Examination of Witnesses (Questions 220
- 238)
TUESDAY 25 APRIL 2006
LORD BRETT,
MR DAN
REES AND
MR ALBERT
TUCKER
Q220 Ann McKechin: Rather than end
up with having growth but not terribly significant increases in
formal employment.
Mr Tucker: Yes, creating the circumstances,
both governments and countries.
Q221 Hugh Bayley: Are employment
and growth ends in themselves? If you look at China and India,
where industrialisation has created millions of new jobs, some
of those jobs are on very, very low rates of pay and in terms
of great exploitation—and some people have been left behind
altogether. Really this takes us back to your conversation with
the Senegalese President. What can the ILO do to stop people being
left behind in the industrialisation process? Or is that just
the way it happens, like it did in the industrial revolution in
Europe in the 19th Century?
Lord Brett: The concept that the
ILO has adopted is the concept of decent work. Decent work is
freely chosen, with labour rights and social security. In the
last question, social security is key. Only three states in Asia
have any real social security, Australia, New Zealand and Japan.
Therefore, to build social security—and that is the way
you provide a safety net—is the answer in many ways to how
you stop people being left behind. Now the Chinese Government,
of which I have mixed views, does understand that problem. It
is trying to address the fact that it now boasts that only three
million people are now not able to be fed and clothed properly—and
when I say boast, I need to point out, of course, that the figure
was much larger 20 or 30 years ago. The problem with China is
how they struggle out of—and this is a personal view, not
an ILO institutional view—having a communist state without
communism. If you have a capitalist state and you do not have
the safety valves of the free press, democratic governance, and
independent trade unions, then it seems to me you have similar
difficulty making capitalism work, and you probably have a difficulty
in making communism work if you do not have the faith of communism.
That breeds the kind of corruption which is a major feature of
China. The ILO seeks to provide the advice and technical assistance
to help put safety nets in place. As for wage levels, the ILO
has been traduced by some by saying that they do not want to set
minimum international wage levels by insisting on having basic
core labour standards. It is not the case. If a country wants
to have a minimum wage, it will be negotiated at the level that
country can afford, by the trade unions, the employers and the
government. The right should not be denied people of being able
to belong to trade unions of their choice and of being able to
sit down and bargain with employers in a framework—much
as they do in the Republic of Ireland, for example—with
government and employers agreeing not just on the bread and butter
issues of wages but on a wider social premise. It is that denial,
I think, which is the problem in China and some other countries,
but even more so if you are not putting in place safety nets at
the same time.
Q222 Hugh Bayley: If I were looking
for a way to criticise your line of argument, I would say that
ILO has set fine benchmarks or aspirations for these goals of
freely chosen employment, social security and so on, but the question
is: How do you reach those goals? If you look at China, as part
of their industrialisation process they are dismantling the state-provided
welfare which was a feature of Maoist communism, so that healthcare,
for instance, is provided by local communities. If you are one
of the big industrial towns in the East, you may have quite good
healthcare systems provided by your province. If you are from
the rust belt in the North or the underdeveloped rural West, you
may have absolutely nothing, and if you are a migrant worker and
you go to town in search of labour you do not get any benefits
at all because you are a foreigner in a different city. Fine,
you set the goals and you advocate compliance with the goals,
but by your own admission there are only three already developed
countries in Asia that fully provide all this. How do you try
to ensure that the process of industrialisation in China or India
or smaller states in Asia scoops up the poor and the dispossessed
as well as the more skilled workers who are unionised or may be
unionised who clearly gain from industrialisation?
Lord Brett: I would argue that
the core labour standards are not aspirational, they are enabling.
