Kam Pui Tsang

(KU Leuven)

will give a presentation on

Sanctioning forced labour in China: Evidence from the US cotton ban

Abstract: Over the last two decades, the use of targeted sanctions has been on the rise. A more recent phenomenon has been the rise of humanitarian sanctions aiming at curbing human rights abuses and corruption. Our paper focuses on the region-wide cotton ban imposed by the US government on the importation of cotton-containing products from Xinjiang since December 2020 as a case study. Using a triple-differences strategy, we observe that the US's sanction reduces the export of sanctioned products from China to the US by 20% at the intensive margin and 5 percentage points at the extensive margin. Regions such as Xinjiang and other Chinese provinces, which heavily relied on Xinjiang for cotton-containing materials, experienced more substantial losses due to the cotton ban. Additionally, we identify negative but significant spillover effects of the US's sanction on the export of cotton-containing products from China to the EU, despite the EU not imposing any trade sanctions against Chinese products. By delving into various mechanisms, the study suggests that the fear of reputational damage linked to the utilization of Xinjiang cotton-containing products could explain the observed negative spillover effects.