President Trump describes environmental, social and governance (ESG) investing as a “way to attack American business.”
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He has called climate change a “hoax”.
In his address to a joint session of Congress in March, he declared, “Our country will be woke no longer.”
His administration has downscaled the United States government’s annual report on global human rights abuses.
Business and investors have scrubbed ESG policies from their websites and eliminated diversity, equity and inclusion (DEI) in response.
Across the Asia Pacific, people focussed on his anti-ESG and anti-woke rhetoric believe this means violations of such laws no longer will be enforced on them from the United States.
They look at the pausing of the Foreign Corrupt Practices Act enforcement as one such example.
Many extend their analysis to conclude that he and his administration do not care about their labour practices. As such, they do not have to worry about forced labour in their operations or supply chain impacting their access to the US market.
That is flat out wrong.
If businesses and investors do not ramp up their investigations, compliance and due diligence to ensure human rights abuses such as forced labour do not exist in their operations or supply chain with Donald Trump in the White House, they could receive a very expensive reality check.
Trump 1.0 acts to ban forced labour
On forced labour - one of the most fundamental human rights issues - his first administration had been surprisingly aggressive.
Key measures taken under Trump 1.0 included:
● Expansion of Withhold Release Orders (WROs) via US Customs and Border Protection to block imports linked to forced labour.
● Stronger enforcement of Section 307 of the Tariff Act, which prohibits importing products that are mined, produced, or manufactured, wholly or in part, by forced labour, including by forced or indentured child labour.
● Creation of pressure points on China’s Xinjiang-linked supply chains, including banning cotton imports from a powerful Chinese quasi-military organisation that it says uses the forced labour of detained Uighur Muslims.
In Malaysia during Trump 1.0, companies like rubber products manufacturers Top Glove and palm oil giant Sime Darby faced US import bans due to forced labour and environmental violations. Both firms received WROs from Customs and Border Protection in 2020 and had to implement sweeping reforms to regain valuable access to the US market, including third-party audits, remediation programmes, and increased ESG reporting.
Aside from direct compensation paid to forced labourers upwards of USD $20m in some cases, companies suffered lost sales revenue, incurred significant legal fees, reduced workforce efficiency with manpower directed toward crisis management, and increased compliance costs.
Companies sourcing from them found themselves restructuring their supply chains to accommodate the bans while increasing due diligence measures across all suppliers.
Malaysian companies have since taken steps to remove forced labour from their operations, especially if they are part of US supply chains, as a risk mitigation measure.
In addition, in 2021 the Malaysian government put in place its National Action Plan on Forced Labour, refreshed in June of this year, detailing a roadmap to eliminate forced labor by 2030.
Malaysia’s upgrade to Tier 2 on the US State Department’s Trafficking in Persons report, which includes forced labour, demonstrates general improvement on the topic.
Forced Labour bans aim to achieve Trump’s goal of rebalancing trade
While the America First policy agenda uses tariffs to both bring manufacturing back to the US and lower the trade deficit, it’s not the only tool it uses to do so.
US trade representative Jamieson Greer frequently discusses how non-tariff barriers are a key concern under the America First agenda.
As he wrote in a recent op-ed in The New York Times, “Why We Remade the Global Order,” the US’ trade agenda encompasses more than just tariffs, foreign investment and the purchase of US goods.
“Countries are also committing to upgrade and better enforce their labour standards, tackling arbitrages that have put American workers and producers at a disadvantage. Multiple countries will join the United States (along with the European Union, Mexico and Canada) in banning the importation of goods made with forced labour,” Ambassador Greer wrote.
John Leonard, former deputy executive assistant commissioner for the Customs & Border Protection’s (CBP) Office of Trade said that the Trump administration expands its enforcement actions.
“CBP is still actively enforcing Section 307, the basic anti-forced labour statute, as well as the Uyghur Forced Labour Prevention Act. These aren’t going away. Companies need to ensure their supply chains are free of forced labour and that they are paying the correct tariff from an origin standpoint,” he said.
The enforcement actions taken in Trump 1.0 are just the baseline.
The Trump administration’s next country of heightened focus looks to be Indonesia, with it requiring the country to address its forced labour practices if it wants to receive a lower tariff rate from the United States.
The White House’s Fact Sheet, The United States and Indonesia Reach Historic Trade Deal, contains this section on human rights:
Improving Labour Standards: Indonesia has committed to adopt and implement a forced labour import ban and remove provisions that restrict workers and unions from exercising freedom of association and collective bargaining rights.
Indonesian exporters – and the companies that have them in their supply chain, either upstream or downstream – had better learn from the experiences of their Malaysian counterparts.
If the same standards from Trump 1.0 in Malaysia are similarly enforced, Indonesian exporters who want to maintain market access must take practical efforts to gain full supply chain transparency, including mapping supply chains to the ground level, setting up due diligence systems robust enough to capture unfavourable practices and investing in preventative programs and/or remediation systems.
This will be particularly challenging in high-risk sectors such as agriculture, fisheries, mining and manufacturing where there has historically been a lack of either punitive measure or incentives around labour practices in Indonesia.
Failure for Indonesian firms to meet US-mandated force labour standards could result in financial losses, reputational damage and trade restrictions. Proactive compliance from both a regulatory and practical perspective becomes a strategic imperative.
To advance US economic interests, Trump advances migrant workers’ rights
No one will mistake Donald Trump as a champion of human rights.
Still, when it comes to migrant workers and Southeast Asia, he may end up improving their lives.
Trump 1.0 accelerated human rights enforcement in supply chains. This term could do so at an even faster rate.
“Regardless of why, whether and how Trump 2.0 is addressing human rights, companies have their own reasons to stay intently focused on supply chains that are free from forced and child labour, as well as other core human rights principles,” Aron Cramer, CEO of global business network BSR told us.
“Whatever the shelf life of the current US administration’s approach, it remains undeniable that supply chain partners that respect human rights are more reliable, and their workforces more stable, in addition to the principles-based reasons why this is important,” he added.
Businesses, investors and the governments of Southeast Asia which do not ensure their accountability for migrant worker’s rights with Trump in the Whitehouse do so at their own peril.
APAC Advisors, a Singapore-headquartered consultancy focused on geopolitics and responsible investing, includes CEO Steven Okun, senior advisor Megan Willis and associate Noemie Viterale.
