House Dems Defeat GOP Move Against ‘Bad Actors’ Behind China’s Forced Labor Camps

This photo taken on May 31, 2019 shows a watchtower on a high-security facility near what is believed to be a re-education camp where mostly Muslim ethnic minorities are detained, on the outskirts of Hotan, in China's northwestern Xinjiang region. (Greg Baker/AFP via Getty Images)

House Democrats defeated an effort by Republicans on June 16 to require public disclosure of and potentially sanction “bad actors” regarding China’s forced labor abuses identified in U.S. firms’ supply chains.

Rep. Andy Barr (R-Ky.) introduced a motion to recommit to be attached to the Democrat-sponsored “ESG Disclosure Simplification Act.” That motion was defeated 218–207, with five members not voting.

Had the motion carried, the legislative proposal would have been returned to the House Financial Services Committee to consider an amendment adding the bad actors’ identification and process to the act.

The bill itself would impose a host of new required disclosures by U.S. public firms concerning their environmental, social, and governance (ESG) practices and how management views their inclusion in company strategies.

The specifics of those disclosures would be determined by a new Sustainable Finance Advisory Committee established in the U.S. Securities and Exchange Commission (SEC).

Rep. Juan Vargas (D-Calif.) is the main sponsor of the ESG bill, which he first introduced in Congress two years ago. President Joe Biden will sign the bill if it comes to his desk, according to the White House Office of Management and Budget.

House Financial Service Committee Chairwoman Maxine Waters (D-Calif.) hailed the proposal for creating what she termed “clear, consistent disclosure standards for issuers” and providing investors “with the information they need to make the best investment decisions possible and to hold the companies they’re invested in accountable.”

Barr’s motion and the related amendment wouldn’t have changed the ESG disclosure mandate, but would have added provisions requiring companies to report to the Department of Treasury any supplier or other business partner found to be participating in or otherwise supporting Chinese facilities that are estimated to be holding more than 1 million ethnic Muslim Uyghurs in forced labor and detention.

The offending suppliers and partners would be subject to potential U.S. sanctions if they: use forced labor or are participating in building detention camps in the Uyghur Autonomous Region of China; create or provide technology or assistance for mass surveillance in Xinjiang Province of China, where most of the Uyghurs live; participate in serious human rights abuses or corruption; or undermine the democratic process or institutions in Hong Kong.

Speaking on the House floor for his motion, Barr said that if House members in both parties are “truly concerned by public companies who may be working with bad actors—particularly bad actors responsible for China’s worst human rights abuses—then burying their name on the SEC’s website will achieve absolutely nothing. We need to ensure that they are referred to the Treasury Department so that we can impose sanctions.”

Presently, U.S. firms are only required to report to the SEC when they suspect one of their suppliers or business partners is involved with China’s atrocities against the Uyghurs.

Barr noted that if his motion was adopted and the bill was changed, then “instead of reporting on malign Chinese companies to the SEC—an agency that has long acknowledged its lack of expertise, and frankly its lack of capability and interest, in pursuing foreign policy goals—we will instead make sure that entities in corporate supply chains are flagged for the Treasury when public companies have reason to believe they’re involved in atrocities in Xinjiang.”

The Kentucky Republican described the atrocities as “ranging from mass surveillance to forced labor and other violations of basic human rights. Companies will also be able to sound the alarm on entities complicit in China’s assault on Hong Kong’s freedoms, allowing [the Office of Foreign Assets Control] OFAC at the Treasury to determine whether it can impose new sanctions.”

“We must cut off offenders from the global economy until China changes course. We must rely on appeals to their bottom line, not their conscience. That is the power of U.S. sanctions,” Barr told House members.

“We can either pass half-measures that we know won’t work and then wring our hands later when the problem remains unresolved, or we can articulate what we want to target and take real action.

“The former is beneath the dignity of this House, measly disclosures and securities filings, transforming 10Ks [the standard SEC report for public firms] from a hundred pages to thousands of pages, that’s not going to solve the problem.

“The former is beneath the dignity of the House, the latter is embodied by my amendment—sanctions, OFAC, using the power of the U.S. Department of Treasury.”

Congressional correspondent Mark Tapscott may be contacted at [email protected].