Is Volkswagen Exploiting Slave Labor in China?

Is Volkswagen Exploiting Slave Labor in China?
An attendee looks at the Volkswagen ID.6X during the 2022 Central China International Auto Show in Wuhan, in China's Hubei Province, on July 14, 2022. (Getty Images/Stringer)
Anders Corr
Volkswagen (VW) is in the hot seat. It apparently got caught benefitting from slave labor in China.

On Feb. 14, Reuters reported that a German human rights researcher found photographic evidence and online statements that indicate VW benefited from what appears to be forced labor—including from an engineering company that allegedly used Uyghurs dressed in military drill uniforms with red flowers as some kind of marker.

Uyghurs allegedly built a test track for a VW joint venture in Xinjiang, China. The track was in a desert for testing cars in “extremely hot weather,” according to The New York Times. Xinjiang is where Beijing is executing a genocide against Uyghurs, according to multiple government entities around the world, including the U.S. State Department.

As a result of the new allegations, one German investment fund canceled Volkswagen’s status as a sustainable investment.

The same day, news broke in the Financial Times that thousands of cars from Volkswagen brands—Porsche, Audi, and Bentley—were impounded by U.S. authorities for including a part that could have been made with forced labor.
The Chinese Communist Party (CCP) defends its “work programs” as poverty alleviation, but in 2022, the U.N. Human Rights Office called Beijing’s abuse of the Uyghurs a potential “crime against humanity.”
Uyghur groups have alleged that Volkswagen’s joint venture could be benefitting from aluminum manufacturing in Xinjiang that uses slave labor. Human Rights Watch reported on Feb. 1 that VW responded to such allegations by saying it had no idea where its joint venture aluminum came from.
A VW spokesman attempted to minimize the company’s involvement in a country well-known for years to be committing genocide and forced labor. “One tiny part,” he said, according to The Wall Street Journal on Feb. 15. “We really try, but this shows how challenging it is to really know everything that is happening in complex supply chains.”
Really? Knowing one’s supply chain is challenging, partly because many companies do not really want to know.

As soon as VW discovers that a particularly cheap part is made with slave labor, for example, it has to fess up. That could lead to costly vehicle impounds, recalls, and retrofits. VW headquarters could be forced into politically fraught cancellation of Chinese suppliers and joint venture partners that effectively act as front companies, shields, intermediaries, or fall guys for VW. More expensive suppliers would have to be found. Over time, as these costs and risks build, they could force VW production out of China altogether, which would anger the CCP. That would further damage already faltering VW sales in China or force VW dealerships there to go out of business entirely.

Within a few days of the latest slew of bad news for VW, the German car company apparently started to consider uprooting its joint venture production facilities from Xinjiang. BASF, a German chemicals company that is the world’s largest, is also reportedly decoupling from Xinjiang.
But Xinjiang is not the only place where Uyghur slaves are used. The CCP reportedly shipped them to other provinces throughout mainland China in an apparent attempt to hide them after news of locked-down factories in Xinjiang emerged through the research of Adrian Zenz, currently with a Washington think tank (full disclosure: Mr. Zenz previously published reports with this author’s publication).
Mr. Zenz is the source of the latest evidence of forced labor by the VW joint venture. He told Reuters that VW’s response to date, given that slave labor in Xinjiang is old news, has been inadequate.
And VW and BASF apparently have no plans to leave China as a whole. In fact, BASF plans to invest almost $11 billion in China by 2030. In 2023, VW depended on China for approximately 35 percent of its sales. Yet the German government is encouraging its companies to cut at least some of their dependence on China.
China’s foreign ministry has gone apoplectic over the only slightly cooler shoulder it gets from Germany. A ministry spokesman issued a written response to moves by VW and BASF on Feb. 18, according to The New York Times, that called the allegations “a lie of the century concocted by anti-China forces to discredit China” and decouple the country’s economy from the world.
Decoupling is an excellent idea for any country that engages in slave labor. But decoupling should not result in greater U.S. and allied investment in the Chinese regime through an “in China for China” strategy, as some major German companies are following, according to The Wall Street Journal. New laws will be required to ensure that decoupling results in more friendshoring, not more investment in democracy’s greatest adversary.
On Feb. 19 and 20, at least some good news emerged, perhaps not coincidentally, of billions of dollars of new VW investments in production facilities in the United States, India, and Mexico. VW could be following a new moral imperative against slave labor. Or, it could be a result of local car companies, whose sales are taking market share from VW. The United States and its new preferred countries for production are a much better bet.

It’s time for VW to cut its moral losses and decouple from all of China, not just Xinjiang.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
Anders Corr has a bachelor's/master's in political science from Yale University (2001) and a doctorate in government from Harvard University (2008). He is a principal at Corr Analytics Inc., publisher of the Journal of Political Risk, and has conducted extensive research in North America, Europe, and Asia. His latest books are “The Concentration of Power: Institutionalization, Hierarchy, and Hegemony” (2021) and “Great Powers, Grand Strategies: the New Game in the South China Sea" (2018).
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