Examination of Witnesses (Questions 220
- 239)
TUESDAY 27 MARCH 2007
MS SHEILA
PAGE AND
PROFESSOR DOUGLAS
HOLT
Q220 Mr Davies: I think we have established
this morning that as well as the issue of resolving the ownership
of the brand and the sharing of the value created by the existence
of the brand, we do need to look at the domestic market. We probably
do not have time to go into that. I would like to ask a final
question to Ms Page about Fairtrade. Fairtrade itself is a brand,
is it not?
Ms Page: The Fairtrade Foundation
certificate, or whatever they call it—
Q221 Mr Davies: By "brand"
I mean something which is non-substantive, which does not itself
give any particular utility to the consumer, but which adds to
the consumers' satisfaction in a non-material way and that people
are prepared to pay for. Is that a fair definition of a brand?
If that is a fair definition of a brand, is Fairtrade a brand?
Ms Page: I do not know whether
that is the correct definition of a brand. If that is what you
mean by a brand, that is what Fairtrade is, yes. It is a label
which people are prepared to pay for. It is a label which has
varying degrees, depending on where you get it from, of substance
behind it.
Q222 Mr Davies: If Fairtrade is a
brand, and I think we agree that Fairtrade is a brand, the same
issue arises as in the case of Ethiopian coffee: who owns the
brand and what is the share of the value created by the brand?
Is it your feeling that the share is a fair one as between the
intermediaries and the marketers in the northern world, the developed
world, who actually put Fairtrade on their labels and get a premium
price as a result and between the original producers of the commodities
that go into the product which is thus branded? Do you think that
that distribution of value is a fair and reasonable one?
Ms Page: I am an economist. I
do not deal with fairness. I deal with markets. That is a serious
point.
Q223 Mr Davies: I think you misunderstand
economics. Economics is a science.
Ms Page: Economics is not a science.
Q224 Mr Davies: Economics certainly
deals with markets rather than making normative judgments about
fairness.
Ms Page: In terms of whether the
producers are getting a fair return from the people to whom they
are selling, the only answer to that is that they are still selling
to them. If they felt that they were getting an unfair deal, they
would stop producing it and they would get out of it, or at least
if they think they are getting a less unfair price from their
current retailers or whatever than they would get from somebody
else. I do not want to get into judgments about whether the distribution
is fair or not. I do not think that is a helpful way of looking
at it. I think what is helpful is finding ways of ensuring that
they do have alternative ways to sell, both alternative things
to sell and alternative markets in which to sell, and that is
the best guarantee.
In the absence of the Chairman, Mr Battle
was called to the Chair
Q225 Mr Davies: If you do not want
to address the normative issue of fairness, would you agree that
the distribution is very much weighted in favour of the northern
partners in this game, the northern partners who own the brand
and market the brand, and that the proportion of added value which
the original commodity producer gets is very small as a proportion
of the total additional value created by the brand? I see Professor
Holt is nodding his head. Perhaps he would like to answer.
Ms Page: I think that is true
and I think that there is a problem in the fact that there is
a distinction between labelling which is developed for the consumer
and labelling that is developed by the producer. Fairtrade has
been a consumer country led standard. I think it creates some
of the same doubts in developing countries' minds as any other
standards that are consumer country led.
Q226 Mr Davies: Professor Holt, what
is your answer to my question?
Mr Holt: I certainly think it
is like an ingredient brand where it is adding ethical value to
a standardised version of ethical value for a lot of consumers.
I agree with you that the Fairtrade model has a lot of benefit.
I read through the testimony of Marks & Spencer and others.
One of the huge benefits to it is that it is easy; it is a turnkey
system once the infrastructure is developed, which is very hard.
If you talk to a number of entrepreneurs in this space, developing
it is hard but once it is there, if you are Marks & Spencer,
you just plug and play and it works. That is nice. The less nice
part if you are concerned with the socio-economic issues is that
the people who are using it are not part of the old alternative
trade system that was fair trade 30 years ago, which was really
connecting consumers and producers in creating as much value as
possible for producers. They are commercial companies looking
to make lots of money. They do make the vast majority of the rents
on it. That is why I think Fairtrade is an absolutely essential
model because it can be ubiquitous; it can be a model for the
supply chain, for the retailers, but to extract more of the rents.
