Fair Trade opens new opportunities for garment sector

Sri Lanka’s garment sector is linking up with the global Fair Trade movement. Already one company, Ocean Lanka, has qualified as a Fair Trade manufacturer while other firms are also giving this hitherto, almost-unknown concept the once over.

The Fair Trade movement is a global social movement to promote ‘fair’ international trade. This means producing and selling goods in a socially and environmentally friendly fashion. In Europe and the US the movement is gaining momentum with more consumers in these countries asking for Fair Trade goods.

More and more people in Europe for instance, buy more expensive goods if the price increase is due to paying decent salaries for workers in developing countries, rather than buying cheaper goods that are produced in sweatshops. In 2005, Fair Trade certified sales were estimated at 1.1 billion euro worldwide, showing a 37 % year-on-year increase.

Given the growing consumer pressure, many of the major clothing brands in Europe and the US are already into Fair Trade.

In Sri Lanka, so far only one company, Ocean Lanka, the largest weft knit fabric manufacturer in the country, has got direct Fair Trade accreditation. But the company says interest in Fair Trade is growing and others in the garment sector are expected to join the ranks of the Fair Trade movement this year.

“You will see a number of companies getting Fair Trade accreditation very soon, within the period of March to May this year,” says Deputy General Manager of Ocean Lanka, Simon Weston.

A garment company in the Hirdaramani group is already manufacturing Fair Trade garments, through extended accreditation from UK retailer Marks and Spencer. The company says it is looking at acquiring direct Fair Trade accreditation for all of its garment factories.

“One factory is already in the process of being accredited. We are looking at accreditation for all three of our companies,” says Director Hirdaramani group, Mahesh Hirdaramani.

The Brandix group is also considering Fair Trade accreditation for a garment factory.

Why Fair Trade
As it is, Ocean Lanka is already putting its recently acquired Fair Trade status to use and is having discussions with some leading UK clothing retailers. The UK has the largest fair trade market in the world and in 2005, sales of Fair Trade products topped 195 million pounds.

“We have already started Fair Trade production for Marks and Spencer. We are also talking to Tesco and Sainsbury,” says Weston. The company says Fair Trade will open up new opportunities for the entire garment industry.

“Previously there was no Fair Trade source here for the big Fair Trade garment companies in Europe and the US to source from. But the whole ethical trading initiative is now very important in these countries. So if we have Fair Trade accredited manufacturers here, we become a more desirable sourcing destination,” explained Weston.

Weston says that Fair Trade benefits to Sri Lankan companies are indirect – not by directly increasing profit margins but by increasing business.

“We can’t add a mark up to products simply because it is a Fair Trade product. That would be unethical. These goods would anyhow cost more because Fair Trade cotton and yarn cost more. The advantage is that by providing an ethical source you can unlock bigger business. For instance, if you can supply Fair Trade t-shirts the buyer may also place orders for other t-shirts as well,” says Weston.

Fair Trade is also one way Sri Lankan garment companies could stay in the race but avoid the rat race of constantly competing against low cost items from countries like India, Bangladesh, Vietnam and China.

Under the Fair Trade system, for any product to be known as a Fair Trade item, all inputs must be sourced from other Fair Trade accredited suppliers.

The goods must then be sold through Fair Trade accredited retailers.

As there are no Fair Trade raw material suppliers in Sri Lanka at the moment, Ocean Lanka is sourcing Fair Trade yarn from accredited Indian buyers who in turn, source their inputs from Fair Trade farmers in India and North Africa.

The fabric is then converted into clothing by Fair Trade accredited manufacturers and sold by Fair Trade retailers in the US and Europe.