Lifting People Out of Poverty: The past, present, and future role of sweatshops in the global economy
By Evan Herring, Jane Stern, & Lucretia McCovy
The focus of our research centers around commercial importers and the sweatshop industry. We started by exploring how outsourcing, and thus the sweatshops, became such an integral part of so many large corporations. In order to narrow our research we focused mostly on the apparel industry. We also wanted to explore solutions to the problems in the sweatshop industry. This turned our focus to codes of conduct and a new Fair Trade system.
This document consists of three main parts:
1) The Sweatshop Industry; written by Evan Herring
a) The economics behind sweatshops
b) Why production has changed location throughout history
c) Apparel and footwear producer in Asia
d) A case study of Nike
2) Codes of Conduct in the Apparel Industry: A Solution to the International Child Labor
Problem?; written by Jane Stern
a) The use of child labor in the production of apparel for the U.S. market
b) Prevalence and impact of codes of conduct prohibiting the use of child labor in U.S. apparel markets today
c) Recommendations for improvements
3) Fair Trade; written by Lucretia McCovy
a) What Fair Trade is and how it works
b) Fair Trade vs. Commercial Importers
c) The impact Fair Trade has had and can have on the world economy
Codes of Conduct in the Apparel Industry: A Solution to the International Child Labor Problem?
This report focuses on the use of child labor in the production of apparel for the U.S. market, and reviews the extent to which U.S. apparel importers have established and are implementing codes of conduct or other business guidelines prohibiting the use of child labor in the production of the clothing they sell.
In a recent development, corporate codes of conduct and other business guide-lines prohibiting the use of child labor are becoming more common, as consumers as well as religious, labor and human rights groups are increasingly calling upon companies to take responsibility for the conditions under which the goods they sell are being manufactured. Many U.S. companies that import apparel have adopted codes of conduct that prohibit the use of child labor and promote other labor standards. For purposes of this report, the term codes of conduct is used generically to refer to various types of corporate policies and standards on child labor and other working conditions including: statements of company policy in the form of letters to suppliers; provisions in purchase orders or letters of credit; and/or compliance certificates.
1. Child Labor in the Apparel Sector
The term child labor generally refers to any economic activity performed by a person under the age of 15. Not all work performed by children is detrimental or exploitative. Child labor does not usually refer to light work after school or legitimate apprenticeship opportunities for young people. Nor does it refer to young people helping out in the family business or on the family farm. Rather, the child labor of concern is generally employment that prevents effective school attendance, and which is often performed under conditions hazardous to the physical and mental health of the child.
There are no reliable statistics on the rate of child employment in any particular economic activity, including the apparel sector. Most information on child labor in the garment industry comes from eyewitness accounts, studies by non-governmental organizations (NGOs) and academicians, reports by journalists, and studies by the International Labor Organization (ILO).
Anecdotal information indicates that in some countries, fewer children may currently be working on garment exports for the U.S. market than two years ago. A dramatic example involves Bangladesh, where large numbers of children worked in garment factories in as recently as 1994. International media attention and threats of boycotts and can-celled work orders led to the dismissal of thousands of child workers from the garment sector unfortunately with no safety net in place for them.
Thus, it is possible that in the absence of government programs to assist the children, the precipitous dismissal of child workers can endanger, rather than protect them. More research is needed so that governments, industry, international organizations, and others concerned with the welfare of children are better equipped to design appropriate programs. It is clear, however, that local and national commitments to universal and free education for children are immediate and positive steps which can and should be taken.
One reason for any potential downward trend in the use of children in the garment industry may be the widespread adoption in the last several years of U.S. company codes of conduct prohibiting child labor. This potential downward trend may also be the result of (1) greater public awareness about child labor and its use in export industries; (2) changes in the garment industries of exporting countries tending to eliminate subcontractors where the use of child labor is most likely to occur coupled with policies to the same effect by U.S. importers; and (3) concerns that importing countries could enact legislation banning the importation of products made by children. Most likely all of these factors have worked in a mutually-reinforcing way to reduce the use of child labor in the export sector. On the other hand, there remains continuing evidence of child labor in the apparel industry of some countries, including the use of child labor in homework. To be any more definitive, further information is needed.
2. Codes of Conduct
Voluntary codes of conduct have become increasingly common among U.S. corporations in recent years, particularly in the apparel sector. They have their roots in ethical guidelines for multinational corporations developed in the 1970s and voluntary codes of conduct developed by private groups during the 1980s. The first apparel company code of conduct was adopted in 1991. Most other codes have been developed in the last two or three years.
United States corporations have adopted corporate codes of conduct for a variety of reasons, ranging from a sense of social responsibility to pressure from competitors, labor unions, the media, consumer groups, shareholders, and worker-rights advocates. The U.S. Government has also encouraged U.S. corporations to adopt model business principles for their overseas operations.
3. The Apparel Industry
The U.S. is the worldÕs largest importer of garments. Imports of garments have been increasing steadily since the 1970s. Between 1985 and 1995, U.S. imports of apparel grew in current dollars by 171 percent, reaching nearly $34.7 billion. In that year, the U.S. imported apparel products from 168 countries.
The U.S. apparel industry is made up of a complex chain of actors whose functions often overlap. The industry includes the following entities:
Apparel manufacturers are primarily engaged in the design, cutting, and sewing of garments from fabric. Some manufacturers are contractors or sub-contractors, which generally manufacture apparel from materials owned by other firms. Larger manufacturers often contract production to many such contractors and subcontractors in the U.S. and abroad. Some manufacturers are vertically integrated, producing the textiles from which they make garments, or even operating retail outlets.
Apparel merchandisers generally design and market clothing, but contract the actual production to manufacturers.
Buying agents locate, qualify and inspect foreign suppliers/producers of garments, negotiate with suppliers/producers, and often monitor production for quality control and compliance with other standards. They may be used by U.S. companies that do not have a large presence abroad, or in addition to a U.S. company's buying staff.