That is why I think models like Divine Chocolate, like the Ethiopian
coffee sector and social justice brands that allow some of those
rents to go back to the south are absolutely essential. These
are two very different branding models that we are talking about
in these proceedings.
Q227 James Duddridge: I would like
to direct a question to Sheila Page. The British Government has
focused very much on fair trade issues. I think it is right that
we do look at fair trade issues. To what degree is this really
a cheap publicity stunt on their part, and more seriously rather
than a PR issue diverting them from the more fundamental problem
of resolving international trade issues at the world trade talks
and the Doha Rounds? To what degree, whilst it is laudable, is
it distracting them from the much bigger picture and letting DFID
off the hook?
Ms Page: I do not think it is
distracting them. I think the UK Government is distracted, if
you like, from international trade issues and the Doha negotiations
but it is not because of fair trade; it is because it has many
more different issues within the EU to deal with and since the
UK is a member of the EU dealing with international trade talks
means dealing first with the other members of the EU. Trade is
not usually the first priority when it is deciding which position
to fight for. The distraction from trade is important and it is
happening but I do not think it is because of fair trade.
Q228 James Duddridge: Is it worse
because we have a British Commissioner? Does that put us in a
difficult position?
Ms Page: Yes. There were advantages
in having the Commissioner from a notoriously non-fair-trade,
non-trading country, yes, but that is getting beyond fair trade
and my competence. In terms of DFID and fair trade, I think there
has always been a problem in interesting development agencies
in trade, fair or normal trade. It is not susceptible to easy
measures like numbers of hospitals, numbers of schools and things
like that. It involves dealing with the private sector; it involves
all sorts of very messy things. It is difficult. There is a real
problem in getting DFID or any aid agency to do this well. It
is one which we and I hope you will be trying to get DFID to do
more of in terms of helping production, helping training, helping
countries to trade. There is an excellent agency of the Netherlands
Government that basically brings exporters up to scratch. It does
not produce new products. It merely tells people how to do the
final stage of becoming a good marketer in a developed country.
That is the type of thing that the UK Government stopped doing
years ago and probably should do more of.
Q229 John Battle: I was not quite
clear on your answer to Quentin. Should DFID give financial support
to fair trade organisations, do you think?
Ms Page: Not only; I think it
should be supporting organisations which help develop production
for trade in developing countries, which includes some fair trade
organisations, yes, but it should be doing it because they are
helping countries to trade and producers to become traders, not
only fair trade organisations.
Q230 Joan Ruddock: My question is
also to Sheila Page and returning to the WTO. Under the process
and production rules as you are obviously aware, it is not possible
for retailers to give preferential treatment to fair trade products.
If we take the case of bananas, then all bananas, whether they
are fair trade or not, will come in under the same tariff regime.
What we know has happened in the Windward Islands is that with
the removal of the preferences under the EU banana regime, the
Windward Islands have decided to go wholly to fair trade products
in order to deal with their difficulties in maintaining their
market. I wonder what you think about that. In answer to an earlier
question, if I quote you correctly, you said that farmers should
look at all their possibilities and that farmers should get out
of a declining industry. What is your comment on what the Windward
Island have done in respect of bananas?
Ms Page: If you look at the data
for the Caribbean countries since the various changes since the
end of the banana regime, what happened is precisely that. They
have gone into tourism. In every country except Surinam tourism
has more than replaced the income which they have lost from bananas.
They have also tried to improve their bananas and gained more
profit out of bananas, so it is not only getting out of the industry
but the main remedy has been to get out of it into services. If
you think about small islands with relatively poor land but extremely
good climate, that does seem to be a fairly sensible advantage
to be seeking. It is not true that retailers cannot choose. Consumers
can choose on the basis of fair trade. As someone who grew up
looking for the ILGWU[1]
label in clothes, I am quite aware that consumers can make these
choices. They went on to look at fruits. Retailers can certainly
label things and if you go into any supermarket, they have labelled
them. The import regime has to treat them fairly. That is important
because the reason it is not allowed in the WTO is not because
it could not be put into the WTO. We have put a lot of these things
into the WTO and GATT[2]
over the last 50 years. It is because the majority of the countries,
that is developing countries, do not want it there. I think it
would be quite wrong to say you must help developing countries
by doing something that they do not want us to do. It is right
that we should not try to change the import restrictions on it,
but if a particular consumer or particular retailer makes a choice
that is completely legal and it happens every time anyone shops.
