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Option 2 : witnessing
The correct option is 2 as the use of ‘is’ gives a clue that the scenario is still prevailing in our society, which clearly shows that 'witnessing' is the most appropriate form to use. Present continuous tense is the most appropriate tense to use in such a scenario.
Therefore, the correct sentence is:
Witnessing a factory which employs child labor is a nerve-racking experience.
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