Examination of Witnesses (Questions 212
- 219)
TUESDAY 25 APRIL 2006
LORD BRETT,
MR DAN
REES AND
MR ALBERT
TUCKER
Q212 Chairman: Good morning to you,
gentlemen. Welcome to the Committee. I know you are there as three
individuals rather than as a team, so I do not expect you to speak
for each other as a collective. I am sure you will all have an
opportunity to answer questions which relate to you and to come
in on any which you feel you want to add to. Perhaps I could start.
As a Committee, we are looking at the whole gamut of private sector
development: How can we make it happen? What works and what does
not work? In this particular session we are looking at the ethical
side of things and whether ethical business practices can promote
more employment and development opportunities, or, on the contrary,
whether unethical practices can have counterproductive effects.
Perhaps I could ask you to explain what you think donors—and
obviously we are talking in this context particularly of government
donors—can do to ensure that company supply chains and employment
conditions are fair; in other words, how they purchase and how
they deal with employees. What is the role of donors, as opposed
to what the companies will do on their own initiatives? Could
I start with you, Lord Brett, and then your colleagues will come
in.
Lord Brett: Thank you very much,
Chairman. The International Labour Organisation is very much constituent
driven. It is the only UN agency which is not wholly governmental.
The control of the organisation, both at the conference and at
the governing body, is shared equally between the workers' and
employers' groups, who have 50%, and the Government's. In that
sense, there is always the voice of both the employers/business
and also the voice of trade unions. That means that the ethical
base from which we start is a given, because of both the constitution
of the ILO and also how it works. When it comes to the role that
we have with donors, it is of course to facilitate the policies
of DFID in this country, or of whichever government is seeking
to provide sponsorship. It was driven originally—the reason
why we were created in 1919—by the protection of workers,
which expanded from just labour rights to health and safety, et
cetera. With globalisation, it has become much more with additional
tasks put upon us that are related to the world of work—which
of course is our raison d'être. That means we have
been pressed in recent years to do for example skill training,
employment, capacity building of employers' organisations in Eastern
Europe, and trade unions in Africa. We have a relationship with
a whole series of donors. The better ones—and this includes
DFID—are the ones with whom we have partnerships, which
is a much more effective way of delivering results. Others still
have a `flag' mentality—for example the United States—where
individual projects are proposed or required, and that approach
does not provide the same degree of coherence and capacity building
at the nation level as that within the partnerships that we have.
We have a three-year partnership agreement with DFID coming to
an end, worth about £15 million, and a new one hopefully
starting this year, worth about £20 million, but the greater
element of our work is done in response to DFID at the country
level. Again, because our constituents at the country level are
both employers and trade unions and government, that quite often
leads to what they want being put forward rather than perhaps
what the donors themselves think is in the best interest. Therefore,
we have different responses in different parts of the world. Our
current package of work being done with DFID funding includes
child labour; the trafficking of women for labour purposes in
West Africa and in China; jobs in Africa; SME development; micro
insurance and micro finance dialogue; and in Nigeria social security
work—so we have a whole gamut of activities and we respond
very much to the donors. If the countries adopt an intelligent
approach—as I believe the Dutch and the British do in their
relationships with the international community—they tell
us which of our programmes they believe they can support as part
of our core activities, and which at the country level fit in
with what DFID are doing in terms of its international relations
with that particular government either in support for projects
or indeed directly with organisations in the country concerned.
For example, in relation to child labour and HIV/AIDS we have
major support from DFID at a worldwide and at national levels.
Q213 Chairman: Dan Rees, of the Ethical
Trading Initiative, what do you think members could do? What can
they do wrong?
Mr Rees: Time is short, so there
is no time really to introduce my organisation, but I would initially
say four things. One of the things donors do best is give money.
To DFID's credit, it has had a programme of ethical trade since
1997; it has supported, amongst others, the Ethical Trading Initiative,
the Fair Trade movement and many other things in doing work which
is pertinent to this inquiry. Obviously, if that is of interest
to you, then I can go further into that. A programme of support
is important. I think it should do that and it could do more of
that, but, as well as that, the Government can use its natural
advantages to good effect in other areas too. If I can step back
briefly, when we talk about private sector development and we
talk about ethical trading in particular, I think there is a tendency
to look at business somehow outside the main development model
or as actors who are not principally in the development decision
making. The potential of business and indeed many of the answers
that business is being asked for lies in a much closer co-operation
with government, trade unions, national governments, national
business and NGOs. On that note, I think the government must take
responsibility, wherever government is, in creating an enabling
environment for business in order to trade ethically. The reality
is that members of the ETI and indeed other companies are sourcing
from countries around the world where the rule of law does not
always apply, where labour law is not applied, and I think encouraging
governments to act like governments and to enforce labour laws
and to raise the bar in terms of creating that ethical environment
is a very useful thing that governments could and should be doing.
