Beitrag vom 17.07.2020

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The new Supply Chain Law: Germany goes alone again

Thomas Bonschab and Robert Kappel

You only have to look into your own garden to find violations of human rights. The shabby employment contracts at the German meat company Tönnies are not an isolated incident. Poor working conditions and low wages are the norm in many industries, be it in the textile industry, flower production or in the mining of raw materials. Such things should be prevented, no question. The German answer from the Houses of the Ministry of Labour and the Ministry of Development (BMZ) is: the Supply Chain Law. It should force the global players to respect human rights. At last not a polite request, but a legal requirement.

The tugging has already begun. Business and employers‘ associations have set out to prevent or water down the law. They fear, as with any reform, the final end of German competitiveness. It is mainly hypocritical arguments that are being put forward: Competitive disadvantages, taking responsibility for something for which they supposedly have no responsibility, or the corona crisis, which is already damaging the supply chains. Economics Minister Altmeier has taken a clear position – against the new law. Now it is obviously up to the Chancellor. Will she take the side of the trade unions and non-governmental organisations and of the 60 or so companies that have something to gain from the law (such as Tchibo, Rewe, Ritter Sport)? The Chancellor would also have support from the churches, the SPD and parts of the CDU.

But the matter is not so simple. Even if the planned law is supported by a legitimate moral indignation, it would be a step in the wrong direction.

That starts with the fact that it is once again a German solo effort. What will now become of the many multilateral agreements that civil society actors have fought hard for for years? The fair trade label, for example, or Rugmark with certified social and environmental standards to combat child labour in carpet production. Or the „codes of conduct“ for companies and their suppliers to independently monitor the implementation of standards (quality, delivery punctuality and labour standards). Particularly in sectors with an extensive global division of labour (clothing, toys and sportswear), considerable pressure has been built up in recent years on department store chains and branded companies to meet such standards with their globally scattered subcontractors. Tripartite Social Minimum Standards (TSMS) have been agreed by trade unions, non-governmental organisations, transnational companies (global buyers and producers), the International Labour Organisation (ILO) and governments. We may not yet be on the home stretch, but a German solo effort is at least irritating here. It can be more than doubted that the responsible ministers would have spoken seriously with the ILO. The fact that the Federal Government emphasises in all its pronouncements how much it wants to strengthen multilateralism – this is simply being undermined.

The two ministers also came up with this quick fix without the participation of the countries concerned. What are the governments in Vietnam, Cambodia, Bangladesh, Colombia or Ethiopia actually saying? How do these countries view German rushing and intervention in internal economic and social affairs? Vietnam, for example. Once celebrated as Next 11 and decades of good cooperation. Within two months, the country is first unilaterally removed by the BMZ from the list of bilateral partner countries, and now it may be learned from the press that they no longer meet German standards.

The German government has not even bothered to consult with these countries and negotiate joint measures. For example, the implementation of a plan to establish support measures and incentive systems to extend human rights and against the exploitation of labour. That would be necessary, however, because it is easy to imagine that countries selected by the West as locations for textile production, flowers and toys might have wanted to agree to the decisions from Germany. This is how the German ministers are trumpeting their message to the world: we press ahead, we decide, we have the upper hand, we say where it goes, we raise our index finger – and do not even analyse the real political and economic-social consequences for the countries and subcontractors concerned.

What the affected countries need, on the other hand, is not a supply chain law, but a credible and serious approach, together with the German economy or the economies of the industrial nations as a whole, to strengthen value creation in their own countries. German investment can work best when it works together with local medium-sized companies, when there is a transfer of technology and knowledge, when productivity rises and thus also wages increase. High-tech entrepreneurs from Germany in particular know from their own experience in China, South Africa, Mexico and Thailand that it is no longer a question of the lowest wages, but rather of a future concept with high-income workers, growing consumer markets, well-trained people and modern agriculture. In other words, German investors should invest in the development of value chains. It is about local value creation from which German investors benefit. Supply chains are the status quo, value chains are the future. Word of this has got around to many companies, even if the established economy is struggling with it.

Since the planned Supply Chain Law does not even begin to pursue such a goal, it would not lead to a better globalization, but rather to the current trend of renationalizing value chains. It can be assumed that a considerable proportion of companies will withdraw from low-wage countries and shift production back to Europe, and then to Eastern and South-Eastern Europe. Does this serve the poor in Bangladesh, Ethiopia or Vietnam? Probably not. In countries such as Vietnam, Thailand, Colombia or Indonesia, companies have emerged in recent years that have caught up with the companies in Europe with their own brand names and the push in technology and productivity. Instead of deepening economic cooperation with these wealthy countries with high purchasing power, the Supply Chain Act is backing out. The up-and-coming countries may be able to get over this and will stick with other partners such as China in particular, but also India or Korea. The ever louder complaints about the geopolitical loss of importance of Germany or Europe are becoming more and more implausible.

Germany is flying blind in foreign policy. Of all countries, Germany, which benefits from the global division of labour, is pushing a lawsuit in the wrong direction and has gone from being the world champion exporter to the anti-globaliser. The Supply Chain Law is a serve in the wrong field, which carelessly awards international trust capital built up over decades. It should therefore be rejected against the opposition of its supporters.