Examination of Witnesses (Questions 83
- 99)
TUESDAY 13 MARCH 2007
MR MONJURUL
HAQUE, MS
ERICA KYERE,
MS SAFIA
MINNEY AND
MS SOPHI
TRANCHELL
Q83 Chairman: Good morning, and thank
you very much for coming in to what is our second evidence session
on fair trade products and fair trade issues. The fact that you
are very much engaged in the production of both Fairtrade raw
materials and Fairtrade manufactured products is of particular
interest to us today. Obviously you are here to give us information
and we are looking forward very much to hearing from you, so can
I start perhaps with Artisan Hut. Having had the chance to find
out a little bit more about you, obviously you have a really interesting
operation in Bangladesh, can you tell us just a little bit about
it, how big it is, how many people it employs, and if you are
able to say what the turnover is and is it growing and can it
grow; that is to give us a sort of introductory explanation of
it.
Mr Haque: Thank you very much
for giving me the opportunity to be with you. There are 31 Fairtrade
organisations in the Bangladeshi Fairtrade Forum, which is related
to IFAT, the International Fairtrade Association. There are 65
countries involved with IFAT and 300 Fairtrade organisations now
are members of this organisation and Artisan Hut is one of them.
Artisan Hut was started in 2002, with nine individual groups and
250 producer artisans.
Q84 Chairman: When you say nine groups,
you mean nine work units, working together?
Mr Haque: Yes. It was our aim
to create the Fairtrade business and, in Bangladesh, Artisan Hut
is one of five leading organisations, those who are working for
fair trading in the domestic market and abroad. Within these five
organisations we have got around a $1 million export market, and
50% is coming from People Tree.
Q85 Chairman: Is it growing?
Mr Haque: Yes, it is growing.
When we started, in 2002, our first buyer was People Tree and
within five years our export sales have grown by 764%.
Q86 Chairman: How does it work, between
Artisan Hut and People Tree; you say 50% of your exports go to
People Tree, which implies that 50% goes elsewhere. How far back
does your relationship with People Tree go?
Mr Haque: Five years.
Q87 Chairman: Do you sell products
in a similar way with other people, or are they just sold on the
market?
Mr Haque: Artisan Hut also export
their products in the European market; the UK is fairly well covered,
there is another organisation, and two in The Netherlands, as
well as Artisan Hut working on clothing in the US market.
Q88 Chairman: Are you engaged entirely
in Fairtrade products, and are you involved in any products other
than these ones?
Mr Haque: We have a little group
for leather also.
Q89 Chairman: Is that Fairtrade leather,
or just leather?
Mr Haque: It is Fairtrade leather.
We collect the raw materials from export oriented leather factory
and then produce products in the condition of fair trade.
Q90 James Duddridge: What benefits
do Artisan Hut producers get, and specifically what social benefits
are there and also environmental benefits from being Fairtrade
producers?
Mr Haque: First, I would like
to say we are providing the artisans with skill development and
medical facilities and education facilities for their children
as well as their neighbours. In Bangladesh there was a lot of
disaster so we are building houses; we have seven-year schemes
to face the emergency problem, so this type of benefit, and social.
We are also participating in community development. For example,
the local government is not able to do all the things, so in sanitation
we are providing these things also in the community.
Q91 James Duddridge: Can you go into
more depth about how much people are paid on a fair trade basis,
compared with the average wage in the community, and how much
of your profits financially go back into the community?
Mr Haque: In terms of wages, the
definition is different, but Artisan Hut is transparent with the
buyer as well as the producer label people, that is the skill
we are using in the community, so we are providing at least 30%
more wages for the artisans. In the Fairtrade business, we do
not have a full year's work, so I would say now that our textile
producers are getting six or seven months' work. This is the condition
in Bangladesh with the Fairtrade groups. The other answer I would
like to give you is, it is a 12% margin we have got from the business
as well as those who are our buyers; they are also sharing their
profit with us, which goes to the beneficiaries, like artisans.