I think DFID does it and it could be doing more of it. Of course,
if you are going to advocate that abroad, you also need to do
it at home. I think government in general—and I do not just
point the finger at DFID—could have a more coherent approach
to ethical trading and could have a more joined-up approach to
what it means by ethical trading and encouraging UK PLC to have
a clearer view of this, to have clearer standards on this, including
things like reporting on it, and all of that package, if you like.
I hear much from DFID but I do not hear nearly so much from DTI,
for example, on this subject. Lastly, I think the UK Government
is a big buyer. If we look at just the NHS alone—I think
£15 billion—this would dwarf the vast majority of companies
around the world. What is it doing to ensure that ethical standards
are a part of that massive purchasing power? If it did, it could
have a massive impact in the markets and it could also speak with
more authority to the private sector.
Q214 Chairman: If I could get a comment
from Mr Tucker. Currently, the transition is between donors and
companies and clearly there are practices, so perhaps you could
give your view of that, in terms of the role of donors and companies.
Mr Tucker: Thank you. I think
in the Fair Trade movement we have demonstrated that link between
development and business. If you think that fair trade has grown
exponentially in the last 10 or 12 years, it is still a small
percentage of global markets but it has touched over five million
poor farmers and raised the ethical agenda very high, even for
those outside of fair trade. What donors can do and also what
they should not do—which is to get out of the way sometimes—is
quite important. For example, one of the things DFID has been
very strong at is piloting approaches, but where I see a weakness
is bringing that to the mesh of business and private sector life
and linking that in. Learning from DFID's better work, so that
the farmers are on fair trade and ethical trade, or, even, in
international development, how that learning is shared and applied,
I think is a weakness. I think, also, with some of the systems
we have, particularly around codes and standards, the way we are
financing this is that we are putting costs back to suppliers
and the poorest in the chain, so sometimes we find that businesses
from the private sector do very well out of the work, because
it helps them build their business, but a lot of the costs in
terms of compliance gets pushed back to suppliers. I think donors
can look at how to mitigate that in the way they apply funding,
because I think there is a very strong focus on the market side.
I think also the learning from some of these approaches needs
to be shared in the market place, so you create market conditions
where consumers actively choose businesses that take an ethical
approach, so that, in effect, you create circumstances where there
is market advantage in being ethical. I think donors have a very
strong role to play, because, in a way, they are investors in
this, they are investors in the ethical approach, they are investors
in the development. I think that is a central role and I see that
could be stronger, that role of talking to consumers about what
has worked and what has not worked, of talking to the private
sector about what can be applied and support development better
than other practices. I think that is one element. The other element
is the entrepreneurial element. I think the private sector can
be very effective in the international context but I think there
is a question of hard and soft infrastructure. Donors have been
very good at sending technical expertise in to develop a product
or quality base to do something very specific to support a particular
business but then that is the end of it and, after a three-year
programme, we expect people to perform perfectly in the market.
It does not happen. The kind of relationships that donors can
sponsor is one, I think, of mutual development, perhaps—a
kind of win-win, with poor farmers or poor community-led businesses
taking a small- and medium-sized enterprise kind of approach but
also supporting, I guess, a modern apprentice type of approach
for young social entrepreneurs in developing countries. Young
people are very entrepreneurial in the countries I have worked
in, but the outlets and opportunities and the infrastructure for
them to bring that to the fore have been limited. In some areas
it is cultural: young people are not seen as having anything special
to offer. I think donors can support the development of the entrepreneurial
a lot more but with social purpose. Finally, in the Fair Trade
movement we have found co-operatives quite valuable. I know there
are mixed experiences of the success of co-ops, but we have found
that poor-people-led co-operatives, when they are successful,
have invested much more widely in the communities they are working
in and in infrastructure than traditional shareholder-led private-sector
interventions, foreign direct investment or whatever, come in
and the profits move out. Where donors can support businesses
in situ, developing their capacity and working mutually
with strong business expertise externally but in a longer term
way, I think longer term support and capacity building, as opposed
to the training intervention, might be a stronger thing for donors
to support as well as supporting the consumer end. I think the
consumer end is quite important.
Lord Brett: Could I emphasise
the issue of co-operatives. Co-operatives in Africa had a bad
reputation because they were seen to be top-down, state-driven
organisation, and very much liable to cronyism and corruption.