Retailers are primarily engaged in the distribution, merchandising, and sale of garments to consumers. Apparel retailers include department stores, mass merchandisers, specialty stores, national chains, discount and off-price stores, outlets, and mail-order companies. A relatively new development is the rise of electronic forms of retailing such as interactive TV and on-line shopping services. Some retailers who sell their own private labels go beyond their traditional role as distributors and become directly involved in the design and sourcing of garments from manufacturers and contractors.
B. Codes of Conduct in the U.S. Apparel Industry
In order to gather information on the extent and implementation of U.S. garment importers codes of conduct containing child labor provisions, the Department of Labor conducted a voluntary survey of the largest U.S. retailers and apparel manufacturers, based on their level of sales in 1995 as reported in publicly available documents. A questionnaire on import sourcing and child labor policies was sent to 48 companies, representing U.S. apparel manufacturers, department stores, mass retailers, specialty stores, and non-store direct marketers (mail order and electronic home shopping). Forty-five companies responded to the questionnaire, three of whom said that they regard all information provided as confidential. The remaining 42 companies all indicated that they acquire foreign-produced apparel, the majority as direct importers (i.e., purchasing apparel directly from abroad for their own account), others as indirect importers (i.e., purchasing apparel domestically from U.S. companies that have imported the goods), or in both forms. Follow-up telephone interviews were conducted with respondents to obtain additional information.
1. Existence and Scope of Codes of Conduct
Thirty-six of the 42 companies indicated that they have adopted a policy specifically prohibiting the use of child labor in the manufacture of goods they import from abroad. These policies take different forms: special documents (typically referred to as codes of conduct) outlining their values and guidelines in a variety of areas, including child labor. These documents are a means for companies to clearly and publicly state the way in which they intend to do business to their suppliers, customers, consumers and shareholders; letters stating their policies on child labor circulated to all suppliers, contractors and/or buying agents; compliance certificates, which typically require suppliers, buying agents, or contractors to certify in writing that they abide by the company’s stated standards prohibiting the employment of children; clauses in formal documents such as purchase orders or letters of credit, which make compliance with the policy a contractual obligation for suppliers; a combination of the above.
Corporate codes of conduct that address labor standards vary from company to company with regard to the specific labor standards included. Some or all of the following elements are found in various codes: (1) prohibitions on child labor; (2) prohibitions on forced labor; (3) prohibitions on discrimination based on race, religion, or ethnic origin; (4) requirements to ensure the health and safety of the work-place; (5) provisions on wages, usually based on local laws regarding minimum wage or prevailing wage levels in the local industry; (6) provisions regarding limits on working hours, including forced overtime, in accordance with local laws; and (7) support for freedom of association and the right to organize and bargain collectively.
U.S. corporate codes of conduct in the garment industry also differ with respect to how the labor standards are defined. The standards used to define child labor vary significantly from company to company. For example, a company’s policy statement may: state a minimum age for all workers who make their products; refer to the national laws of the host country regarding the minimum age of employment or compulsory schooling; refer to international standards (e.g., ILO Convention 138); or use some combination of the three.
Unfortunately, in some cases, companies policies prohibiting child labor in the production of their goods do not contain any definition of child labor.
An important issue regarding implementation of corporate codes is their transparency, or the extent to which foreign contractors and subcontractors, workers, the public, NGOs and governments are aware of their existence and meaning. Transparency reinforces the message of codes and leads to more credible implementation. When transparency is lacking, interested parties cannot benefit fully from a code of conduct.
Most of the respondents with child-labor policies indicated that they had distributed copies of their policies to all suppliers, but few stated that they had communicated their existence to a wider audience or engaged in educational efforts. Many respondents stated that they did not know whether workers were aware of the existence of their codes.
A small group of companies indicated that they have tried to ensure that production workers in overseas facilities know about their code or policy by specifically requiring that copies of such a statement be posted in the foreign factories from which they purchase.
Only a few respondents solicited input from international organizations, labor unions, NGOs, or government agencies in developing or implementing their codes of conduct.
Monitoring is critical to the success of a code of conduct; it also gives the code credibility. Yet, most of the codes of the respondents do not contain detailed provisions for monitoring and implementation, and many of these companies do not have a reliable monitoring system in place.
Respondents indicated that they utilize a variety of means to monitor that their codes of conduct or policies on child labor are respected by their suppliers. Some companies use a form of active monitoring, which involves site visits and inspections by company staff, buyer agents or other parties, to verify that suppliers are actually implementing the importing company’s policy on child labor. Some use contractual monitoring, whereby they rely on the guarantees made by suppliers, usually through contractual agreements or certification, that they are respecting a company’s policy and not using any child labor in production. This may be seen as self-certification by contractors or suppliers. Companies that use contractual monitoring in some cases have no mechanism for ensuring compliance. Some respondents indicated that they use a combination of active and contractual monitoring.
Active monitoring may be done through regular checks, formal audits or evaluations, or special visits by corporate staff. The frequency and intensity of visits vary greatly from company to company. For example, some companies may focus their site visits on their larger suppliers or on suppliers where there have been alleged problems, or may only monitor those facilities from which they import directly or which manufacture their private-label merchandise.
Contractual monitoring shifts at least part of the burden of responsibility for ensuring compliance with codes of conduct onto the foreign manufacturer, the supplier, or the buying agent. Even when monitoring is primarily contractual, there are instances in which the U.S. corporation requires documentary proof of compliance or reserves the right to carry out on-site inspections.
While technically not a monitoring activity, evaluation of prospective contractors with regard to labor standards is becoming an important aspect of code implementation. Seventeen of the companies that responded to the survey stated that they have a process in place to evaluate overseas facilities before they establish a business relationship with them. Such on-site evaluations or inspections have long been made primarily to verify whether the facilities have the physical capacity to meet quality and quantity specifications. Increasingly, the working conditions and employment practices of prospective contractors are also being evaluated, screening out companies that are violators or have the potential for being so in the future.
Several of the companies that conduct such evaluations indicated that compliance with their policies on working conditions is an important factor in the decision to place a production program with a contractor. These evaluations, according to many, enable them to screen out contractors who do not comply with applicable legal or company standards.
