Examination of Witnesses (Questions 190
- 199)
TUESDAY 27 MARCH 2007
MS SHEILA
PAGE AND
PROFESSOR DOUGLAS
HOLT
Q190 Chairman: Thank you both for
coming. By way of apology, I shall be leaving at about 11.15.
I am going to the Service in Westminster Abbey to commemorate
the abolition of the slave trade. John Battle will take the chair
then. This is proving an interesting inquiry. The role of fair
trade and its growth has impressed us. It has been rather more
substantive than I think many of us realised and it is certainly
beyond niche marketing in the kind of volume we are talking about.
A number of issues arise. Indeed, when we were in Ethiopia, although
we did not make a formal visit, we did pass a very large area
of greenhouses which were growing flowers to fly to the European
markets and employing very large numbers of people. That is happening
in Kenya and in other countries as well. I was going to ask you
this, Sheila Page. It came up on occasions like Mother's Day and
Valentine's Day. War on Want had been campaigning, implying that
(a) the people are being exploited, whereas the counter to that
is that they have been given jobs, and (b) it is environmentally
damaging to fly these products in to Europe. I wonder whether
you believe that this kind of development is beneficial and sustainable,
as I think the Secretary of State indicated that it is environmentally
better than growing them in Holland under forced conditions, and
whether or not therefore we should be encouraging more of it.
Could you give your take on that debate. Clearly, the last thing
developing countries coming into niche markets want is for us
to get all environmental and say, "Thank you very much for
your flowers, but no thanks".
Ms Page: I think there is a real
risk in looking at the environmental costs of looking at just
one cost of getting the flower on to your sideboard. The growing
of a lot of these flowers within the developed countries nearer
to the UK tends to be very environmentally unfriendly. It is using
even more fuel and glasshouses. If you have ever flown across
bits of the Netherlands, you will have seen huge swathes of countryside
literally covered with glass or plastic houses. That is not particularly
environmentally friendly either. In order to answer whether a
particular flower from Ethiopia or from the Netherlands or from
Spain is more environmentally friendly, you do have to look at
the full costs of producing it. It tends to be much lower in the
developing countries, if only because they cannot afford as much
of the expensive energy and expensive fertilizers as the developed
countries can afford. Provided what they are using on both sides
is costed correctly, you should make your own decision on the
basis of which is the cheaper flower.
Q191 Chairman: That is a fair answer
to the environmental point. What about the working conditions?
Ms Page: From the point of view
of the working conditions, yes, they are not the sort of conditions
that you or I would like to work in probably but they are better
than not being employed and they are quite probably better than
what the alternative is. The evidence on labour of this type—I
do not know in particular about Ethiopia so I am not speaking
about that—is that employees, certainly of multinational
firms and to a lesser extent of those who are contracted to multinational
firms, tend to have better working conditions than the average
in developing countries. When it is contractual as opposed to
actual employees of the firm, it is more distant; it is less certain
how good they are. But the existence of pressure, the existence
frankly of bad publicity if you are seen to be badly employing
someone is a serious constraint on any retailers in this country,
which would not exist on someone who was employing Ethiopian labour
for the Ethiopian market.
Q192 Chairman: Does not Fairtrade,
perhaps using capital letters, have a role to play or do you think
it has a role to play in determining that Fairtrade flowers mean
that there are certain basic both environmental and working conditions,
social benefits if you like, that are attached to that? After
all, that is what they are offering in coffee or chocolate. Why
they should not do it in flowers?
Ms Page: As to why they do not
do it in flowers, you will have to ask one of the Fairtrade people.
I do not know. I think there is a risk in assuming that if something
is not labelled "fair trade" it is unfair. I know the
Fairtrade people themselves are always careful not to do this.
It would be very wrong to assume that you should be promoting
fair trade in something like this where there are reasonably competent
businesses involved in doing it. The Fairtrade people may be useful
at the margin for illustrating what can be done on a very open
and accountable basis, but they do not have the scale of the large
businesses that are involved in this, so if you are trying to
provide a lot of employment to Ethiopians, you are probably going
to be using the normal businesses.
Q193 Mr Davies: Ms Page, you say
that the consumer, if he or she wishes to be guided by environmental
considerations in consumption decisions, should make his or her
own calculation of, for example, the net carbon emission cost
of growing flowers in the Netherlands as against Ethiopia. Even
if the ordinary consumer has the methodology to do so, has worked
out the right equation, he or she may find it difficult to calibrate
it because they will not have access to the data required. Can
you point us, and through us the general public who might be interested
in this exchange, to any reputable academic work that has been
done on that matter and which might give a guide as to whether
or not the net carbon emission cost of growing flowers in the
Netherlands is in general higher or lower than that of growing
them in Ethiopia or elsewhere in Africa and then flying them in
to Europe?
Ms Page: That is not exactly what
I said, that the consumer should do. What I said was that provided
the carbon, all the fuels, all of the inputs into the flower are
correctly costed, the consumer can make the choice on the basis
of price.
Q194 Mr Davies: Has that been done?
Can you point us to that?