They do not in themselves set anything, but is it fair, is it
decent, is it reasonable that people should have to suffer forced
labour or that they should suffer child labour or that employers
should be able to discriminate against women? Is it fair that
workers should not be allowed to belong to trade unions or allowed
to collectively bargain? All those things, if put in place, enable
the rising of people's standards. Having said that, I was a member
of the TUC General Council, I recall, when we celebrated that
we had got an Equal Pay Act. We got it exactly 100 years after
the TUC Congress called for it. Maybe we have to understand that
in politics we think in terms of five-year Parliaments and we
have to think longer. Interestingly, I was in the Vatican in 1996
meeting the Pope with other Labour leaders, including John Monks
of the TUC, and it was said, "Well, we had a meeting in 1896
which led to the Congress of Berlin which led to the creation
of the ILO," and I commented, "Oh, well, we are having
a meeting because someone put in the diary, `Bring forward in
100 years'." He said, "No, no, we in the Vatican, in
terms of policies, think in terms of centuries." I suppose,
if you have been around for 2,000 years without too many democratic
elections, you can do that. Maybe our problem in development is
that we are not thinking long-term. We are still thinking far
too short in terms of donors. We pride ourselves, rightly, I think,
but when they are looking beyond one year/two years to three years,
five years, to 2015, maybe that in itself is too short. The ILO,
which has only been around for 80-odd years, can only try and
build on it year on year. I think that is the answer: "We
will get there—not as quickly as we want, but if we do not
keep trying we will get there even more slowly."
Mr Rees: China is obviously hugely
significant, but I guess I would just like to point out that decent
work, access to trade unions to represent workers, the application
of the rule of the labour law are massive issues all around the
world, not just in China. I appreciate your point, but I think
it is still a priority for donors, in order to do whatever they
can to encourage the rule of the law and the rights of workers
to join trade unions. If I look at, say, Bangladesh: 20 million
people in Bangladesh, one of the poorest countries in the world,
are dependent in some way on the garment industry. I do not think
it is right to say that those who do have work are somehow some
waged aristocracy: they are earning about half a dollar a day,
which, by anyone's terms, is absolutely appalling.
Q223 Hugh Bayley: You want a conditionality
with labour conditions being the condition on which aid is given.
Mr Rees: ETI does not have that
position, because that goes beyond our particular mandate, but
we think it is vital that the role of government should be beefed
up in terms of enforcing the laws of the land. We are talking
about, as you referred to in China, the laws of the land just
being adhered to, the rights of workers and citizens in countries
just being adhered to and enforced. We could go an awful long
way in combating poverty by just encouraging governments to act
as responsible governments should, to allow workers to have the
protection of the laws that exist and to organise and bargain
for themselves. I think it comes back to a view about how rights
are realised. Are they handed out by governments or promoted by
foreign business, or do people realise them through self-determination
and joining organisations of their own choosing? To a certain
extent it is both, but you have to create both conditions. That
is the first comment I would like to make. The second is that
the vast majority of people who are involved in making products
that end up in the UK market of course do not have permanent employment,
do not have secure-waged employment; and there could be much more
done to look beyond that tier of the supply chain into large groups
of workers like home workers and smallholders, many of whom are
willing, many of whom are very poor, many of whom have a crucial
role in supporting others, in order to bring them into the business
process, in order to bring them into the development process,
if you like. ETI has done work in this area and so have others,
but I think it is a vital part of what we consider corporate responsibility
to be in terms of impact for poor people.
Q224 John Bercow: If the witnesses
were obliged to put it very precisely, what would they say would
be the emerging lessons from the Ethical Trading Initiative about
the effective use of the codes of conduct for promoting labour
standards? To put it in context, The Observer recently
described the ETI as "a not-very-stringent voluntary code
of practice"[1].
I suppose, therefore, the follow-up and related point, and the
focus of the question, is: Can signing up to a voluntary code
make any significant difference in terms of corporate behaviour
overnight? If not, over what sort of period might it do so? Will
it do so simply by virtue of the fact of the signing, or does
that signing need to be a signing to a series of quite specific
principles; for example, on the basis of which wage levels should
be determined according to company average or some other index,
and, in terms of working conditions, quite precise principles?
And does it have to be accompanied also by some sort of mechanism
of scrutiny or assessment? In other words, you do not just take
people at their word: "You have signed up, you have ticked
the box, that is jolly good," and nobody ever knows otherwise.
Lord Brett: In the ILO London
Office, we look at all the Corporate Social Responsibility reports
(CSRs) of British multinationals and half of them leave more than
a little to be desired. They are, at best, opaque and quite often
misleading. We have instigated in my office in London, not on
a name and shame basis but on a constituency service, to write
into British multinationals, "We have seen your CSR report.