A few respondents indicated that such pre-contract inspections had enabled them to avoid doing business with a facility that appeared to employ under-age children, but most reported that when facilities were rejected, it was usually for other reasons.
Enforcement of codes of conduct refers to how U.S. companies respond to violations of their codes of conduct. The vast majority of respondents stated that they have never found any violation of the child labor provisions of their codes; some companies attributed this to their efforts to evaluate and carefully select suppliers before entering into contracts with them, while others indicated that child labor
violations of their codes are less common than other types of violations, such as safety and health.
Most respondents stated that, faced with an allegation of violation of their code of conduct, they would first investigate to confirm the use of child labor and then impose enforcement measures. Enforcement policies range from the more severe immediate termination of the business relationship to more tempered responses, including demand for corrective action (e.g., dismissal of under-age workers), cancellation of specific orders, and placement of the violating supplier on probation.
C. Implementation Experiences of Codes of Conduct in the U.S. Apparel Industry
Department of Labor officials visited six countries where there is extensive production of garments for the U.S. market. These countries included, the Dominican Republic, El Salvador, Guatemala, Honduras, India, and the Philippines. The objective of the visits was to learn about foreign suppliers approaches to the implementation of the established child labor policies of U.S. importers. As many interviews as possible were held with relevant persons or organizations who were found to be in some way associated with the apparel industry. These included Labor Ministry officials, manufacturers, plant managers, buyers, trade associations, unions, workers, community activists, human rights groups, organizations concerned with children's issues, and other NGOs. At the beginning of each interview, Department of Labor officials indicated that the purpose of the interview was to gather information for a public report, and any information collected could be used for that purpose.
The central element of the field visits was the opportunity to discuss matters related to the existence and implementation of codes of conduct with managers and workers of plants producing apparel for the U.S. market. Department of Labor officials visited 74 apparel-producing plants and 20 export processing zones and met with key representatives of the garment industry and more specifically, of the garment export industry, in all six countries. The results of the interviews conducted at the 70 plants determined to be exporting to the U.S. market at the present time are reported below.
1. Child Labor in the Apparel Industry
The consensus of government officials, industry representatives, unions and NGOs interviewed by the Department of Labor in the Dominican Republic, El Salvador, Guatemala, and Honduras is that child labor is not now prevalent in their garment export industries. In the very few cases where child labor was mentioned, the children were 14 or older. However, the use of workers 15 to 17 is common and there may be extensive violations of local laws limiting the hours for workers under 18.
There was some anecdotal information about the prior use of child labor in the garment industry in Central America. Labor union representatives stated that about two years ago, the garment export industry began to dismiss young workers to avoid adverse publicity in importing countries. Many plant managers stated that they no longer hire young workers (14-17 years of age) even if they meet domestic labor law or company code of conduct requirements. However, there are also some reports of fraudulent proof-of-age documents being used by child workers to seek jobs in the garment industry. There continue to be allegations in Guatemala of children working for small subcontractors or in homework in the San Pedro de Sacatepequez area.
Meanwhile, it is clear that children continue to work for subcontractors and in homework in the Philippines and India. They perform sewing, trimming, embroidering and pleating tasks. Currently, children are not prevalent in the larger factories in the Philippines, and in a recent development, plant managers in India have become more concerned about not using child labor.
While most survey respondents indicated they have distributed their code of conduct to all suppliers, many said they were not certain if workers knew about their code. Field visits in six countries revealed that managers of two-thirds of the plants visited indicated that they were aware of codes of conduct prohibiting the use of child labor, particularly of the codes issued by their U.S. customers. However, not all of the companies that indicated they were aware of codes of conduct had a copy of the code of conduct (or contractual provision) available, that they could show and discuss with the visiting Department of Labor official.
Formal training of plant managers and supervisors about the codes of con-duct was not common in the six countries visited. About 30 percent of the facilities visited where managers indicated awareness about codes of con-duct stated that they had received some formal training regarding the U.S. companie’s code of conduct. However, more than half of these facilities produced for just two companies. It was also evident that the intensity of the training varied widely from company to company.
Posting of a U.S. garment importers code of conduct is not commonplace in most of the countries visited. In all, 21 of the 70 plants visited by the Department of Labor officials had posted a code of conduct of a U.S. customer; 7 of such plants (out of 8 visited in that country) were in El Salvador. The number of plants visited in each of the other countries where codes of conducted were posted was: Dominican Republic, 2; Honduras, 1; Guatemala, 2; India, 2; and the Philippines, 7.
Although a significant number of suppliers knew about the U.S. corporate codes of conduct, and codes were posted at 30 percent of the plants visited, meetings with workers and their representatives in the six countries suggested that relatively few workers are aware of the existence of codes of conduct, and even fewer understand their implications.
Department of Labor officials also found a mixed record regarding the extent to which host governments, NGOs, and business organizations were familiar with codes of conduct and their implications.
While most respondents monitor foreign suppliers for quality of product and scheduling coordination, monitoring of child labor policies is far less common. Field visits revealed that all of the plants exporting garments to the U.S. confirmed that they are subject to regular visits by their U.S. customers or their agents to verify product quality and to coordinate production and delivery schedules. About 90 percent of the companies visited stated that monitors/inspectors verifying product quality generally also examined working conditions in the plant, with emphasis on safety and health issues (climate control, ventilation systems, fire escapes, etc.).
Monitoring for compliance with provisions of the codes of conduct of U.S. garment importers dealing with labor standards and child labor in particular is less common. Foreign suppliers that are wholly owned by a U.S. corporation, or contract directly with a U.S. corporation with a presence abroad, seem to be subject to the most frequent and most thorough monitoring of codes of conduct, including child labor and other labor standards.
A few U.S. corporations, particularly those in manufacturing, tended to have structured monitoring of all aspects of their codes of conduct and subjected their foreign subsidiaries to such disciplines.
