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The idea of free trade only works in the academic world(Part 2)
FNA | 09 January 2012

An alternative vision of trade in the 21st century



Replacing the current system with “Sustainable Trade”

Where is SUSTAINABILITY is this view of trade

International Trade has to be taken out of its traditional vacuum and linked directly to manufacturing procedures – and by this I mean that trade has to be linked to sustainable or environmental manufacturing.

Trade is ubiquitous and for this reason it is already implicitly linked to environmental concerns. Toxic financial products have endangered the global financial system and we must not allow toxic consumer goods to do the same to the global environment. With the world population expected to reach 9.3 billion by 2050 sustainable practices will become even more important since, without a healthy environment living creatures, including man, will not be able to survive longer term.

Container Vessel

During the World Leather Congress, the lead speaker on the panel dealing with International Trade – New Challenges, Sergio Miranda da Cruz of The United Nations Industrial Development Organization (UNIDO) concentrated on trade and environmental concerns in the leather industry. “The sector will have to consider environmental management even more in terms of renewable energy. It is impossible for us to continue in this way since resources are limited,” stated Cruz.

This is certainly part of the solution for the environment but how do we link this to trade and take on “New Challenges” when the “old challenges” have still to be resolved?

Despite programs aimed at consumers to recycle waste in many countries this is simply not enough to decisively benefit the environment. It is papering over the cracks since it is industrial production which produces 70% of harmful environmental and air borne waste. Thus, industrial practices must be tackled and given our attention. They must be the Number 1 priority, rather than concentrating on consumer actions when disposing of household garbage, for example.

Manufacturing and trade have been regarded as separate activities but in reality must be inextricably linked together. Sustainable manufacturing should be rewarded, by products made in this way having lower tariffs imposed on them. Products manufactured or produced with harmful discharges for the environment or are not biodegradable should have punitive tariffs imposed on them. In other words manufacturers, farmers and tanners will be rewarded for promoting and implementing an environmental service to society by limiting harmful waste and discharges into the environment.

A major obstacle to be overcome is that it is developing economies that lack the skills and/or financial and other resources to produce the newest and latest techniques. They have the will but not the means but if developed consumer nations want “green products” then they will have to accommodate (i.e. help pay and at least finance) the technology and environment machinery necessary to preserve the environment.

This idea goes beyond Free Trade – or “free for all or unregulated trade” and even beyond Fair Trade, since it ensures that environmental protection and sustainable practices are at the forefront of industrial production even before a product enters the international commercialization chain.

In the case of the footwear industry, and as proposed by Mike Redwood, Visiting Professor in Business Development in Leather at the University of Northamptonat, during the IUTIC conference in Mexico in November 2010, the carbon footprint of footwear manufacturing would be reduced if some effort was made to promote time zone manufacturing. For example, shoes for the Americas would be produced in that continent, cutting back the transport times, component delivery times and the fuel consumption needed to deliver shoes to market from Asia – half way around the world. Shoes for Europe could be manufactured there and even in Africa.

In this context Peter Geisler, President of the Swedish safety and occupational footwear manufacturer, Arbesko AB, stated at the World Footwear Congress that he had calculated how far some shoe components had to travel on average before reaching the retail shelves. The distance is twice around the world or approximately 80,000 km! This cannot be good business or environmental practice no matter how it is spun and is perhaps one of the manifest absurdities of unbridled globalization.

Time zone manufacturing does not mean that factories would lose business since they could set up manufacturing facilities in the required time zone and operate there. For example, Chinese or Vietnamese factories could set up operations in Latin America (there are already examples of this in Colombia) or Central America, as is the case with Taiwanese apparel manufacturers. Sustainable manufacturing would be rewarded; transport times would be shorter; employment would be created locally and manufacturing leading to international trade would not be focused just on profit and cost per unit, but environmental concerns would be an integral part of the manufacturing process. Thus sustainability would play an important role in establishing a competitive selling price for the finished item or pair of shoes.

To enforce such practices it would be necessary to involve UNIDO and the WTO (which would have to focus on the environment as well as on trade) with national and regional governments participating and patrolling the industrial processes and environmental cost. The name for this could be termed “Sustainable Trade”. Longer term, this practice of Sustainable Trade will be more important than the traditional concepts of “Free Trade” or even “Fair Trade” since these two ways of doing business internationally do not encompass the greatest challenges mankind will face in the next 40 years in terms of planetary environmental protection.

Some may argue that a system of carbon credits which can be bought and sold will aid sustainable manufacturing but I disagree with this assertion. Carbon credits will favor countries and companies with large amounts of money behind them and will automatically place smaller manufacturers in developing countries at a competitive disadvantage.

The environmental impact of producing a piece of finished leather or a pair of shoes should not be offset by buying a carbon credit. To protect the environment production must have a lower impact and in the system of Sustainable Trade, the more competitive its price will be in the market place. This will encourage sustainable practices rather than using the loophole of buying carbon credits to continue to manufacture unsustainably.

Another objection could be that international and government regulations would interfere with investment and industrial production. This is an objection whose roots are embedded in a free trade ideology when the absolute priority must be to protecting the environment. Free Trade never has and never will subordinate profits to the environment. Voluntary restraints would simply not work. We are all dependent on the environment for survival and legal constraints and/or punitive fines would have to be applied and enforced by regulatory bodies.

Does it not make consummate sense – products fabricated unsustainably should be less competitive than products manufactured with the environment in mind. If you cannot sell a product due to a high environment tax levied on it, no one will manufacture it and in this way unsustainable or “toxic” products will be gradually excluded from the commercialization chain.

The whole trade paradigm needs to be rethought if industry is to act responsibly across the board and protect the environment. As Moacir Berger, President of AiCSul, said at the end of his presentation at the World Leather Congress, “Environmental policy is as important as commercial policy”. The phrase Sustainable Trade encompasses both of these policies and with a decisive combination of political and commercial will it could be applied for the benefit of the expected 9 billion plus inhabitants of the Earth in first half of this century.

Let the debate begin!

This topic will be the subject of a debate to be held at the Prime Source Forum which runs from March 28th – 30th 2012 in Hong Kong entitles “Localization vs. Globalization” and will address the many challenges pertaining to this issue. Don’t miss this debate if you are in Hong Kong. It is bound to be stimulating for all concerned!

Click here to read Part 1