Memorandum submitted by Tropical Wholefoods/FM
Foods Ltd.
1. BACKGROUND
1.1 Tropical Wholefoods is a Fair Trade
brand of food products on sale in the UK. Started in 1990 by Adam
Brett and Kate Sebag the company now employs 35 people in England
and has developed busineses in Uganda, Pakistan, Burkina Faso,
Tanzania and Zambia which employ many more.
1.2 Tropical Wholefoods is one of the leading
Fair Trade businesses in the UK and pursues a positive development
role in its business practices. While other Fair Trade companies
often purchase products from existing businesses in less economically
developed countries (LEDCs) Tropical Wholefoods goes one step
further by assisting new businesses to start up.
1.3 Over the history of the company Adam
Brett has worked with a number of DFID development projects.
2. CRITICAL CONSTRAINTS
ON ENTERPRISE
DEVELOPMENT
2.1 We strongly believe that enterprise
development is at the root of all development. Without healthy
businesses providing products and services, creating employment
for their communities and paying taxes to their governments no
economy can prosper.
2.2 Entrepreneurs in LEDCs face a huge up-hill
battle developing new enterprises in a context of a globalized
world economy where from day one they face intense international
competition. They also face the likelihood of massive fluctuations
in the sale price for their products due to world commodity price
fluctuations. This means a product that is profitable in one season
may be loss-making in another. Finally, they face a legislative
environment which is constantly changing, throwing up new requirements
and restrictions.
3. FAIR TRADE
AS A
PARTIAL SOLUTION
3.1 Fair trade aims to level the playing
field and institute ethical rules for the operation of international
business, thereby removing key barriers to development in LEDCs.
1. Fair Trade businesses do not have to cope
with massive fluctuations in the value of the products they sell,
as fair trade prices are managed and vary gradually, in line with
market demand. In place of price, demand acts directly to alter
levels of production through advance orders placed by fair trade
businesses.
2. Fair Trade businesses assist their partners
in LEDCs to cope with other non-price barriers to entry such as
quality standards, organic certification etc.
3. Fair Trade businesses transfer technology
and skills to their LEDC partners to ensure they are fit to operate
effectively in the market-place.
4. TRADE JUSTICE
4.1 The term "Trade Justice" became
a buzz-word during the Make Poverty History campaigns. Fair trade
businesses see Trade Justice as a fundamental human right. It
should not be allowable or acceptable for the economically powerful
to benefit unfairly in the context of trade or commerce.
4.2 The present global trade network frequently
allows injustice to occur in trade which if it were duplicated
in other contexts would create outrage. Imagine an employer who
regularly reduced their employees wages to 30% of the agreed wage.
Or an employer who regularly changed the rules of employment for
their employees without consultation. Such behaviour towards staff
would be totally unacceptable, yet occurs regularly in international
trade between the powerful buyer and weaker selling partner in
the trading relationship.
4.3 The Fair Trade movement sees itself
as the first step towards the creation of a more just system of
international trade.
5. POTENTIAL
FOR GOVERNMENT
ACTION
5.1 Tropical Wholefoods has worked with
DFID and DFID funded organisations in many countries since 1990
on projects to develop enterprises, develop Fair Trade or provide
training to LEDC entrepreneurs.
5.2 Tropical Wholefoods has also worked
with other funding bodies from other countries, including DANIDA
(Danish), USAID (American) and GTZ (German).
5.3 None of these experiences has been wholly
positive, and there have been frequent failures and problems.
In general this seems to be a very difficult area for Government
intervention.
5.4 In contrast Tropical Wholefoods has
worked very effectively with the DTI, local and regional Government
in the UK in the development of our UK business. Tropical Wholefoods
has a UK factory, employing 35 staff. Interestingly Tropical Wholefoods
has always found it relatively straightforward applying for subsidy,
grants and developments support (training, information etc) within
the UK for our work as a UK business.
5.5 It has always been far harder (at every
stage: application, assessment, implementation and final auditing
of results) to gain subsidy, funding or support for our international
development work.
5.6 If we could see one simple thing changed
in the way Government approaches International development it
would be to make it more similar to the way Government currently
supports National development.
5.7 National development grants and awards
tend to be characterized by the following features:
1. Grants and awards are transparently described
and tend to exist as clear "pots" of funding with clear,
concrete functions. ie "EU Funds to support factory infrastructure:
25% co-funding" provides small factories in the North East
of England with 25% subsidy towards the cost of their factory
building.
2. In the UK the application process usually
involves a member of UK civil service visiting the applicant,
making an assessment of their needs and assisting them to complete
an application process. The application form is usually a simple
form, and the applicant needs no special skills to complete it.
3. Grants and awards are given directly to
operational businesses for concrete activities rather than being
given to agencies or organisations to implement projects.
4. Applicants are usually told quickly whether
their application has been successful and how much money they
will receive.
