EU Firms Find Doing Business in PRC More Costly as West Puts Screws on Xinjiang Imports

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Economic ties between China and the European Union took a hit last year after Beijing and Brussels slapped tit-for-tat sanctions on one another over Western allegations about human rights abuses in the western Chinese province of Xinjiang. The spat caused a freeze in talks on a major new investment pact.
European firms are finding it “more complex and expensive” to do business in China as Washington and EU countries undermine economic opportunities by implementing legislation related to Beijing’s alleged mistreatment of the Uyghurs in Xinjiang, Joerg Wuttke, president of the EU’s Chamber of Commerce in China, has indicated.
Speaking at a panel discussion at a forum hosted by the Beijing-based Center for China and Globalization think tank on Monday, Wuttke complained that it was virtually impossible to provide the proof required by regulators that firms operating in Xinjiang were not using forced labor in their operations.
“There are no external auditors willing to work in Xinjiang, so it’s going to be a big challenge,” he said.
Sun Yongfu, former director of China’s Ministry of Commerce responsible for trade with Europe, echoed Wuttke’s concerns, saying the West’s politicized moves have caused “a lot of difficulties” in trade, with no solutions in sight. He expressed hope for “a good compromise…to really solve the problems” at a high-level China-EU economic and trade meeting later this year.
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The rate of growth of European exports to China slowed to a crawl between 2019 and 2021, increasing by 25 billion euros to a total of 223 billion euros. During the same period, imports from China shot up from 363.5 billion to 472.2 billion euros, leaving the EU with a trade deficit of negative 248.9 billion euros, according to European Commission figures.
Brussels hoped to redress the deficit and other problems via the Comprehensive Agreement on Investment (CAI), an ambitious China-EU investment pact first proposed in 2013. Negotiations on the agreement ground to a halt in May 2021 after Beijing slapped retaliatory sanctions on 10 EU politicians, think tanks and diplomatic entities in response to restrictions imposed on China by the EU and its allies over the Xinjiang issue. Behind the scenes, Brussels also grumbled about alleged advantages provided by China to the US in the so-called Phase One Trade Deal signed in 2020.
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European companies’ concerns about increasing difficulties in doing business in China comes at an inopportune time for Brussels, with the EU already reeling from economic losses caused by Washington’s proxy conflict with Russia in Ukraine, which has led to a dramatic spike in energy costs and ballooning inflation for ordinary Europeans, while undermining the bloc’s economic competitiveness.
A US ban on imports from Xinjiang took effect on Tuesday, with the legislation, dubbed the ‘Uyghur Forced Labor Prevention Act’, introduced at the height of President Trump’s trade war with Beijing, and signed into law by President Joe Biden in December 2021. US lawmakers boasted last week that the new law sends “a clear message that we will not longer remain complicit in the Chinese Communist Party’s use of slave labor and egregious crimes against humanity.”
Some EU countries, including regional economic powerhouse Germany, have approved similar measures, with a German law implemented last week requiring companies to make note of any human rights violations and abuses in their Chinese supply chains.
China has consistently rejected claims made by Western officials and media about alleged abuses against the 12 million-strong Uyghur minority in Xinjiang, officially known as the Xinjiang Uyghur Autonomous Region. Last week, Foreign Ministry spokesman Wang Wenbin called “so-called forced labor” allegations in Xinjiang being peddled by the West “an out-and-out preposterous lie.”
Last month, after United Nations human rights official Michelle Bachelet accused Beijing of a host of abuses against the Uyghurs, President Xi Jinping shot back by saying there was “no need for ‘preachers’ to boss around other countries.” Xi accused the West of practicing “double standards” on the Xinjiang matter as “an excuse to interfere in other countries’ internal affairs.”
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China ratified a pair of International Labor Organization conventions on forced labor in April in a bid to assuage Western concerns, but to little apparent effect. The ILO hailed the move, saying it “demonstrates China’s strong support” for the organization’s values “and reflects its commitment to protect any female or male workers from being trapped into forced labor practices, which have no place nor justification in today’s world.”
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