Appendix: Government response
[Paragraph 15] "The rise in ethical labels
demonstrates that both retailers and consumers are interested
in ethical sourcing. It is important that fair trade organisations
do not assume they have a monopoly on this although fair trade
can be said to represent a gold standard in terms of trading relations
with producers. With many different schemes pursuing different
objectives it is vital that consumers are given the correct information
in order to make informed choices."
We agree.
[Paragraph 20] "We believe that fair trade
labels have helped consumers to be reassured about the way in
which fair trade products are traded. This is an important achievement
for which the Fairtrade Foundation in the UK and the Fairtrade
Labelling Organisation internationally are to be commended."
We agree.
[Paragraph 32] "It is right that questions
should be asked about the engagement of big companies in fair
trade. It is relatively easy for them to tick the "fair trade
box" for specific products without necessarily changing the
way in which they do business with most of their other developing
country suppliers. Fair pricing should not be restricted to a
few beneficial but limited niches for either supermarkets or multinationals.
We were particularly impressed with the efforts of Marks &
Spencer to engage directly with its producers and to use the FAIRTRADE
mark for those products where direct engagement is not possible."
We agree. We want companies to give a fair deal to
all suppliers. The retail industry needs to ensure suppliers pay
a living wage to their workers by ensuring the prices they pay
their suppliers and the turn around times they demand allow suppliers
to pay workers a wage they can live on not just survive on —
e.g. forward planning, investment in better equipment, ensuring
enough staff to do the job safely. Fairtrade has made a
significant contribution to this and has encouraged companies
to improve their practices. We agree that fairer pricing structures
should be extended to a wider range of producers. That is why
DFID also helped to establish the Ethical Trading Initiative (ETI)
and why we are working with a range of fair-trade organisations,
the Fairtrade Foundation (FTF), ETI, supermarkets and others to
improve standards in all supply chains.
[Paragraph 33] "The drive for cheaper produce
is neither desirable nor sustainable if such low prices involve
the exploitation of labour abroad. We accept that developing countries
have a competitive advantage in cheaper labour and they should
be able to take advantage of this, but we do not accept that workers
should be paid less than the national minimum wage where one exists.
Nor should fundamental labour rights be dependent on levels of
economic development."
We agree. Core labour standards are fundamental human
rights. The recent International Development White Paper on
making governance work for the poor (para 5.9) points out that
while governments need to remove unnecessary barriers to
business, regulation is needed to make sure that workers earn
a decent wage and have safe working conditions. We are committed
to promoting good labour standards. DFID is a major supporter
of the International Labour Organisation's technical
assistance programmes to promote decent work, through a £20
million Partnership Framework (2006-9).
[Paragraph 40] "The Government
has acknowledged the achievements of the fair trade movement and
has made public statements in support of it. It has also provided
funding for specific projects and initiatives. However, the Government's
approach tends to confuse projects specifically concerned with
promoting the fair trade movement with other initiatives associated
with more ethical trade and respect for international labour standards.
There is merit in supporting a number of different initiatives
that are effective in reducing poverty. The Government could,
however, do more to promote the fair trade movement specifically
if it was clearer in recognising the different contributions that
different kinds of initiatives can make. One way of doing this
would be to assign a senior DFID official to be responsible for
fair trade within Government and for this responsibility to be
properly publicised and supported. This may also help to encourage
greater coordination in the promotion of fair trade through public
procurement, as we recommend in Chapter 6."
The Government supports a number of initiatives in
the broad field of fair and ethical trade because they all contribute
to the overall goal of making trade work for poor people. The
Fairtrade Foundation (FTF) and others support this diverse approach.
Within this approach we give substantial support to the FTF for
these clear reasons: direct impacts; influence on the whole retail
sector; and raising public support for trade justice.
A number of departments in DFID have an interest
in fair and ethical trade, including our International Trade Department,
and teams in the Growth and Investment Group, working on growth
and engagement with the private sector.
DFID is in the process of establishing a coordinated
team on fair and ethical trading involving officials from all
of the aforementioned departments. It reports to senior officials
in our Global Development Effectiveness and Policy and Research
Divisions.