5. Usually funds are given out on a "first
come first served" basis. If the "pot" of funding
runs out no further applicants are encouraged to apply. This allows
funds to be dispatched quickly, without the need for time-consuming
rounds of applications, reviews, deadlines etc.
5.8 All these features ensure that it is
relatively straightforward for UK businesses to apply for available
subsidy. They do not waste time making unnecessary applications
and they are told quickly what funding they are likely to receive.
5.9 In contrast International development
grants lack virtually all of these features.
1. UK based funds tend not to be fuzzy and
confusing. Compare this with equivalent DFID funds: "The
Development Awareness Challenge Fund" or "the Business
Linkage Challenge Fund", whose purpose is hard to determine.
I challenge anyone to read to descriptions of the purpose and
rational of DFID funds (which are on the relevant web-pages) and
give a concise explanation of their purpose.
2. Applications are undertaken with DFID
priorities rather than applicants priorities at the for-front.
— Applicants get relatively little assistance
with application forms, and these forms are more complex, including
elements like Log Frames which are only understood by highly trained
professionals.
— Applications are managed in "rounds"
with deadlines, so that applicants get the money when DFID wants
to give it out rather than when the applicant need it.
— The ambiguous nature of most of the funds
means that it is rare that an enterprise can apply and hope that
their funding needs can be usefully met within the terms of the
fund.
5.10 This has lead to a situation where
DFID grants are paid, in large part, to organisations who are
dedicated to working for DFID. These organisations are the only
ones that understand the complexities of the application process
and are willing to wait over the long time-scales and uncertainties
of DFID funding rounds.
5.11 While many of these organisations do
good work, it is not our opinion that this represents the best
possible use of the funds for development purposes.
6. ANSWERS TO
THE SPECIFIC
QUESTIONS OF
THE COMMITTEE
1. Impact of donor funding on fair trade?
— Some additional funding to the Fairtrade
Foundation.
2. How best can donors help to develop fair
trade consumer markets in both developed and developing countries?
— Continue to support the idea of Trade
Justice and international agreements that put a priority on ethical/fair
trade.
— Provide direct support to LEDC Fair
Trade businesses, using the types of funding method used for UK
businesses and described above.
— Strongly support reduction of tariff
and non-tariff barriers to trade.
3. Mobilising producers to improve Product
Quality?
— Provide direct support to LEDC Fair
Trade businesses, using the types of funding method used for UK
businesses and described above.
— Reviews of the escalation of legislation
around food quality in the UK and EU. It should be required that
if a piece of new legislation threatened an LEDC producer then
EU governments responsible for the new legislation should fund
improvements for the LEDC producer, and give them generous timescales
to improve their standards.
4. Ethiopian Coffee Trademark Dispute?
European food producers are widely protected
with terms like "Champagne", "Parma Harm"
etc. These protections are seen as valid ways of reducing "rip-off
retailing." No such protections seem to exist for LEDC producers.
Perhaps this situation should change. Certainly moves must
be made to ensure that EU corporations are not able to trademark
LEDC assets. It would be clearly unjust for a UK business to own
the trademark for Ethiopian Coffee for instance, and this principle
ought to be extended to other indigenous food products and marks.
5. Tariff regimes?
Tariffs rarely work in favour of poor producers
from LEDCs, the example of bananas is highly atypical. In most
instances poor producers would prefer to see tariffs lowered and
reduced.
However, tariffs represent only the tip of the
legislative ice-berg, and non-tariff barriers to trade are probably
now far more important in terms of their impact on poor producers.
6. Guidelines provide an enabling environment?
I don't know.
7. Role of Supermarkets/retailers?
Supermarkets simply meet the needs of consumers
as cost effectively as possible, while acting within the bounds
of ever-extending legislation, therefore in large part their behaviour
simply reflects the desires of consumers and government. Larger
retailers do exert significant "buyer power" which can
be destructive, more carefully thought out rules on Trade Justice
and allowable ethics in international trade could well reduce
this. Recent consumer interest in Fair Trade has lead to a "rush
to Fair Trade" by many retailers and supermarkets which is
welcomed, but there is no saying whether it will last or not,
as supermarkets will always be ready to throw Fair Trade products
out of the door to replace them with products that meet the needs
of the next wave of consumer interest.
8. Trades Unions?
I don't know.
9. Distinguishing Fair trade brands?
I am not convinced there is a role here for
legislation. The modern media is extremely quick in "naming
and shaming" companies that falsely identify products from
any product category. Fair Trade/Trade Justice/Ethical Trade is
a very young and as yet only partially formed concept. If you
ask five fair-traders what fair trade is you will receive five
different answers. If an attempt was made to legislate a "meaning"
to Fair Trade now it could be highly problematic. I believe it
is better to wait for the environment to settle before such an
effort is made.
Adam Brett
January 2007
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