Q231 Joan Ruddock: As an economist,
do you think that consumers should be encouraged to buy fair trade
products?
Ms Page: By the Fairtrade Foundation,
yes, and that is its job. By the Government, no. I think the Government
does not really have a role in doing that. I think consumers will
make that sort of choice, as each of us has made various choices
in the past. Each of us has particular values which we want to
promote by our consumption. I am not really sure that it is for
the Government—given that the vast majority of production
in developing countries does not take place under the Fairtrade
label, to discriminate against that. Telling people that they
should only look at a Fairtrade label would I think be wrong.
Q232 Joan Ruddock: Is the Windward
Island trade sustainable, do you think, on the basis on which
it is being done?
Ms Page: I do not know. I think
it might be if it is small. There certainly is a market for that
many Fairtrade bananas. They should probably try to differentiate
the bananas themselves more than they do, but I think they are
moving in that direction with different types of bananas, not
just Fairtrade. Yes, it is potentially sustainable but they should
not be tied to it if it proves unsustainable.
Q233 Joan Ruddock: Of course. Given,
as we have just been saying, that the WTO prohibits discrimination
between products on the basis of the way in which they are produced,
how best do you think the international community can encourage
employers to respect ILO[3]
labour standards or should they?
Ms Page: I am not sure what you
mean by "the international community". The WTO will
not do it. The ILO is trying to do it and has been trying to do
it for nearly 90 years now. I think that the way to do it is to
develop the conventions, perhaps encouraging individual producers
to accept the conventions for their own suppliers and increasingly
importantly the sub-contractors of their own suppliers.
Q234 Joan Ruddock: You do not think
governments in developed countries for example which are receiving
most of the products should have a role? You are saying they should
not?
Ms Page: I think they should themselves
accept all of the conventions. The UK has I think still one or
two to accept. The US has a lot more that it has not accepted.
Yes.
Q235 Joan Ruddock: Does Professor
Holt want to contribute?
Mr Holt: I am not an expert in
international trade policy, I am sorry.
Q236 John Bercow: I appreciate your
argument, Sheila Page, that fair trade products in developing
countries should not be advantaged over and above the vastly greater
proportion of the output of developing countries that does not
fall within that category. However, it does seem to me that as
far as fair trade products are concerned, it is quite important
to be clear, and I am afraid I am not, and perhaps you will ensure
I am, whether those products are exempted from the duty-free or
quota-free access agreement that I think it was sketched within
the WTO. You will be aware that within that agreement are all
sorts of loopholes which effectively protect the big trading nations.
I put it very simply: it means that the free developing countries
can export to us anything they like as long as there is not the
slightest danger that anybody is going to want to buy it, which
is a pretty cynical view by the big trading powers. Where do fair
trade products fit within that continuum?
Ms Page: They fit within their
normal category. A fair trade banana is just a banana from that
point of view. Under the EU scheme, by 2008 all goods from least
developed countries will enter duty free, quota free, fair trade,
non-tariff trade bananas. That is the EU.
Q237 John Bercow: Those are LDCs.[4]
Ms Page: Non-LDCs have a huge
range and since I think you have to finish this hearing this morning,
I will not go into the full list of all the EU's different arrangements
with different countries. Under almost none of them is there any
special provision for anything that would be considered fair trade.
There are some provisions in some of the clothing and textile
imports for hand-woven things, which has a certain correlation
with fair trade, but that can be there because it is a different
product. I am not quite sure what you asking. Countries have rules
for what products can enter duty free and quota free which do
not distinguish within each good, within bananas, within whatever.
Q238 John Bercow: What you are saying
is that there is not a discrimination as between a fair trade
product and another product. The judgment is made about the product
line as a whole.
Ms Page: It is: are bananas allowed
or not, and then all bananas are or are not.
Q239 John Bercow: You do not think
that there is any evidence that although there is no formal discrimination
against fair trade products, there is some sort of implicit assumption
against fair trade products at all?
Ms Page: No.
John Battle: Thank you both very much
for your contribution to our investigations into these complex
areas. I think we almost ended up discussing whether economics
is an art or a science. We could have been here all day on that.
You have been most helpful to our inquiry.
1 International Ladies' Garment Workers' Union (ILGWU). Back
2
General Agreement on Tariffs and Trade (GATT). Back
3
International Labour Organization (ILO). Back
4
Less Developed Country (LDC). Back
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