Lawrence Herman is a former Canadian diplomat, lawyer with Herman & Associates and senior fellow of the CD Howe Institute in Toronto..
Last year, the governments of the United States and Canada issued what are known as “business advisories,” a new type of communication that contains official warnings about the business, reputational and legal risks associated with doing business or being in business. the conclusion of supply agreements in regions of the world where human rights are under attack.
This is different from the usual advice governments give about risk in difficult or war-torn places around the world. And different from travel advisories issued by governments long before the COVID-19 emergency, which warns against travel to places affected by epidemics, corruption, civil unrest and other dangers. These new business advisories aren’t just about risk avoidance, they’re straightforward warnings.
In one, the Canadian and US governments are warning companies against having supply chains and other arrangements in China’s Xinjiang region. In another, the United States warns against doing business in Hong Kong. Canada has issued a similar one for Myanmar.
Across the European Union, 15 member governments have issued opinions on trade risks regarding Israeli settlements in the West Bank. This includes France, Germany, Italy and Spain and, when it was part of the EU, the UK. As far as is known, the British advice for the West Bank is still in effect.
Regarding human rights in Xinjiang, the US advisory says the Chinese government continues its “horrific abuses” targeting Uyghurs and other Turkish Muslims, including “widespread state-sponsored forced labor and intrusive surveillance, forced population control measures and the separation of children from their families. , mass detentions and other human rights abuses in connection with ongoing genocide and crimes against humanity.
“Given the severity and extent of these abuses,” he warns, “businesses and individuals who do not leave Xinjiang-related supply chains, businesses and / or investments could be at risk. high to violate US law “.
Although these advisories currently focus on human rights violations in selected locations, it is possible that the warnings will be extended to other parts of the world, including, for example, countries without adequate policies on human rights. environment or climate change.
These have direct effects on international trade, but because they are “consultative” and do not involve government-imposed trade embargoes or tariff increases, they do not violate the rules of the Organization. world trade. Moreover, even in the event of a dispute, the WTO exceptions for measures targeting violations of human rights and the environment could still be invoked.
Cynically, one could say that these are just exhortations, designed for national political consumption, since every country has already put in place laws that penalize people carrying out transactions or negotiating or facilitating the trade of goods derived from them. forced labor or other human rights violations.
This may be partly true, but these are more than facades. They carry direct warnings designed to have an impact on the market. Using more threatening language than the Canadian opinion, the US Xinjiang Communication states, “As with all of their risks, financial institutions should assess their potential exposure to the risk of handling the proceeds of forced labor on behalf of their clients and, where appropriate, implement a mitigation process that aligns with that risk, in accordance with their requirements ”under US anti-money laundering laws. If cross-border payments are not processed by financial institutions, business will obviously cease.
Besides legalities and financial risks, both governments say companies are expected to follow responsible business standards. Canada’s Xinjiang Notice states that in addition to complying with Canadian laws, the government “expects Canadian companies operating abroad, in any market or country, to respect human rights. of the person, operate legally, conduct their business responsibly and voluntarily adopt internationally respected best practices and guidelines such as the United Nations Guiding Principles on Business and Human Rights and the Organization for Economic Co-operation and Development Guidelines for Multinational Enterprises, including provisions on eliminating forced labor or other abuses from their supply chains.
The opinions references to the OECD guidelines, which include due diligence guidelines for responsible business conduct abroad, as well as references to the Canadian government’s own guidelines on corporate social responsibility (CSR), inform companies of the business risks involved and potentially negative reactions from investors and the market, even if no laws are broken.
Due to the far-reaching effect of these opinions, questions arise. What factors go into deciding when or why they are issued and for which region or country? Why, for example, did the United States publish a notice for Hong Kong but not Canada? Why did Canada issue one for Myanmar but not the United States? The answers may have something to do with domestic politics, but the questions need to be asked.
Given domestic political pressures, governments may not limit future opinions to cases of human rights abuses, but extend them to warning of legal consequences, business risks and stigma. social by doing business in unrepentant or lax carbon-emitting jurisdictions. Or where other completely unacceptable actions of foreign governments have taken place, such as in Belarus, Syria or Iran. These are factors that could influence their future development.
The point is that once released, these new advisories set precedents that could proliferate, especially when public pressure and investor values, aided by social media, demand greater government involvement in the pipeline, and indeed, responsible business practices abroad.
Although until now limited to the governments of the United States, Canada and some European governments, the advent of these business advisories shows that global business and societal values are converging, beyond the demands of international trade agreements and treaties. Even if not all countries take this kind of action, in their stages of formation, official government warnings like these are precedents that could be a new phenomenon in the changing world of international trade.
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