Can trade measures help to tackle the use of forced labour?

The European Union is seeking to curtail the use of forced labour in global supply chains by placing greater responsibility on firms trading within the bloc. While the trade measures adopted may complement the use of human rights and criminal law sanctions, they will not provide redress for victims.

The International Labour Organization (ILO) estimates that 28 million people worldwide are used as forced labour – defined by the ILO as ‘all work or service which is exacted from any person under the threat of a penalty and for which the person has not offered himself or herself voluntarily’.

The majority of these individuals (63%) work in the private sector, with the greatest number of people in forced labour in Asia and the Pacific region, and the greatest concentration in the Gulf states, which are heavily dependent on migrant workers (see Figures 1 and 2).

Figure 1: Forced labour, by region (millions)

Source: ILO, 2022

Figure 2: Forced labour by region (per 1,000 population)

Source: ILO, 2022

Tackling the illegal exploitation of labour

Attempts to protect against the illegal exploitation of labour using international human rights law and criminal law sanctions through state enforcement mechanisms are frequently ignored. This is especially the case in countries that face highly competitive world markets.

While consumers are often keen to know where and how goods are made, supply chains are global and opaque. To tackle these challenges, and to stop the use of illegal labour practices, two different approaches are emerging that place greater responsibility on private firms.

One adopted by the European Union (EU) as part of a wider sustainability, environmental and human rights agenda, is to require firms trading within the EU to exercise due diligence. This comes with the threat to remove any goods made with forced labour from the EU market.

A second approach allows victims to bring claims using national law against multinational firms that are operating in developing countries.

Can these approaches be effective in exposing and eradicating the use of forced labour in global supply chains? Both approaches should encourage firms trading in Europe to take more care in choosing suppliers. The use of trade measures by the EU may complement the use of human rights and criminal law sanctions, but it will not provide redress for victims of forced labour. This is why the use of national law remedies may be necessary.

The EU’s Forced Labour Regulation

The EU’s Forced Labour Regulation (FLR) creates a new EU trade and customs enforcement mechanism that requires importers and exporters to exercise due diligence and to drop any suppliers who may be producing goods made with forced labour.

The FLR creates a general prohibition against marketing or exporting goods produced from forced labour. In addition, it allows the authorities to block the future import of products made with forced labour for all economic operators in the supply chain, not just those under investigation.

Responsibility for the implementation of the FLR is allocated between national authorities and the European Commission, with the latter dealing with allegations of forced labour outside the EU. The European and national competent authorities will encourage the general public, whistleblowers, non-governmental organisations (NGOs) and trade unions to provide information and data, and to cooperate in a new ‘Network against Forced Labour Products’.

Will it work?

The strength of the FLR approach is that it hits firms where they will be hurt most: economically. If a firm must withdraw goods from the market, trade – and ultimately profits – will be directly affected. The resulting publicity could have a negative effect on a firm’s image too. As a result, firms will have incentives to clean up their supply chains.

The FLR also creates more stringent duties and penalties than the use of transparency requirements, such as the Transparency Act – Forbrukertilsynet introduced in Norway in 2023. It is also stricter than due diligence through reporting, seen in the Dodd-Frank Wall Street Reform and Consumer Protection Act 2010 in the United States, the UK’s Modern Slavery Act of 2015, the Australian Modern Slavery Act of 2018 and the California Transparency in Supply Chains Act introduced in 2015.

Nevertheless, there are limitations to the plans set out in the FLR.

What are potential weaknesses?

The FLR encourages firms to conduct due diligence assessments throughout their supply chains. But that is not a simple task.

First, the use of forced labour often occurs in smaller companies and sub-contractors, which act informally under the radar (Financial Times, 2018).

Second, corporate law can facilitate firms easily changing their identity to evade detection. Low standards of evidence could also allow firms to argue that they have carried out due diligence as a defence to stave off a full investigation of their supply chains.

What does this mean for victims?

By focusing on the goods produced under conditions of forced labour, the victims are ignored. It may be difficult even to locate victims given the clandestine nature of illegal labour practices.

As a result, the question of what kind of remedy would be appropriate – beyond compensation and payment of back wages – is enormous given the physical and emotional/mental harm suffered by victims of illegal labour practices.

One possible solution could be for direct remedies to be available to individuals as a prerequisite for the lifting of a ban on goods, subject to a forced labour order.

What other measures could be used?

Labelling and kitemarks

The onus of proving that products are made with forced labour lies with the investigating authority. This requires time, information and resources.

An alternative approach would be to place a mandatory duty on producers to label or certify that a product was made free of forced labour. The producer is best placed to have information on its supply chain and to have the capacity to act quickly if any abuse occurs.

The idea of using kitemarks in this way is not new, and this approach can help to gain consumer confidence. For example, the GoodWeave certification label builds partnerships in the rug and home textile sector to eradicate child, forced and bonded labour in supply chains.

Labelling or kitemarking could function as an incentive for a firm to register and speed up the import/export trade process.

Area bans

The FLR is neutral in terms of the countries it targets. So, for example, producers and suppliers in the UK are as much a target as those in countries such as China and Myanmar where forced labour is prevalent.

