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LONDON – Did taxpayer money find its way to Xinjiang Production and Construction Corp (XPCC) under the guise of ‘sustainable cotton’ procurement? Was China’s dominance in textile and clothing export markets simply too strong an incentive for brands and retailers to overlook abuses that were occurring right under their noses in Xinjiang? Was a fixation on rapid scaling the reason why BCI succumbed to the temptation to overlook the human rights abuses occurring in Xinjiang and pair up with XPCC? And, moving forwards, does the apparel industry need a complete recalibration in terms of how it thinks about the issues of ‘more sustainable’ and ‘preferred’ cotton?

In a follow-up to her recent essay on XPCC, VERONICA BATES-KASSATLY asks why it took so long for brands, retailers and the ‘sustainable cotton’ industry to wake up to serious human rights issues in Xinjiang.

This wide-ranging, detailed piece raises difficult questions for brands and retailers moving forwards. Not least of these is the issue of due diligence in apparel and cotton sourcing and the fact that current methods of ensuring their cotton is free from forced labour have been found do be so badly wanting – and for so long – in Xinjiang.

Recently, Apparel Insider published my pro bono article “Shaking Hands With The Devil: ‘Sustainable Cotton’ and the Xinjiang Production and Construction Corp” (XPCC). In it, I outlined the historical role of the XPCC, its current practices, and explained how XPCC cotton, tainted by prison and child labour, whose very cultivation both promoted and financed the Sinification of Xinjiang, should never have been regarded as more sustainable and preferred. It should never have been sold to consumers as the socially and environmentally correct choice.

So how and why did this happen? Whose idea was it? Who promoted it? And why did nobody say anything to stop it?

But first, a little background.

Wealth and Power

On 15 September 2012, I flew into Beijing, on the day that: “The biggest anti-Japanese protests since China and Japan normalised diplomatic relations in 1972 are held in cities across China. The Japanese embassy in Beijing is besieged by thousands of protesters throwing rocks, eggs and bottles.”

The reason? Eight uninhabited islands and rocks in the East China Sea known as the Senkaku/Diaoyu Islands. A place most of us had never heard of before.

The catalyst apparently was that on September 10, 2012, Japan’s government had announced that they had decided to purchase the islands from a private Japanese owner. Four days later the Chinese retaliated. Six Chinese surveillance ships sailed into Senkaku/Diaoyu waters to assert China’s territorial claims and for ‘law enforcement’. And then left again.

By the 16th of September, anti-Japanese protests had spread to dozens of mainland cities throughout China. Some turned violent as protesters clashed with policemen, smashed up Japanese restaurants, and even attacked drivers of Japanese made cars. By September 18, firms such as Toyota and Honda had temporarily shut factories and offices across China and many flights between China and Japan were cancelled.

Two years later, I was living in Beijing, and I went to Capital M’s Literary festival to hear John Delury talk about his book “Wealth and Power”, A book that to quote the publishers:

examines the lives of eleven influential officials, writers, activists, and leaders whose contributions helped create modern China.

“The common goal that unites all of these disparate figures is their determined pursuit of fuqiang, ‘wealth and power’. This abiding quest for a restoration of national greatness in the face of a ‘century of humiliation’ at the hands of the Great Powers came to define the modern Chinese character.

“It’s what drove both Mao and Deng to embark on root-and-branch transformations of Chinese society, first by means of Marxism-Leninism, then by authoritarian capitalism.

“And this determined quest remains the key to understanding many of China’s actions today.”

What unites these two – my presence in Beijing aside – is the importance of national greatness, of avoiding humiliation by Western powers, in the mind of modern China. I submit we would be wise to remember this in the current Xinjiang dispute.

