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GLOBAL OUTLOOK NEWS


SCORECARD


Cross-borderM&Abrokerecordsinthefirst quarter,whileEuropeancountrieshave risenupanannualFDIranking.Chinaand


Iranhavesigneda25-yeardraftagreement, whilePresidentBiden’ssanctionsapproach is likelytofocusonindividuals.Western


companiesarecaughtoutfor theirexposure tohumanrightsabusesinChina.


LOOKING UP


GLOBAL Cross-borderM&A hits recordQ1high (page 6)


Fromblooddiamondsto reeducatedcotton


THE GLOBAL LAWYER


VALUE CHAIN DUE DILIGENCE IS BUILDINGMOMENTUM EVERYWHERE – ABOVE ALL IN XINJIANG


On his way out the door, president Donald Trump went on a spree of pardon- ing white-collar criminals and coddling carbon


polluters. But he also took one set of midnight actions that human rights campaigners have no problem with: a week before departing, Mr Trump banned the import of any product made with Xinjiang cotton or toma- toes. And on his last day in office, he declared China’s treatment of Uyghurs a genocide. Thesemoves cappeda surprising


EUROPE


Countries across continent


dominate annual FDI index (page 68)


CHINA-IRAN The two countries have signed a 25-year deal (page 84)


record of progressive continuity in this one policy sub-area: froman anti-traf- fickingcompliance guidance for the Obama-era Federal Acquisition Regulation, to a business advisory setting out best practices to avoid the taint of Xinjiang forced labour in the supply chain. To be sure,whenitcame to Africanconflict minerals, Trumpists impeded enforcement of the Dodd– Frank Act, but xenophobia trumped free-market ideology onChina, where they advanced the transatlantic centre-left agenda on process-based businesshumanrights regulation. That agenda nowhasroomto run. Probably the most popular of the


US


Biden’s sanctions playbook set to


focus on individuals and entities (page 50)


CHINA Western brands caught in Xinjiang supply chains (see page 60)


TRENDING DOWN


8


many environmental, social and governance (ESG) bills pending in Congress is the Uyghur Forced Labor Prevention Act. Passed in the House of Representatives by a vote of 406–3, it even garnered the support of the hapless Republican Matt Gaetz, who is knownfor casting a lonely anti-traf- ficking vote, and is nowcaught up in a sex trafficking investigation himself. The Uyghur bill would create a presumption that any import from Xinjiang falls afoul of the Tariff Act ban on forced labour, unless the customscommissioner reports clear and convincing evidence to the contrary. But even if it never becomes law, the supply chain guru Michael Littenberg of Ropes&Gray predicts that US customswill continue to aggressively enforce the ban on forced labour when it comes to goods sourced in Xinjiang. A combination of legal, consumer and shareholder pressures is now


driving severalmajorWestern apparel brands to advertise that they steer clear of Xinjiang. But the back- lash from China—notably conveyed by the suspicious disappearance of H&Mfromthe Alibaba platform— has inspirednumerous Chinese brands (and a fewnervyWestern outliers) to wave the flag of genocidal cotton. Assuming noWestern brand stays with the skull and bones, the trend will be toward regionalisation. Beyond China, the Biden adminis-


tration promises considerably broader regulation of supply chains by Congress—and vastly broader disclosuredemands by securities regulators. Several pending bills would create an American answer to the Modern Slavery Act model pioneered in Britain, Australia and at a US state level in California (with Canadamoving along a parallel track). Other congressional bills, embraced by Democrats in both houses of Congress, would create an ambitious new systemof ESG disclo- sure. Similar measures are being debated in the EU. With or without legislation, however, the US Securities and Exchange Commission shows every sign of embracing non-financial disclosures that would create a frame- work for ESG due diligence. While transatlantic human


rights regulation is converging, the judicial trend lines have never been farther apart than in early 2021. The US Supreme Court, in Doe v. Nestlé, is considering only whether to widen its rejection of corporate liability and hostility to extraterritoriality. Meanwhile, Dutch and English courts have handed down a series of decisions, in Millieudefense v. Shell, Okpabi v. Shell and Begumv. Maran, that accept foreign direct liability by parent companies for their subsidiar- ies — or, in Begum’s case, for their supply chain partners. The result is sadly predictable. The US and Europe will end up with ESG regulatory regimes that look similar on paper, but Europe’s will havemore bite.■


Michael D Goldhaber has been tracking the world’s largest disputes since the turn of the millennium. Email: michael.goldhaber@gmail.com


www.fDiIntelligence.com April/May 2021


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