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State Department Layoffs Could Hurt US Companies' Ability to Compete Globally

Strategic Insights

— 2 min read

The recent layoffs at the US State Department, which resulted in the elimination of the Business and Human Rights team, have been largely overlooked in headlines focusing on the implications for American diplomacy. However, the loss of expertise in this area could have far-reaching consequences for US companies operating in global markets. As an economist who has worked at several US trade agencies and the World Bank, I can attest to the growing importance of business and human rights policy for both global governance and US competitiveness.

Key Takeaways:

  • The State Department's Business and Human Rights team, eliminated in the recent layoffs, provided crucial expertise to US companies navigating shifting global human rights risks and regulations.
  • The loss of this support puts American businesses at risk of falling behind market trends and expectations, particularly with the rise of human rights due diligence laws in countries like the EU, France, and Australia.
  • US-based multinational companies must comply with HRDD laws in the countries where they operate, starting in 2028, to participate in the EU market.
  • Industry groups have endorsed human rights due diligence laws, which they see as leveling the playing field for responsible business activity, with some companies already reporting benefits from compliance.
  • The US government now lacks the expertise to advise US businesses on human rights issues, risking a weakening of the country's global business position.
  • The elimination of the Business and Human Rights team also removes the US government's ability to effectively engage in diplomatic efforts to improve human rights conditions globally.
  • The OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights have established clear policy frameworks for business and human rights since 2011.
  • The EU Corporate Sustainability Due Diligence Directive, adopted in July 2024, will reshape compliance for global companies across markets, industries, and supply chains.

Statistics:

  • 28 million people are globally in forced labor, producing products from cotton to car parts, according to the International Labour Organization.
  • The EU Corporate Sustainability Due Diligence Directive will begin to go into effect in 2028.
  • Investor demand for ESG investment opportunities is predicted to reach $40 trillion by 2030.
  • A 2025 survey of 1,300 German corporate decision-makers found that most believed their country's HRDD law gave them an edge over European competitors.
  • 44% of respondents in the same survey reported that the law gave them an advantage over US and Chinese companies as well.

Sources:

  • Carey Durkin Treado, Associate Teaching Professor of Economics, University of Pittsburgh, as quoted in "State Department layoffs could hurt US companies' ability to compete globally - an economist explains why" by The Conversation -- USA.
  • The Conversation -- USA (2) -- "State Department layoffs could hurt US companies' ability to compete globally - an economist explains why" (2025).
  • The Conversation -- USA (2) -- "Many global corporations will soon have to police up and down their supply chains as EU human rights 'due diligence' law nears enactment" (2025).
  • The International Labour Organization.
  • The OECD Guidelines for Multinational Enterprises.
  • The UN Guiding Principles on Business and Human Rights.
  • The EU Corporate Sustainability Due Diligence Directive.
  • The U.S. Chamber of Commerce.

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