Also evident from the field visits were the numerous instances of contractual monitoring of the codes of conduct. A reliance upon a form of contractual monitoring is most prevalent in the cases of U.S. retailers who do not have a significant presence abroad. In these situations, the burden of monitoring compliance with the U.S. importerÕs child labor policies rests with the foreign agent, contractor or subcontractor, typically through a certification process. The role of the U.S. importer in monitoring these situations is minimal. In addition, site visits confirmed that some U.S. importers screen foreign garment contractors prior to entering into a supply relationship.
Foreign plant managers indicated that factories which have passed the screening process and have become contractors of U.S. apparel importers may face a range of corrective measures should they fall short in complying with codes of conduct. Examples of corrective measures cited included, changes to the physical plant (improvement of bathrooms, eating facilities, lighting, ventilation), monetary penalties, immediate dismissal of young workers, and termination of contracts.
Foreign plant managers and other industry officials stated that continued access to the U.S. market is a very large incentive for overseas garment producers to meet quality/timeliness requirements and comply with codes of conduct.
D. Conclusions and Recommendations
Based upon the information collected from the voluntary survey of 48 U.S. apparel importers and site visits to six countries producing garments for the U.S. market, the Department of Labor found that codes of conduct can be a positive factor in solving the global child labor problem. Most of the large U.S. apparel importers responding to the voluntary questionnaire have adopted codes prohibiting child labor in garment production and some are clearly committed to their implementation. This is a remarkable change that has occurred in a matter of just a few years.
Nevertheless, codes of conduct are not a panacea. Child labor remains a serious problem, with hundreds of millions of working children around the world. However, the presence of children in the garment export industry may be reduced by the implementation of codes of conduct. It is also possible that changes induced by codes of conduct could have positive spill over effects for children more generally, e.g., a greater commitment of a foreign country to compulsory education for children. However, this relationship requires further study.
Finally, because codes of conduct seem to be tools used primarily by large apparel importers, there may remain smaller importers without codes of conduct, still willing to overlook the working conditions of the plants in countries from where they purchase their garments. This question also deserves further study.
Consistent with the important efforts already undertaken by many U.S. apparel importers, U.S. companies should consider whether some additional voluntary steps might be appropriate:
1. All actors in the apparel industry, including manufacturers, retailers, buying agents and merchandisers, should consider the adoption of a code of conduct.
If all elements of the apparel industry have a similar commitment to eliminating child labor, this would have a reinforcing impact on the efforts that the leaders in the industry have made. Trade associations should consider whether or not they could increase their technical assistance to help assure that the smaller companies in the industry can achieve this objective.
2. All parties should consider whether there would be any additional benefits to adopting more standardized codes of conduct.
There is a proliferation of codes of conduct. Some foreign companies and producer associations are even drafting their own codes. The definition of child labor differs from code to code, thereby creating some uncertainty for business partners and workers as to what standard is applicable.
3. U.S. apparel importers should consider further measures to monitor subcontractors and home workers.
Since most of the violations of labor standards, including child labor, occur in small subcontracting facilities or homework, U.S. apparel importers should consider further measures to monitor subcontractors more closely.
4. U.S. garment importers, particularly retailers, should consider taking a more active role in the monitoring/implementation of their codes of conduct.
The implementation of codes of conduct is a complex matter, and a relatively recent endeavor. Implementation seems best and most credible when U.S. companies get directly involved in the monitoring. There is little incentive for foreign companies to comply with a U.S. importers code of conduct if there is no verification of actual behavior.
5. All parties, particularly workers, should be adequately informed about codes of conduct so that the codes can fully serve their purpose.
In the supplying countries, managers of enterprises are generally familiar with the codes of their clients. Workers, however, are seldom aware of codes of conduct of the U.S. corporations for which they make garments. NGOs and foreign governments are also not fully informed about codes of conduct.
A. A quick Look At the Global Economy
B. Globalization From Below
II. Fair Trade
A. What is it?
B. Fair Trade Benefits
C. Fair Trade Risks
III. Fair Trade Organizations
A. Fair Trade Federation
B. International Federation for Alternative Trade
C. International Federation of Organic Agricultural Movements
D. Co-op America
E. European Fair Trade Association
F. Transfair International
G. Max Hevelaar Foundation
IV. Fair Trade Organizations vs. Commercial Importers
V. How FTOs are Impacting the Economy
VI. The Future of Fair Trade
A. Lifting people out of poverty
B. Doing our part
VII. FTO Contact Information
A. Retailers in California
B. Wholesalers Based in California
A quick Look At the Global Economy
We live in an unjust world. Our resources, both natural and economic, are distributed very unevenly and not enough people are taking responsibility to change that. The first world elites DO have the power to redistribute resources. However, instead of creating equality out of a world that is inherently unequal, the wealthier nations are exploiting the poorer nations and capitalizing on the fact that the world is unjust.
Defenders of the system keep reassuring us that if we can just get economic growth rates high enough, these problems will be solved. In fact what is happening is that unrestricted growth of big companies and this globalization of market forces has greatly increased the inequality in the world. Just 150 years ago there was not great inequality between the standards of living of people in the global north and those in Africa, Asia and Latin America. But slavery, colonialism and an increasingly integrated world economy transferred wealth from the south to the north. The data shows that during a period of significant growth in world trade (1960 to 1989), global inequality got significantly worse: the ratio between the richest 20% and poorest 20% of the world population went from 30 to 1 to 59 to 1. Many nations become poor because of unfair national and international trading practices.
The majority of the poor live in the South and are frequently exploited by the wealthier and more powerful trading nations. Today, the richest 20 percent of the world's population receives 83% of the world's income, while the poorest 60% of the world's people receive just 5.6% of the world's income. The richest 20% of the world's population in northern industrial countries uses 70% of the world's energy, 75% of the world's metals, 85% of the world's wood, and 60% of the world's food. This 20% minority is also responsible for producing about 75% of the world's environmental pollution.
