This summer, the U.S. State Department experienced a significant workforce reduction, with more than 1,300 employees losing their jobs in a mass firing.
While much of the media attention focused on the implications for American diplomacy, the layoffs also hint at broader consequences for U.S. companies aiming to maintain competitiveness in global markets.
Among the casualties of this reorganization was the State Department’s Business and Human Rights (BHR) team, which had played a crucial role in assisting American enterprises in avoiding human rights violations and adhering to international regulations.
The implications of this team’s disappearance extend beyond simply diplomatic relations and touch on a key area for U.S. economic growth and global reputation—a concern that holds significant weight in economic circles.
As an economist focused on international trade, I recognize the growing relevance of BHR expertise in framing both U.S. competitiveness and global governance frameworks.
Throughout my academic career, as well as during my time at various U.S. trade agencies and the World Bank, I have seen firsthand how vital this expertise is for helping businesses navigate the complexities of global human rights dynamics.
The layoff of the BHR team diminishes the support American businesses have come to rely on, increasing the risk of them falling behind on essential market trends and stakeholder expectations.
The evolution of business and human rights norms has been a gradual process spanning over 75 years, beginning with foundational documents like the 1948 Universal Declaration of Human Rights.
However, it was not until the establishment of the United Nations Guiding Principles on Business and Human Rights in 2011, along with the OECD Guidelines for Multinational Enterprises, that a clear directive emerged.
This directive places the onus on businesses—alongside governments—to ensure that their operations do not contribute to human rights abuses.
Issues related to supply chain integrity are particularly pressing, with businesses required to investigate potential “upstream impacts,” such as labor practices among suppliers, as well as “downstream impacts,” such as avoiding sales to hostile governments.
The challenges are real and pervasive, as evidenced by reports indicating that roughly 28 million individuals are currently trapped in forced labor conditions worldwide.
Recent concerns have also surfaced regarding the distribution of AI and surveillance technologies to authoritarian regimes, further complicating the landscape for responsible corporate practices.
Traditionally, the State Department has been a leading authority within the U.S. government on promoting human rights policies on a global scale.
The three principal responsibilities in this domain historically included assessing human rights conditions internationally, providing foreign aid to advance these issues, and engaging in diplomatic initiatives aimed at enhancing human rights globally.
The BHR team functioned primarily within this last category, offering invaluable expertise as international frameworks surrounding human rights in business evolved and expanded.
In recent years, there has been a growing trend toward the implementation of human rights due diligence (HRDD) laws amongst major global economies.
Various countries, including nations in the European Union, France, the Netherlands, Germany, and the United Kingdom, have enacted or proposed such legislation.
Most notably, the European Union adopted the Corporate Sustainability Due Diligence Directive in July 2024, a regulatory regime anticipated to significantly influence compliance expectations for companies across the globe beginning in 2028.
Industry leaders and organizations have largely received these HRDD laws positively, perceiving them as measures that can level the playing field for entities engaging in ethical business practices.
A 2025 survey indicated that 1,300 German corporate decision-makers viewed the HRDD law as advantageous, even when compared to U.S. and Chinese competitors.
Entering the EU market will require U.S. multinational firms to align with these forthcoming human rights regulations by 2028.
While some industry groups support such HRDD measures, others—like the U.S. Chamber of Commerce—have voiced apprehensions regarding the deadlines and specific mandates associated with these new laws.
Before the recent reshuffle of the State Department, the BHR team collaborated with international organizations and other governments to outline definitive policy standards for business and human rights.
The elimination of the Office of Multilateral and Global Affairs along with the BHR team has stripped U.S. businesses of a critical resource essential for navigating the complexities of foreign regulations.
Having accumulated insights from various economic cycles since the 1990s, I understand that U.S. competitiveness hinges on a robust grasp of global market demands and regulatory frameworks.
To flourish, American enterprises must adeptly operate within the legal boundaries of their international partners and suppliers.
Moreover, consumer and investor scenarios are shifting toward prioritizing ethical business behavior, with expectations for corporate accountability on the horizon.
From sustainable products to environmental, social, and governance (ESG) mandates, there’s an increasing focus on corporate practices that reflect a commitment to human rights and sustainability.
Notably, analysts predict significant growth in ESG investments, potentially reaching $40 trillion by 2030.
For the U.S. government to effectively position its companies against emerging human rights-related market challenges, a solid foundation of expertise in human rights issues is essential.
By dismantling that expertise, the U.S. risks diminishing its competitive standing on the world stage.
image source from：theconversation