[Paragraph 43] "Development
Awareness Funds have been extremely useful to the fair trade movement
and have contributed to continuing growth in awareness of fair
trade in the UK. This level of awareness will have knock-on effects
in other sectors as consumers begin to demand a greater level
of responsibility from companies and retailers. It could also
act as a catalyst for greater support for the work of DFID in
general. But Development Awareness Funds could be better publicised
and the application process made less complicated, especially
for those who are applying for the first time or who have no experience
of working with DFID. We recommend that DFID address these two
issues."
The Development Awareness Fund is well known among
UK voluntary organisations, largely because it is one of the few
funding sources available for activities to raise awareness about
poverty issues and change people's attitudes.
The application process has been streamlined in the
past year. There are extensive guidelines on the website, on which
we consulted prior to finalising them. External partners have
told DFID they think they are clear and easy to understand. We
have also removed the demand for a proposal to find matched funding
for the project, which simplifies the process further.
We are also running seminars throughout the year
across the UK which offer details about the application process
and allows organisations to ask questions. From those we have
so far run, the majority of attendees have not successfully applied
to the DAF before.
[Paragraph 49] "We consider that Challenge
Funds are a good means of supporting innovation in the private
sector and believe that the Africa Enterprise Challenge Fund is
a useful initiative which has the potential to improve trade capacity
and competitiveness in Africa. We expect DFID to update us on
progress in establishing this Fund."
The AECF was launched in Cape Town in June 2007 and
should be operational by mid 2008. DFID's Pan Africa Strategy
Department are now working on setting up the legal entity and
then will move on to finding a consortium of appropriate fund
managers.
[Paragraph 51] "The Government's approach
to funding ethical and fair trade projects does not take advantage
of opportunities to learn from previous experience and at present
there is no formal mechanism for doing this. The lessons learned
from the various individual initiatives which DFID has funded
should be drawn together and best practice shared."
A number of DFID funded fair and ethical trade initiatives
have been subjected to independent impact assessments (eg the
ETI and the Business Linkages Challenge Fund). Lessons have been
drawn from these in developing our future strategy of support
to the ETI and in developing the Food Retail Challenge Fund (FRICH).
The impact assessments of larger DFID projects are all entered
into our PRISM project database, allowing anyone across the organisation
to access information on project performance and lessons learned.
This data base is searchable for fair-trade related projects.
How this information can be made more widely available outside
of DFID will be an issue that the DFID virtual Team on Fair and
Ethical Trading (outlined at para 40, above) will look at. Also
see answer below.
[Paragraph 53] "We believe there should be
increased systematic analysis of the impact of fair trade and
would urge DFID to contribute to this process."
We agree. DFID are encouraging the Fairtrade Foundation
and other fair trade organisations to pay greater attention to
systematically measuring the impacts of fair trade schemes on
poverty reduction over time.
DFID and other donors agree it is important to see
how different schemes can contribute to poverty reduction and
have requested that the proposal for a fund to scale up fair trade
include more on Fair Trade Labelling Organisations' impact assessment
and how different fair trade organisations can work together on
this.
[Paragraph 55] "In the context where some
supermarkets are putting pressure on suppliers to reduce prices
below the cost of basic wages, or when commodity prices are low,
the guaranteed fair trade price is extremely valuable for farmers."
We agree. As mentioned in previous responses we are
actively working with supermarkets and retailers to extend fairer
pricing structures to a wider range of producers, not just those
achieving fair-trade certification.
[Paragraph 61] "The benefits of fair trade
to producer groups, and often their wider communities, through
the social premiums, are clear. Fair trade targets disadvantaged
producers who have either been excluded from the export market
or who may not be benefiting from it. Fair trade helps to build
up their capacity to trade effectively in the market-place and
offers a stable income. In this respect it has a positive development
impact which reflects some of the objectives of the Government
in relation to trade-related capacity-building."
We agree.
[Paragraph 65] "If Ethiopia is allowed to
trademark its speciality coffees in the US, it would then have
the potential to add significant value to its product. Such innovative
strategies should be encouraged by multinational companies."