Therefore the word "co-operative"—a bit like the
word "trade union" in Eastern Europe—had a problem
in the post-single-party state in Africa, but it is key because,
as has been said, it brings people together, it provides local
training and leadership, it is multi-functional. It is not only
about livelihood. For example, with one of the major problems,
HIV/AIDS, the village co-operative is the key to spreading information
and spreading assistance. A large component that we are putting
to UK Government is about co-operatives in Africa because we think
this is a very cost-effective way of bringing assistance which
will not blow away in three years time because it is grounded
in the people and cooperatives can—as they did in this country
in the nineteenth and twentieth century—develop very quickly
from a small base. We think it is a major area for further investment.
Q215 Richard Burden: Could I just
come back to the first point that you made, Albert, about DFID
specifically being good at piloting things but it is a question
of translating that through the mainstream practice. Could you
expand a bit more on how easily that could happen, with maybe
an example or two of where a project has gone quite well but there
is something they could have done which could have taken them
further.
Mr Tucker: If I could give you
an example of something that worked, despite the system and structure
that were there, it is Divine Chocolate. When we started trying
to launch that, we had decided, because of fair trade principles,
that we would give ownership to the farmers because the value
would be in the brand that was created. We had gone into the liberalised
environment in Ghana—although it was not fully liberalised,
internal liberalisation had taken place but not external—to
support farmers to respond to that because liberalisation usually
just wiped out small farmers. We had brought the experience of
working in coffee with Cafédirect from Latin America into
that context, and built up farmer organisations. DFID put what
was a very small amount, I think it was something like £70,000
to develop a coffee programme in Tanzania and in Ghana with the
coffee farmers. After this three-year intervention, DFID had done
that and it is gone. Five years later or three years later, we
got to the stage with the farmers where we decided to create a
brand which they would own and which would be introduced to the
Market, and that was Divine Chocolate. We decided that the farmers
would have ownership. We had the Devil's own job getting the capital
to deliver this, particularly as the structure was very unfamiliar.
Then, interestingly, we decided to go back to DFID, and DFID decided
that it could not put cash into this, because of competition rules
and so on, but it gave a guarantee. This helped with leverage,
to get the brand off the ground. That brand is now supplying all
the co-ops chocolate and doing very well. DFID's intervention,
by accident, came at various points, but after that intervention
I believe that DFID decided this was something they could not
do any more—the guarantee structure was far too troublesome.
I think there is a way of looking at the chain and seeing where
DFID, particularly with their experience, can do significant interventions.
More importantly, after that, we were not really involving DFID
in debriefing and looking at the replication value of that and
how else we could have done it better, because we were making
it up as we went along—as were the farmers—and we
were not sure what would be the end result. We could not give
at the beginning a nice neat little trajectory of how it was going
to happen, but what we knew was that we were going to do it. When
we measured risk it was very, very different: we would do it,
either with this much space or with that much space, but we would
do it. Our chances of success depended on the key elements where
we could get support and it needed a very entrepreneurial approach.
We did it together, almost despite ourselves, but we had not taken
that learning on to say, "Can this be macro'd up? Can it
be used in other contexts? Can this approach be changed to make
other systems, which are struggling to make it work, work?"
That partnership, in being entrepreneurial and innovative, we
have been looking at and so have some of the donors. We have done
it and say, "We have improved on this great thing. Look at
it." It is great now—I am proud of the brand and it
is going to do well—but, if it sits there, it has done no
good. How can the bigger players in the market be moved into doing
more supportive interventions like that? We did not really develop.
That is quite a detailed example, and there are many others. There
are good bits of research that DFID has done, particularly around
things like climate change, use of water, energy use, which we
could have applied with some of the farm co-operatives we were
working with, but we had no idea about them until we stumbled
across them accidentally—and I know that DFID deals with
a lot of different things—so there needs to be a system
to get that interaction a bit better.
Q216 Ann McKechin: Lord Brett, the
Director General of the ILO stated earlier this year that we potentially
face an "unprecedented global jobs crisis of mammoth proportions"
throughout the world. He said that one of the keys to tackling
the issue of employment was the policy and regulatory environment
for enterprise and investment. DFID in turn has talked about creating
an Investment Climate Facility. Could you pass comment as to whether
you think an initiative such as the Investment Climate Facility
is an appropriate mechanism for job creation and if there are
any other strategies which we should be trying to follow in general
principles in terms of widening employment opportunities.
Lord Brett: I am encouraged because
DFID prior to the adoption of the strategy for investment endorsed
the core labour standards. Not every DFID officer, I am sure,
was aware of them or of supporting them—but the Secretary
of State did. He endorsed a document and it was circulated widely.