Q92 Chairman: What do people do for
the other five or six months of the year, if they are not working
for you; are they not working or are they working elsewhere?
Mr Haque: This is our challenge
and we are working hard on how to develop, how to manage the situation
in a better way, because it is Fairtrade business. On the other
hand, we are trying to create a domestic market, so our problem
is, in Bangladesh, we are producing hand-woven fabric, and just
meeting our demands. Before, traditionally hand-woven fabrics
were strong in Bangladesh, but this last 10 or 15 years, with
power looms being used, hand-weavers are losing their jobs. When
we started the export business, with people like People Tree,
we got the skills from the people, that is, before we started,
and traditionally we produced the sharis, which are worn by Bangladeshi
women, and lunghis, traditionally worn by the men. It is 2007,
and in 2005 the demand changed, so we learned from the experts
how to convert these things for the current market. Here Safia
has the sharis, the jacket, which is just selling in the European
market—this is my dream, so now we are changing our fortune
in this way. We have got a lot of barriers, and we are sharing
with you what types of barriers we are facing and how we can solve
them together, that is the main point, that is our main target.
Q93 Chairman: By showing the jacket,
you have raised an obvious question in people's minds: what does
that jacket cost in Europe and what do you get for it? Can you
answer that question?
Ms Minney: If I may answer, the
jacket costs £75. Typically, in the conventional fashion
business, because everything is made by machine, as little as
0.5% of the retail price would be labour cost, so Fair Trade is
looking at how to maximise the value added to create the maximum
number of livelihoods, spinning, natural dyeing, hand-weaving,
hand-embellishment work and then finally the tailoring. This is
also imported Fairtrade organic cotton from an Indian project
which was certified with the Fairtrade mark in February 2006.
Maximising the value added, can bring the component of the labour
cost from 0.5% to between 7% and 10%. The point is how to create
the maximum amount of livelihoods through selling one piece of
garment, and this is key. We have a world population which will
be increasing phenomenally within the next 20 years, and a natural
resource which we have in plentiful supply is people's hands;
so really how to use this hand skill to put food on the table
and to be able to allow an income level which enables people to
send their children to school, to develop and run schools and
social programmes within the context of the rural environment.
Q94 James Duddridge: I may have missed
it, just coming back to the question; they cost £75 to buy
in the shops, how much does it cost to produce?
Ms Minney: It would cost one-seventh
to produce and we would be selling to the shops at 45% of the
retail price; there would be VAT at 17.5%. The buying-in price
would be three times that. Within that People Tree, will cover
design, product development, environmental testing, logistics,
imports, duties, warehousing, administration, marketing, sales
administration costs, etc., etc.
Q95 Chairman: As I understood it,
you are saying effectively you multiplied by seven the returned
amount to the producers, compared with the open market, or whatever?
Ms Minney: Times 14, in fact;
multiplied by 14. We estimate in our social review that producers
are earning between 30% more to double what they would locally,
or through conventional trade. This is through an ongoing programme
of technical assistance and market exposure programmes, so producers
come to Britain, to Japan, where our other market is, to understand
the market, look at the distribution system, understand trends,
so that they are empowered through trade, and we can isolate the
barriers which keep them from using trade as a tool for development.
Q96 John Barrett: If I could explore
with you, Safia, the role of government funding to enable new
markets and new products in the Fairtrade organisations to develop.
We heard from the Fairtrade Foundation that they were seeking
funding from DFID over a five-year period to explore new markets
and new products. Has People Tree received any government funding
and do you think there is a role for DFID to play in funding Fairtrade
organisations?