We agree. Ethiopia has managed to trademark several
of its coffee names in the US. Ethiopia has also recently agreed
with Starbucks to enter into a private licensing agreement about
the use of Ethiopia's coffee names and the distribution of its
coffees. Ethiopia was helped to do this with the support and funding
from DFID (an NGO also provided help).
Innovative strategies like Ethiopia's should contribute
to better access for poor countries' products in rich countries'
markets. Poor countries should as a result be in the position
to capture a higher share of the value to the consumers of the
original and traditional, high quality products and services they
export. Developing countries are not only able to supply raw,
commodity, and unprocessed goods; they also produce unique products
— such as premium coffee — in high demand in rich
markets. However, with only marginal control and involvement in
the supply of their own products, poor producers will not reap
as many benefits as they could. Trademarking is one way for them
to gain more ownership.
[Paragraph 68] "The fair trade towns campaign
has been extremely successful and we commend Wales and Scotland
on their initiatives to become fair trade nations. That communities
and nations are willing to engage with fair trade to this extent
demonstrates the success of fair trade awareness-raising campaigns
as well as growing interest in development issues."
We agree.
[Paragraph 73] "Whether or not companies
are involved in fair trade, we believe that they should all be
engaged in a process of ensuring their supply chains are socially
sustainable. Companies need to be particularly aware of the impact
of their purchasing policies on small producers. Fair trade offers
an excellent means of ensuring purchasing has a positive impact
in the categories where fair trade standards and products are
available."
We agree. DFID encourages all companies to ensure
that their supply chains are socially sustainable. The minimum
price that Fairtrade offers to farmers is one way of doing this.
[Paragraph 78] "We believe that the largest
supermarkets in the UK should be leading the way in corporate
social responsibility and setting an example for smaller competitors.
The performance of some large retailers in this regard falls below
standards we consider acceptable."
We encourage all UK business to
adopt best practice and set an example for its competitors. The
Ethical Trading Initiative helps supermarkets and their suppliers
to do this and we encourage those supermarkets that are not members
to join.
[Paragraph 79] "We question whether the Government
is doing all it can to make the Ethical Trading Initiative (ETI)
a credible one which genuinely promotes corporate social responsibility.
It should not be the responsibility only of NGOs to investigate
and monitor the behaviour of UK companies abroad. As we suggested
in our report on Private Sector Development, the ETI could be
expanded into a monitoring mechanism that ensures more independent
scrutiny of companies. The Government should encourage the Ethical
Trading Initiative board to investigate the potential for the
Initiative to be enhanced in this way."
The recent independent review of the Ethical Trading
Initiative (ETI) by the Institute of Development Studies concluded
that, although challenges remain, the ETI has achieved positive
impact. DFID believes that ETI is a credible initiative and has
demonstrated genuine success in promoting corporate social responsibility.
We do not agree that the ETI should be expanded into an independent
monitoring mechanism: the strength of the ETI's approach is as
an alliance between business, NGOs and Trades Unions. However,
through our Board membership, we will continue to encourage the
ETI to improve the consistency and quality of social auditing,
for example, by working with others to develop an accreditation
system for auditors and developing and promoting good audit methodology.
The UK government also plays a role in promoting
the responsible behaviour
of UK companies abroad, through the National Contact Point for
the OECD Guidelines on Multinational Enterprises, which
investigates complaints of breaches to the guidelines.
[Paragraph 85] "The current Competition Commission
inquiry into supermarkets offers an opportunity to investigate
whether their business practices undermine attempts to improve
ethical standards in supply chains in developing countries."
We are keen to work with supermarkets about all of
their supply chains. It is up to the Competition Commission to
decide whether this issue falls within the scope of the current
inquiry.
