Ethics, Sustainability and Global Trade Revision Notes | GCSE OCR Economics

1. Why This Matters

Should a UK supermarket sell cheap clothes made by workers earning less than a living wage? Should we buy coffee from a country where farmers receive a tiny fraction of the retail price? Is it acceptable to import food from the other side of the world when it could be grown locally? These are not just abstract questions for economists. They are real decisions that affect millions of lives and the future of the planet.

This lesson explores the ethical and sustainability dimensions of global trade. For your GCSE Economics course, you need to consider whether the economic benefits of trade justify the social and environmental costs, and to evaluate possible responses such as fair trade and corporate social responsibility.

2. Ethical Considerations in International Trade

When UK firms trade with other countries, they face moral questions about the conditions under which goods are produced. The central ethical dilemma is this: if a product is made cheaply because workers are paid very low wages, work in dangerous conditions, or are denied basic rights, is it right for UK businesses and consumers to benefit from those low prices?

There are arguments on both sides. Some argue that any trade with countries that have poor labour standards is exploitative and that UK firms have a moral duty to refuse to buy from such suppliers. Others argue that trade provides employment and income that would not otherwise exist, and that cutting off trade could make workers in developing countries worse off, not better.

3. Environmental Sustainability and Global Supply Chains

Global supply chains have a significant environmental cost. Products are transported thousands of miles by ship, lorry and sometimes air freight, generating carbon emissions that contribute to climate change. The concept of 'food miles' highlights how far food travels from farm to plate. For example, green beans sold in UK supermarkets are often flown in from Kenya, covering over 4,000 miles.

However, the food miles argument is more complex than it first appears. In some cases, food grown in a sunny climate with minimal heating or artificial lighting can have a lower overall carbon footprint than food grown in heated UK greenhouses, even after accounting for transport. The key is to consider the full lifecycle of a product, not just the distance it travels.

Beyond transport, global trade drives resource depletion, deforestation and waste. The fast fashion industry is a major example: the UK alone sends approximately 300,000 tonnes of clothing to landfill each year. Production of cheap clothing requires vast amounts of water, energy and chemicals, and garments are often designed to be worn only a few times before being discarded.

Palm oil production illustrates the tension between economic benefit and environmental cost. Palm oil is found in roughly half of all supermarket products, from biscuits to shampoo. Its production provides income for millions of smallholder farmers in Indonesia and Malaysia, but has driven widespread deforestation, destroying habitats for endangered species such as orangutans and releasing large quantities of stored carbon.

4. Fair Trade as an Ethical Response

Fairtrade is one of the most recognised ethical responses to the problems of global trade. By guaranteeing a minimum price, it protects farmers from volatile world commodity prices. The Fairtrade premium, an additional sum paid on top of the market price, is invested in community development projects chosen by the producers themselves.

However, Fairtrade has its critics. The minimum price can sometimes discourage farmers from improving quality, since they receive the guaranteed price regardless. Only a small proportion of the retail price goes to farmers. Additionally, Fairtrade certification costs money, which can exclude the very poorest producers who cannot afford the fees. Despite these limitations, Fairtrade has improved livelihoods for over 1.9 million farmers and workers across 75 countries.

5. Corporate Social Responsibility (CSR)

MNCs face growing pressure from consumers, governments and campaign groups to demonstrate CSR. This might include auditing supply chains to check for child labour, setting targets for reducing carbon emissions, paying suppliers fair prices or investing in the communities where they operate.

Critics argue that much CSR is 'greenwashing', where companies make public commitments to ethics and sustainability that are not backed up by real action. For example, some fast fashion brands have launched 'sustainable' clothing lines while continuing to produce billions of cheap, disposable garments. The challenge is distinguishing genuine CSR from marketing exercises designed to improve a brand's image without changing its core practices.

6. Sustainability: Resource Depletion and Climate Change

Sustainability means meeting the needs of the present without compromising future generations. Global trade raises serious sustainability questions. The extraction of raw materials, energy-intensive manufacturing and long-distance transport all contribute to resource depletion and climate change.

7. Balancing Economic Benefits with Ethical Concerns

The central challenge is balancing economic benefits against ethical and sustainability costs. Globalisation creates jobs and reduces poverty, but it can also exploit workers and damage the environment. There is no simple answer, and examiners want to see you weigh up both sides of the argument.

Key evaluation points include: the impact depends on the strength of regulation in the producing country; consumer choices (such as buying Fairtrade) can create incentives for ethical behaviour; governments can use trade agreements to require minimum labour and environmental standards; and businesses that adopt genuine CSR may gain a competitive advantage through improved brand reputation.

Worked example: Evaluating Ethical Trade Decisions

A UK clothing retailer currently imports cheap t-shirts from a factory in Bangladesh where workers earn less than a living wage. Evaluate whether the retailer should stop buying from this factory. [6 marks]

Method: Two-sided evaluation with conclusion

1. The retailer has an ethical responsibility to ensure its supply chain does not exploit workers. Selling clothing made by workers earning less than a living wage could be seen as profiting from exploitation. If the story becomes public, it could damage the retailer's brand reputation and lead to consumer boycotts. — Start with one side of the argument. Use clear reasoning and think about consequences.
2. However, stopping purchases from the factory could lead to job losses for the workers who currently depend on this employment. Even low wages may be significantly higher than the alternatives available locally. Simply cutting ties does not solve the underlying problem of low wages in Bangladesh. — Present the counter-argument fairly. Show you understand the complexity.
3. A middle-ground approach might be more effective: the retailer could use its buying power to insist on improved wages and conditions as a condition of continued orders, rather than withdrawing entirely. — Strong evaluation considers alternatives, not just yes or no.
4. On balance, the retailer should not simply stop buying, but should use its influence to push for better conditions. This protects workers' livelihoods while also addressing the ethical concern. The effectiveness of this approach depends on whether the retailer is willing to accept slightly higher costs. — Reach a judgement that is clearly supported by your analysis. Use phrases like 'on balance', 'the extent depends on' or 'the most effective approach would be'.

Answer: The retailer should use its buying power to push for improved wages and conditions rather than simply cutting ties, as withdrawal could harm the workers it aims to help. The effectiveness depends on the retailer's willingness to absorb higher costs and the strength of enforcement mechanisms.

8. Key Examples for Your Exam

Fast fashion: The global fast fashion industry is worth over $100 billion annually. Brands produce cheap clothing at high speed, often in factories with poor conditions. The environmental cost is enormous: the fashion industry produces around 10% of global carbon emissions and is the second-largest consumer of water globally. The UK alone discards approximately 300,000 tonnes of clothing per year.

Palm oil deforestation: Palm oil is in roughly 50% of supermarket products. While it provides livelihoods for millions of smallholder farmers in Indonesia and Malaysia, its production has caused widespread deforestation, destroying habitats for endangered species and releasing stored carbon into the atmosphere.

Fairtrade coffee: Coffee is one of the most traded commodities in the world. Without Fairtrade, coffee farmers in countries like Ethiopia and Colombia can receive as little as 1-2% of the retail price of a cup of coffee. Fairtrade guarantees a minimum price and a social premium, helping to improve farmers' incomes and fund community projects such as schools and clean water.

9. Exam Success Strategy

For ethics and sustainability questions, the examiner is looking for balanced, well-developed arguments. Use the structure: Point → Explain → Example → Counter-argument → Judgement. Always consider who benefits and who loses. Use phrases like 'However, this depends on...', 'On the other hand...', 'The effectiveness of this approach is limited by...' and 'On balance...'. Name real examples such as Fairtrade coffee, palm oil deforestation, or fast fashion waste to support your arguments.