Source: Blog – Alliance for American Manufacturing

“We take a very long term view with China, we’re continuing to invest in China, and we’ll continue to invest in China,” Nike CEO John Donahoe said last week. Photo by Open Grid Scheduler/Grid Engine via Creative Commons

There’s bipartisan support to block imports from Xinjiang, where the CCP stands accused of cultural genocide. But Nike’s CEO says the company isn’t sacrificing its values by doing business in China.

It’s been a busy few weeks when it comes to manufacturing policy, what with the Biden administration taking steps to strengthen Buy America and the Senate working to pass an infrastructure investment bill. So, we missed this clip from Thursday of Nike CEO John Donahue talking about China on CNBC.

But now we’ve seen it — and boy, do we have thoughts on it. First, here’s the clip:

To summarize, Donahoe was asked by CNBC’s Sara Eisen whether Nike should speak more on China’s human rights abuses, considering that the athleticwear brand has been so vocal on societal issues in the United States. Rather than use this moment as an opportunity to call out China’s government for its cultural genocide of the Uyghurs and other Muslim minority groups in Xinjiang, Donahoe doubled down on his company’s commitment to China.

“We take a very long term view with China, we’re continuing to invest in China, and we’ll continue to invest in China while also operating a very responsible global supply chain,” Donahoe said.

At one point, Eisen asked Donahoe point blank: “Do you feel like you have to sacrifice your values to do business” in China?

His reply: “Not at all.”

Conservative media quickly jumped on Donahoe’s remarks, pointing out the hypocrisy given Nike’s championing of causes like Black Lives Matter and Stop Asian Hate (indeed, as of this writing, both were the focus of the brand’s bio on Twitter).

But we have a slightly different take. It’s not a bad thing when companies stand up for causes they believe in, and Nike shouldn’t be faulted for joining the fight for racial justice in the United States.

The problem is that Nike is calling for justice in the U.S. while standing accused of benefiting from forced labor and other human rights abuses being perpetrated by the Chinese Communist Party (CCP), and the company’s recent actions aren’t doing much to dispel those accusations.

Remember Donahoe’s statement that Nike was operating “a very responsible supply chain?” Well, there’s evidence that may not be exactly the case.

The Australian Strategic Policy Institute (ASPI) in 2020 named Nike as one of the dozens of Western companies that are “directly or indirectly benefiting from the use of Uyghur workers.” The report even included a case study on one factory it claimed supplies Nike:

“[A] factory in eastern China that manufactures shoes for US company Nike is equipped with watchtowers, barbed-wire fences and police guard boxes. … At the factory, the Uyghur labourers make Nike shoes during the day. In the evening, they attend a night school where they study Mandarin, sing the Chinese national anthem and receive ‘vocational training’ and ‘patriotic education’. The curriculum closely mirrors that of Xinjiang’s ‘re-education camps.”

In response, Nike maintained its commitment to “ethical and responsible manufacturing” and claimed that it does not source from Xinjiang.

But that statement led to a boycott in China. Eventually, Donahoe reaffirmed his company’s commitment to China, telling a group of Wall Street analysts that “Nike is a brand that is of China and for China.”

And if Donahoe’s groveling wasn’t telling enough, Nike’s actions on Capitol Hill have spoken volumes.

The New York Times reported in November that Nike was among the big name brands that actively lobbied to weaken the Uyghur Forced Labor Prevention Act, which aims to block imports of products made with forced Uyghur labor.

“Lobbyists have fought to water down some of its provisions, arguing that while they strongly condemn forced labor and current atrocities in Xinjiang, the act’s ambitious requirements could wreak havoc on supply chains that are deeply embedded in China,” wrote reporter Ana Swanson. “Xinjiang produces vast amounts of raw materials like cotton, coal, sugar, tomatoes and polysilicon, and supplies workers for China’s apparel and footwear factories. Human rights groups and news reports have linked many multinational companies to suppliers there… documenting Uighur workers in a factory in Qingdao that makes Nike shoes.”

Even if Nike doesn’t source directly from Xinjiang — which frankly, is a big if — it may indirectly benefit from forced labor due to the complexity of global supply chains. As the Financial Times noted, “few brands can say with certainty where their materials are sourced and their garments are manufactured; some produce goods in hundreds of factories across the globe and often those factories subcontract their work to other factories the brands are unaware of.”

But that’s no excuse for Nike, or any American brand, to capitulate to authoritarian regimes that are overseeing a genocide. Access to the Chinese market should not be worth sacrificing core values of human rights — which, despite Donahoe’s statement last week on CNBC, is exactly what Nike is doing right now.

In fairness, Nike isn’t alone. Many iconic American brands have bent the knee to the CCP in an attempt to maintain access to China’s market. Just a few weeks ago, Kodak shamefully pulled down images highlighting the plight of the Uyghurs in Xinjiang from its Instagram page and apologized for posting them.

Indeed, much of corporate America has decided that doing business in China is worth more than the criticism. But the tide may be turning.

The Wall Street Journal reported Monday that the Biden administration and Members of Congress from both sides of the aisle are “stepping up pressure” on American businesses to stop importing from Xinjiang. Meanwhile, the Uyghur Forced Labor Prevention Act — that same piece of legislation that Nike lobbied against last year — “passed the Senate by unanimous consent last month and is awaiting approval by the House, which passed a similar bill by a wide bipartisan vote last year.”

If the legislation does become law, imports of all products from Xinjiang would be prohibited, unless the importer can prove its imports are free of forced labor, which is a pretty high bar. Meanwhile, U.S. Trade Representative Katherine Tai has said the administration’s “worker-centered trade policy will champion workers’ rights and address unfair competition, especially when it is based on human exploitation.”

As my colleague Matt McMullan wrote last week, tensions between the U.S. and China are growing strained, and there is now bipartisan desire in Washington to take on China.

Thus far, much of that effort has focused on direct security threats, leading to bans of companies with ties to the Chinese military, for example. But bipartisan efforts like the Uyghur Forced Labor Prevention Act are shifting some of the focus to consumer goods, and importantly, shine a much-needed spotlight on the human rights cost of unfettered global production. Calls to boycott the upcoming Olympics in Beijing will likely add to the pressure.

Corporations like Nike clearly don’t want to leave China. But they may eventually find themselves having to decide whether the cost of doing business there is worth it.

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