EU Introduces Proposal on Forced Labor; German Chancellor Olaf Scholz on his official visit to China 

Editor's Note: One year after the announcement during the 2021 State of the Union speech, on 14 September the European Commission presented a proposal for a Regulation on prohibiting products made with forced labour on the EU market. CCCEU has compiled a memo for your information. Enjoy reading and have a restful weekend. Enjoy reading and have a restful weekend. To subscribe, please write to info@ccceu.eu. 

Regulation on prohibiting products made with forced labour

One year after the announcement during the 2021 State of the Union speech, on 14 September the European Commission presented a proposal for a Regulation on prohibiting products made with forced labour on the EU market.

Before forwarding the text to the European Parliament and to the Council of the EU for the negotiations, the Commission launched a round of feedback on this Regulation until 30 November 2022. [Link]

The new proposal is linked to the Commission's proposal for a directive on corporate sustainability due diligence, which aims to regulate corporate behaviour and due diligence processes for companies. The proposals are different, but they work in tandem and partially overlap: if a company has carried out effective due diligence on its supply chains, such that they mitigate, prevent and bring to an end risks of forced labour, this will be taken into account by the competent authorities when they assess whether there is a well-founded suspicion that a product is likely to have been made with forced labour.

Aim and content of the proposal

With this new Regulation, the Commission aims to ban forced-labour products from the EU market, thus "contributing to the eradication of forced labour both in the EU and elsewhere." The Regulation will create a ban on new products made with forced labour, and products made by forced labour which are already on the EU market would be withdrawn from the market.

To achieve this objective, the Commission is proposing a comprehensive approach. Therefore, the new rules will apply to all items, including goods manufactured in the EU, imports into the EU, and exports from the EU. Likewise, the rules will be applicable to all sectors, and they will not target specific companies or industries.

The Implementation

The implementation of the new rules will be mainly operated by EU countries. National authorities in the EU Member States will be empowered to withdraw from the EU market products made with forced labour, following an investigation. They will need to designate competent authorities responsible for implementing and enforcing the Regulation.

According to the proposal, the Commission will support Member States in the implementation. It will build a public database of forced labour risk areas or products. It will help ensure coordination among the Member States' authorities through a new platform, the "EU Forced Labour Product Network". And it will issue guidelines to support companies, especially SMEs, on how to carry out due diligence in this area.   

EU Member States' customs authorities will be in charge of enforcement at the EU borders. They will rely on the decisions by Member States' competent authorities to identify the products concerned and carry out controls for imports and exports.

The Investigative process

The investigative process will be carried out in two phases.

1. In the preliminary phase, the authorities assess if there are well-founded reasons to suspect that products have been likely made with forced labour.

2. If they determine that there is a substantiated concern of forced labour, they will proceed to the investigation phase. 

Competent authorities will have to follow a risk-based approach in all phases. They will focus their enforcement efforts on the economic operators involved in the steps of the value chain as close as possible to where the risk of forced labour is likely to occur. Respecting the principle of proportionality, they should also take into account the size and economic resources of the economic operators, the quantity of products concerned, as well as the scale of suspected forced labour.

In carrying out investigations, competent authorities will examine all the information available to them. According to the Commission, this includes:

• independent and verifiable information on risks that forced labour has been used in the production process;

• information on market surveillance and compliance of products shared by other Member States;

• submissions made by third parties, including civil society;

• information on whether a company carries out forced labour due diligence in its operations and supply chains.

Importantly, the Commission also maintains that, if the national authorities cannot gather all the evidence they require, for instance due to the lack of cooperation by a company or a non-EU state authority, they can take the decision based on the available facts.

If the authorities have established that a product was made by forced labour, it cannot be sold in the EU, or exported from the EU. The company producing or selling the products will be required to withdraw it from the market and to dispose of them. The economic operator concerned will bear the costs of disposing of the prohibited product.

Furthermore, if a company does not follow the decision of a Member State under this Regulation, they face penalties under the national law of that State.

Position of other relevant stakeholders 

AmChamEU - In their position paper, the American Chamber of commerce to the EU (AmCham EU) suggests that EU's proposal of a withdrawal mechanism or a ban is not the most suitable solution to combat forced labour.

AmChamEU points out that forced labour is an issue that has already been addressed by their member companies though policies and principles, and it therefore several recommendations.

AmChamEU recommends that the implementation of the Regulation be standardised across all EU member states in order to avoid fragmentation and different repercussions on the business sector. AmChamEU also recommends that there should be more transparency on the identification of forced labour, stressing that the proposal should not be applied automatically on mere presumption: companies must be able to prove their compliance with the enforced rules first. Finally, AmCham EU recommends the recognition within the EU regime of companies that are fair and compliant, to encourage them to go beyond compliance.

BusinessEurope - BusinessEurope also recognises that this proposal, which aims to be uniform, cannot necessarily solve the problem of forced labour, and it questions the application of an effective product ban in this risk-based system.

BusinessEurope recommends that the proposal should take into account existing market regulations and comply with them in its application. 

Business Europe also considers that sectors and their specificities should be taken into account to achieve a more targeted and effective approach. As such, it stresses the need for an impact assessment to strengthen the implementation and enforcement of the Regulation. It also recommends that the public consultation be over for a longer period.

Business Europe also believes that the systematic application of this regulation is worrying because companies cannot necessarily verify the presence of forced labour in their production chain due to the lack of collection tools on the ground. Business Europe adds that there is a lack of clarity on the responsibility for enforcement, i.e. whether it is the responsibility of states or the Commission.

