FDP opposes agreement on EU supply chain law: "Unreasonable tightening"

Reinhard Houben - FDP opposes agreement on EU supply chain law: "Unreasonable tightening"

Now that the European Parliament and Council have reached an agreement in principle, theEUsupply chain law is on the home straight. This means that large companies will have to monitor and document their supply chains in future and can also be held accountable if they profit from child or forced labor outside the EU, for example.

If this directive is finally confirmed by the EU member states, it will be stricter than the existing German Supply Chain Act: it will apply to companies with more than 500 employees and a global turnover of more than 150 million euros. However, the obligations are also to apply to companies with 250 or more employees and a turnover of more than 40 million euros if at least 20 million of this is earned in certain high-risk sectors. These include textiles, agriculture, fishing, food production and the extraction of mineral raw materials.

Civil liability is also envisaged - this would allow injured parties to sue companies at the end of the supply chain in Europe for damages. For theSPD and the Greens, this is a breakthrough - but the FDP is grumbling, having previously been against such a directive. Will the Brussels decision be another test for the coalition in Berlin? Reinhard Houben, economic policy spokesman for the FDP parliamentary group, is critical of the agreement in Brussels.

Mr. Houben, what did you think of the agreement in Brussels on an EU supply chain directive?we are still in the middle of the process. This agreement does not mean that everything has been finalized.

So it's not over yet?That's how I see it. In the last legislative period, the FDP, as the opposition, already argued against the German Supply Chain Act - from a fundamental position: should a task that should actually be carried out by the public sector be transferred to the private sector? In my opinion, the state should be responsible for ensuring that human rights and labor standards are respected, not a company.

The state can't simply look into company books,and you won't find anything in the books about whether someone is complying with labor standards. This can only be closely monitored on site. In any case, the current agreement at EU level means a tightening of the German Supply Chain Act, because smaller companies will also be affected. I can't go along with that. I am already experiencing this in Germany, where I personally manage a company that has fewer than 20 employees: The problem is being passed downwards, we have of course been asked about the issue by large customers - so we are basically taking over their work to control supply chains. I'm worried that we'll end up with a kind of confirmation industry.

Reinhard Houben, 63, has been a member of the Bundestag since 2017. He is the economic policy spokesperson for the FDP parliamentary group.

What would that be?So big law firms say to a company: I specialize in auditing supply chains or value chains. I have international offices that can check this. Now give me 20,000 euros every year, and then I'll check for you and confirm it.

So basically you now see an increase in bureaucracy for companies that is not justified?yes. nobody wants to buy products that have been made by child labor or forced labor. Now such a directive could introduce a mechanism that creates a lot of work, but doesn't achieve the goal at all. I read a few days ago that Volkswagen received an exonerating confirmation for a factory in China's critical Xinjiang province. The Chinese are now running around claiming that all reports of human rights violations there are false.

That's just one example. Do you really think that it is generally unaffordable for a company to comply with documentation obligations? Of course a giant company like VW can do this. But in the end, is the result what we actually wanted to know? Isn't such a result used to create a smokescreen to hide real problems?

Let's push the fog aside. After all, every company should have an interest in keeping its business clean. Then there's nothing wrong with this directive, yes, but the difference is that you have to prove it. And an entrepreneur has to reckon with the threat of being sentenced to pay substantial fines. So the big companies will pass these risks on down the line.

The Federal Office of Economics and Export Control (BAFA) says that this mechanism of passing on risks downwards is not legal and that you can defend yourself against it -don't make me laugh. Do you really believe that a company with less than 20 employees would say to its biggest customer: I won't take on your documentation obligation?

Because this customer would then switch to a competitor?no, I see pressure on the supplier. The larger the customer, the more likely they are to confirm what they want. There is already the effect that Zara no longer wants to have its sewing done in Myanmar - or that a large number of roasting companies no longer want to buy coffee from Ethiopia. Why? Because it is almost impossible to check whether everything is being done properly on the ground.

There is now this agreement paper. What adjustments do you want to make now? You will also have to get your way in the traffic light, because the SPD and the Greens are in favor of this directive.Now we have to get down to the small print. I'm not exactly pleased that France has made it a condition of its approval that the financial sector is excluded. This means that the financing of a factory in which labor standards are broken is irrelevant. But if some plastic product is now being built into cars or televisions, it suddenly becomes outrageous.

I don't think the Greens and SPD would have had anything against including the financial sector, but this concession was only made to get France on board.

That's called a political compromise, and of course you have to ask yourself: do you want to go along with this compromise? And that's why, of course, there needs to be a debate about the German government's position on this. On the one hand, this agreement brings with it unacceptable tightening, on the other hand it creates blind spots, such as the exclusion of the financial sector. I think that's wrong. We have a relatively unique corporate structure in Germany with a broad middle class - a five-digit number of companies. In contrast, there are countries in the European Union where only a handful of companies are involved.

This means thatthe German economy would be scrutinized all the more by this directive?exactly. Compared to the German law, the current EU agreement reduces the number of employees in companies that fall under the directive. In France, this is obviously not considered critical for their own market. They don't have a classic SME sector like we do.

Doyou still see any points that you want to negotiate away?But I think it comes down to a top or a flop.

Doyou want to prevent the directive?We will see what we can do. It should be sent back to the workshop in its entirety.

The trade associations will be up in arms against this agreement, andI am not at all interested in whether the trade associations are up in arms or not. As a member of parliament, I have to answer the question: are we achieving anything on the ground with our supply chain law to protect people from oppression, poor working conditions and poor pay? My impression is that we are not achieving this goal at all with such laws.

Once again, why should it not be the responsibility of companies to ensure fair production conditions?because the state is shifting its responsibilities onto the private sector. Why doesn't the German ambassador in Beijing go to the Chinese government and say: "We have information that there are human rights problems in this province?

For reasons of diplomacy, yes, but why send medium-sized companies with 250 employees to the front? I think that's simply wrong.

China is a blatant example of centralized rule. However, the EU directive would also apply to business in regions where the state hardly intervenes. Why shouldn't it be possible to achieve something locally in cooperation with companies?I belong to a party that is concerned with the issue of responsibility. And I think the first step is a state responsibility.

And where does the entrepreneur's responsibilitybegin? Above all, the entrepreneur's responsibility begins where the national laws of this country apply. After all, it is the task of the nation state to ensure that its laws are implemented locally.

What does your critical attitude mean for the traffic light coalition? Coalitions are not conflict-free.

To what end will this conflict be taken? Could it come down to a break-up of the coalition if no agreementis reached? This is not an issue that would cause the FDP to leave the government alliance - just as I assume this applies to the Greens or the SPD.