Cambridge
SP Adopters Group
5th
November 2003 - Policy Forum
Making all trade Fair Trade
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What is Fair Trade?
How
could the Simultaneous Policy make all trade Fair Trade?
Criminal
law
Tariffs
Implications
What is Fair Trade?
[This is based on the presentation made by Francis Irving
of the Cambridge Fair Trade City campaign and quotes
from the briefing paper ‘Introducing Fairtrade’ produced
by the Fairtrade Foundation http://www.fairtrade.org.uk/]
"
The first Fairtrade label was launched in 1988 in the Netherlands
and applied only to coffee. Since then, labels have been
launched in 16 other countries, in Europe, North America
and Japan, and the products have gained between 1% and 14%
market share in different countries. In the UK, the first
FAIRTRADE Mark products appeared in 1994 (chocolate, coffee
and tea) and, from a small base, sales are still expanding
rapidly – by around 40% per year.
"
Unlike the various ‘ethical’ and socially-responsible
trade arrangements, Fairtrade can only work if consumers
are willing to select Fairtrade products in the supermarkets
and elsewhere. The FAIRTRADE Mark is both a tool to attract
consumers’ attention, and a guarantee to the consumer
that Fairtrade standards really have been met. Without such
an external assurance – and without agreed international
standards – any company could lay claim to fair trade.
This would in time create two linked problems:
"
Consumers would become sceptical about fair trade, as they
did about ‘green’ claims in the late 1980s.
" Producers would find standards of fair trade begin to decline
as more companies competed for consumer attention and began
to negotiate prices down.
" The FAIRTRADE Mark creates a level playing field; an external
standard below which companies cannot drop, allowing competition
to operate without damaging the poor producers at the end
of the supply chain.
" The problems experienced by poor producers and workers in
developing countries differ greatly from product to product.
The majority of coffee and cocoa, for example, is grown by
independent small farmers working their own land and marketing
their produce through a local co-operative. For these producers,
receiving a fair price for their beans is more important
than any other aspect of fair trade. Most tea, however, is
grown on estates. The concerns for workers employed on tea
plantations are fair wages and decent working conditions.
" To address this there are two sets of generic producer standards;
one for small farmers and one for workers on plantations
and in processing factories. The first set applies to smallholders
organised in co-operatives or other organisations with a
democratic, participative structure. The second set applies
to organised workers, whose employers pay decent wages, guarantee
the right to join trade unions and provide decent housing,
where relevant. On plantations and in factories, minimum
health and safety as well as environmental standards must
be complied with, and no child or forced labour can occur.
" As Fairtrade is also about development, the generic standards
distinguish between minimum requirements which producers
must meet to be certified Fairtrade. Progress requirements
also encourage producer organisations to continuously improve
working conditions and product quality, to increase the environmental
sustainability of their organisations and the welfare of
their members or workers.
" Trading standards stipulate that traders must:
" The Fairtrade Foundations, with its international partners,
checks that approved products continue to meet these criteria."
[Additional comments from Francis]
Cambridge city council has passed
a fairtrade resolution to
promote and
support Fair
Trade in Cambridge.
However, there is more work
to do to get shops and workplaces
stocking and using fair trade
products before the Fairtrade Foundation
declare us a "Fairtrade Town".
The exact criteria to be
declared a fairtrade town
are available
on the
Fairtrade Foundation
website:
http://www.fairtrade.org.uk/get_involved_fairtrade_towns.htm
The aim is to encourage
us in Cambridge to take
practical
action, merely
by buying a
different product, to
help the lives now of
producers in developing countries.
Rather than
just watching the news
and despairing about
poverty, this would be a simple
statement
that Cambridge is concerned
about the way the world
trade systems
works, and that it can
be improved. Also,
we have to
get there
before
Oxford!
They're
ahead at the moment,
and it would be
terrible if The
Other Place became a
fair trade town first... Show
your support
via http://www.bbc.co.uk/dna/ican/Club106
How could the Simultaneous
Policy make all trade
Fair Trade?
[Presentation by Mike
Brady, Coordinator
of the Cambridge
Simultaneous Policy
Adopters Group]
SP gives us the opportunity
to make the Fair
Trade criteria
just presented
to
us requirements
for
all companies,
not only those
who voluntarily choose
to opt in to the
system.
We are here today
to think through
some
of the methodology
and implications
of
making
all trade
Fair Trade.
My suggestion
is to write up out
discussion as
the starting
point for
a possible policy
document,
which
other SP Adopters
Groups can take
to discuss
and develop
further.
We may wish
to return
to this topic
in future meetings,
particularly
when we have
feedback from
groups in other countries.
I am working
to
set up twinning
with SP Adopters
Groups
in Latin
America and
Africa at present
and it
will be
very interesting
to have their
views on the ideas coming
from
this meeting
today.