Adrian Zenz’s  latest revelations on Uighur population control and forced sterilization shocked us. But do ethnic Han, who, after 35 years of one child policy, have only been allowed to have two children themselves since October 2015, feel the same way? Under that policy, provincial governments could impose the use of contraception, abortion, and sterilization, and fines for violations were huge. Xinjiang authorities appear to be employing the same techniques. But since the one child policy did not apply to minorities such as the Uighur, does the rest of China see this in the same light as we do? Or will the fate of Merdan Ghappar, by all accounts a perfectly assimilated, apolitical, fashion model, who spoke and wrote “in very good Chinese”, resonate with China’s youth, and will they say ‘enough’?

Or will the mystery surrounding how Merdan obtained his phone and kept it charged whilst incarcerated, be enough to convince them that the whole thing is indeed lies, fabricated by Western powers seeking to humiliate China?

Whatever the case, to proclaim Xinjiang cotton preferred and more sustainable, as the sustainable apparel sector has declared – all evidence to the contrary – for the past ten years; to have encouraged consumers to purchase from Xinjiang and more specifically, the Xinjiang Production and Construction Corporation (XPCC), in the guise of doing good, is an entirely different matter. It is and was, clearly, completely and utterly unacceptable.

Heaven is High and the Emperor Far Away

Like ‘wealth and power’, ‘Heaven is High and the Emperor Far Away’, is an historic Chinese term. It covers the concept that in far flung corners people do things because they believe that nobody will notice. Is the promotion of Xinjiang cotton as ‘preferred and more sustainable’ a case in point?

Scaling up ‘sustainable cotton’ has proved hard for both brands and initiatives – educating, often illiterate or semi-literate farmers, with a hectare or two of land to their names is a very slow and painstaking process. The huge XPCC cotton farms in Xinjiang must have appeared very tempting. To quote one Chinese expert: In vast Xinjiang, a regiment generally owns hundreds of thousands of acres of land which are contracted by regimental farmers (workers).”

Only the regimental commander had to be converted to BCI or organic production and at a stroke, thousands of hectares and hundreds of the XPCC’s settled farmers followed. 

Scale is particularly important for BCI, whose leadership believes that once the initiative accounts for 30 per cent of world cotton production, approximately 8 million tonnes, then BCI will have become a mainstream product and all actors in the value chain, from farmers to retailers, will feel compelled to participate. With China accounting for about one-third of world cotton consumption at the textile mill level (mill use) and about one-fourth of world cotton production, any effort to achieve scale in cotton, almost by definition, must include China.

For brands and retailers, China’s dominance in textile and clothing export markets provides a strong incentive to overlook abuses that might occur. During 2018 (the most recent year of complete data) the fob (free on board) value of textile exports from China were US$119 billion (38 per cent of total world textile exports) and the value of clothing exports reached us$158 billion (31 per cent of world clothing exports).

Around 2010, it would appear that both BCI and the organic cotton industry, represented by the Textile Exchange (TE), succumbed to the temptation to overlook the human rights abuses occurring in Xinjiang and to operate in China.

It should be noted that the first problem that you encounter when analysing all this, is actually identifying which farms are XPCC, and which are not. For example:

On April 29, 2020, Esquel Group completed the divestment of its stake in Xinjiang White Field Cotton Farming Co. Ltd. (“White Field”).

Esquel Group became a minority shareholder in White Field, a joint venture company established in 1998 with the Third Division of the Xinjiang Production and Construction Corps (“XPCC”)”

As we can see, the XPCC were majority stakeholders in this operation, but it is not called XPCC anything. White Field Cotton Farming sounds positively folksy, and since, as TE pointed out in 2010 ,approximately half of the farming units have been set up with private finances,” it is clearly impossible to tell by the name alone whether you are looking at an XPCC farm or not.

I shall stick to farms actually labeled XPCC, but the reader should be aware that these are just a proportion of the total.

BCI

Let’s start with BCI. Their forays into Xinjiang are well documented in the Better Cotton Fast Track Program 2010-2015 (BCFTP) and then its follow-up program: The Better Cotton Growth and Innovation Fund (Better Cotton GIF or the Fund).

