Global brands find it hard to untangle themselves from Xinjiang cotton

Farmers picking cotton in a field in Hami, Xinjiang, on Oct 14, 2018.
Farmers picking cotton in a field in Hami, Xinjiang, on Oct 14, 2018.PHOTO: AFP

NEW YORK/BEIJING (NYTIMES) - Faced with accusations that it was profiting from the forced labour of Uighur people in the Chinese territory of Xinjiang, clothing retailer H&M Group promised last year to stop buying cotton from the region.

But last month, H&M confronted a new outcry, this time from Chinese consumers who seized on the company's renouncement of the cotton as an attack on China. Social media filled with angry demands for a boycott, urged on by the government.

Global brands like H&M risked alienating a country of 1.4 billion people.

The furore underscored how international clothing brands relying on Chinese materials and factories now face the mother of all conundrums - a conflict vastly more complex than their now-familiar reputational crises over exploitative working conditions in poor countries.

If they fail to purge Xinjiang cotton from their supply chains, the apparel companies invite legal enforcement from Washington under a US ban on imports. Labour activists will charge them with complicity in the grotesque repression of the Uighurs.

But forsaking Xinjiang cotton entails its own troubles - the wrath of Chinese consumers who denounce the attention on the Uighurs as a Western plot to sabotage China's development.

The global brands can protect their sales in North America and Europe, or preserve their markets in China. It is increasingly difficult to see how they can do both.

"They are being almost at this point told, 'Choose the US as your market, or choose China as your market'," said Ms Nicole Bivens Collinson, a lobbyist who represents major apparel brands at Sandler, Travis & Rosenberg, a law firm in Washington.

In an age of globalisation, international apparel brands have grown accustomed to criticism that they are profiting from oppressed workers in countries such as Myanmar and Bangladesh, where cheap costs of production reflect alarming safety conditions.

The brands have developed a proven playbook: They announce codes of conduct for their suppliers, and hire auditors to ensure at least the appearance of compliance.

But China presents a gravely elevated risk. Xinjiang is not only the source of 85 per cent of China's cotton, but synonymous with a form of repression that the US government has officially termed genocide. Critics say as many as one million Uighurs have been herded into detention camps, and deployed as forced labour.

The taint of association with Xinjiang is so severe that both the Donald Trump and Joe Biden administrations have sought to prevent Americans from buying clothing produced with the region's cotton.

For the apparel brands, their dilemma is heightened by the fact that the Chinese government has weaponised China's consumer market. In fomenting nationalist outrage, Beijing is seeking to pressure the international brands to pick a side - to ignore reports of forced labour or risk their sales in the world's largest potential consumer market.

Framing this choice is the reality that China remains the world's central hub for making clothing.

In pursuit of alternatives, many international brands are shifting production from Chinese factories to factories in countries such as Vietnam, Cambodia and Bangladesh. But moving does not eliminate their exposure to Xinjiang cotton.

China exports unprocessed cotton to 14 countries, including Vietnam, Thailand, India, Pakistan and Bangladesh, and yarn to 190 countries, according to the International Cotton Advisory Committee, an international trade association in Washington.

China is the source of nearly half of all cotton fabric exported around the world. Most of that material includes cotton harvested in Xinjiang.

"Supply chains are long and opaque, and the journey from field to shelf involves cotton gins, mills, weaving or knitting, dyeing and finishing - all steps that may take place in different parts of China, or different countries," said Ms Leonie Barrie, an apparel analyst at GlobalData, a consulting company in London. "Even if a brand had no direct relationship with Chinese factories, they can't completely rule out any links to Xinjiang's cotton."

Long march to Xinjiang

As China has transformed itself from an impoverished country into the world's second-largest economy, it has leaned on the textile and apparel industries. China has courted foreign companies with the promise of low-wage workers operating free from the intrusions of unions.

The brands have turned China into an export colossus. They have also invested heavily in selling their products to a growing Chinese consumer class.

Xinjiang, a rugged expanse more than twice the size of Texas, holds China's largest oil reserves. Its abundant land and sunshine have made it fertile ground for cotton.

The Chinese government has rejected claims of worker abuse in part by claiming that much of Xinjiang's cotton harvest is now automated. But manual picking remains common in the south of the region, where most Uighurs live. There, nearly two-thirds of cotton is hand-picked, the regional government said last year.

As human rights groups have focused on the exploitation of the Uighurs, apparel brands have sought to distance themselves from Xinjiang.