In relation to our area of interest, which is labour standards,
where we think it is either opaque or misleading. We suggest that
they quote directly from the ILO Declaration on Fundamental Principals
and Rights at Work. We point out companies which have done it,
and where there can be no duplicity, or confusion in what the
company intends its policy to be. Another question is: How do
you police it? By having a code, you invite scrutiny, but the
question is then how you do it. One of the problems with CSR is
that companies tend to pretend it is easy. It is not. Tesco have
a million suppliers; they have 30,000 major suppliers. The supply
chain runs around the world, so ensuring that what you promise
in your code is applied is actually quite difficult. I think sometimes
companies are too glib about saying what they can do. I have my
own list of companies which are good and companies which are not
so good—and of course, as with Sherlock Holmes, the real
question lies with the dogs that do not bark. What about the companies
that do not produce reports? Are they better or worse? We are
in the infancy of CSR and it is here to stay. It is an area where
the ILO was soon "off the mark". The tripartite mechanism
is very powerful and a very great advantage—but not when
it came to CSR, because we could not get Governing Body consensus
of whether we should be involved in a voluntary initiative area
when we set international law. It took a decade for that to work
itself out. It has now worked out.
Q225 Chairman: You said you had a
list. Is that you personally or the ILO?
Lord Brett: I personally have
a list of companies in the UK, and, if there is a single thing
about some of the better ones then it is that they tend to be
companies who have got their fingers burnt. They tend to be companies
which did not start off being quite as ethical as they now are,
but have had some bad experience in PR terms from things that
might be put in the North Sea that should not have been.
Q226 John Bercow: Forgive me, Lord
Brett, for interrupting you, but I feel sure this will be a point
of consensus between us. The fact that they themselves have experienced
bad PR—which is something about which none of us here give
a tinkers cuss, but it is incredibly important that there should
be a mechanism that is preventative rather than reactive after
the event. Although we do not give a stuff about their bad publicity,
and it might be that it is richly deserved and the opprobrium
heaped upon them subsequently is well warranted, we do not want
people to have to suffer in the first place before corrective
action has to be taken if the suffering is the result of inadequate
procedure.
Lord Brett: I think it has encouraged
others who have taken on CSR to make sure that they do not get
themselves in that position—because, if you take it on,
you are inviting greater scrutiny—because you are more than
likely deemed guiltier because you have taken a promise which
has been broken, rather than not having made a promise in the
first place. In that sense, it is quite valuable.
Mr Rees: Referring to the statement
in The Observer that the ETI was not a very stringent monitoring
initiative, that is true, but we were never set up to be a monitoring
initiative. We were set up to do two things: to get commitment
from business and to promote international labour standards in
a certain way, and to develop good practice in the implementation
of corporate codes of conduct. We always took the view and we
take the view now—it is like a double-edged sword—that
these codes can be good things for poor workers or bad things
for poor workers, depending on how they are applied. That is a
strategy to which we remain committed. On the emerging lessons
from ETI, I think there are many—and it is a shame for me
personally that it comes at this time in the meeting—but,
to follow Bill's point, I think that getting commitment from companies,
public commitment, that they have responsibilities in this area
is a huge step forward. If you look back, in the last five years
there has been a sea-change, in getting large companies to make
this commitment and in generating the expectations that this is
what they should be doing. I think one of the successes of the
Ethical Trading Initiative is built, from what Bill said, on international
labour standards and the language of the ILO that the ETI Base
Code is the standard that British companies are working towards.
I think other lessons are that there can be benefits from this.
If I could refer you to what ETI members alone did last year:
in 2005 they scrutinised the performance of some six and a half
thousand factories and farms around the world, employing an estimated
two and a half million workers. I do not yet have the figure on
the number of improvements that they have asked of their suppliers,
but, if it is similar to the year before, it is close to 30,000
different improvements. These numbers and this scope is not insignificant.
We are beginning to get momentum. Of course it is not enough.
I absolutely agree with you: there needs to be more independent
scrutiny. One of the difficulties is by what yardstick and how.
I think people such as yourselves and consumers are asking simple
questions, such as: "How can I buy products that are produced
ethically?" and the reality is that it is a fantastically
long and complicated answer, and, at the moment, as Bill pointed
out, there are no guarantees. Moving forward, what are the key
issues? I think the key issues are that there must be more companies
who are challenged to make this commitment and they must be reporting
more publicly upon it. I think that companies must be challenged,
in order to integrate their ethical decision making and ethical
standards into their core business practice, that is reflected
in price and in ordering and lead times. That is where we will
really get the purchase on the market.
