On September 10, the United States Department of Labor (DOL) added Indonesian nickel to its list of goods produced by child or forced labor. Nickel is a critical mineral with applications in steelmaking, aircraft engines and turbines, and perhaps most prominently in renewable energy and vehicles, where it is one of the key components of nickel-manganese-cobalt (NMC) lithium-ion batteries.
This listing highlights the dominance of Indonesia’s nickel sector by Chinese firms and deals yet another blow to the country’s aspirations to secure a critical minerals-specific free trade agreement (CMS-FTA) with the United States. But the listing also clarifies one of the dangers the United States courts by not engaging with middle-income and developing countries in developing and diversifying critical mineral supply chains: the U.S. absence cedes the field to business interests with a decidedly different approach to human rights standards and practices.
Indonesia’s Role in Nickel Markets
Indonesia’s role in global nickel markets is beyond pivotal. In 2023, the country mined half the world’s nickel, a share the International Energy Agency forecasts will grow to 62 percent by 2030. Since 2020, Indonesia has emerged as the world’s top refiner of nickel as well, endowing the country and its predominately Chinese-owned and operated smelters with pricing power that has led to a market glut and suspension of operations by some large, Western-owned nickel producers.
Eyeing access to the significant tax incentives created by the Biden administration’s Inflation Reduction Act (IRA), Indonesia’s President Joko Widodo last year proposed a CMS-FTA with the United States. The IRA’s critical minerals provisions require mining or processing to take place either in the United States or a country with which the U.S. has a free trade agreement. Despite Indonesia’s position as the dominant producer and market-setter and Indonesia’s increasing security cooperation with the United States, the proposed deal has faced strong bipartisan opposition in the U.S. Senate and received a vocal but lukewarm response from the Biden administration. The senators’ reservations revolve around Indonesia’s environmental and labor rights standards, as well as the prominence of Chinese business interests in the sector.
The Listing: Causes and Effects
The DOL has published the “List of Goods Produced by Child Labor or Forced Labor,” known as the Trafficking Victims Protection Reauthorization Act (TVPRA) list, biannually since the mid-2000s. Now in its 11th edition, the list is based on research led by the Office of Child Labor, Forced Labor, and Human Trafficking in the DOL’s Bureau of International Labor Affairs. Listings are based on a mixture of fieldwork, academic and grey literature reviews, expert interviews, and consultations with the State Department and International Labor Organization, among others. The DOL also accepts public comments and submissions, providing an avenue for industry and civil society to flag goods for potential inclusion – or presumably also to fight said inclusion.
The allegations leading to Indonesian nickel’s inclusion on the TVPRA list are not in the main about Indonesia or Indonesian workers. The brief (less than 200-word) section of the report discussing nickel and the accompanying 12 sources mention the words “China” or “Chinese” 16 times, with the discussion focused on the treatment of Chinese nationals by the Chinese firms that dominate Indonesia’s nickel processing activities. The allegations revolve around deceptive recruiting practices, surveillance, forced overtime, and confiscated passports to restrict workers’ freedom of movement.
These are serious infractions and deserve the attention they are generating. But they reflect an overarching concern about China and its labor practices abroad, rather than the conditions faced by the Indonesian workers that provide the bulk of the sector’s labor or the actions (or inaction) of the Indonesian government or firms.
Conceptually, the TVPRA list is a classic “naming and shaming” exercise. Naming and shaming is the practice of publicizing and raising awareness of alleged rights-based violations to change the behavior of alleged perpetrators. Unlike the U.S. entity list or the Uyghur Forced Labor Prevention Act, designation on the list does not carry with it punitive measures or prevent access to the U.S. market. The hope is that TVPRA listing will give firms and governments incentives to bring their behavior in accordance with accepted global standards by naming the problems, shaming the behavior, and leaving it to the market, civil society, and consumers to respond.
Like most naming and shaming exercises, the TVPRA list has no teeth per se – but it can still bite. Though initially viewed with skepticism, international relations scholars have amassed a body of evidence suggesting naming and shaming can improve human rights performance in targeted countries and in specific political-institutional contexts. More recently, the University of Oxford’s Margaryta Klymak assessed the effects of TVPRA listing at the commodity level and found product listing resulted in decreased U.S. imports of products alleged to be made with child and/or forced labor. The DOL names and shames; U.S. consumers respond.
The implications for Indonesian nickel are seemingly straightforward. First, though the United States imports relatively little nickel, the TVPRA designation certainly augurs against a large increase in 2024 and beyond. Second, this will make the starting point for any further discussion of a CMS-FTA between Indonesia and the United States a discussion of forced labor.
The U.S. Is Ceding the Field
This situation is sadly ironic. If Indonesian nickel’s placement on the list precludes engagement by the U.S. government via a CMS-FTA and Western firms keen to access the IRA’s critical mineral tax incentives, the result will be to push Indonesia further into dependence on China and Chinese firms – the bad actors named in the allegations – as a source of foreign investment in and market for exports for its nickel sector.
This is the dark side of naming and shaming, an otherwise laudable and effective tool for improving human and labor rights: that the spotlight becomes a scarlet letter. A better outcome would be for the United States and other liberal democracies, which value and uphold restrictions on forced labor, to be able to engage and provide credible, better alternative models of labor-management relations.