Nike, Burberry and PVH, the parent of Calvin Klein and Tommy Hilfiger, have issued assurances that they have ceased buying cotton from sources in the region. PHOTO: EPA-EFE

Nike, Burberry and PVH, the parent of Calvin Klein and Tommy Hilfiger, have issued assurances that they have ceased buying cotton from sources in the region, while conducting audits of their suppliers.

But supply-chain experts caution that multinational manufacturers frequently game the audit process.

"The key tool it's used for is rubber-stamping conditions in supply chains, as opposed to trying to deeply figure out what is going on," said Professor Genevieve LeBaron, an expert on international labour at the University of Sheffield in England.

In Xinjiang, efforts at probing supply chains collide with the reality that the Chinese government severely restricts access. Not even the most diligent apparel company can say with authority that its products are free of elements produced in Xinjiang. And many brands are less than rigorous in their audits.

Major apparel brands have coalesced around the Better Cotton Initiative, an organisation based in Geneva and London whose official mission includes improving working conditions for those in the trade.

Last year, the organisation announced a halt to its activities in Xinjiang amid persistent reports of forced labour. But the body's China branch recently asserted that its investigation in Xinjiang "has never found a single case related to incidents of forced labour", dating back to 2012, according to a statement reported by Reuters.

That assertion flew in the face of a growing body of literature, including a recent statement from the United Nations Human Rights Council expressing "serious concerns" about reports of forced labour.

The Better Cotton Initiative declined a request for an interview to discuss how it had come to its conclusion.

"We are a not-for-profit organisation with a small team," the initiative's communications manager Joe Woodruff said in an e-mail.

The body's membership includes some of the world's largest, most profitable clothing manufacturers and retailers - among them Inditex, the Spanish conglomerate that owns Zara, and Nike, whose sales last year exceeded US$37 billion (S$50 billion).

Anger among consumers

Even as statements about Xinjiang cotton from apparel companies have failed to ease human rights concerns, they have provoked outrage among Chinese consumers.

On Chinese social media, people have posted photos of themselves throwing away their Nike sneakers or - for the less committed - covering the logos on their sweaters with masking tape.

A car body shop in Hohhot, Inner Mongolia, put up a banner barring customers who wore Nike or H&M. A bar in Beijing offered free drinks to customers who wore apparel from domestic brands.

The global brands are putting stock in the enduring popularity of their products in China, while seeking to avoid further provocation. Inditex removed from its website a statement in which it had promised to avoid Xinjiang cotton.

Yet in muting their condemnation of forced labour in Xinjiang, the brands risk amplifying their problems outside China.

"If they do the right thing, they face serious commercial risk in China," said Mr Scott Nova, executive director of the Worker Rights Consortium, an advocacy organisation. "Yet they know consumers globally will be repulsed by a brand that wilfully abets forced labour. It is a profound moral test."

Beyond China

For the apparel brands, the furore over Xinjiang is merely the latest development driving them to move production to other countries.

As labour costs have climbed in China in recent decades, many industries have moved operations to lower-cost nations like Vietnam, Cambodia and Bangladesh. The Trump administration furthered the trend by pressuring American multinational companies to abandon China.

"All of the economic forces that pushed this production to China are really no longer at work," said Dr Pietra Rivoli, a trade expert at Georgetown University in Washington.

Still, China retains attributes not easily replicated - the world's largest ports, plus a cluster of related industries, from chemicals to plastics.

Other countries present their own human rights concerns. Last year, the European Union revoked duty-free access for garments from Cambodia in response to its government's harsh crackdown on dissent.

Some global brands are seeking Beijing's permission to import more cotton into China from the United States and Australia. They could employ that cotton to make products destined for Europe and North America, while using the Xinjiang crop for the Chinese market.

Yet that approach may leave the apparel companies exposed to the same risks they face now.

"If the brand is labelled as 'they are still using forced labour, but they are just using it for the Chinese market', is this going to suffice?" said Ms Collinson, the industry lobbyist.

Last week, H&M issued a new communication, beseeching Chinese consumers to return. "We are working together with our colleagues in China to do everything we can to manage the current challenges," said the statement, which did not mention Xinjiang. "China is a very important market to us."

Those words appear to have satisfied no one - not the human rights organisations sceptical of claims that apparel companies have severed links to Xinjiang; not Chinese consumers angry over a perceived national indignity.

On Chinese social media, criticism of H&M remained fierce.

"For you, China is still an important market," one post declared. "But for China, you are just an unnecessary brand."