Lord Brett: Can I comment on one
major weakness in the UK. We have an OECD code of conduct. We
have a mechanism for reporting and a mechanism for investigation.
Who knows of any company which has been investigated by the DTI?
Who knows what the results were? Who knows how that investigation
took place? The answer is: If you know, then you know more than
I do. In essence, that is the problem. I know from talking to
investors in the city, major pension funds, that they would like
to know in order to put some pressure on those companies, so that
they do not find themselves in a situation where they are the
sufferers when something comes out that affects the share price.
Therefore, there seems to be a DTI reluctance to be perhaps as
effective as it should be or at least as transparent. That I should
say is purely a private grumble rather than from my institution.
Mr Tucker: I think there is a
danger of looking at a single bullet solution on these issues.
For us in the fair trade movement, ETI has been useful in terms
of partnerships they have brought together, but, from my perspective,
in order to be harsh about it, I would say we always saw it as
a baseline. It created the climate in which discussion could be
heard in companies that do not normally do it. In the fair trade
movement we found that, if we had businesses that had ethics as
a central core and took it to the marketplace saying, "Ethics
are important and they are central to our business," then
you start having a reaction, and that combination of things starts
raising the joint levels of engagement, ethical and so on. If
Fairtrade brands had not been successful, some of this debate
would not be happening, so I think it is quite important that
these different points of attack are there. I also think we should
use the market to make sure that companies know it is a market
disadvantage not to move in this direction. However we can make
that work, by promoting businesses that take notice and creating
incentives for businesses that have an ethical position will be
quite important. The framework . . . I hesitate to say the regulatory
framework, as politicians are always being criticised for too
much regulation, but the framework and the incentives for companies
is quite an important area to look at for donors and for government.
How do you create incentives for businesses to act more ethically
which has an impact on suppliers? If you have a market opportunity
coming up, you will take these commitments more seriously. I think
there is a basket of approaches, including the support of pioneer
brands that are going to say, "Actually, this is a market
proposition that consumers will buy into."
Q227 John Bercow: Mr Rees said a
few moments ago, in response to the question, that his organisation,
his initiative, is not set up with a monitoring role. I think
I can probably deduce from the answers you have given thus far
that you would not exactly cry into your soup if your brief were
extended. I wonder whether members would accept that there is,
in some sense—and we cannot be too sanctimonious about this—an
analogy or a parallel with domestic practice. For example, Lord
Brett referred to the Equal Pay Act, and even now pressure has
to be exerted to ensure that, although the Government itself in
its direct dealings applies the content of the legislation, it
has to check to ensure that subcontractors to the Government are
doing so and to remove them from the lists of contractors if they
are not. That is quite a recent development and it remains ongoing
in terms of equal pay legislation and its implementation. I wonder
whether Mr Rees feels that one thing we could do would be to initiate
a scheme, for example, which one might call "the labour standards
equivalent of random breath testing". You would randomly
select companies for an ethical audit on a regular basis. I am
bound to say that schools do not get that much notice to the fact
that they are going to be subjected to a rather rigorous detailed
and time-consuming OFSTED inspection process. We do not want it
to be a very heavy and burdensome and damaging regulation, but
presumably it is reasonable to check that people are adhering
to and implementing the commitments that they have professed to
support and to which they have signed up. Could there not be an
ethical scorecard, for example? My feeling is that you need rigorous
implementation of what is reasonable. It would not be a good idea,
in the spirit of the worst and most unrealistic of the anti-capitalist
NGOs, to expect companies to defy the laws of economics, but it
is reasonable to say: You should not do things that palpably breach
human rights and you should implement what you have agreed to
do.
Lord Brett: I find it easier to
ask three questions of the CSR report. First, is the CSR policy
board driven? How often does the board discuss it? Secondly, is
it adequately resourced? Gap have 92 inspectors to inspect factories
worldwide, which is understandable, given the product they produce;
BP do not have it because it is a different kind of area. Thirdly—key
in the procurement, absolutely crucial—is there a buy-in
from the buyers? If there is a choice between buying cheap and
buying ethically and bonuses and job security rely on buying cheap,
ethics go out of the window. How do you get that buy-in? I would
put a key performance indicator in the job description of the
buyer. If there was a risk and it was found out afterwards that
it was bought without the minimum wage being paid in China or
what-have-you or with some conditions which he knew about or did
not bother to ask about . . . . If you ask those three questions
and get satisfactory answers, from my experience that company
is serious about CSR. If you do not—well, the answer is
obvious—they are not serious.
