On YouTube, you can watch a video clip of Volkswagen’s chief executive, Herbert Diess, denying that he knows what’s going on in Xinjiang. When the BBC correspondent helpfully spells it out – so-called reeducation camps for one million Uyghurs – Diess says: “I’m not aware of that.” Either he was being culpably ignorant about a region where Volkswagen has a factory, or he was lying.

This was in the spring of 2019, and a company spokesperson soon declared that Diess was “of course aware” of the situation in Xinjiang. The case is particularly sensitive because Volkswagen was originally set up by the Nazis, and its use of forced labour during the Third Reich has been scrupulously documented by German historians.

It is interesting to compare Diess’s response with a statement made earlier this year, by the president of the Board of Deputies of British Jews, to coincide with Holocaust Memorial Day. “As a community, we are always extremely reluctant to consider comparisons with the Holocaust,” Marie van der Zyl wrote in a letter to the British prime minister. But, she went on, there are similarities between what is reported to be happening in China and what happened in Nazi Germany in the 1930s and 1940s. The violations of the human rights of the Uyghurs are “shaping up to be the most serious outrage of our time”, said Van der Zyl.

Volkswagen is significant in another way, too. It is an example of a western company that has become so dependent on the Chinese market that it can hardly do without it. China accounts for more than 40% of Volkswagen’s global car sales. Whatever the exact calculations that led Volkswagen to open its relatively small plant in Xinjiang in 2013, it seems clear that to close it down now would negatively impact its whole relationship with the Chinese regime, on which its business in the country depends. The company has got itself stuck between the rock of Xi Jinping and the hard place of an increasingly outraged western public opinion. The result could be a moral car crash.

Behind this leading western company that is too dependent on China is a leading western country that is at risk of becoming too dependent on China. Under Angela Merkel, China has risen to be Germany’s largest single trading partner. Her likely successor, Armin Laschet, the Christian Democratic Union candidate for chancellor, currently heads a federal state, North Rhine-Westphalia, which has a large stake in economic relations with the east Asian dictatorship. Every week, many giant container trains pull into the city of Duisburg, which is often billed as the western land terminus of Beijing’s belt and road initiative. Despite pressure on Berlin from the Biden administration in Washington, everything Laschet has said so far in the German election campaign suggests the continuation of a soft, business-first China policy. Without a change in Germany’s policy, there will be no coherent European China policy.

To be clear: this is not just about Germany. Coca-Cola also has a factory in Xinjiang. Wall Street firms are piling into Chinese markets wherever they can. British bankers, lawyers and estate agents have for years been falling over themselves to service Russian oligarchs, Chinese apparatchiks and Central Asian tyrants. France would love a larger slice of the action.

In the original cold war, the west was never economically dependent on the east (then meaning the Soviet bloc). On the contrary, in the later years of the east-west conflict, several east European states became heavily indebted to the west. That hastened their downfall. In this new cold war – or hot peace, if you would rather – the west is already economically dependent on the east (now meaning China). In the 2000s, it was still just possible to believe in the possibility of Wandel durch Handel (change through trade). But when the German economics minister, Peter Altmaier, said last year: “I still believe that change can be achieved through trade,” it sounded like the platitude of a bygone era. In the past decade, China has done more trade, become more repressive and exercised more leverage over the west. So who has changed whom?

Although it is a dangerous illusion to believe that economic interdependence necessarily prevents international conflict, we certainly do not want a world of competitive autarkies. Western democracies do, however, need to ensure that they are not strategically dependent on China. We had a taste of such dependency in the early months of the Covid pandemic, when we discovered just how much of our personal protection equipment came from China. If Huawei were to dominate our 5G networks, that would be a deep strategic vulnerability.

Western businesses must also accept the ultimate primacy of politics in a democracy. In the German Ostpolitik of the 1970s and 1980s, German trade and investment in the Soviet bloc served the country’s larger foreign policy goals. In Germany’s recent China policy, by contrast, the commercial tail has wagged the political dog.

As individual investors and consumers, we should include a broader concern about violations of human rights in ESG (environmental, social and governance) criteria for assessing companies. The German parliament recently passed an admirable supply chain act, which requires German companies to monitor human rights standards wherever they produce. It will be fascinating to see how Volkswagen responds.

Last year, the chief executive of Volkswagen Group China, Stephan Wöllenstein, said he was aware of the “allegations” in relation to Xinjiang (what a great leap forward in executive knowledge!), but that no forced labour is used in their factory or its local supply chains. Diess repeated this assertion in an interview earlier this year, claiming: “Neither we nor our suppliers employ forced labourers.”

As it happens, I drive a Volkswagen. It’s a perfectly good car, but I need to change it soon for one with a climate-friendly electric engine, and there are plenty of other good makes. I am realistic. I don’t expect the boss of Volkswagen to speak out like some fiery human rights advocate. In Europe, jobs, prosperity and the sustainability of our social model depend on those earnings from abroad.

But the next time a Volkswagen executive is asked about the Chinese camps by one of those troublesome journalists, he or she could at least say something like this: “As a citizen, I am deeply concerned whenever I hear credible reports of human rights violations in areas where we do business. I hope our government, and all democratic governments, will continue to speak up in defence of human rights everywhere. As a company, especially having in mind the early history of Volkswagen, our specific duty is to ensure that no violations of human rights are to be found in our supply chain.” And then a group of reporters experienced in Chinese affairs should be invited to visit the Volkswagen factory in Xinjiang, talk to its employees and look in detail at its supply chain. History and conscience demand nothing less.

• Timothy Garton Ash is a Guardian columnist