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Communicative backfires by German CEOs

By Thorsten Benner of the Global Public Policy Institute (GPPI)
Thorsten Benner, Political Scientist

“Siemens defends slave labor (again)” was the headline in the British Spectator last week. The origin of this headline is a lesson in what is amiss in the China political positioning of some German CEOs. What happened? At the turn of the year, Siemens CEO Roland Busch had warned in a German newspaper against a “confrontational foreign policy” and urged a “respectful approach” to China.

He expressed one concern very specifically: “If export bans are enacted, this could mean that we can no longer buy solar modules from China – then the energy transition will be over at this point. Do we really want that? After all, it is in our common interest to reduce global CO2 emissions.” Busch did not address it directly, but he was aiming at possible sanctions against components from Xinjiang since the use of forced labor in their production cannot be ruled out.

The American position on this is clear: In December, US President Biden signed a law that largely bans imports of products made in Xinjiang or containing components and materials from Xinjiang. The European Commission, however, remains skeptical. It said that US laws “cannot be automatically replicated in the EU”. An import ban would not abolish slave labor for these products. The EU Commission seems to favor a law with stronger due diligence requirements for suppliers.

Siemens CEO Busch burst into this discussion with his philippic against “export bans”. At the very least, Busch is right about the solar industry’s dependence on Xinjiang. But for a corporation with historic ties to slave labor, the intervention is remarkably clumsy. Especially since, according to German newspaper FAZ, Siemens is cooperating with Chinese defense supplier China Electronics Technology Group Corporation (CETC). According to Human Rights Watch, CETC has developed a surveillance app that is allegedly used to track and detain Uyghurs. It is of little help that Busch assures us concerning human rights: “We comply with them worldwide, including in our workplaces in China.”

Now, of course, Busch does not defend forced labor, unlike what the Spectator suggests. But there would have been many more clever ways to express skepticism about import bans. With his clumsy statements, Busch has opened the door to misinterpretation of his words. What is missing from his statement, for example, is an explicit commitment to uphold human rights in supply chains as well as with cooperation partners.

Busch also fails to live up to what his predecessor as Siemens CEO and chairman of the Asia-Pacific Committee of German Business, Joe Kaeser, formulated shortly before the end of his term in September 2020: “We are observing the current developments in Hong Kong, but also in the province of Xinjiang, closely and with concern. We categorically reject any form of oppression, forced labor, and involvement in human rights violations. As a matter of principle, we would not tolerate any of this in our operations, nor would we accept it from our partners without consequence.” For Kaeser, who for years had rhetorically courted the Chinese party-state, this was a remarkably clear formulation. Busch is now signaling that he does not want to follow up on Kaeser’s criticism.

Instead, Busch seems to be following Volkswagen CEO Diess, the head of another German global company with a history of forced labor. Diess had told the BBC in 2019 that he was unaware of re-education camps and was “proud” of the jobs Volkswagen had created in Xinjiang. This made him sound like Theo Sommer, former editor of the German newspaper ZEIT, who claimed in 2019 that German companies “can and will make a contribution to the successful coexistence of different peoples in Xinjiang’s difficult conditions. Then the Uyghurs – like the South African blacks at BMW once did – will one day say that whoever is employed at a German company, has hit the jackpot.”

Few German CEOs would probably argue quite as vehemently as Sommer in public. But all too often, they come across as if they had won the great prize of kowtowing to the Chinese leadership. In his book “Machtverfall” (Power Decay), journalist Robin Alexander writes about the German CEOs who accompanied Merkel on her last trip to China in September 2019: “The bosses have been urging the chancellor not to snub the Chinese government with overly explicit criticism of the suspension of the Basic Law of the former British Crown Colony of Hong Kong and the repression of its democracy movement.”

The author also recounts a vote among German managers during said trip on whether they, in turn, should approach the Chinese about the closer monitoring of Internet activities of Chinese workforce in companies with German stakes – since this not only endangers freedom of expression, but also German trade secrets. By a show of hands on the Chancellor’s plane, the CEOs voted against it. What is alarming about this, is the fact that corporate leaders seem to bow to Beijing even when their core interests might be affected.

In their search for more strategic clarity and backbone, CEOs might find what they are looking for at the Federation of German Industries (BDI). Last summer, the BDI published a discussion paper on “Foreign Economic Cooperation with Autocracies” on “Shaping Economic Relations in International System Competition” and coined the term “responsible coexistence”.

More strategic clarity in China policy is urgently needed on the part of CEOs like Busch, because the human rights component, which is distorted by the Spectator, is not the biggest problem. What is also disturbing is that Busch seems to be instrumentalizing the climate crisis for a “business as usual” course toward Beijing. And even more disconcerting is the fact that Busch reduces the issue to the question of human rights. Yet there is far more at stake in the systemic competition with Beijing’s authoritarian state capitalism.

Forced labor is not our main problem when we depend on production of core technologies in China to decarbonize our economy, or when companies like Volkswagen take on a China cluster risk by becoming overly dependent on the Chinese market. In 2020, Siemens signed a far-reaching “strategic cooperation agreement” with the aforementioned China Electronic Technology Group Corporation (CETC). The state-owned company is a crucial supplier for the Chinese military. Subsidiaries of CETC are already subject to US sanctions. And it is only a matter of time before the US also takes a closer look at Siemens’ cooperation with CETC.

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