[Paragraph 87] "The garment industry is one
which involves large numbers of low-paid workers in developing
countries and is a sector where improved standards would be particularly
beneficial. The development of fair trade certification for the
manufacture of fair trade cotton garments will assist in ensuring
higher standards of traceability along the supply chain as well
as better working conditions for garment workers. Fair trade standards
will not, on their own, improve working conditions for the majority
of garment workers but could provide a model of how an ethical
garment industry can work and could contribute to raising standards
across the wider industry. This is a specific area where we believe
DFID could make a useful contribution and we recommend that it
actively seeks out projects in this sector where it can support
the private sector."
We agree that the garment industry is a critical
one which engages large numbers of poor people in developing countries
and that fair trade initiatives can play a positive role in improving
working conditions in the sector. In addition to the ETI, DFID
also supports the Multi-Fibre Arrangement (MFA) Forum which was
established to help ensure the maintenance of standards in garment
factories after the MFA quota system ended. DFID takes a country-led
approach and where there are requests in country for support to
additional initiatives in the textile industry, country programmes
may choose to support these. We also support the work of the ILO.
DFID has a £20 million partnership framework agreement for
three years with the ILO, which helps countries to introduce and
implement its decent work agenda across a range of sectors.
[Paragraph 89] "We believe
that fair trade should become more pro-poor and help the most
disadvantaged producers in the poorest countries. We recommend
that this pro-poor focus becomes a key area for future Government
funding for fair trade."
We agree. We are concerned that the most disadvantaged
producers in the poorest countries are often not able to meet
the current fair trade standards. We are encouraging the FTF to
work with contract farmers, in order to make fair trade certification
more accessible to the poorest people.
[Paragraph 91] "As part
of its role in raising awareness of development DFID should consolidate
its learning and create a formal mechanism to promote an exchange
of information between the fair trade movement, mainstream companies
and donors."
We partly agree. The new strategy in the area of
fair and ethical trading (as outlined in the response to para
40) will identify communication outputs on fair and ethical trading
issues for fair trade organisations, mainstream companies and
donors. However, there are a large number of fair and ethical
trade organisations who have valuable experience to share with
one another, independent of donor funding. We would encourage
these organisations (such as the Fairtrade Foundation and Rainforest
Alliance) to share more information on best practice. The fair
trade movement already has extensive contact with mainstream companies.
[Paragraph 93] "We agree
with the European Parliament Development Committee's recommendation
that product information on the conditions of production should
be displayed in such a way as to ensure that it is easily understood."
We agree. The UK Government supports the principle
that product information should be comprehensive and clear, and
recognises that the proliferation of voluntary labelling schemes
and standards could lead to confusion amongst consumers. However,
companies and other organisations are entitled to establish their
own corporate responsibility or other labelling schemes, and the
UK Government would not wish to discourage these endeavours, which
have the potential to make a significant contribution to sustainable
development.
Whilst it may be possible to introduce new labelling
requirements within the EU, any statutory requirements for labelling
within the EU or the UK would need to be consistent
with the WTO Agreement on Technical Barriers to Trade (TBT) to
ensure that these did not lead to unfair discrimination. It would
also be important to ensure that any new measures did not either
duplicate or undermine existing initiatives such as FAIRTRADE,
ETI and Rainforest Alliance.
[Paragraph 94] "The FAIRTRADE mark has achieved
a significant level of recognition in the UK but only covers a
limited range of products. There are many other credible certification
schemes with social and environmental objectives. Consumers should
be given sufficient, and easily accessible, information about
products made available under these schemes to enable them to
make informed choices. We recommend that the Government commission
research on the feasibility of creating a labelling scheme which
gives consumers information on the share of the retail price that
producers receive for a product. Supermarkets already know how
much farmers are paid for each kilogram of fruit or vegetable
they sell, and companies know how much they pay per kilogram of
coffee, or for each tee-shirt. Passing this information on to
consumers should not be a difficult task."
We agree. DFID welcomes the recognition that the
Fairtrade mark has achieved in the UK. Increasing interest about
where our food comes from is an opportunity to increase shoppers'
awareness about development issues. We are working with DEFRA
on research into the feasibility of a development labelling scheme.