The primary concern of rich nations and powerful companies is not the well-being of the world’s people or the preservation of the environment, but how to maximize profits. Cavanagh and Frederick Clairmonte have calculated that just over a quarter of the world's production comes from General Motors, Mitsubishi, Shell, Philip Morris and 200 of the other largest firms. These firms are the primary beneficiaries of the world's rapidly growing trade. As they compete with one another to capture global markets, their primary mode of reducing costs has been through cutting jobs, wages and benefits. Between 1979 and 1992, for example, the Fortune 500 largest firms in the U.S. cut 4.4 million workers from their payrolls globally to remain competitive and keep profits high. John Cavanagh has determined that more than a quarter of the world's production comes from General Motors, Mitsubishi, Shell, Philip Morris and the other 200 largest firms. As these firms compete with one another to capture global markets, they have cut jobs, wages and benefits. In addition, the United Nations says, up to a third of the world's trade takes place between affiliates of the same firm. It' s these multinationals, not the “free market”, Cavanagh contends, that set the terms of trade. As agreements like NAFTA enhance corporations' mobility, they are able to pit developing countries against one another in providing the lowest environmental and labor standards.
Globalization From Below
It may seem as though the wealthy elite nations are in control of the global economy. According to the evidence presented thus far, until those powerful governments and “controlling companies” take the initiative and responsibility for the negative effects of the growing world economy, poorer nations and less powerful institutions will continue to suffer. However, there is another vision of globalization. One lead by grassroots alliances of human rights activists, trade unions, women's organizations, environmental coalitions and farmers organizations. This "globalization‑from‑below" does not get as much publicity as the elite form of globalization nor does is possess the amount of money or political pull of the elites, but it is growing just as rapidly. It’s strongest weapon at the moment is moral authority.
This alternative vision calls for more openness and accountability by institutions such as the World Bank, the IMF and transnational corporations. It calls for raising wages, health and safety standards in the third world to bring them up to first world levels, rather than driving first world standards downward in a desperate effort to keep capital from fleeing to lower wage areas. It calls for stewardship of natural resources that will preserve something of the environment for our grandchildren to enjoy. It seeks to redefine self‑interest so that it is more in line with the common interest of humanity.
Fair Trade Organizations (FTOs) are committed to this alternative vision of globalization. Fair Trade brings the benefits of trade into the hands of communities that need it most. It sets new social and environmental standards for international companies and demonstrates that trade can indeed be a vehicle for sustainable development. Today, a growing movement of workers, environmentalists, consumers, farmers and social movements worldwide is calling for a different framework for trade. They want a global trading system that promotes workers' rights, protects the environment and sustains the ability of local producers to meet community needs. Together, as consumers, they can make a huge difference by demanding significant changes in the ways goods are produced, and vote with their dollars for a more just and environmentally sound trading system.
What is it?
FTOs work to help eliminate the middleman (commercial importers) and give artisans, farmers, and other producers direct contact with consumers. Producers are paid fair wages for the work they put into products. Consumers are guaranteed quality products and the assurance that sources, production and workplaces do not exploit people or the environment. Fair Trade means an equitable and fair partnership between marketers in North America and producers in Asia, Africa, Latin America, and the Caribbean.
Many of the goods that we consume every day come from farmers in the Third World. Unfortunately, many of these products are produced and traded in such a way that very little of the price that we pay at the grocery store reaches the people who actually grow these items.
Part of the problem is control of production. Poor farmers in the Third World are often locked into a cycle of debt and poverty. Many people are forced to work on plantations for very low wages. Small farmers who are lucky enough to own their land are often isolated from the market and forced to sell their products to middlemen at very low prices. Because farmers are cut off from the marketplace, profits go to the businessmen and large landowners who control land, capital, and access to First World markets.
Another aspect of Fair Trade is to generate income for artisans of these poorer nations. As a positive side effect, increased knowledge about world cultures is made possible. For example, Global Exchange, a Fair Trade retailer, offers consumers the opportunity to purchase beautiful, high quality gifts, housewares, jewelry, clothing, and decor from producers that were paid a fair price for their work. They tell the stories of the cultures and families, primarily indigenous peoples and women, that created these amazing crafts from Bali, South Africa, Haiti, Guatemala, Kenya, Mexico, Cambodia, Nepal, Thailand, as well as the United States.
Fair Trade Benefits
Here is a comprehensive list of the benefits of Fair Trade:
• Values and preserves traditional cultures
• Generates fair income for thousands of artisans around the world
• Educates consumers about trade and cultures
• Promotes people‑to‑people ties among artisans, traders, and consumers
• Gender equity: 70% of craft artisans are women
• Provides resources for education, health care, and community development
• Promotes environmental stewardship
• Supplements income in between harvest cycles, when rural communities most need income
• Promotes democratic participation in cooperative group structures
• Ensures that artistic technologies in indigenous cultures are passed on to the next generations
Fair Trade Risks
There is both promise and risk associated with the idea of representing Fair Trade and environmental issues jointly in the retail marketplace. "Green" or forest products provide an opportunity to further educate the consumer and perhaps attract more customers. However, the “green” label must be used honestly and consistently. Not all "natural fiber" clothing, "natural" personal care products, and "rainforest" products are necessarily good for the planet, only those that are organically grown, sustainably harvested, responsibly produced, in addition to being fairly traded. So too, although handicrafts generate income at the community level and are suitable Fair Trade items, over‑exploitation of resource materials is often a problem. Here are some examples based on information from AMACUP in Mexico and Co‑op America:
• Bark paper (amate from six species of Ficus and Heliocarpus is the canvas for lovely Mexican folk art paintings sold throughout Mexico. There are five towns involved in the annual production of 48,000 pieces of amate paper‑‑the equivalent of 16,000 trees!
• Thousands of artisans are now making the brightly colored animales fastasticos, or wooden carved animals from Oaxaca. The artisans have done well and the economy of entire villages has improved. However, there is no evidence that this level of tree exploitation can be sustained, even with a reported replanting program.
• Rayon, Tencel, or acetate clothing, most of which comes from developing countries such as Indonesia, is made from wood pulp from virgin trees. There is mounting evidence that rayon clothing is responsible for significant forest destruction, in addition to the pollution caused by chemicals and dyes.