Ms Minney: Yes, I do. We have
not received government funding in any way whatsoever. We are
a fair trade company which I founded in Japan, which has less
of a movement for fair trade and for environmental issues compared
to the UK. We feel very, very strongly that DFID can support,
at a very practical level, the further development of the fair
trade supply chain that we, the fair trade pioneer companies,
have developed. If we are starting, for example, an initiative
for Fairtrade organic cotton in Bangladesh, this is a huge opportunity,
but also there is a huge infrastructural expense where the commercial
costs would not be covered in anything less than five years. We
are supplying design and technical expertise and assistance to
producers, 70 producers in 20 countries, funding that entirely
from the sales revenue, whilst competing in an incredibly un-level
playing-field where fast fashion is being sold with incredibly
short lead-times, maybe four to six weeks—this is incredibly
tough with funding. When we are working with fantastic organisations
like Monjurul's but with an eight-month production time, with
50% advances which need to be paid because these organisations
are so small that they do not have the collateral to be able to
raise advances so they can procure quality materials and they
can pay their producers on time. I was very, very excited to hear
about DFID's support of the loan guarantee scheme to, for example,
the Day Chocolate Company. We also need to look at multi-stakeholder
approaches to ownership, so that producers can own the market
access through organisations, fair trade companies, like People
Tree, in a similar initiative. Also, we need to secure grant funding
for assistance to producer groups, a very practical hand-holding
through the fair trading process, not a theoretical, "If
you try this then this is how you write your business plan"
but something which really develops and builds on the skills that
we have developed already in developing the fair trade supply
chain. The other area would be in funding campaign work. We spend
a lot of resources and time raising consumer awareness, which
in turn puts pressure on the conventional supply chain to improve
social compliance and meet the ILO[1]
Conventions on Labour Rights. Also in terms of environmental legislation
and regulation—this is largely ignored by the conventional
business as we see it today in the context of fashion.
John Barrett: Thank you.
Q97 Ann McKechin: Last week we heard
from Marks & Spencer, who said they were about to expand their
Fairtrade into a much larger scale on the textile side, which
as you have said, quite rightly, previously has been very small
scale, with smaller organisations, such as your own, promoting
it here. Now that we have Marks & Spencer and Topshop using,
no doubt, the power loom weavers, as opposed to the hand-weavers,
in terms of producing their product, how big do you think the
market can be for Fairtrade garments, and do you see the Fairtrade
mark becoming more for those who are involved in the industrial
production rather than those in the hand-crafting market?
Ms Minney: The launch of the Fairtrade
cotton mark came after some two years of consultancy, from fair
trade companies like our own, with hundreds of hours that were
invested into consultancy unpaid. We, the Fairtrade companies,
have developed the Fairtrade standards, whether it has been for
coffee, cocoa, cotton, or whatever. This is a fantastic start,
to get Fairtrade cotton, and it is making a huge difference to
the lives of cotton farmers in the developing world. In terms
of the manufacture standards, this has not yet been developed.
The Fairtrade Foundation have put on hold any development for
three years, because they accept that they do not have the expertise
to do it. We need to develop these Fairtrade standards, to go
beyond social compliance. It would be a terrible shame if we stopped
and we acknowledged and rewarded mainstream companies for doing
the minimum, meeting the social compliance, the ILO Conventions
on of Labour Rights, which should be respected as a minimum, as
should environmental legislation, anything less should be criminalised.
We have seen movement now, with the Company Law Bill going through,
and we hope that, in 2008, again we will see further developments
to hold companies accountable. I think what we need to do now
is refine and develop the expertise that we have within the context
of the fair trade manufacture supply chain. This is not expertise
that Marks & Spencer have.
Q98 Ann McKechin: Perhaps, unlike
obviously a very small organisation like yours, organisations
like Topshop and Marks & Spencer do have the means to do this
from their own resources?
Ms Minney: Topshop have a collection
called People Tree for Topshop and they acknowledge, just as the
international designers working with People Tree through Vogue,
that they do not have a fair trade supply chain, and that they
come to People Tree to learn about it.
Q99 Ann McKechin: Would you say there
is a supply constraint, at the moment?
Ms Minney: There is an expertise
constraint, because there has not been any investment in drawing
out the expertise and developing the infrastructure for fair trade
manufacture—not a supply constraint as such.
1 International Labour Organisation (ILO). Back
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