The BCFTP 2015 report describes their own initiative in messianistic terms: “The Better Cotton Fast Track Program (BCFTP) was born from unprecedented cooperation in uncharted territory: an innovative public-private commitment to make Better Cotton a sustainable mainstream commodity. This wasn’t an idea that would be nice to achieve – it was an absolute imperative to ensure the long-term security of cotton supply, poverty reduction, and safeguarding the environment.”

You would have thought that before signing up for this cotton crusade, someone would have asked to see a study that demonstrated that BCI cotton was indeed sustainable, that it did reduce poverty and safeguard the environment. Apparently, they did not. I have asked BCI repeatedly for any robust studies that they might have undertaken that demonstrate the benefits of the system. None has ever been produced, so presumably, none exist. But all that is another story – back to Xinjiang.

The money:

The 2010-15 BCFTP report documents the spending of €35 million over 5 years. Of this, 50 per cent of the funding apparently came from private partners: Adidas, BESTSELLER, C&A, H&M, IKEA, Levi Stauss, Marks and Spencer, Nike, Tesco, Tommy Hilfiger, and VF Corporation.

The other 50 per cent came from public funders, specifically: IDH (The Sustainable Trade Initiative), Rabobank Foundation, Interchurch Organization for Development Cooperation (ICCO), and Solidaridad (FSP).

In 2010, the program operated in India, Pakistan, and Mali. Brazil was added in 2011, and China in 2012. There is no data on 2012 operations, but In 2013 9 per cent of BCFTP funding went to China, and by 2015, the proportion had risen to 15 per cent. Since, as the report states, “the Xinjiang Production and Construction Corps (is) the single largest cotton producing organization in the world,” it is inevitable that a large chunk of that money went to the XPCC.

From the chart on page 64, we can see that in 2015, Wanhu/XPCC No.1, Xinjiang, LF produced 68,739 tonnes of cotton and XPCC No.5 Division, LFE, Xinjiang produced 93,485 tonnes.

Total BCFT production in China in 2015 was 312,774 tonnes, so at least 52 per cent was provided by the XPCC.

Exactly how much money was given to China by the BCFTP each year is not stated in the report. But we can try to roughly estimate this by multiplying the cost/metric ton (€) by the number of tonnes produced (page 67).

On this basis, in 2012, BCI China funding must have totalled some €342,000. For 2013, it was €459,000. In 2014, €1,045,000. And in 2015, we see that it cost €10.09 per tonne to source 312,800 tonnes of Better Cotton Lint from China – or a total of €3,156,152.

It appears, however, that the full cost is not funded by the BCFTP, and Implementing Partners are obliged to fund part of the cost themselves. Implementing Partner (IP) is a rather vague term however, and in the 2016 GIF annual Report, we are told: “Better Cotton GIF progress in China has been supported by key partnerships and relationships with local governments. In 2016, China nearly became the first million tonne Better Cotton country, partially due to strategic investment from the Better Cotton GIF but mostly due to self-funded implementing partners including NGOs, social enterprises, cotton cooperatives, supply chain actors and local governments.”

It seems then that while the XPCC was an IP, it did not necessarily finance the full counterpart cost itself.

For 2015, The BCFTP claims to have invested €0.76 million in 14 projects or 24 per cent of the €3,156,152 total cost.

In 2016 the total GIF contribution for the year is explicitly broken out in the report (page 26); it was €649,460, and the IP contribution was €1,238,127. That year, 81 per cent of GIF cotton produced in China came from a single XPCC farm – XPCC-Xinjiang-LF.

So, did 81 per cent of that €1.92 million in funding filter through the XPCC’s hands?

In 2017-18 GIF contributions in China totalled €626,300, and XPCC production dropped to 16 per cent of total GIF output (presumably, earlier farmers graduated the program).

BCI dropped the XPCC as an IP in November 2019. As a result, the 2018-19 GIF report no longer refers to the XPCC as a partner. However, they were not dropped until November 2019 (harvest time), indeed, the BCI annual report states “XPCC Cotton & Linen Trading Co., Ltd (suspended from 15 Jan 2020)”. So XPCC presumably did actually receive GIF funding that year, but we have no idea how much.