There are undoubtedly many folk art products that have been sold in Fair Trade stores, or perhaps still are, that fall into the gray area of sustainability‑‑phingo wood (African ebony) carvings from Tanzania, cactus rainsticks from Chile, and the many carvings currently coming from Bali. Baskets, hats, and other items woven from botanical fibers number in the millions of pieces worldwide. These are some of the most popular items at the retail level, purchased from responsible businesses, and consistent with the Fair Trade motto, but not necessarily sustainable.
If handicrafts and agricultural or forest products are promoted as a way to improve local economies, sound environmental planning must be acknowledge and encourage from the start. Importers should be aware of the levels of exploitation of the products they import in addition to the Fair Trade issues; retailers must be honest about the costs and benefits of bringing products to the marketplace. There are often many contradictions in what Fair Traders do. They are promoting "good" consumption, when overall consumption should decline. The responsible consumer is only slightly more enlightened; they are willing to make their contribution, but they are naive about the many complex issues.
Fair Trade Organizations
The following are a few major FTOs and their missions. They are just one part of a growing community dedicated to the worldwide movement of Fair Trade. The largest percentage of Fair Trade is centered in Europe.
Fair Trade Federation (FTF)
FTF is an association of Fair Trade wholesalers, retailers, and producers whose members are committed to providing fair wages and employment opportunities to low‑income artisans and farmers worldwide. FTF's mission is to educate consumers about the importance of purchasing fairly traded products which support living wages and safe and healthy conditions for artisans and farmers in the Third World. FTF links low‑income producers with consumer markets, provides resources and networking opportunities to FTF members and acts as a clearinghouse of information on Fair Trade issues. There practices and principles include fair wages, cooperative workplaces, consumer education, environmental sustainability, financial and technical support, respect for cultural identity, and public accountability. The members of the Fair Trade Federation all share a common goal: To create a just and sustainable economic system through Fair Trade.
International Federation for Alternative Trade (IFAT)
IFAT is a federation of producers and alternative trading organizations (ATOs). In IFAT, producers of handicrafts and food products from the developing countries come together directly with buyers and managers of ATOs as friends and partners in a spirit of mutual trust. They cast aside the traditional trading system of middlemen and create an "alternative" way of doing business that is beneficial and fair. IFAT's objectives are two‑fold: to improve the living conditions of the poor and oppressed in developing countries; and to change unfair structures of international trade.
IFAT's objectives are two‑fold: 1)To improve the living conditions of the poor and oppressed in developing countries; and 2)To change unfair structures of international trade. The present members of IFAT fit into three categories: importing ATOs in the North, exporting ATOs in the South, and producers. Groups not directly involved in import/export but who share the objectives of IFAT are welcomed as observers (non‑voting). Currently, IFAT is comprised of nearly 100 member and observer organizations representing approximately 40 countries around the globe.
International Federation of Organic Agricultural Movements (IFOAM)
IFOAM’s mission states that it:
• Represents the worldwide movement of organic agriculture and provide a platform for global exchange and cooperation.
• Is committed to a holistic approach in the development of organic farming systems including maintenance of a sustainable environment and respect for the need of humanity.
• Opens the way for implementation of above aims in everyday life by the expertise of its members.
The federation's main function is coordinating the network of the organic movement around the world. IFOAM is a democratic federation and grassroots oriented. Major activities within IFOAM are carried out by our World Board of Directors, various committees and task forces.
IFOAM membership is open to associations of producers, processors, traders and consultants as well as to institutions involved in research and training committed to organic agriculture. Individuals and private companies contributing to the movement may join IFOAM as associates.
Co‑op America, a national nonprofit organization founded in 1982, provides the economic strategies, organizing power and practical tools for businesses and individuals to address today's social and environmental problems. While many environmental organizations choose to fight important political and legal battles, Co‑op America is the leading force in educating and empowering our nation's people and businesses to make significant improvements through the economic system. Co-op America aims to make sure that our purchases can support businesses that create jobs, care about communities, engage in Fair Trade and protect our environment. Co‑op America has nearly 50,000 individual and 2,000 business members. In partnership with the Social Investment Forum, they also offer memberships to financial professionals and institutions interested in socially responsible investing.
European Fair Trade Association (EFTA)
EFTA is an association of 11 Fair Trade organizations in 9 European countries. It was established in January 1990 after 10 years of informal cooperation. EFTA seeks to stimulate practical cooperation between its members, develop common policies and offer joint support to producers and strives for the adoption of Fair Trade principles in commercial trading in Europe. EFTA members import from over 550 producer groups in 44 countries.
Founded in June 1992 by EFTA and Transfair Germany, Transfair International is a Fair Trade labeling initiative which has been introduced in several European countries and Japan. Transfair International helps consumers distinguish fairly traded products in the marketplace through the provision and monitoring of a Transfair seal that is offered to traders which buy from registered cooperatives in developing countries and abide by Fair Trade criteria. Products covered by the TransFair seal include coffee, honey, cocoa, sugar and tea.
Max Havelaar Foundation
In 1988, the Max Havelaar Foundation introduced a "Max Havelaar" quality seal for coffee in the Dutch market. It has since been introduced in other European countries including Denmark. Coffee roasters seeking the right to sell coffee under the seal must comply with a number of Fair Trade criteria. Besides coffee roasters, Max Havelaar is working with companies offering chocolate, tea and bananas.
Fair Trade Organizations vs. Commercial Importers
The goal of FTOs is to benefit the artisans they work with, not maximize profits. By reducing the number of middlemen and minimizing overhead costs, FTOs return up to 40 percent of the retail price of an item to the producer. Comparatively, workers in sweatshops generally receive less than 0.5% of the retail price of the items they produce. For example, Nicaraguan worker gets 11 cents to sew a pair of jeans with retail price of $14.99 at JC Penny. That translates to about 0.0073% of the retail price being paid to the worker.
Cooperatives and producer associations provide a healthy alternative to large‑scale manufacturing and sweatshops conditions, where unprotected workers earn below minimum wage and most of the profits flow to foreign investors and local elites who have little interest in ensuring the long term health of the communities in which they work. Fair Trade Organizations work primarily with small businesses, worker owned and democratically run cooperatives and associations which bring significant benefits to workers and their communities. By banding together, workers are able to access credit, reduce raw material costs and establish higher and more just prices for their products.
