MADE IN CHINA…Or Is It? The Outsourcing Rabbit Hole

The following is a guest post by Jacob Schmalzle. The views expressed here are those of the author and do not necessarily reflect those of Global Exchange.

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MADE IN CHINA…Or Is It?  The Outsourcing Rabbit Hole

As the founder of my church’s Fair Trade mission, I’ve witnessed untold billions of dollars wasted on ineffective programs to alleviate poverty. Without belittling these efforts, the complex problems of economic injustice have clearly not been solved. Though well-intentioned, these altruistic motives are often no match for the powers of greed, desperation and the willingness of the greedy to exploit the desperate.

Exploitation takes on many forms. It is with different political structures, different cultural tolerances, and with varying perspectives that we recognize (or fail to recognize) exploitation around the world, even in our own backyard. The efforts of watch-dog groups that fight for human rights have made serious progress in the task of illuminating social injustice. However, when you turn on the kitchen light and see a multitude of roaches scatter into hiding, the smart ones will end up at your neighbor’s house rather than succumb to extermination. The roaches that exploit desperate people for underpaid labor are scattering from Asia into Africa.

While not the only contributing factor, outsourcing in the last several decades has spawned an industrial revolution across Asia. The desire to maximize profit is a function of every business model, and outsourcing to cheaper labor markets continues to be a logical move for many companies. The problem is when profit ceilings are not defined by basic ethics, and workers are exploited or worse, enslaved.

After decades of economic growth, Asian economies are becoming more developed and have moved away from manufacturing toward services and technologies. Following the corporate hand-washing model of outsourcing accountability along with production, Asian factories have now re-outsourced to cheaper African labor markets as the “last frontier”. Export Processing Zones (EPZ), factories that operate without corporate tax, import/export duties and without any notable workers rights, are becoming common. It’s like an “African Bermuda Triangle” of manufacturing. Companies are slashing production costs while neglecting to provide gainful employment to producers or any cost savings to consumers.

I have been on private tours of several clothing factories and was shocked to recognize clothing being produced for mainstream labels. Raw textiles are imported duty-free, clothing is produced with underpaid labor, free of corporate taxes, and then exported back to Asia where a “Made in Asia” label is attached. The clothing ends up on racks of retail stores in developed countries. One factory owner told me that not a single article of clothing will cost them more than $2, including labor and shipping. How much did you pay for your last pair of brand name dress slacks? Do YOU feel exploited?

If we thought it was tough fighting exploitation, it just got a lot tougher. The web of corporate outsourcing and re-outsourcing, combined with political policies that have been over-engineered to attract foreign commerce, leaves the human rights warrior picking their jaw up off the floor.

The good news is that the Fair Trade movement is uniting people from many different platforms to provide alternatives. As we educate consumers, they realize that exploitation of workers is also usually accompanied by unjustifiably high retail pricing. Why do I pay $50-100 for the dress pants that cost $2 to produce?

Eliminating exploitative middlemen to pay producers a fair wage also eliminates the profit margins of those middlemen. As Fair Trade volumes increase, prices must come down so we can simply phase out the exploitative model by natural market competition. There are no more “last frontiers” for the exploitative roaches to hide.

While the people reading this right now might cringe at the very mention of the word “sweatshop”, let’s face it, the average shopper is only out to help themselves, their image or their sex appeal. If we can keep Fair Trade prices lower than non-Fair Trade substitutes, consumers will ALWAYS make the ethical choice to save money AND help people. The future of Fair Trade cannot depend on the good will of a select few…the future of Fair Trade must depend on competitive positioning within the general market.

Fair Trade needs to lose the “lone rangers” who try to put an overpriced fence around their corner of the market. Fair Trade needs to be a movement that breaks into the global market with quality substitutes at competitive prices. May our collective advocacy of Fair Trade and the impact we make continue to be blessed!

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Jacob Schmalzle is the Founder and Managing Director of Village Markets of Africa, the Fair Trade mission of the Lutheran Church in Kenya. He can be reached at jacob@villagemarketsofafrica.com.