The EU could take the initiative and identify countries where the use of forced labour is known and documented, for example, the exploitation of Uyghurs in China. It could also impose blanket bans of known goods, such as textiles, emanating from regions or countries where the use of forced labour is known.

In the United States, the Uyghur Forced Labor Prevention Act (UFLPA) from 2021 creates a rebuttable presumption that goods emanating from Xinjiang are made with forced labour. This effectively blocks all imports from the region where it is alleged that Uyghur Muslims are compelled to work under forced labour conditions.

Yet the EU continues to import large volumes of solar panels from Xinjiang, and Volkswagen operates a car assembly plant there. Indeed, one reason that the EU has acted to tackle forced labour is to prevent trade being deflected from the United States because of the UFLPA.

Tackling forced labour at source

A bigger question for the EU to address is how to monitor labour abuses systematically in third countries.

A complementary approach to the FLR would be for the EU to bolster standards through the inclusion and monitoring of labour clauses in trade agreements. This would allow for regulation and standards to apply at the source of the production/supply chain and provide the EU with enforcement mechanisms.

But the inclusion of such labour and social laws in trade agreements is a sensitive issue, linked to criticisms of colonialism. What’s more, it would be huge task and one that would not address labour abuses in non-cooperative states such as China.

One way of desensitising the incursion of one trading bloc interfering in the labour rights of a third country is to use global benchmarks, such as the ILO fundamental principles to create non-negotiable standards. Economic research has shown that where trade agreements have strong institutionalised cooperation provisions they may improve market access from low- to high-income countries (Carrère et al, 2021).

Bringing legal claims in national courts

The FLR complements the emerging trend in which non-state actors – firms or individuals – are sued by individuals, trade unions or NGOs for a breach of human rights obligations (derived from global, international norms). This happens using private law litigation at the national level in developed countries.

In the UK, for example, a basic principle of corporate law is that firms have separate legal personal and limited liability, meaning that a parent company is not liable for the actions of its subsidiaries. The UK Supreme Court has recognised a new duty of care on parent companies for torts (civil wrongs causing loss or harm to another) committed by foreign subsidiaries (see, for example, Vedanta Resources Plc and another v Lungowe and others [2019] UKSC20; Okpabi and others v Royal Dutch Shell Plc and another [2021] UKSC 3).

In one example, a claim for damages – using Canadian tort law – was brought against a Canadian firm for breach of customary international law concerning forced labour, slavery, cruel inhuman or degrading treatment and crimes against humanity. The claimants had been conscripted indefinitely by the Eritrean military into a forced labour system and made to work at a mine in Eritrea that was 60% owned by Nevsun Resources Ltd (a Canadian company) through its subsidiaries (Nevsun Resources Ltd v Araya a [2020] Decision of 28 February 2020, SCC 5).

In the United States, claims have been made in the domestic courts to hold multinational firms to account for human rights abuses committed abroad. In Doe v Chiquita Brands International, a Florida jury awarded $38.3 million in damages to the families of eight victims murdered by the Colombian Autodefensas Unidas de Colombia (AUC) ‘death squad’. Chiquita was accused of making secret and illegal payments (of $1.7 million) to the AUC between 1997 and 2004.

In another case, activists have called on major suppliers to withdraw gloves with the ‘Milwaukee Tool’ trademark because they are made in Chinese prisons using forced labour. On 27 June 2024, a claim was lodged in a Wisconsin court on behalf of a former prisoner at Chishan prison in China's Hunan Province, alleging that Milwaukee Tool and its parent company relied on forced labour at the prison to produce work gloves. The claim seeks compensation for unpaid wages and other damages under the Trafficking Victims Protection Act 2000.

This litigation strategy overcomes the problems of filing claims in third countries where the government or judiciary are not cooperative.

Conclusion

The FLR is part of the EU Open Strategic Autonomy (OSA), in which trade measures are taking on a functional and multipurpose perspective. The EU is developing legal tools to address the geopolitical challenges it faces in a climate of economic and political uncertainty.

The Covid-19 pandemic, trade wars between China and the United States, the current war in Ukraine, instability in the Middle East and climate change have disrupted trade norms and exposed the vulnerability of global supply chains. These factors have also exposed the vulnerability of people affected by these events.

A trade policy move towards near-shoring and economic localisation allows the EU to have greater control and involvement in supply chains, and to ensure their reliability. The EU also recognises that it should develop a set of foreign policy and trade measures to enhance its political and economic security when dealing with countries farther afield that pose geostrategic risks.

What we see in the new approaches are trade tools used in a functional manner to address new kinds of risks facing global supply chains. They also create a narrative around human rights, climate change and sustainability issues.

The measures are political and economic. They respond to developments at the Member State level, ensure the unity of the internal market, and are opportunistic in that they match and sometimes coordinate with measures taken by the United States.

The aim is to place the EU at the forefront of creating a new set of trade rules in the wake of the demise of the multilateral trading system and the World Trade Organization Appellate Body. But these initiatives also aim to avoid firms dumping goods on the EU market that cannot be exported to the United States because of trade restrictions.

One added value is that the measures may expose the use of illegal labour practices and increase the possibility of remedies for victims.