Interestingly, in an email to Apparel Insider dated November 27, 2019, BCI stated: “XPCC’s links with forced labour were not a factor in the decision to terminate the Implementing Partner Agreement.

XPCC has been undergoing a significant restructuring during the past 24 months specifically in the context of the XPCC Cotton and Linen Company. The reorganisation resulted in sweeping changes in internal management systems and changing approaches to working at the farm level. The operational result is that the large commercial farms of each Division are being broken down into cooperative units of individual smallholder farms.

“XPCC Cotton and Linen Company’s ongoing restructuring over the past few years has led to challenges in implementing the Better Cotton Standard System in line with our requirements related to Principle 7 – Internal Management Systems. As a result, the Implementing Partner Agreement has been terminated. As BCI actively seeks to support smallholders where we can, we are now engaging with potential alternative Implementing Partners to support the farmer cooperatives and manage the programme.

“It is worth noting that XPCC is a multi-entity parastatal organisation, that includes many branches – some of which carry out core government functions, and others which are largely autonomous and perform more administrative or purely commercial functions. The division that BCI has partnered with is XPCC Cotton and Linen Company, a commercial cotton farming and trading organisation.”

Of course, none of this actually holds water. The ‘core government functionscarried out by the XPCC include incarceration of prisoners from the rest of China – whose labour has apparently been used to clear all the XPCC cotton fields, and continues to be used to farm and harvest some of them – as well as appropriation of local resources and Sinification of the region. Their multiple commercial enterprises – including cotton farms – help fund these activities. And since all the land is owned by them, no matter how well intentioned the operation and how happy the smallholders, the XPCC is still reaping part of the benefit.

The promoters

The BCI email to AI of November 27, continues:

We were aware, through the review of the XPCC Cotton and Linen Company as a potential Implementing Partner, that other, separately managed XPCC entities run other branches and serve distinct functions of the government. The BCI Council and the governing bodies of the independent Better Cotton Fast Track Programme (BCFTP), consisting of public donors and leading Retailer and Brand Members, reviewed and discussed the risks associated with XPCC in its entirety and the region as a whole prior to approving the programme. The BCFTP led field-level investments into BCI projects in the period 2010-2015.”

In 2010, those leading Retailer and Brand Members were: H&M, Levi’s, IKEA, and Marks & Spencer, followed successively by all the others listed under The Money, above. C&A were the last to join – in 2015 – but as we know, they were familiar with Xinjiang and the XPCC, through Shell and CottonConnect.

If the donor and brand members reviewed and discussed the risks, as my companion article “Shaking Hands With The Devil” explains, it should have been abundantly clear in 2010, that partnering with the XPPC meant partnering with exploitation of prison labour, forced Sinification and appropriation of natural resources, and the use of mandatory labour by schoolchildren. As that article elaborates, the situation only worsened from 2014/15 onwards, and there was absolutely no excuse for enrolling XPCC as an IP for the GIF in 2016.

H&M actually opened a store in Xinjiang in 2015 when, “On the day of the opening of the Urumqi store, H&M northern China Sales Manager led many executives to Xinjiang, not only to celebrate the opening of the first store in Xinjiang, but also to inspect the Xinjiang market.”

Indeed.

Under the circumstances I think we can be certain that if not before, by 2014/15 H&M was well aware of what the XPCC was and how it operated.

More recently, in response to Glossy’s enquiries in June this year, we learnt: A Jack & Jones spokesperson provided the sourcing policy of its parent company Bestseller, which bans production in Xinjiang and says it is conducting ‘due diligence’ and is a member of the Better Cotton Initiative for cotton sourcing…Other brands stating they utilize BCI guidelines include Puma and H&M.”

At this point it is hard not to laugh. As we already know, Bestseller and H&M were part of the BCFTP Executive Board that decided to invest in Xinjiang and hand money to the XPCC in the first place.

Is this really what taxpayers want?