Q228 Hugh Bayley: How does the Ethical
Trading Initiative measure compliance with its Base Code? How
does DFID measure the outcome and success of its financial support
to ETI?
Mr Rees: I did not get a chance
to respond to John Bercow's question. Do I have time to do that?
Q229 Chairman: If you do not take
too long, yes.
Mr Rees: I think independent scrutiny
is vital, and I will come on to what we do in just a second. From
your question, I was not sure if the proposal for "labour
standards random breath testing" is the right way. I think
more visibility definitely needs to be shone on the companies.
Within the ETI, we now feel we have a much stronger basis of what
we understand good practice to be—which was our initial
focus. We have developed what we believe to be much more robust
indicators between companies. I take Bill's point that the comparability
between them is vastly different—the diverse membership
is difficult—but that is where we want to be. I think the
answer is not, with respect to your phrase, an "ethical scorecard".
There are no guarantees. It is ludicrous to expect or suggest
that huge global companies, with the complex supply chains that
they do have and the kind of numbers that they have talked about,
can be looked at as ethical. The reality is that they have some
of the best and the worst practice at the same time due to the
nature of their businesses. We have to identify what we think
good looks like. It has to be fairly simple and we have to shine
the light on it. That discussion is going on within the Ethical
Trading Initiative at the moment. You are not far wrong in terms
of my personal view of our mandate of where it should go: I do
not think we should necessarily be the independent scrutineer
but I think we can do much more to reflect the good work that
our members are doing against the work that others are not doing,
so I take those points. What do we do to assess the compliance
of ETI members? We ask them to report annually. We have quite
a complex annual reporting framework, where company members are
asked to explain in some detail about what they have done to scrutinise
their supply base, what improvement actions they have achieved
in which factories and why they have not achieved improvement
where improvement is needed, and that is measured on a year-on-year
basis.
Q230 Hugh Bayley: Do you ever suspend
a member from membership because of non-compliance?
Mr Rees: Members have left because
that was in the offing. Our process for a suspension of membership
is quite—
Q231 Hugh Bayley: Which companies
have left your membership?
Mr Rees: Companies that have left
our membership include small supplier companies, for example,
who, when the anti was upped, decided they did not want to be
a part of the ETI. companies in seafood, for example.
Q232 Chairman: Could you send us
a list?
Mr Rees: I certainly could. It
might be better to do that. I could write you a note on the whole
process of what we go through in terms of the scrutiny of our
members, what our process is in terms of holding them to account
and what the outcome has been, and including the improvement.
How does DFID measure this? Built into our partnership—we
are in negotiation currently with DFID—are measures of the
company performance based on an annual reporting process. So there
are indicators in there for example that 75% of all ETI members
must demonstrate that they are implementing the ETI Base Code
and the principles of implementation, and there are measures of
how we do that. Again, I can write you a note, if helpful, on
how we intend to measure that going forwards[2].
Chairman: That would be helpful. We are
under some pressure of time, because there are a lot of colleagues
who still want to come in, so perhaps I could ask everybody to
be conscious of that.
Q233 Mr Davies: There is no doubt
at all that the objectives you have been setting out today are
admirable, humane, attractive ones, and no-one would doubt your
sincerity in pursuing them, but is there not a fundamental problem
that really elementary economic theory tells you that if you increase
the price of something you reduce the demand for it. If you succeed
in increasing the price of labour by introducing maximum hours,
minimum wages, social security charges and so forth—and
I am talking about the real output costs of labour, the costs
of labour in relation to productivity—you will reduce demand
for labour and you will not achieve your objective of maximising
employment. In other words, you may do a good job for the people
who get the benefit of the minimum wages or the maximum hours
or whatever it is, or the social security payments, but you will
be fighting against your objective of drawing in those landless
labourers, the half a billion to which Lord Brett referred who
have no chance of employment at all. Similarly, if you succeed
through fair trade in increasing the price that consumers pay
for whatever products, they will have less money to spend on other
things. They will spend more money on a limited number of producers
and they will have to spend more money on fair trade itself through
paying more commission. They are going to spend less money on
other things, so you will actually fail to maximise output and
employment. You will actually ensure that total output in the
world of employment is less than otherwise it would be. You will
have achieved, though in reverse direction, the effect of monopoly
pricing. I want to give you the opportunity of answering this
fundamental question and tell us what your attitude to it is.
