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What do shifting global trade dynamics mean for ethical trade?

Over the last two decades, the dynamics of global trade have been shifting.

Since the early 2000’s, food producers and other suppliers based in the global South, an area which includes Sub-Saharan Africa and South Asia, have increasingly exported to buyers based in the same region. At the same time, they have shifted trade away from previously established trading routes with supermarkets in the global North, including Europe, the UK and the US.

A decade ago trade between Southern suppliers and buyers alone had grown so much that it accounted for a quarter of all world exports. This trend has only continued to gather momentum.

But the changing trade dynamics have led academics and policy makers to question what this changing landscape could mean for ethical standards and working conditions in value chains linked to different end-markets. And could it pose an ethical crisis for global trade?

Shifting South: regional value chains and decent work in Africa

I recently explored these issues as co-investigator on a major GCRF-funded study, ‘Shifting South’, which involved academics from the Universities of Manchester, Nairobi and Cape Town and policymakers from the Ethical Trading Initiative (ETI). Our focus was on agricultural and garment suppliers based in Kenya, South Africa, Lesotho and Swaziland who had shifted exports from Europe and the US towards Africa and the global South.

At its heart, the ethics of buying are shaped by codes of conduct. These codes are imposed by lead-firm buyers and travel through inter-connected value chains to suppliers, who must adhere to them as a condition of supply. We found that these codes can vary dramatically across different regions and end-markets.

We found that Northern buyers typically govern value chains differently and require greater levels of compliance, with more stringent measures surrounding quality standards, production processes, working conditions and rules of origin, compared to those demanded by their Southern counterparts.

Faced with the more onerous requirements of Northern retailers, many Southern suppliers - otherwise known as multi-chain operators - have taken the opportunity to simultaneously serve buyers across the global North and, increasingly, the global South.

To adapt to the competing compliance demands from the different regions, multi-chain suppliers have devised a variety of ‘multi-chain’ strategies. These range from deciding to vary product volumes sold across different markets, to shifting product types and standards in order to maximise their earnings.

While there are clear benefits to adapting operations to maximise earnings, adopting multi-chain strategies could also result in higher costs for suppliers and less social protection for workers.

Policy implications

Supplying different end-markets can result in long-term economic benefits for Southern suppliers.

But we found that social compliance standards are demanded less by Southern buyers in certain sectors and contexts – something we observed in the South African and Kenyan agro-food export sector. 

Government players and states must play a much stronger role in ensuring social and working standards don’t slip as a result of shifting trade to end-markets in the global South. Despite South Africa and Kenya having a comprehensive suite of labour regulations, they are poorly enforced on the ground.

All of this means that it’s vital that multi-stakeholder initiatives emerge to prevent a drop off in ethical trade. The ETI base code is one such example originating from here in the UK. But given the shifts in trade described above, it is important that local in-country initiatives where suppliers are based, involving civil society, government and private sector, emerge to fill a potential governance gap. This is no doubt a tall order, given the diverse interests and agendas of these actors. But it is also critical to ensure the economic and social sustainability of shifting global trade.

Blog posts give the views of the author, and are not necessarily those of Alliance Manchester Business School and The University of Manchester.

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