As we have seen from the broad brush calculations provided in The Money above, BCI appears to have handed hundreds of thousands of euros to the XPCC over the seven years 2012-2019.

What is particularly disturbing here, is that taxpayer’s money was involved. I quote the IDH website:

In 2013 the Federal Council of Switzerland decided to allocate €24.5 million to a strategic four-year partnership to support public-private cooperation to upscale and accelerate the sustainable production of coffee, cocoa, cotton, soy and palm oil.”

Why the good people of Switzerland felt that collaborating with a paramilitary organisation responsible for pacifying and colonising one of the furthest reaches of China was a good idea, is not made clear.

And:

“The Dutch Ministry of Foreign Affairs … has granted IDH an additional €100 million for the period 2015-2020 to co-fund private sector investments in sustainable market transformation in 11 commodity sectors.” An additional €100m? Presumably then, Dutch taxpayers’ money funded the XPCC throughout the 2010- 2018/19 period? And not just money:The Netherlands are an active partner through its embassy network and in international diplomacy.”

Are they indeed?

That the Dutch Embassy in Beijing had no idea what the XPCC was and how it operated seems inconceivable. I knew who the XPCC were and that all was not well in Xinjiang when I lived in Beijing in 2013/14, and whilst friends and family worked at both the British Embassy and the Carnegie Tsinghua Center, I was hardly privy to specialised diplomatic information.

No doubt this all had something to do with geopolitics and the trade ambitions of Switzerland, and Holland in what is expected to be a hugely important market in the future, but it is clearly neither a sustainable nor transparent use of their taxpayer’s money.

And IDH were not the only one’s gifting taxpayer’s money to the XPCC.

Solidaridad’s Income was €18.3 million in 2011, and €66.2 million in 2019. Fifty-one percent of this apparently comes from government grants.

Similarly, BCI themselves state: “In 2016, BCI received $1 million in unrestricted funds from USAID Development Innovation Ventures (DIV) to scale the BCI Programme. This grant gave BCI the flexibility to allocate funding to different project areas as needed, as the scope of BCI’s work expanded. This has contributed greatly towards BCI’s growth over the past three years.”

Given the major role that China has played in that growth, did US taxpayers’ money also end up in XPCC hands?

The other face of Organic cotton:

Lest it appear that all the blame lies with brands sourcing BCI, I’m afraid the disciples of the organic cause were no better.

In February 2020, I emailed Stella McCartney Ltd: “From your cotton supply ‘map’, I can see that you source from (Xinjiang), indeed, if you have farm level traceability at over 96% you presumably know which XPCC farm your cotton came from? That most of us would not associate cotton, grown on farms cleared by, and possibly farmed by prisoners, and from which the profits are being ploughed into financing the internment and re-education of Uighurs, with “strengthening worker’s voices and advocating for vulnerable groups”, goes without saying. I have a lot more detailed information on the issue and TE involvement, should you have any concern or interest.”

Stella McCartney Ltd. did not reply.

When Patagonia were questioned about sourcing in Xinjiang, by the Wall Street Journal in April 2019, they declined to comment. I contacted Patagonia, several times, between December 2019 and February 2020. In response to my concerns about the lack of data substantiating their claims for organic cotton, they accused me of promoting “chemical-intensive agriculture practices.” And in response to my suggestion that they consider introducing organic cotton production to Uzbekistan, they informed me that:

“Patagonia trusts human right experts that say hundreds of thousands of people remain in forced labor jobs.

Which is very interesting. If Patagonia trusts human rights experts at the Uzbek-German Forum for Human Rights absolutely, even when they are contradicting claims published by the ILO, why did they not trust the Uyghur Human Rights Project (UHRP)? The UHRP has produced a stream of well researched and documented reports on the XPCC and its abuses since 2008. Did Patagonia read none of those reports? Or did they simply decide to ignore them?

But I digress.