So nothing we
discuss today
is definitive.
How could
it be? It
is the start
of a process.
I
hope this
discussion will
also show the
potential of
SP to change
the world and
encourage
more people
to become
SP Adopters.
That is
our long-term
project. In the
immediate term,
I hope those
of you who do
not presently
show
a preference
for
buying
existing Fair
Trade goods will
do so. There
are also
actions
you can
take to support
Fair Trade such
as making
Cambridge
a Fair Trade
city and joining
Oxfam’s coffee campaign. SP fits in
very well with these other activities.
I am a great
believer in
not re-inventing
the wheel.
This
is partly due
to laziness
and partly
due to
respect for
the work done by
others in developing
policies.
Fair Trade,
as we have been
hearing, is
something that
is working
in a day-to-day
practical
sense to
transform
people’s lives.
The global
Fair Trade
market
is presently
valued at £300
million. Fair Trade is a niche market. Fair Trade goods are
generally more expensive than other goods, partly because
supermarkets make more profit on them. For example, Fair
Trade bananas are typically 78-90 pence/kg more expensive,
with 35-65 pence of this going to the supermarkets as increased
profit and on 24 pence extra to the growers. We can campaign
for this to be changed. For Fair Trade to become more mainstream,
supermarkets could accept lower margins to build turnover
of Fair Trade goods.
SP is not
an alternative
to these
campaigns,
but it provides
us the
opportunity
to think
beyond
what is possible
through
conventional
campaigning,
to bring
in the
policies
which are
necessary,
not
only
those that
will be
tolerated.
So how can
we make
all trade
Fair
Trade using
SP? There
are several
approaches
I have
been attempting
to think
through.
Perhaps
you can think
of alternatives.
Criminal
law
We could
include
in
the Simultaneous
Policy
package
the
legal requirement
that
all
companies abide
by
Fair
Trade
criteria.
Corporations
are
adept at following
legislation
in
a whole
host
of
areas from
contract
law,
to
PAYE tax
and
VAT,
to
quality standards.
They
have
systems
for
ensuring that
their
own
quality standards
are
abided
by
when they
source
primary
ingredients
or
components from
outside
suppliers.
There
is
already
in
the
UK
something
called
the
Ethical
Trading
Initiative,
which
is
attempting
to
work
with
supermarkets
to
ensure
that
core
labour
and
environmental
standards
are
followed.
It
relies
on
reporting
from
the
supermarkets
concerned.
We
should
perhaps
not
be
surprised
to
learn
that
Tesco
has
been
accused
of
demanding
a
payment of £278 per year
per site from all primary suppliers to cover the costs of
its compliance with the ETI code. Some have also raised concerns
that ETI can help retailers ‘avoid addressing the broader
ways in which they create inequitable power relations in
trade and agrofood networks between North and South’ (Du
Toit A 2001, quoted in Food,
Inc, UK Food Group 2003).
The
relationship between
retailers and
suppliers is
extremely unbalanced.
The UK
Food Group’s new report Food, Inc.
Corporate concentration from farm to consumer provides an
expert analysis of this (To download as a pdf go to http://www.ukfg.org.uk/docs/UKFG-Foodinc-Nov03.pdf).
It talks of supply chain ‘bottlenecks’ which
concentrate power. For example, in Europe, 110 buying desks
source produce coming from 3,200,000 farmers for 160,000,000
consumers using 170,000 retail outlets of 600 supermarket
chains. Those buying desks have enormous power to squeeze
prices, discard produce which does not comply with their
exacting standards and, perhaps as an inadvertent consequence,
drive down standards for human rights and environmental protection.
Can
such power
be held
to account
by voluntary
codes such
as the
Ethical Trading
Initiative? Only
independent monitoring
can verify
that. Generally
speaking, corporations
are opposed
to independent
monitoring of
their undertakings
to abide
by voluntary
codes.
I
have a
great deal
of experience
in monitoring
baby food
companies at
the other
end of
the supply
chain, in
how they
market their
breastmilk substitutes.
The International
Baby Food
Action Network
(IBFAN), consisting
of over
200 citizens’ groups
in more than 100 countries, monitors marketing practices
against international standards adopted by the World Health
Assembly. Companies claim they comply with the standards.
Independent monitoring shows they do not, and this malpractice
contributes to the unnecessary death and suffering of infants.
According to the World Health Organisation 1.5 million infants
die around the world every year because they are not breastfed.
IBFAN’s report Using
International Tools to Stop
Corporate Malpractice – Does it Work? is available via the IBFAN
website for further details of this experience (http://www.ibfan.org/).
So,
I believe
we need
some form
of enforcement
mechanism. Presently
international standards
can only
be enforced
at a
national level.
Following this
model, the
Simultaneous Policy
could require
the governments
of supplier
nations to
police and
enforce Fair
Trade criteria.
