off the issue as irrelevant. Businesses deemed insufficiently conscious of human rights could risk being shut out of European supply chains. The impact will be significant for sectors that do a lot of business with Europe such as auto parts, machinery and materials.

At the root of these tough measures by Europe is the culture that values human dignity. It is what drove the enactment of the General Data Protection Regulation to safeguard online privacy, as well as the European Green Deal and ethical standards to regulate the development of artificial intelligence.

If European justice is based on human dignity, the U.S. is motivated by national security. Washington has imposed trade restrictions on products under the banner of protecting the nation. That reasoning is also used to justify policies that distort competitive principles, such as discretionary subsidies and state intervention in business operations.

In China's case, the overarching philosophy would be state capitalism. Most of the citizens are willing to tolerate state intervention as long as safety and economic growth is sustained, even at the cost of limited freedoms.

The divides between China and the West will not be bridged through negotiations. The three competing value systems will inevitably clash with each other. From time to time, that confluence will give rise to tensions or cooperation, depending on the interests at stake.

On human rights, the U.S. and Europe have been in lockstep against China. But they have clashed when it comes to regulating big tech companies with access to large troves of data.

Meanwhile, the U.S., Europe and China have all announced ambitious goals to decarbonize their economies and combat climate change.

It is important to focus on what lies behind each of these moves. Lofty rhetoric on justice is often used to disguise a country's industrial interests. The raging debate on human rights gives the U.S., Europe and China all a valid excuse to freeze out foreign companies.

What Japan considers to be justice is less clear. The country has not fully articulated its stance on human rights, the environment or personal data. It is hesitant to impose sanctions over human rights violations in China or Myanmar, and has yet to set a detailed road map for decarbonization.

The game of diplomacy is undergoing a fundamental shift, and Japan seems to be shut out of the game. If so, it has no choice but to follow the U.S., Europe or China on key issues, regardless of whether it believes the policies are right.

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