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How feasible is a fair-trade cell phone?

Here’s a simple solution to the controversy over working conditions in the foreign factories cranking out our gadgets: fair-trade electronics.

Give consumers alternatives they can feel good about buying – devices sourced and assembled in a fair, safe and green manner. Then let the market decide whether it values worker rights over cheap devices. The manufacturer that takes the gamble could own a niche in a market rife with conscientious young customers.

Well, it sounds like a simple solution, anyway.

The more I researched the issue and talked to supply chain and fair-trade experts, the more complicated things became.

For starters, no such designation exists for electronics today and it would require buy-in from the industry to establish one, said Heather Franzese, director of new business at Fair Trade USA in Oakland.

Businesses have to want to stamp their products with such declarations to differentiate them in the marketplace. Unlike segments of the food and apparel sectors, however, tech firms have displayed little interest in doing so. Typically it takes a critical mass of consumer and media pressure before industries move in this direction – and it seems we’re not yet there.

But perhaps the thorniest problem comes in determining what fair trade means. Ultimately the standards are subjective and somewhat arbitrary. How do you determine a fair wage in a poor nation with few other employment options? How many hours are too many hours? What qualifies as safe enough? Does “underage” mean 18, 17 or 16

A particular challenge for electronics is determining what parts of the industry’s long supply chain falls under those standards. Depending on how you count, there are hundreds or thousands of components in the average smart phone, using materials sourced from around the globe.

Auditing minerals

Should we hold companies responsible for minerals that might have changed hands five times before arriving at a smelting facility? Can we realistically audit the origins of all those materials?

The answer may simply be no.

“Everyone would like to see a phone that comes from places where everyone is treated fairly, but in practice, I think the supply chain is so global and so complex that it’s virtually impossible to confirm 100 percent,” said Rick Pierson, an analyst at IHS Global Insight.

Take the tantalum capacitor, a component of circuits that holds an electric charge. There are more than 450 in an iPhone, according to IHS.

Some estimates say 20 percent of the world’s tantalum comes from the Congo, where its sale has financed militias that have committed atrocities over the last 15 years, including mass murder, rape and mutilation, according to various reports. These rebels have forced miners to dig up minerals for a pittance in conditions that make Chinese factories look like Google’s corporate campus.

Major volumes of other minerals critical for electronics – like tin, tungsten and gold – are produced under similar conditions throughout Central Africa.

In 2010, Steve Jobs addressed the complexity of tracking these materials in an e-mail to a customer.

“We require all of our suppliers to certify in writing that they use conflict few (sic) materials,” he wrote. “But honestly there is no way for them to be sure. Until someone invents a way to chemically trace minerals from the source mine, it’s a very difficult problem.”

And there are other complexities.

Human-rights groups like the Enough Project have pushed companies to stop using conflict materials in their products, ultimately helping to insert a provision into the Dodd-Frank financial reform law that mandates companies disclose when they buy conflict materials.

The Securities and Exchange Commission has yet to implement the rules, but the fact they’re coming has already led to big changes in the region – for better and worse.

A 2011 opinion piece in the New York Times called the law a catastrophe, saying smelting factories have responded by refusing to buy minerals from eastern Congo, even from legitimate suppliers.

“I heard from scores of artisanal miners and small-scale producers who used to make a few dollars a day digging ore,” freelance writer David Aronson said. “Paltry as it may seem, this income was a lifeline.”

But Aaron Hall, associate director of research at Enough Project, said that companies are figuring it out. He said that Motorola and Kemet, which makes capacitors, have set up systems that allow them to monitor and track materials. Meanwhile, the Electronic Industry Citizenship Coalition, whose members include IBM, Dell and Apple, launched a Conflict Free Smelter Assessment Program to identify facilities that aren’t using conflict minerals.

There are two points worth emphasizing here: One is that the industry is making some real changes, at least in certain parts of the supply chain.

The other is that fair trade doesn’t always come down to a simple moral choice. There are sometimes steep trade-offs and difficult questions. What’s the greater good: providing work to the desperately poor in the Congo, or preventing money from falling into the hands of warlords?

The final uncertainty surrounding the feasibility of fair-trade electronics is the most important one: Would enough consumers buy them?

On this question, there was a perfect split in my interviews between business experts, who said no, and advocacy groups, who said yes.

“The template is there and the world is waiting,” said Jeffrey Ballinger, executive director of labor group Press for Change.

But tablets and smart phones are volume businesses, meaning companies have to sell huge quantities of each short-lived version to make the numbers pencil out. A fair-trade stamp alone may not line up the buyers Ballinger speaks of, whose identities are often as wrapped up in their tech savviness as their political consciousness. To have any chance of success, the products would have to be technically comparable – without being far more expensive.

Big change in cost

In its recent exposé of working conditions at Chinese plants producing Apple products, the Times said various experts estimated building iPhones in the United States would add up to $65 to each device. But that doesn’t address the unsavory origins of the phones’ components – and doing so would surely raise costs higher still.

“Will people pay a social premium? Sure, some people would, but not enough to justify it,” said John Morgan, a business professor at UC Berkeley. “It still won’t make it economically viable.”

None of this is meant to argue that companies should get a free pass – or that we shouldn’t demand U.S. businesses use their clout to raise labor standards around the world.

It’s only to say that there aren’t any simple solutions to complex problems.

By: James Temple
Source: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2012/03/25/BUI21NOBG6.DTL

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