Outsourcing and Fair Trade?

Phil Fersht’s blog Horses for Sources published a piece about Senator Schumer’s proposed tax on calls transferred to foreign call centers several weeks ago that has received spirited comments for and against the proposed legislation.

One comment in particular caught my attention, because it seemed to call on the principles of Fair Trade in support of the tax, and for not working with call centers in developing countries.  I’ve copied in my comment below, and would be very interested in hearing your thoughts on this.

Phil,

I don’t want to beat a dead horse, but I notice that no one has yet responded to the flawed argument that Schumer’s proposed call center tax supports Fair Trade (in […] comment).

Fundamentally, a U.S. tax on calls directed to India will work against the Fair Trade movement’s purpose, which is to support market access and fair prices for small producers in developing economies. (See http://transfairusa.org/content/about/overview.php or http://www.fairtrade.net/what_is_fairtrade.html.) Schumer’s tax would likely reduce market access and payments to small businesses in India, while increasing payments to the U.S. government – hardly a small producer in a developing economy.

Fair Trade organizations in developed economies typically guarantee a price to their suppliers based on what is needed to ensure a decent standard of living for their workers (rather than the lowest available current market price), and provide technical and economic support, such as business planning and access to loans. The Fair Trade response to […] concerns about poor conditions and low pay in the services business in India should be support for the creation of call centers in India (and other developing economies) that are governed by the same principles applied to Fair Trade farmers and goods producers. The U.S. side of a Fair Trade supporting business would focus on marketing services to American businesses who believe their customers will value their certification of Fair Trade practices sufficiently to pay a small premium. For a great example of an organization innovating in this area, look to Samasource (www.samasource.org ), which pays individuals and small worker co-ops for service work in some of the world’s poorest areas, including refugee camps.

[…] is correct that Fair Trade principles include a commitment to ensuring fair labor practices from suppliers, and further, to requiring suppliers to run their businesses democratically and responsibly, for the good of all in their community, including the environment. However, Schumer’s tax will not have any impact on Indian labor laws or practices. Indeed, by impeding trade and probably taking away American business, the tax will likely reduce the ability of the US to influence labor practices. Schumer’s tax will work against the ability of employees to improve their own working situations as employment and business grows in India. Witness the steady increase in salaries in IT/ITES businesses as the number of jobs began to outpace the availability of skilled employees. The reality is that this industry has enabled many Indian families to move up from poverty and buy homes and cars for the first time ever. I don’t mean to suggest that today’s India-based call centers are adhering to Fair Trade principles, but it is a gross misrepresentation to claim Fair Trade in support of trade restrictions and taxes on business in emerging economies.

Cindy Carpenter

This entry was posted in globalization, marketing, outsourcing, political risk and tagged , , . Bookmark the permalink.

1 Response to Outsourcing and Fair Trade?

  1. Pingback: Outsourcing to Support Socioeconomic Development | Global Sales and Marketing

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