Southeast Asia is bearing the mounting brunt of U.S. trade curbs aimed at stemming the forced labor of ethnic minority Uyghurs in China, with billions of dollars in blocked exports, the latest U.S. trade figures show.
Economists and human rights experts ascribe the heavy hit the region is taking to global supply chains shifting to reroute exports from China through Southeast Asia and to China’s persistent dominance in key commodities.
With both powerful forces at play, Southeast Asia is “caught in the middle,” Jayant Menon, a senior fellow at the ISEAS Yusof Ishak Institute in Singapore, told VOA.
The United States has detained $3.56 billion worth of imports in all since its Uyghur Forced Labor Prevention Act, or UFLPA, took effect in mid-2022, according to recent figures from U.S. Customs and Border Protection. Some 86% of those, more than $3 billion worth, arrived from Malaysia, Thailand and Vietnam. Only $395 million arrived directly from China.
The act forbids imports of any products made in whole or in part in China’s Xinjiang autonomous region, the Uyghurs’ historic homeland, presuming they have been made with forced labor. While many of the shipments are eventually allowed to enter the United States, the burden is on the importer to secure their release by proving the products are produced without forced labor, a process that can take months.
The United States and other governments have accused China of genocide over its treatment of the mostly Muslim Uyghurs for subjecting them to not only forced labor but mass surveillance and detention, religious persecution and forced sterilization — all denied by Beijing.
Xinjiang is a major source of some commodities crucial to the global supply chain, including 12% of the world’s aluminum, more than a third of the polysilicon for solar panels and 90% of the cotton produced by China, according to the Coalition to End Forced Labor in the Uyghur Region, a global network of rights groups.
Many of those supply chains now flow through Southeast Asia for reasons beyond just the UFLPA, said Nick Marro, principal Asia economist and global trade lead analyst for the Economist Intelligence Unit.
“For years, multinational companies — both Chinese and non-Chinese owned — have been pouring investment into Southeast Asia to construct supply chains aimed at dodging U.S. tariffs,” he told VOA.
While far from the only reason for the influx, he said, “shifting some production chains to Vietnam or Thailand, for example, can obfuscate whether a good might originally be produced in China.”
“This isn't necessarily a fool-proof strategy,” Marro said. “U.S. trade authorities are very sensitive to illegal transshipments and other efforts aimed at circumventing U.S. duties. But for some supply chains, cracking down on these activities can be challenging — especially for products like cotton, which is notoriously difficult to trace.”
Evolving supply chains now require looking beyond exports arriving directly from China to catch what’s made there, said Menon, a former lead economist for trade with the Asian Development Bank.
“Increasingly there’s production and value addition in multiple countries,” he said. “Simply looking at goods that emanate from Xinjiang to the U.S. will not capture the intended objective.”
Of the slightly more than $3 billion worth of exports the United States has detained from Malaysia, Thailand and Vietnam because of the UFLPA, the vast majority, $2.96 billion, have been electronics, including solar panels.
Louisa Greve, global advocacy director for the Washington-based Uyghur Human Rights Project, ascribes that to the surge of investment from Chinese solar panel makers into Southeast Asia starting more than a decade ago.
“We don’t know of any Uyghurs working in Southeast Asia in solar, but we do know where the polysilicon has to come from. That’s the issue,” she told VOA. “It’s about the components.”
Greve added that the Southeast Asian countries and companies involved in importing and incorporating that polysilicon into the solar panels they help make and export also risk being complicit in the state-sponsored forced labor that goes into producing it in China.
“Thirty-five percent of the world’s polysilicon, or solar-grade polysilicon, is coming from China. It’s up to every manufacturer, like the plants that are actually making solar panels in Southeast Asia … to say, ‘We have to be responsible for the raw materials that we’re using,’” she said.
Menon asserted the UFLPA could benefit low-wage countries less tainted by forced labor than China by driving more business their way, but he said that Southeast Asia will still struggle to wean itself off Chinese supplies.
“China is still the hub or the center of ASEAN [Association of Southeast Asian Nations] supply chains. That hasn’t changed. There’s been some reconfiguration taking place, but by and large, China’s not going away,” he said.
Menon said that “blunt” trade tools like the act can also hurt the countries in the middle of those supply chains by driving existing production and investment away, leaving local workers with less work or fewer jobs.
“This [act] is quite a big move, quite a massive measure, and so I’d be surprised if it doesn’t have some impact in moving production around,” he said. “If you ban imports in this way, inevitably there will be some shifts that move production in a way that tries to circumvent those bans.”
Marro said the same pressures that drove companies to “de-risk” by moving production from China to Southeast Asia years ago could yet prove a “double-edged sword.” While the shift has boosted Southeast Asia’s economies, the costs may mount as the United States and others start taking a harder look at countries helping China evade their trade curbs.
Even with only 11 months of the 2024 fiscal year reported, U.S. customs figures show the UFLPA blocked more imports from Southeast Asia over the past year than the year before.
Marro said enforcement efforts were at a “very real risk” of picking up but added that geopolitics could also intervene.
“As much as U.S. officials want to crack down on Chinese tariff circumvention, there's an equal effort to avoid isolating Southeast Asia when it comes to the U.S.'s increasingly hawkish strategy towards China,” he said. “This balancing act will characterize the future of U.S. policy to the region.”