That gives the worker organisations the confidence that, if an
investment strategy is based on a recognition that it shall not
have the impediments of child labour, forced labour, but that
there will be freedom of association and effective collective
bargaining and there will be no discrimination then that is a
foundation on which you can build. I do not think there are many
of the class war problems that we had perhaps forty years ago
in this country, where trade unions—and I was an active
trade unionist—were never quite sure whether they approved
of profit making in companies and if they did they did not want
people to know about it. I think that the problems that are faced
by workers in Africa and Asia are such that they understand entirely
that that is a facile discussion to have. The question is: How
do you make an effective, profitable business, whether it is public
or private, that provides a livelihood for them? I think the core
labour standards endorsement is important. The Director General
pointed out that the tip of the iceberg of recognised unemployment,
185 million worldwide, is just that: the tip of an iceberg. The
key thing in Africa, in particular, but in general terms, is that
we are talking about a formal economy which excludes a lot of
people. When I met the President of Senegal—and it was a
rather chastening experience some years ago when I was vice-chairman
of the governing body and I was leader of the workers group—he
said, "Ah, you represent the elite in my country." It
is not usual to be called a person who represents the elite when
you are a trade union leader and I was politely puzzled. He said:
"You represent the 6% of the workers in my country who are
in formal employment and organised in unions. I, unfortunately,
have also to take care of the 94% who are not." That is,
I think, the biggest challenge for the trade union movement in
the world and it is the biggest challenge for the ILO and it is
the biggest challenge for DFID: How do we bring poverty eradication
not just to those who have to be protected by labour laws because
they are in the formal economy but to all those people, the poor
and the poorest of the poor? The ILO wants to get to the poorest
of the poor, the 500 million landless labourers. How do we work
together get to that? An Investment Climate Facility that brings
investment but with guaranteed labour standards is very important.
Q217 Ann McKechin: The ILO has estimated
that reducing the world's youth unemployment rate by half would
add US $2.2 trillion to the global economy. Clearly, when you
go into different countries the majority of the population is
under 30. Is there any measure which you think can be taken to
channel job opportunities towards young people in terms of creating
a skill base and allowing them to be able to exploit that?
Lord Brett: The ILO is the lead
agency for the Youth Employment Network (YEN). The African Union
Summit on development last year endorsed the whole question of
putting employment at the centre of economic planning. It is interesting,
the words "employment" or "jobs" do not appear
anywhere in the Millennium Development Goals (MDGs). It is there
now, in paragraph 46 of the conclusions of the Millennium Summit,
because it endorsed the findings of the World Commission on Globalisation,
on which I served, which said, basically, that if we are going
to solve poverty we have to put the priority on employment. That
is where the Director General was coming from in his statement.
It is not just a question of youth unemployment being an issue
for youth: political stability in Africa will depend on young
people not being educated and cast on the scrapheap but educated
and able to use their education in fulfilling their livelihoods.
That makes youth unemployment an absolute crucial issue. How you
do it is involving the state in universal education; the donors
in providing the wherewithal to help achieve that; and the private
sector has a major part to play in the skilling of the labour
force, not in the educational sense but in the vocational sense.
Some of that is being done, but I do not think multinationals
in Africa and elsewhere have done enough outside their own narrow
requirements to help in that task. De Beers in Botswana are doing
a good job trying to spread the skills outside the diamond industry,
which will disappear in about 30 years time. Not many multinationals
have been that far-sighted. There is a major job to be done—and
again it comes back to the partnership between civil society,
national government and the international agencies and the 10
major donor countries that donate 70% of the ODA aid in the world.
Mr Tucker: In preparing for this
meeting, one of my colleagues from West Africa highlighted something
that donors can do. One of the things is this problem that job
creation or sustaining jobs or strengthening jobs does not appear
in any of the targets or points of view for donors. Particularly
in the context of Africa, there is no real focus on it. Where
a colleague from, say, Oxfam says, "How many jobs would you
say Oxfam have created in their how many years of going to Africa?"
it feels like a criticism. But I bet you they have done better
than they think—but it has not been a focus. I think we
need to put it more as a focus, so that all of us can work harder
at either sustaining jobs—which many of us do and the fair
trade movement does very well—or creating jobs. I think
the target of the investment in terms of donor finance should
begin to put that in as one of the key indicators.
Q218 Ann McKechin: You think that
the emphasis, when countries are growing their economies, is that
they may need to look at growth employment policies.
Mr Tucker: Yes.
Q219 Ann McKechin: And to use that
growth?
Mr Tucker: Yes.
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