However, I
think we
would see
the same
kind of
pressures SP
is intended
to address:
corporations could
play one
country off
against another,
threatening to
switch to
buying from
a country
with less
strict regulations
and enforcement.
We
could make
it a
requirement on
the market
countries to
ensure that
only Fair
Trade goods
are sold.
Imports presently
have to
comply with
health and
quality legislation.
Customs and
excise and
Trading Standards
officer currently
enforce such
regulations. I
had a
quick look
at the
Trading
Standards
website this
afternoon to
check the
product recall
notices. Taking
one notice
at random
from the
9 posted
in October
2003, Morrison’s is recalling cans of Chicken Tikka
Masala because it contains a non-permitted colouring. That
will be an expense to the company, both in terms of the products
it has to scrap, but perhaps more importantly, because the
notice has to be published in the national press, which harms
the company’s
reputation. So companies
do their best to comply
to such regulations.
If they do not, they
could
be faced with more
than a product recall,
they could be faced
with criminal prosecution.
Earlier this year,
SMA was successfully
prosecuted by Trading
Standards for breaking
regulations over the
marketing of baby
milks (Update
Newsletter, Baby
Milk Action 2003 http://www.babymilkaction.org/).
The
same enforcement
system could
be used
to enforce
Fair Trade
criteria. If
Fair Trade
documentation is
not in
order, then
products could
be banned
from sale.
If it
is found
after the
event that
there is
some irregularity,
then products
could be
recalled, companies
fined or
even executives
imprisoned. There
is not
the same
risk of
pressure being
placed on
a country
with strict
regulations for
selling. Companies
have a
choice where
they source
their produce
from, but
they want
to reach
as many
customers as
possible. If
a company
refused to
sell in
a country
because it
objected to
the regulations,
it would
be harming
its own
turnover and
profits.
A
third route
could be
through the
international courts.
The International
Court of
Justice can
presently only
hear cases
involving governments,
but its
remit could
be extended
to corporations.
There are
moves to
do just
this within
the European
Union. The
European Parliament,
prompted by
East Anglia
MEP Richard
Howitt, has
adopted a
white paper
on corporate
accountability (click
here to access the white paper EU
standards for European Enterprises operating in developing
countries: towards a European Code of Conduct).
This
calls on
the European
Commission to
set up
a monitoring
platform so
that complaints
can be
registered against
corporate malpractice,
be it
abuses of
human rights,
the environment
or whatever,
as judged
against existing
international standards.
The monitoring
platform would
then be
able to
sanction the
company in
some way
if it
finds it
guilty of
malpractice.
These
proposals have
not progressed,
because the
European Commission,
with the
backing of
our governments,
prefers the
route of
a code
of conduct
for corporations
to voluntarily
adhere to.
It prefers
round-table discussions
involving all
stakeholders,
rather
than independent
investigations and
sanctions. It
is a
classic example
of the
problem SP
aims to
address: the
undue influence
of transnational
corporations over
policy setting.
Corporations are
powerful lobbyists.
Our governments
are also
in a
bind. Why
put European
corporations at
a competitive
disadvantage by
forcing them
to abide
by international
standards if
corporations with
headquarters outside
Europe can
get away
free? You
can write
to your
Member of
the European
Parliament to
support the
Monitoring Platform
approach as
a parallel
strategy to
SP.
George
Monbiot, in
his book ‘Age of Consent’ has
proposed a new multi-lateral
organisation,
the Fair Trade Organisation,
to
replace the World
Trade Organisation.
This
would licence corporations
on
the basis of compliance
with Fair Trade
criteria.
In
any of
these cases,
I think
sanctions
against
corporations
breaking
the rules
need to
be meaningful.
In the
SMA case
I mentioned
earlier,
the
company was
fined £60,000,
equivalent to
3 minutes turnover.
The case
set an important
precedent and
the publicity
and loss of reputation
was probably
more costly for
the company, but
it shows
the weakness
of current systems.
I would suggest
linking fines
to company
turnover and
ideally holding
executive
officers personally
liable with an
ultimate sanction
of imprisonment.
Tariffs
Another
possible
method
of
promoting
Fair
Trade
would
be
to give
preferential
tariffs
to
Fair
Trade
products.
In other
words,
import
duties
would
be
lower
if compliance
with
Fair
Trade
criteria
could
be
proven.
An
imaginative
tariff
structure
could
make
Fair
Trade
products
cheaper
than
alternatives.
I
know
some
Non-Governmental
Organisations
are
investigating
this
approach
for
their
lobbying
of
the
European
Union.
It relies
on
market
forces
driving
corporations
to
support
Fair
Trade
for
simple
economic
reasons.
I
think
this
needs
careful
evaluation,
because
it will
also
create
pressure
for
non-Fair
Trade
goods
to
be
made
even
cheaper
to offset
the
greater
import
duty.
