From the Body Shop to Fair Trade Coffee, ethical trade is big business. But how can consumers be sure that what it says on the label is what they get? Can we believe multinationals when they make claims to fair working conditions? Can selling online help developing country producers benefit from globalisation?

Researchers from the University of Manchester set out to see how information affects ethical trade. In particular, they are concerned with the impact of the growth in global information and communication technologies (ICTs). They conclude that while ICTs may help push ethical trade, multinationals will still have the edge over developing country producers. New forms of trade, such as e-commerce, may help redress that balance.

Increased trade between industrialised and developing countries is generally seen as a good thing. Trade liberalisation supposedly helps poor countries to catch up with rich ones, and faster growth helps eliminate poverty. Consequently, overcoming barriers to increased trade has become a critical goal of development policy for most developing countries.

But countries that rely too much on external trade can run into trouble. In addition to the economic dangers, there are non-economic, negative consequences of external trade. These negative aspects of globalisation relate to the unfair trading practices of multinationals. They include issues such as human rights, labour standards (including child labour and forced labour), conditions of employment and minimum incomes, non-discrimination and gender, and environmental impact.

These concerns have led to demands for ethical trade, which aims to promote human rights, labour standards and environmental protection. Examples of ethical trade initiatives include company ‘codes of conduct’ and consumer-led boycotts against ‘unethical’ goods.

Signficant findings of the research include:

• Ethical trade can be seen as an example of an informal, self-regulatory system: it is decentralised and participatory, influenced by the self-interest of stakeholders and based on voluntary compliance.
• Information is critical within an informal regulatory environment such as ethical trade. Consumers need to know where products come from and how they are made, and producers need information about consumers’ ethical concerns.
• Emerging global information and communication systems, such as the Internet, can benefit ethical trade. However, ICTs do not exist in a vacuum: they reflect existing social and economic structures.
• The ‘digital divide’ between rich and poor countries means that multinational corporations are best positioned to use information.
• E-commerce (for example, shopping online) may be a good way to protect the interests of developing country producers.

The research identifies a number of priority research issues. These include:

• How do business and development community stakeholders come together to establish voluntary codes?
• How can access to information help consumers see whether producers are implementing ethical trade rules and whether these are reaching the desired outcomes?
• How can accountability be built into self-regulatory systems, and what support role can information play?
• Who should control ethical information – government, the private sector or NGOs?
• To what extent should regulations governing ethical trade be formalised, and what role might information/ICTs play in that process?

Source(s):
‘Ethical Trade, Information and Communication Technologies (ICTs) and Self-Regulation’, Centre on Regulation and Competition Working Paper Series no. 8, by R. Heeks and R. Duncombe, 2001

Funded by: Centre for Regulation and Competition

id21 Research Highlight: 5 September 2002

Further Information:
Fiona Wilson
Secretary, Centre on Regulation and Competition
Institute for Development Policy and Management
University of Manchester
Crawford House
Precinct Centre
Oxford Road
Manchester M13 9GH
UK

Tel: +44 (0)161 275 2798
Fax: +44 (0)161 275 0808
Contact the contributor: crc@man.ac.uk

Institute for Development Policy and Management, University of Manchester, UK

Other related links:
'How civil can corporations be? Ethical business in a fairer world'

'Ethically sustainable? Trade and rural livelihoods'

Insights #36 'Richer or poorer? Achievements and challenges of ethical trade'

Refer to id21's links page on ethical trade