What is “Direct Trade” and how we do it

I  (Sabith) made a presentation at a senior living center in Ventura County, this week. It was a very interesting group of seniors 85 years and plus, who listened attentively – many with hearing aid devices – to what I had to share. I wasn’t sure how I did, until the questions started pouring in. And at this point, I was genuinely impressed with not just the quality of questions, but also the way they were asking me.

 One of the questions (and a subsequent comment) revealed a lot about how businesses conduct themselves and I want to share that with you.

 The question was about what we call a “direct trade” model of purchasing our goods from artisans and makers in Mexico. Our model is pretty straightforward. We deal with the makers directly, pay them a fair price (that they set) and we mutually agree to, in cash and bring it to the U.S., for sale. Direct trade and Fair Trade are buzz words in this industry and it is time we educate people, a bit more about the nuances and intricacies that they entail, especially in practice. 

These are artisans I met a few years ago, and who we have gotten to know, at a personal level, over the years. We have built a relationship of trust, mutual recognition of honest work and a sense of comfort in knowing that we are all doing our best, to put our best foot forward. 

 This model is unique in many ways, but today, I learnt that many other companies don’t pay the artisans and makers until their goods are sold. Meaning, they get the goods from the artisans, keep them in storefront or other outlets and the artisans get paid only when the goods are sold (which can be weeks or months) after they are made. So, while from an accounting and cash flow perspective, this makes sense, it is just purely not good ethical practice to hold up others money and labor.

 Our practice has been the opposite – to pay the makers as soon as we make the purchase, in terms of being not only “fair”, but also ethical, in our dealings. The burden of selling and marketing is ours and we believe that the makers and artisans should not be responsible for what is our job.

 While we haven’t highlighted this aspect of our work, I felt compelled to write about this, not with the intention of bragging, but rather to help educate folks about the different ways that many companies that claim to be doing the right thing aren’t really doing right by their suppliers. Such practices are not well known and may actually be seen as exploitative, in many ways.

 There are fair trade certifications and licenses that one can acquire – which ironically cost a lot of money. While we aim to get certified in the near future, we simply don’t have the financial means to do it right away. However, the question to ask is this : do companies that claim to do fair trade follow these basic norms?

 Here is some language from the World Free Trade Organization, that is helpful to think through this issue : “he organization trades with concern for the social, economic and environmental well-being of marginalized small producers and does not maximize profit at their expense. It is responsible and professional in meeting its commitments in a timely manner. Suppliers respect contracts and deliver products on time and to the desired quality and specifications.

Fair Trade buyers, recognizing the financial disadvantages faced by Producers and Suppliers of Fair Trade products, ensure orders are paid on receipt of documents or as mutually agreed. For Handicraft FT products, an interest free pre-payment of at least 50 % is made on request. For Food FT products, pre-payment of at least 50% at a reasonable interest is made if requested. Interest rates that the suppliers pay must not be higher than the buyers’ cost of borrowing from third parties. Charging interest is not required.

Where southern Fair Trade suppliers receive a pre-payment from buyers, they ensure that this payment is passed on to the producers or farmers who make or grow their Fair Trade products.”

What do you think? Let us know.