To Combat Modern Slavery, Incentivize Innovation by Funding the Development of Diverse Supply Chains

This commentary is part of a report from the CSIS Global Development Department series entitled Global Development Recommendations for the Next Administration. 

Current estimates have approximately 28 million people across the globe in some form of forced labor. This is 28 million individuals who are not compensated for their work, are coerced into performing work, and are often subject to horrifying situations they cannot envision a way out of. They exist across consumer products, from seafood, to nickel and cobalt in cell phones, to clothes. The U.S. government has made important strides toward keeping products made with forced labor out of American supply chains, in particular through the Trade Act of 1930, the 2021 Uyghur Forced Labor Prohibition Act (UFLPA), and the recent adjustment to the de minimis provision, but there is far more to be done. In particular, as the United States pushes back against supply chains using products or components made from forced labor, companies are left asking what credible alternatives they have.

A Fair Labor Innovation Fund, funded both by the United States and like-minded donor countries strategically convened around a need for clean supply chains, would help countries develop industries free from forced labor, ensuring that alternatives exist for companies working to clean up their supply chains. Based on the presidential and congressional budgetary timeframes, the first year of the forthcoming administration should be spent developing the technical and strategic underpinnings of the fund, as well as recruiting other countries as participants, and the president’s budget request in February 2026 should include it as a significant budget account, capable of hitting the ground running. To ensure it is strategically positioned to have the greatest impact in key sectors with the worst forced labor violations, the fund should be focused on the top few priority sectors and products and surge funds into these first to incentivize building up the infrastructure required to create a credible alternative rather than having funds spread thinly right away. Policymakers should also develop an accompanying supply chain diversification incentivization strategy, with the input of private sector actors, that identifies ways funds could be used and leveraged to catalyze action in priority sectors, building on the research and consultations on key industries rife with forced labor that the U.S. government and other researchers have already conducted.

One of the main reasons forced labor is so prominent across supply chains is that it is so profitable. According to the International Labour Organization (ILO), forced labor is responsible for approximately $236 billion in illegal profit annually. This profitability also has the downstream impact of eliminating competition. Put differently, if two countries produce a single product, such as cotton, and forced labor is used by one of the countries, that country’s product will almost undoubtedly be cheaper to procure. This makes it very difficult for the second country to develop its cotton sector, often leaving the first country as the only option for the international market. This means that even well-meaning companies who would like to ensure clean supply lines have difficulty moving away from the tainted ones.

At a recent CSIS event, the Department of Labor’s Deputy Undersecretary of International Affairs Thea Lee addressed this point, saying that it was government’s prerogative to make forced labor unprofitable. One way to do this is to ensure clean supply lines can develop while being protected from a race to the bottom on pricing. A Fair Labor Innovation Fund could inject capital into nascent industries and prioritize investment in countries that have eliminated forced labor. This would help countries develop industries that could compete with those utilizing forced labor elsewhere without being immediately driven out of business by lower prices.

In addition to the normative good, and as is the case with the Uyghur Forced Labor Prevention Act, there are significant advantages in the strategic competition realm to combatting forced labor. Forced labor is present in many vital People’s Republic of China (PRC) source industries, such as cotton, aluminum, caustic soda, and fish. Assisting in the creation of alternatives will allow clean supply chains to thrive and will ensure that Beijing cannot maintain its stranglehold on supply chains. It will also help U.S. credibility on this issue to take tangible action to push for and incentivize alternatives, addressing partner concerns that the United States is quick to ask them to avoid PRC sources but does not help identify alternative solutions.

New funds often create interagency competition for control, so determining the correct home for a Fair Labor Innovation Fund is vital. Government entities such as the Departments of Commerce, State, and Homeland Security, as well as the U.S. Agency for International Development (USAID), will likely have their mandates implicated and should be called on to advise in both creation and implementation of the fund. However, the Department of Labor’s Bureau of International Labor (ILAB) is a natural home for such an innovation fund. As the publisher of the annual List of Goods Produced by Child Labor or Forced Labor, ILAB is already deeply aware of the industries most in need of support for the development of clean supply chains and thus can prioritize key products and sectors to begin with rather than spreading a fund thinly across the board. Additionally, ILAB is currently working with Customs and Border Protection on developing guidance that aims to center the voice of workers in efforts to improve and remediate labor protections. This work should cross-reference and lead to a human rights–based approach that takes into account both the individuals most impacted by forced labor and the ways to rid supply chains of such evils. 

Andrew Friedman is a senior fellow in the Human Rights Initiative at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Michelle Strucke is director of the Humanitarian Agenda and the Human Rights Initiative at CSIS.