Ms Page: What I mean is that provided
that both the Ethiopian grower and the European grower are paying
the full costs of what they are doing, that is all the consumer
needs to know because then the retailer is not selling at a loss
and therefore you can rely on the price.
Q195 Mr Davies: That is not correct.
The price, for example of aviation fuel, may or may not reflect
the environmental cost of that. It is the same thing for the heating
fuel that is used in the Netherlands. It might be subsidised natural
gas. The prices may not reflect economic costs, let alone environmental
costs. Most of the environmental costs are actually external and
therefore not reflected in the price system at all, as I am sure
you know. That is not a satisfactory answer to my question. How
does a consumer make a rational choice as to what the net environmental
cost is of flowers grown in these two different ways? Are you
aware of any studies that have been done on this subject which
can throw some light on the question?
Ms Page: What I said was provided
the costs were correct; I did not say the costs were correct.
I would agree that aviation fuel and heating fuel should all be
correctly priced to all these people.
Q196 Mr Davies: You have provided
that and against the value of your observations.
Ms Page: If that is not the case,
then in a sense the consumer has to make a mental allowance for
it but since the price of the Ethiopian flower is cheaper even
than the subsidised European, it is not actually going to affect
the price decision.
Q197 Chairman: You are not aware
of any studies?
Ms Page: I do not at the moment
know of any, no. I can check that for you.
Mr Davies: That is not a very
helpful answer.
Q198 Chairman: I think it is a factual
answer. Mr Holt, another aspect of the Ethiopian market is coffee.
You have written quite a bit about that. We had the corporate
responsibility director of Starbucks here. That was just after
they had signed an agreement with the Ethiopian Government to
back off from the trademark issue. She acknowledged, which I think
you were suggesting would be the consequence, that the actual
dispute was damaging Starbucks' image and was ultimately perhaps
damaging its consumer base because it was undermining its credibility
as a fair trade company, which it claims to be. Can you indicate
how you think in practical terms the difference between having
trademarks and the geographic certification, which was what Starbucks
was arguing, would make a difference to the incomes of the very
small coffee growers in Ethiopia? We met, by the way, while we
were there the head of the coffee growing co-operative, which
of course not all of the farmers belong to. He gave us a flavour
of that. Could you explain to us how you think the difference
would work?
Mr Holt: I will do my best. Realise
I am not a lawyer or a technical expert on certification marks
versus trademarks. I can give you a business case, I suppose.
The first thing to think about if I were the committee would be
to ask why is it that Starbucks cared so deeply about how Ethiopian
coffee growers organised the sector. It is fairly rare for a big
company to go so deeply into its supply chain and care so much
about those sorts of machinations to have public relations efforts,
legal efforts and so forth to enforce a particular policy on their
suppliers. I will let you make your own judgments but I make an
argument in the papers that I have written that Starbucks is acting
as you would expect a large publicly owned company to in pursuing
its long-term profits, maintaining its market power. For Starbucks,
certification marks are much more acceptable than trademarks because
it is allowed to maintain its de facto ownership of these
Ethiopian brands of Harrar, Sidamo and Yirgacheffe. The key difference
is that with trademarks that is intellectual property; that is
ownership of that mark that allows, if done properly, the Ethiopian
coffee sector to organise collectively and act as a marketer of
these marks. If they do it well, and there is no promise that
they will, they will earn a lot more or extract a lot more of
the value of their product in the northern markets. I think the
difference is that the primary purpose of a certification mark,
as I say in the second paper I gave you, is to protect against
counterfeiting, to make sure that the coffee that says Yirgacheffe
is Yirgacheffe coffee and it is not coming from somewhere else,
it is not counterfeit coffee. There are no such problems that
I have been told of in the premium end of the Ethiopian coffee
sector precisely because Starbucks and Peets and all the other
coffee buyers' intermediaries are very careful to be buying the
best coffee. Trademarks have a very different objective, which
is to own intellectual property to run a business.
Q199 Chairman: A couple of points
arise out of that. One is that the trademarks have been recognised
in some countries in Europe, but of course not by Starbucks. First,
has that made any noticeable difference or is it because it is
really Starbucks that made that brand, it is not meaning very
much? Secondly, do you believe Starbucks' claim that in principle
they have built their brand in a genuine belief that they are
adding value to the producers and that they see themselves in
the broadest terms of the word as a fair trade company.
Mr Holt: There are two different
questions. Let me separate them. In terms of the marks that have
been registered so far adding value, of course not. We have to
be clear what the strategy in Ethiopia is. It is not that you
get a mark and all of a sudden your coffee is worth more. You
get a mark and that is an asset that you manage for better or
for worse. Now, once they have the marks in place, that is the
first step of a long process, a multi-year process, whereby the
sector must organise and manage their distribution channels, manage
their communications, packaging, et cetera, with the long-term
goal of extracting more value. That has just started, as I am
sure you know given your trip to Ethiopia. They are just starting
to organise that stakeholder group, and I think that is what they
call it, to market around these trademarks. It is a promissory
note. That is exactly what is happening on the ground in the next
couple of months.
|