FTOs encourage producers to reinvest their profits into their communities. Workers earn a greater return on their labor, and profits are distributed more equitably and often reinvested in community projects such as health clinics, child care, education and literacy training. Workers learn important leadership and organizing skills, enabling self‑reliant grassroots‑driven development. Safe and healthy working conditions are maintained and producers gain greater control and decision making power over the use of their local resources.
Some Fair Trade Organizations work to shift processing and packaging activities to the Third World, so that as much work as possible will remain in the producer country. Often, such activities are performed abroad, depriving the neediest countries of the opportunity to boost their incomes.
How FTOs are Impacting the Economy
Several organizations have been established and it seems as though membership in these organizations is on the rise. But are these organizations really meeting the goal of reversing inequalities in the world economy?
Here are the facts:
• In the U.S., FTOs posted more than $20 million in retail sales in 1995 (Laura Bird, Wall Street Journal, Dec. 14, 1995).
• Sales for Ten Thousand Villages, the largest U.S. FTO, grew from nearly $3 million in 1985 to a projected $8 million in 1995. Ten Thousand Villages' Canadian operations reported another $3 million. Combined, that represents some 11,000 jobs for disadvantaged artisans and farmers (R. Ericson, 1996).
• On the free market, Western consumers pay $4 to $11 a pound for coffee bought from growers for 80 cents a pound. Growers who sell to Max Havelaar, a Dutch FTO, earn $1.12 to $1.26 a pound (Cameron Brandt, The WorldPaper, 1994).
• Of its $4.43 million in sales for 1991, SERRV International returned $2 million directly to producers (Kate Read, Co‑op News, November 1992).
The business generated by Fair Trade Organizations in Europe and the U.S. now accounts for an estimated US $400 million, just .01 % of all global trade. Small as it may be, the rapidly growing alternative or Fair Trade movement is setting standards that could redefine world trade to include more social and environmental considerations. Fair traders believe that their system of trade, based on respect for workers' rights and the environment, if adopted by the big players in the global economy, can play a big part in reversing the growing inequities and environmental degradation that have accompanied the growth in world trade. While fair or alternative trade accounts for only about 0.001 percent of all global commerce (total: $3.6 billion), its principles have significant potential for changing the way mainstream importers do business.
The Future of Fair Trade
Lifting People out of Poverty
Bob Chase, executive director of SERRV International, summarizes the vision of all that support Fair Trade when he says:
"When people become economically empowered, they gain political and social power. Many of the groups that we work with do more than just produce crafts; they're involved in community development, health and education. For the women we work with, the effect is even greater. As they gain employment, they become able to leave abusive situations, to seek legal assistance, to acquire education, to become independent. Their work allows them to be economically significant in the family and gives them leverage to be considered an equal ."
The kind of economic empowerment that Chase speaks of can be realized by getting more and more farmers, artisans, and other producers connected with Fair Trade wholesalers, retailers, and consumers. If workers in sweatshops had other alternatives, such as business through fair trade, they could gain leverage and demand better working conditions in the factors. Now most workers are in the sweatshops putting up with inhuman conditions because they don’t have any other choice.
In 1997 we witnessed a huge increase in the number of consumers demanding products which are made without sweatshop labor. And, as can be seen from the list in the “FTO Contact Information” section, there are growing numbers of entrepreneurs in America and Europe getting involved by starting up their own Fair Trade shops. There are plenty of success stories that give great hope to the future of FTOs:
• Over the years Nicaragua has seen its share of disasters including an earthquake that leveled the capital city, years of civil war, and most recently the devastating floods brought on by Hurricane Mitch. One group that has been a positive force throughout all of this destruction, promoting micro- enterprise in artist communities, is Potters For Peace. Potters for Peace supports potters at all levels of their development including initial training and organizing, technical assistance, product development, and marketing assistance. In a country that has very few job opportunities, pottery‑making has not only allowed Nicaraguans to keep their traditions alive but more importantly offered them a way to provide for their families.
• Coffee farmers near Oaxaca, Mexico, barely eked out a living before Equal Exchange, a Fair Trade Organization, stepped in. Today, the villagers run a rural bus line, send their children to the only secondary school in the region and use a computer to track crop information and sales.
• Bhaktapur Craft Printers (BCP) was founded by UNICEF to revive paper making and to improve the living standards of low‑income families, especially women and children in urban ghettos and remote rural areas in Nepal. In 1993, BCP provided employment to over 1,000 people. From 1987 to 1993, BCP contributed more than 10 million rupees (US $200,000) to fund community projects, including education, irrigation, forestry and environmental programs. BCP's method of gathering the lokta bark used for the paper preserves the fragile ecology of Nepali forests. BCP also promotes ecological techniques to reduce firewood use during the papermaking process.
Ideally, producers in third world countries would use their talents to make food products, textiles, crafts, etc., and start selling directly to fair trade wholesalers and retailers in other countries, thus eliminating the need for commercial importers and sweatshops all together. Economically, this could benefit the producer countries as well as the consumers. By bypassing the middlemen, costs could be cut lowering the retail prices of goods (if only slightly) and more of the retail price would be paid directly to the producer.
Doing Our Part
The globalization of the economy has moved us into an era of interdependence where conflict, environmental destruction, and the problems of poverty in one part of the world can affect people on the other side of the globe. As consumers, our purchasing choices also have a global impact. Every dollar we spend on food from the Third World affects the way these products are grown, traded, processed, and sold. The good news is that consumers in the United States ‑‑ which accounts for 25 percent of the planet's measured economic activity ‑‑ hold the power to demand changes in the way goods are produced, as seen in the Levi‑Strauss, Timberland, Nike and Gap cases as well as other instances.
This first step is education; take a look at the FTOs’ web sites, find out where the Fair Trade retailers are located in your neighborhood. Make a commitment to Fair Trade; pay attention to the products you buy, where and how they are produced, participate in Fair Trade Day on May 8, 1999, write letters to companies like Disney, Guess?, and Nike who haven’t done enough to improve the economic plight of those that are helping them to make millions of dollars.