If you can refute this concern, I think you ought to have an opportunity
to do so on the record.
Lord Brett: It is a false question.
Number one, in 1944, in Philadelphia, at the International Labour
Organisation's first conference after the war—it became
part of the United Nations early in 1946—it was agreed that
labour was not a commodity. The fundamental statement: labour
is not a commodity. It cannot be treated like other commodity
prices. That becomes the question: What is the safeguard that
labour has? We have explained that in terms of core labour standards.
It is then a question of setting not at an international level
but at a level that development in a country can succeed. In my
view there is another flaw in your argument. We do not live by
economics alone, we live by democracy. The truth of it is that
if a government is not delivering for the vast majority of its
people, because in its economic beliefs it may not make sense
to do it, it will no longer remain the government. The reality
is that economics are tempered by politics and, therefore, if
we were living in a static society with no growth in it, you might
have some strength in your argument, but the truth is that we
know we have grown our society in the last century, in the last
100 years in this country, to a standard of living that nobody
could have believed possible 100 years ago. And we have done it
by raising standards as we have gone along. When the Government
introduced pensions 100 years ago, presumably some would have
argued at the time that it was pricing people out of jobs.
Q234 Mr Davies: Lord Brett, you have
not either answered or refuted my economic question; you have
simply made a normative statement of your own to the effect that
you do not think that economics applies to the labour market.
Mr Tucker: If I could come in
on that—
Chairman: I am going to ask Joan Ruddock
to come in now.
Q235 Joan Ruddock: One of you, I
think Albert Tucker, said in the initial round that you thought
the Government could do more in terms of UK PLC. I am wondering
about the parallel that I see existing in the major supermarkets,
for example, where they have some fair trade products but just
a few. Is that not just a PR gesture? To what extent is this really
addressing the problems of the poor farmers of the world of whom
we are all so well aware? If I may give you an example. I was
recently in Tesco—I do not have a full choice about supermarkets,
which is why I have to go to Tesco—and I suddenly spotted
a bin of Fairtrade pineapples. "Fantastic," I thought,
"I will buy a pineapple," and then I happened to see
next to it a bin four times as large of pineapples at half the
price. You ask yourself whether it might not be better if all
the pineapples were at a mid price between the two. What is the
real contribution? Is this going to make real change? Can the
Government do more to influence these companies? At the end of
the day, is this just a way of saying that if I am in that store
I am going to respond to that PR gesture.
Mr Tucker: There are two aspects
to your point: there is the consumer end and there is the development
end. For farmers in coffee in fair trade in the last five years,
fair trade has handed 12 million back to farmers in terms of price
structure, and it is related to trade. As you know, in fair trade,
when oil prices are at minimum price levels the premium shrinks,
so it responds to the fluctuation in world prices, but it puts
some limits in there by which people can plan. At the consumer
end, what we found—again in coffee, for example—the
coffee market in this country has been stagnant for the last five
years. The Fair Trade market has been growing from anything from
15 to 30% year on year. Consumers are saying, "We do not
want to beggar our neighbours by the way we shop." It is
still a relatively low level of consumers, but that is moving
on. We have seen young people responding in a similar way. They
do not have the great purchasing power of the rest of the population.
What the Fair Trade movement has succeeded in doing is sensitising
the consumers to the fact that the way we trade or shop impacts
on your security, your insecurity, your safety in the market and
so on. We have started getting consumers to really think about
their purchasing habits, and it is important for the economy here
as well that this principle begins to apply. Getting cash into
the system and getting business—creating wealth—is
important. If you have social improvement, that generates greater
opportunities at greater value. We are seeing roads built because
people suddenly had an additional income coming through. We have
seen managers trained up that are creating other businesses because
they operate in fair trade and want to have access to world markets,
to be able to understand world markets, and they develop other
things that are nothing to do with fair trade. They are actually
creating wealth. Similarly, companies then see how the markets
are working and codes of conduct, and they are implementing them
in those countries. Gradually, as I said earlier, we find the
systems rising up. We are subject to global economies, it is true,
but if you think of where fair trade and ethical trade were 10
years ago and where we have got to now—and if you look at
our growth trajectory, economists cannot believe it because they
did not think it would work. All I can say is that we have grown
it from a zero starting-point over 10 years, so there has been
very high growth.