[Paragraph 97] "If companies
and public bodies are finding it difficult to interpret the Office
of Government Commerce guidance, and if other EU member states
are interpreting EC procurement rules differently, there is obviously
a lack of clarity which the Government must address. We are pleased
that DFID has made a start on this and look forward to the review
of the guidelines. We expect to be advised of the probable end
date for such a review."
Gareth Thomas wrote to other government departments
on their procurement practices. The responses have affirmed that
Departments support fair and ethical trading and a number encourage
catering contractors to make available a wide variety of fair-trade
products. Our preliminary view is that while there are limitations
to fair-trade specifications in public procurement of catering
contracts, the OGC Guidelines are considered sufficiently flexible
to allow value for money without compromising inclusion of fair-trade
products. As promised at the select committee's hearing with Gareth
Thomas, DFID is taking forward a discussion with the OGC on reviewing
the guidance to maximise availability of fair-trade products in
Government Departments. We hope this will be completed by the
end of the year.
[Paragraph 100] "Government Departments seem
to be less advanced than public authorities and the general public
in the procurement of fair trade products. We believe the Government
should be leading by example in this regard. We recommend that
DFID be much more proactive in encouraging other Government Departments
to procure fair trade goods."
We disagree. All of the replies to the PUSS's April
2007 letter on procurement practices in Government Departments
affirmed support to fair and ethical trading where possible. DEFRA
is responsible for the Public Sector Food Procurement Initiative
that encourages public bodies to procure fairly traded goods,
and stated that most, if not all, Government Departments are serving
Fairtrade tea and coffee at no extra charge. A number of Departments
also procure a wider range of Fairtrade products including fruit,
confectionary, fruit juices, yoghurt and rice. For example, the
Department for Transport run sustainable procurement awareness
sessions for staff, which specifically cover the use of Fairtrade
products. Both the Department for Transport and the Ministry of
Defence are reviewing their commercial/ procurement policy with
a view to expanding take up of Fairtrade products. Her Majesty's
Court Service and the Department for Communities and Local Government
encourage and collaborate with catering contractors to ensure
availability and marketing of the widest possible range of Fairtrade
products.
[Paragraph 103] "We believe that there is
a crucial role for the Government to play in helping the poorest
producers access international markets and that fair trade is
one means of doing this. We recommend that DFID encourage and
fund proposals for the expansion of fair trade where such proposals
demonstrate that the outcomes would be beneficial to the very
poorest farmers."
We agree. DFID is very concerned about the plight
of the poorest farmers in developing countries and the Government
is committed to helping developing country farmers access international
markets. However, many of the poorest farmers are unable to grow
or buy enough food for their families and without this basic food
security, research (Poulton, 2007) suggests that they are reluctant
to invest in commercial agriculture. DFID is in discussions with
the International Fairtrade Labelling Organisation (FLO) and FTF,
about their proposals for expanding fair trade. We agree with
the Committee that this must benefit the poorest farmers.
[Paragraph 104] "DFID says it is working
to encourage the private sector to invest in innovative supply
chains which deliver more returns to small scale farmers and farm
workers. We regard this as a valid policy objective and one which
should be vigorously pursued."
DFID is designing a Food Retail Industry Challenge
Fund to encourage the private sector to invest in innovative supply
chains that deliver more returns to small scale farmers and farm
workers. Once approved by Ministers we expect this to be operational
towards the end of 2007.
[Paragraph 105] "Given that fair trade already
has the commitment of major UK companies, it provides an easy
conduit for engaging the private sector in development by investing
in innovative supply chains with a focus on small scale farmers
and workers. We recommend that the Government regularly reassess
the balance between levels of funding from the private sector
and from donors to the Fairtrade Foundation to determine how Government
support can best add value to the fair trade movement and its
scope, in the context of a rapidly changing market-place."
We partly agree. The Fairtrade mark has made a significant
contribution to engaging the private sector in fair and ethical
trade issues. DFID is also working directly with suppliers and
retailers and others involved in their supply chains in developing
countries. We keep the balance of funding from the private sector
and donors to the FLO and the FTF under review. We believe that
the FLO and FTF should over time become financially self-sustaining
without the need for government funding.
Department for International Development
28 September 2007
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