Implications
I
would
briefly
like
to
think
about
the
implications
of
making
all
trade
Fair
Trade.
The
positive
implications
are,
I
hope,
obvious,
from
the
presentation
we
heard
at
the
outset.
But
there
could
be
negative
implications.
For
a
start,
some
products
will
be
more
expensive.
That
will
have
an
impact
on
people’s
purchasing power.
This may disuade
some people in rich
consumer countries
from supporting
SP if it
includes measures
to make all trade
Fair Trade. One of the values of
SP policy development
process is that
it is links
people around the world, so that
while we will consider
the views of those
who object to paying
more for certain
items,
they will also have
to consider
the views put forward
by SP Adopters in poor producer
countries.
However,
the extra
costs will
not inevitably
be felt
by consumers.
Consider the
breakdown of
the cost
of £1.00
of bananas from
Ecuador sold in
a UK supermarket:
Extra costs for meeting Fair Trade criteria could be met
at various points in this chain. Competition between
retailers with no option
but
to source Fair Trade
products
may
see
them
accepting
lower
mark
ups.
But
again this will have implications,
on
tax revenues, share
dividends
(and so
pension payments) and,
perhaps, fat-cat
salaries.
The above breakdown shows how reducing
or scrapping
the EU tariff, with the requirement
that some or all
of
that
saving is
passed
on to producers, could make a significant
difference.
Another
implication is the impact on competition
between
producers and the role that re-regulating
markets
could
play in this.
Take
coffee
as
an example.
In
2002 there
was a
global
oversupply of
nearly a
million
tonnes
of coffee
(Food,
Inc. UK
Food
Group,
2003).
Global consumption
was 6.4
million tonnes.
Fair
trade (2001)
was just 14,400
tonnes.
Making
all trade
Fair Trade
will benefit
those who
are able
to sell
their coffee,
but
what about
those who
find no market?
At present
growers without
a market can
compete on price.
The
result of this
competition
has
driven the cost
of
raw coffee
beans to
a
30 year
low, with
growers receiving
less than
cost price
for their
beans. Such
competition presently
benefits
the
roasters (the
main ones
being Nestlé,
Philip Morris-Kraft, Procter and Gamble and Sara Lee/Douwe
Egberts). Nestlé is
reported
to
make
26%
profit
on
its
processed
coffee
(more
than
most
other
products
on
the
supermarket
shelves).
Competition
on
price
is
driving
people
into
poverty.
Oxfam
proposes
getting
rid
of
excess
production
by
scrapping
poor
quality
coffee.
That
may
be
a
temporary
solution,
but
down
the
track
we
are
likely
to
see
over-production
of
better
quality
coffee.
I
am
wondering
if
we
can
somehow
introduce
into
the
system
competition
based
on
Fair
Trade
criteria,
perhaps
going
back
to
the
tariff
idea
mentioned
earlier.
The
better
the
working
and
environmental
conditions,
the
more
sustainable
the
agriculture,
the
lower
the
tariffs.
Could
such
a
system
encourage
processors
to
seek
out
the
producers
with
higher
standards?
We
could,
of
course,
return
to
the
system
of
International
Coffee
Agreements,
which
ran
from
1962
to
1989.
Producer
countries
negotiated
quotas
to
supply
the
world
market,
in
much
the
same
way
as
OPEC
regulates
oil
production
still.
Countries,
such
as
Uganda,
divided
up
their
quota
by
issuing
the
licences
to
farmers,
the
majority
being
smallholder
farmers
as
a
poverty-alleviation
method.
The
International
Coffee
Agreements
were
attacked
as
distortions
of
the
market.
There
were
also
concerns
that
some
countries
were
free-riders,
providing
poor
quality
coffee
to
the
market
as
competition
was
less
intense.
There
was,
of
course,
also
squabbling
over
which
countries
received
what
quota.
But
because
a
system
had
certain
problems
does
not
mean
it
should
not
be
looked
at
again.
I
would
like
to
finish
with
some
statistics
from
the
UK
Food
Group
report
which
quotes
a
study
from
Robbins
(2003)
who
calculated
that
had
the
prices
for
the
top
ten
tropical
commodities
risen
in
line
with
inflation
from
1980
to
2002,
suppliers
of
these
goods
would
have
received
US$243
billion
more
than
their
actual
receipts – five
times
the
total
world
aid
budget.
This
is
the
effect
of
the
rules
set
without
our
knowledge
or
consent.
While
processors
and
retailers
have
shown
growth
in
profits,
producers
have
lost
out
in
real
terms.
SP
allows
us
to
take
back
the
world.
I
hope
the
possibilities
I
have
outlined
for
making
all
trade
Fair
Trade
provide
food
for
thought.
The
discussion
forum
on
the
BBC
iCan
site can
be
used
to
post
comments
and
suggestions
prompted
by
this
article.