FTO Contact Information
• Fair Trade Federation, Inc., P O Box 3754, Gettysburg, PA 17325; phone:Cheryl Musch,
Executive Director, at (717) 334‑5583; email: firstname.lastname@example.org; URL: http://www.fairtradefederation.com
• International Federation for Alternative Trade, IFAT Secretariat, 30 Murdock Road,
Bicester, Oxon, OX6 7RF, Britain; voice: 44 1869 249 819; fax: 44 1869 246 381; email: email@example.com; URL: http://www.ifat.org
• International Federation of Organic Agricultural Movements; URL: http://ecoweb.dk/ifoam/index.html
• Co-op America, 1612 K Street NW, Suite 600, Washington, DC 20006; phone: (800)58‑GREEN / (202)872‑5307; fax: (202)331‑8166; URL: http://www.coopamerica.org
• European Fair Trade Association, EFTA Secretariat Witmakersstraat 106211 JB Maastricht The Netherlands; phone: 31‑43‑256‑917; fax: 31‑43‑258‑433
• Transfair International, Am Ochsenberg 1673614, Schorndorf, Germany; phone: 49‑7181‑65417; fax: 49‑7181‑65546; email: firstname.lastname@example.org
• Max Havelaar Foundation, Postbus 12523500 BG Utrecht, The Netherlands; phone:
31‑30‑334602; Fax: 31‑30‑332992
Retailers in California
• Global Exchange, 2840 College Avenue, Berkeley, CA 94705; phone: 510‑548‑0370; fax: 415‑255‑7498; email: email@example.com
• Spirit Matters, 12307 Sir Frances Drake Blvd., Inverness Park, CA 94956; phone and fax: 415‑663‑8699
• Global Village International Folk Art & Crafts Inc, P O Box 390487, Mountain View, CA 94039; phone: 408‑366‑9850; email: firstname.lastname@example.org; hand‑made crafts and clothing from developing nations; incense and fragrance oil
• Everything Under the Sun, Box 493, 211 Main St., Point Arena, CA 93468; phone:
707‑882‑2161; products from around the world •Global Exchange, 4018 24th Street, San Francisco, CA 94114; phone: 415‑648‑8068; fax: 415‑648‑8098; email:
• Baksheesh, 14 West Spain Street, Sonoma, CA 95476; phone: 707‑939‑2847; fax:
707‑939‑3726; email: email@example.com
Wholesalers Based in California
• Casa Bonampak, 3331 24th St., San Francisco, CA 94110; contact: Nancy Chárraga; phone: 415‑642‑4079; fax: 415‑642‑0699; email: firstname.lastname@example.org; Accessories, apparel, cards, jewelry, textiles and crafts from Chiapas, Mexico, and Guatemala
• Maya Traditions, 80 Apparel Way, San Francisco, CA 94124; phone: 415‑821‑0337;
email: email@example.com accessories, houseware, jewelry, musical instruments, textiles, traditional crafts from Guatemala
• Paradiso: Jewels of Bali, 1442A Walnut Street, Berkeley, CA 94709; phone: 510‑235‑8500; fax: 510‑540‑1057; email: firstname.lastname@example.org; jewelry from Indonesia
• Two Porters, P.O. Box 21106, Oakland, CA 94620; contact: Jennifer Sowerwine; phone and fax: 510‑482‑9622; toll free: 877‑229‑0551; email: email@example.com; imports from
• Nepal, including picture frames; albums/scrapbooks; journals; gift wrap, bags and boxes; stationery; notecards: all from recycled or renewable resources; and home accessories
• Asociación Regional de Artesanos del Centro del Perú KAMAQ MAKI, Mariscal Gamarra No.128, Urb. La Florida ‑ El Tambo, Huancayo, Peru; contact: Arturo Durán; fax: (064) 249 898; email: firstname.lastname@example.org; accessories, apparel, ceramics, greeting cards, housewares, embroidery, textiles, traditional crafts
• Crafts Village ‑ Kenya (formerly Baduku Crafts), Peter Wahome, P O Box 40952 L9
NCCK Light Industries Rabai Road off Jogoo Road, Nairobi, Kenya; phone: 254‑2‑784157; fax: 254‑2‑330170; Telefax: 254 2 781531; email: email@example.com; dolls, jewelry, textiles, musical instruments, baskets, soapstone and wood carvings
• Godavari Delta Women Lace Artisans Co‑operative, Rustumbada, NARSAPUR ‑ 534 275, West Godavari Dist., Andhara Pradesh ‑ India; phone/fax: 0091‑8814‑74754; fax: 91‑8814‑75173; lace and crocheted textiles
• Jodelin, 164 Park Avenue, Mt. Hope, Trinidad and Tobago, West Indies; contact: Linus Francis Didier; phone: 1‑868‑675‑6275; email: firstname.lastname@example.org; accessories, jewelry and traditional crafts from Trinidad and Tobago
• Rozi Export International, Farooq Ahmad, Chakmada Village, P O Handia, Allahabad, India; phone and fax: 011‑091‑5332‑22227; clothing, accessories, baskets, housewares, textiles, musical instruments
• UPAVIM Crafts (United to Live Better), Mary Joan Ferrara‑Marsland, 12604 W. Old
Baltimore Road, Boyds, MD 20841; phone and fax: 301‑515‑5911; email: email@example.com; textiles, accessories, apparel, and traditional crafts from Guatemala
• Women's Skill Development Centre, P O Box 1314, Kathmandu, Nepal; phone: 011‑977‑1527591; clothing, textiles, paper products
• Xochipilli, Inez Villaseñor, Bucareleli 38‑3 Col. Centro, Mexico D.F., 06040 Mexico;
phone: (5) 5 184260; fax: (5) 5 101063; email: firstname.lastname@example.org; gifts, housewares
Vietnam Labor Watch. http://www.saigon.com.
Global exchange Organisation. http://www.globalexchange.org/stores/fairtrade.html.
 Contact information and more FTOs are listed in The “FTO Contact Information” section.