Q236 Joan Ruddock: If the largest
economists do not believe it, these companies themselves do not,
I think, actually believe it because they are driving down our
food prices all the time and putting pressure on our own farmers,
which has become a major political issue in this country. That
is the direction in which they are going.
Mr Tucker: It is not systemic.
We are trying to get consumers to be aware that it is not sustainable.
Again, looking at meat, the downward pressure on meat, I contend,
led to the kind of practices that led to BSE, which we paid for.
We might have thought we were paying cheaply, but actually the
real cost of food we will pay for in the end because it will have
other impacts, whether a development impact, or lack of wealth
creation. It will have an impact. It is true. It is as valid here
as it is in developing countries; but they are just at different
stages. It is important to know that, when you look theoretically
at other positions.
Q237 John Barrett: Much of what I
will ask you relates to coffee. Many of the products have processing
and packaging and distribution retailing sectors, but what the
coffee grower receives is important. How do we make sure in relation
to these ethically-traded products that the maximum is going back
to those who have been involved at the early stage? For instance,
I would argue that we need not pay any more for our supermarket
price for coffee on the shelf for the coffee grower to get a fair
deal for his coffee production; so the economics stand up quite
easily. We are looking for a win for the consumer and a win for
the producer but it is each stage of the process that has to be
looked at. Is it trade agreements; is it manufacturing agreements;
or is it labour laws that make sure that a fair deal for the product
gets through in the end?
Mr Tucker: All those things have
a role to play. We have been dealing very pragmatically with this
issue and there are a couple of things that are happening. We
are subject to economic forces. In Latin America, for example,
with fair trade working with farmers and developing capacity and
with people trading in the market, as I said earlier, we are finding
some skills coming up in those countries. Also, in Latin America
there is growth in supermarkets happening now, and that is quite
an interesting dynamic. For example in Brazil we have invested
12 million over five years to create a consumption culture in
Brazil of coffee. This led to a market environment where you could
produce coffee that works in that market, and then you have more
chance to export—although they have not got that far yet.
In Africa, for example, the consumer culture is pretty low so
the idea of capital investment needed for a producing country,
on the risk you will find the market here—a retailer who
is going to take a market risk to be buying direct finished products
from you—it is a big risk gap at the moment. I think there
are other things that are stimulating consumer culture in some
of these developing countries. There are issues about relative
wealth and there is a package of activity around creating the
supermarket culture and creating a culture involving coffee. In
many countries where coffee is produced, local consumption is
pretty poor-quality coffee because the best quality has been exported.
There is a job to be done in creating demand and then raising
the skill base to produce the kind of coffee we would buy regularly
not buy once, with all that capital investment. There is some
other economic activity we need to develop to be able to add value
totally at the manufacturing end, at source. It is being explored
in different countries at the moment.
Q238 Mr Davies: Mr Tucker, in one
sense I think you are confusing the undoubted benefits to your
members of Fair Trade with the issue of whether or not you are
maximising wealth creation and employment in aggregate.
Mr Tucker: I would say that at
the moment it probably looks that way. I am taking a longer-term
view.
Chairman: We could probably extend this
session. The fact is, there has been a big response to what you
do, and many of us would like to know, when I see a shirt for
£4 in Tesco, should I buy it or not? Some of the things you
have said about indicators and some of the evidence you said you
would give in writing we will come to in our report because we
are looking for measures that consumers can make a judgment about,
and at the same time trying to raise everybody's share. I want
to thank all three of you very much for coming along.
1 "Is it wrong to buy cheap clothes?",
The Observer, 2 April 2006. Online at http://observer.guardian.co.uk/magazine/story/0,,1743042,00.html Back
2
Background papers submitted by the Ethical Trading Initiative:
ETI: Members as at May 2006; The Base Code; and ETI Base Code
Principles of Implementation. Not printed. Copies placed in the
Library. Back
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