German law on forced labour in global biz supply chains to have little impact on India's trade: GTRI

New Delhi: The German law to prohibit forced labour and protect human rights in global business supply chains will have little impact on India's trade with the European country as India already has comprehensive rules to deal with these issues, according to a report by think-tank GTRI.

Germany has banned forced labour and other labour law violations in its supply chains extending within and outside Germany.

The law called the Supply Chain Due Diligence Act (SCDDA), came into effect on January 1 this year.

It applies to firms with more than 3,000 employees. These include German firms and foreign firms doing business with Germany.

This means that it covers a significant number of companies in Germany, and it will likely have a considerable impact on how these companies do business.

Smaller firms will be covered under the law from January 2024.

“The SCDDA may have little impact as India already has comprehensive labour laws prohibiting child labour, forced labour, and workplace discrimination,” the Global Trade Research Initiative (GTRI) said in its report on Monday.

It said India also has minimum wage requirements.

“To ensure effective implementation, it is crucial to raise awareness of labour laws among workers and employers and establish efficient complaint-handling mechanisms,” the report said.

It added that the German law has shifted the onus for identifying risk and taking actions from government to business firms.

The law covers violations of labour laws, child labour, forced labour, and occupational health and safety.

This is a broad range of violations, meaning that companies must take a comprehensive approach to due diligence in their supply chains, GTRI co-founder Ajay Srivastava said.

He suggested that the private sector take preventive measures and corrective action against such violations within their operations and their overseas suppliers' operations, including tracing back to mining raw materials.

“This means that companies will need to collect information about their suppliers, their operations, and the risks they face, " he said, adding the SCDDA imposes civil liability on companies that fail to comply with the law.

He also expressed apprehensions that other countries are expected to emulate the SCDDA in the coming years.

All EU (European Union) member countries have some form of regulations on forced labour, which are constantly being updated and strengthened.

In September 2022, the EU published a new regulatory proposal to ban forced labour products. Once the proposal is adopted, it will prohibit the trade of products made with forced labour in the EU market, regardless of where the products were made.

France and the Netherlands have adopted the most comprehensive regulations on forced labour.

“The law could increase costs for companies, as they must implement new due diligence processes and extensive compliance measures. However, the law could also positively impact workers, as it could help prevent them from being exploited,” the report said.

Further, it said the SCDDA is a complex legislation, and implementation may face critical challenges.

“For instance, if the SCDDA is strictly enforced, Germany may face difficulties in producing electric vehicles, as cobalt, a key component for batteries, is often mined in Congo, where human rights issues, including child and forced labour, are prevalent,” it added.

The European country would have to halt the import of industrial goods from China due to concerns regarding the treatment of Uyghurs, it said.

The bilateral trade between India and Germany stood at USD 24.8 billion in 2021-22. Germany is the ninth largest investor in India, with cumulative FDI inflows of USD 13.8 billion from April 2000 to September 2022.

Germany is India's largest trading partner in Europe and has consistently been among India's top global partners.