JBCE - Japan Business Council in Europe (JBCE) considers that the proposals lack of some precisions to make it more practical. For JBCE, it is important to establish policy consistency between future forced labor regulations and other EU legislation, such as the battery regulation.

Furthermore, JBCE insists that EU countries should play a more important role in fighting the problems at the core, and that the proposal should not target specific countries, but rather specific practices. Finally, JCBE further encourages the Commission to refrain from imposing new custom burdens, such as a verification to show that items are free of forced labour.

A hearing of International Trade Committee

The Committee on International Trade (INTA) met on 25 October to discuss on the trade elements of the proposed EU instrument to combat forced labour. Experts, labour representatives, and corporate representatives debated the role of trade in combating forced labour in global supply networks.

Ms Katarina SCHWARZ, Associate Director of the Rights Lab and Assistant Professor of Anti-Slavery Law and Policy at the University of Nottingham, questioned how actions can be most effectively shaped to address forced labour and do so in compliance with WTO rules. She addressed two key considerations: the practical infrastructure for investigating and implementing the proposal, and the support on the ground for translating this sanction framework into meaningful change for people at the end of the supply chain.

Claes-Mikael STÅHL, Deputy General Secretary of the European Trade Union Confederation (ETUC), stressed that the risk-based approach underlying the proposal is a major challenge. He also pointed out that the problem with the current proposal is the short implementation period which would make it difficult to implement.

Finally, Mr. Douglas OPIO, Head of the ILO Global Business Network on Forced Labour and Executive Director of the Uganda Employers Federation, welcomed the EU proposal. However, he said that a systemic response was needed at national level. Thus the proposal should focus on supporting effective national responses by addressing capacity building, information sharing, promoting laws and committees and strengthening inspections. Furthermore, Mr Opio called for the extension of the proposal to the private sector through employment organisations and business networks to enable this sector to identify, remedy and eliminate forced labour. Lastly, the EU should also pay special attention to SMEs in terms of support.

Xi meets German Chancellor Olaf Scholz

BEIJING, Nov. 4 (Xinhua) -- Chinese President Xi Jinping met with German Chancellor Olaf Scholz on his official visit to China at the Great Hall of the People in Beijing on Friday.

Xi noted that Scholz is the first European leader to visit China after the 20th National Congress of the Communist Party of China, and that it is his first visit to China as the Federal Chancellor.

The visit will further enhance the mutual understanding and trust between the two sides and deepen cooperation in various fields, and gives the two sides an opportunity to plan for the growth of bilateral ties going forward, Xi said.

U.S. Fed implements fourth consecutive 0.75-point hike

According to Xinhua, The U.S. Federal Reserve on Wednesday implemented the fourth consecutive three-quarter point interest rate hike, amid the worst inflation in four decades.

The Fed raised its short-term borrowing rate by 0.75 percentage point to the highest level since January 2008.

The Fed will "take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments," according to a statement.

For the third quarter of 2022 GDP up by 0.2% in both the euro area and the EU

In the third quarter of 2022, seasonally adjusted GDP increased by 0.2% in both the euro area and the EU, compared with the previous quarter, according to a preliminary flash estimate published by Eurostat, the statistical office of the European Union. In the second quarter of 2022, GDP had grown by 0.8% in the euro area and by 0.7% in the EU.

German exports, imports down in September: Destatis

According to Xinhua, German exports fell slightly by 0.5 percent in September, while imports were down 2.3 percent compared with the previous month, according to preliminary figures published by the Federal Statistical Office (Destatis) on Wednesday.

In August, exports and imports of Europe's largest economy had still grown by 1.6 percent and 3.4 percent, respectively.

China remained Germany's most important trading partner as goods worth 16.7 billion euros (16.6 billion U.S. dollars) were imported from China in September, an increase of 5.4 percent month-on-month. Imports from the United States decreased by 1.3 percent to 8.1 billion euros.

Europe's climate warming at twice rate of global average, says report

According to The Guardian, Temperatures in Europe have increased at more than twice the global average in the last 30 years, according to a report from the World Meteorological Organization (WMO).

Temperatures in Europe increased at an average rate of 0.5 degrees Celsius (0.9 degrees Fahrenheit) every decade between 1991 and 2021, according to the annual State of the Climate in Europe report published Wednesday by the World Meteorological Organization and Copernicus, the European Union's Earth observation program.

What are experts talking about?

"What signal did Scholz send by visiting today?" is an interview with Yang Xiepiao, Director of the Sino-German Cooperation Center of the Chinese Academy of Social Sciences, conducted by Changanjie News. In the interview, Yang said that Scholz's visit released a positive signal to strengthen Sino-German economic and trade cooperation, indicating that Germany's policy towards China will develop along a pragmatic track.

"European energy solidarity is both a necessity and an opportunity" published by European Policy Center. The author is Fabian Zuleeg. The article points out that if parts of Europe are cold and hungry while others are able to protect themselves, there will be a political backlash that could tear the EU apart. To prevent this, the EU needs to set up a European energy solidarity mechanism. The authors emphasize that this will turn a challenging situation into an opportunity; by showing solidarity it will strengthen European cooperation.

Please note: the English version of this issue is slightly different from our Chinese one. The views and opinions expressed in this article do not necessarily reflect the official position of the CCCEU.