The article in the url below demonstrates the challenges associated with legislation that is passed with good intention, but not much forethought:
"The law, which went into effect on Tuesday, bars products from entering the United States if they have any links to Xinjiang, the far-western region where the Chinese authorities have carried out an extensive crackdown on Uyghur Muslims and other ethnic minorities."
The impact will be broad:
"That could affect a wide range of products, including those using any raw materials from Xinjiang or with a connection to the type of Chinese labor and poverty alleviation programs the U.S. government has deemed coercive — even if the finished product used just a tiny amount of material from Xinjiang somewhere along its journey."
The main trouble is that the burden has been placed on companies to demonstrate a negative:
"The law, called the Uyghur Forced Labor Prevention Act, presumes that all of these goods are made with forced labor, and stops them at the U.S. border, until importers can produce evidence that their supply chains do not touch on Xinjiang, or involve slavery or coercive practices."
The consequences, as a result, are dramatic:
"Evan Smith, the chief executive at the supply chain technology company Altana AI, said his company calculated that roughly a million companies globally would be subject to enforcement action under the full letter of the law, out of about 10 million businesses worldwide that are buying, selling or manufacturing physical things. 'This is not like a 'picking needles out of a haystack' problem,' he said. 'This is touching a meaningful percentage of all of the world's everyday goods.'"
Of course, impactful legislation is not the concern; the issue is whether the disruption is worth it. The forced reorientation of the global supply chain is not only expensive, but will have unintended consequences, both good and bad (e.g., on employment, prices, etc.). The government is an important stakeholder of the firm, but it is not the only stakeholder. The danger is, if not all stakeholders are onboard with this action, the disruption will occur to no discernable end or improved outcome:
"'The public is not prepared for what's going to happen,' said Alan Bersin, a former commissioner of U.S. Customs and Border Protection who is now the executive chairman at Altana AI. 'The impact of this on the global economy, and on the U.S. economy, is measured in the many billions of dollars, not in the millions of dollars.'"
The complexity of the global supply chain is immense – something it seems that politicians reacting to emotional issues appear not to comprehend:
"At the heart of the problem is the complexity and opacity of the supply chains that run through China, the world's largest manufacturing hub. Goods often pass through many layers of companies as they make their way from fields, mines and factories to a warehouse or a store shelf. … Take carmakers, who may need to procure thousands of components, like semiconductors, aluminum, glass, engines and seat fabric. The average carmaker has about 250 tier-one suppliers but exposure to 18,000 other companies across its full supply chain, according to research by McKinsey & Company, the consultancy firm."
Whether we get involved in such issues, attempting to shape outcomes, is not the issue. What is at issue is the extent to which such decisions are informed, both by the facts at hand and the support of the stakeholders who are affected. Decisions taken in the abstract, or intended only to add value to a minority of stakeholders, usually result in sub-optimal outcomes.
Take care
David
David Chandler
© Sage Publications, 2020
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
Law Fighting Forced Labor to Hit Trade
By Ana Swanson
June 22, 2022
The New York Times
Late Edition – Final
B1, B5