I copied the following from the “Footprint Chronicles” for Patagonia’s Women’s Organic Cotton Quilt Snap-T® Pullover, on February 13, 2020: “Guangdong Esquel Textiles factory in southern China makes woven and knit organic cotton fabrics for the Patagonia sportswear they produce at their garment factories. Esquel is involved in every stage of production, which ensures traceability of their supply chain and products. They even grow their own organic cotton at their farm in Xinjiang, China. What fiber they cannot grow themselves, they purchase from other local farmers. They are dedicated to supporting sustainable agriculture in the region, and they organize training sessions to help farmers with everything from organic seed selection to water-conservation techniques, like drip irrigation.”

I drew Patagonia’s attention to this description, on February 19, 2020, and pointed out that Patagonia had neglected to mention that this traceability leads directly to Esquel’s joint venture farm with the XPCC and that ‘other local farmers’ means other XPCC farms. Esquel was not shy about this relationship. I also attached screenshots of Esquel’s Major supplier list, showing their XPCC sources, as well as their major customer list.

When I checked a few days later, all this descriptive material had disappeared from both the Esquel and the Patagonia websites.

The irony that all this was going on literally as Fashion Revolution was finalising its 2020 Index, rating Patagonia number 6 in the World for transparency, should escape no one.

I proceeded to file a complaint with B-Corp. I received the following response: “Thank you for your message regarding Patagonia; we appreciate you bringing these issues to our attention, as well as the supplemental documentation that you provided. B Lab is aware of the ongoing human rights allegations in Xinjiang and is currently conducting work to determine whether and how to address this issue in the context of B Corp Certification, including companies that may have ties to this region in their supply chains.”

Human rights allegations? Allegations?

That said, B-lab also missed the fundamental point. It is not regional ties in supply chains that they need to “determine whether and how to address.” It is the fact that when confronted, in the finest tradition of the tobacco and pesticide industries, Patagonia attempted to scrub the evidence and carry on with business as usual.

For those of you who are wondering who else was sourcing from Esquel, whilst lecturing the rest of us on their impeccable CSR, some are no longer with us – J Crew and Brooks Brothers for example. Most are brands that make no particular sustainability claims, were not involved with any of the initiatives, and presumably had no idea who the XPCC were, or what was going on in Xinjiang. I imagine they assumed that if everyone from BCI and TE to the WWF and Solidaridad promoted Xinjiang cotton as more sustainable, buying it was a good thing. In my opinion, they cannot really be blamed, and so I see no point in naming them.

One exception is Ralph Lauren (RL). Given that in 2018, RL rushed to ban mohair from its supply chain, based on anecdotal evidence of bad practice in just 0.006 per cent of South Africa’s mohair farms, you would have thought that they would have been the first to eliminate Xinjiang cotton from their supply chain when the murmurs of abuse first crept out, 12 years ago.

But no.

Moreover, given that:

a) RL Corp just had their so called “Science based” targets for emissions reduction approved by the Science-Based Targets Initiative (SBTi);

b) 82.1 per cent of RL’s raw material consumption is cotton;

 and

c) RL claims that: “By 2025, 100 per cent of our cotton will be sustainably sourced, which we define as cotton that is either: from the Better Cotton Initiative (BCI), Fair Trade certified, organic, recycled, transitional or aligned to the U.S. Cotton Trust Protocol.”

They must have looked closely at BCI sourcing in the very recent past, and so would have been well aware how much was coming from Xinjiang.

Ralph Lauren then, have no excuse. And, nor does VF Corporation, whose Calvin Klein and Tommy Hilfiger brands are both on Esquel’s list, and whose so called “Science based” targets were approved at the same time as RL’s.

Conclusion:

Both the brands and their funded initiatives should have been, indeed presumably were, well informed on the nature of the XPCC and Xinjiang cotton production. Yet they gave the XPCC funding – including taxpayer’s money – and promoted XPCC cotton as “preferred and more sustainable”.

If they thought they could do this because heaven was high and the emperor far away, on the distance to heaven, they were no doubt correct. But it looks as if today’s emperor – public opinion – just rode into town.


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