Examination of Witnesses (Questions 240
- 259)
TUESDAY 27 MARCH 2007
MR OWEN
TUDOR AND
MR BERT
SCHOUWENBURG
Q240 John Battle: Welcome. We have
got a half hour session with you and you have given some written
evidence already. I wonder if I could start the session by asking
whether you would like to tell us what the TUC position is on
the significance of fair trade, how do you see it? Would you like
to give us a few comments to start with and explain where you
are coming from?
Mr Tudor: Could we introduce ourselves,
first. I am Owen Tudor, Head of the European Union and International
Relations Department of the TUC. My colleague, Bert Schouwenburg,
is a GMB officer, but he is here mostly in his role as a board
member of the Fairtrade Foundation. I think our view about the
significance of fair trade for development is that it is one of
a number of different things which can assist in development by
providing, as is the point of fair trade, a better return for
their labour to the producers of the goods that are covered, so
our view is that it is one part. I am afraid I cannot really give
you a judgment as to what percentage of the job which needs to
be done in development is done by fair trade, or could be done
by fair trade, it is one of a range of tools.
Q241 John Battle: Do you see the
development of the Fairtrade brand that we were discussing earlier
as an end in itself and an objective, or do you see it as part
of a wider issue of trying to ensure that international trade
rules are fairer to people, to workers? How do you see the brand
versus the workers' rights issue?
Mr Tudor: It will come as, I hope,
no surprise to the Committee that coming from the trade union
movement I am not an expert on branding—we would possibly
be in a better position if we were! Our view is that fair trade,
like most of the other tools involved in development, is a means
to an end, it is not an end in itself, and, as you describe, the
end that we have in sight is a fairer return for their labour
to those people engaged in producing the fair trade goods. I am
uncertain also of the precise relationship, I have to say, between
fair trade and the world trade system as a system. I was thinking
about the relationship between the WTO's rules and fair trade.
There is a sense in which the WTO is in some senses beneficial
to the concepts of fair trade in terms of its role in reducing
tariff barriers and so on, and there are other elements in which
WTO rules are less helpful to the fair trade movement, as you
have just been discussing, in terms of its reluctance to get involved
in issues around labour standards and the return to the producers.
Q242 John Battle: Would you like
to add anything?
Mr Schouwenburg: Yes. I think
that is an important view, that fair trade is a means to an end,
it is not an end in itself. What we believe in the trade union
movement is really fair trade is nothing more than what all trade
should be, because if you look at it in essence what fair trade
is trying to do is give the producers a price that enables them
to make a living so, therefore, that should be the norm. In fact,
the difficulty is why all trade is not fair, because the tail
is wagging the dog, that the power of the huge corporations, notably
the supermarkets, are dictating the prices and these prices are
such that the producers cannot survive.
Q243 Ann McKechin: Owen, in your
written submission you say that for the ethical trade agenda to
succeed there must be coherence between the demands of codes of
labour practice and respect for workers' rights and the retailers
on brand policy on price and lead times. Groups such as ActionAid
have been critical of the voluntary code approach taken by the
Ethical Trading Initiative, which the TUC and others have supported
quite vigorously, and said that the voluntary nature has had very
little impact on the ground. Do you agree with that or do you
see other ways in which the ETI should become more effective?
Mr Tudor: It is certainly fair
to say that it has not had enough effect on the ground and it
could certainly have more effect on the ground. I think the Ethical
Trading Initiative itself has conducted research which indicates
the sorts of things that would improve the effectiveness of the
Initiative. Principal of those, I think, is the question about
incentivising the use of those producers who are attempting to
offer better circumstances to their workforces. There is an element,
however, in what ActionAid say and I think generally speaking
about these issues in terms of voluntary codes and so on, which
I want to contest slightly, the trade union movement is not averse—that
may be putting it too weakly—to the use of regulation and
requirements on businesses' activities. In the long run—and
I hesitate if I am being teleological about this—the right
result for the producers in those circumstances is going to be
achieved by those producers, not by an external force that mandates
that. In the long run that is less sustainable than a system where,
you can call it voluntary if you like, it is a question about
whether people reach by agreements a particular level of return
for people's labour or whether they have it mandated by some external
agency because in the long run that external agency may change
its mind.
Q244 Ann McKechin: This issue of
price and lead times seems to be at the core of the problem in
terms of depressing the labour costs which, in turn, results in
long hours and very low pay for people who are down the chain
of supply. How do we change this type of relationship in general?
Mr Tudor: I think there are two
things going on, in fact. One issue is about the issues of lead
times, pricing policy and competition and so on. One of the other
things, however, that is restricting the ability of people at
that end of the supply chain to get a fair return on their labour
is the restrictions that apply to them about what they are able
to do. In China, for instance, one of the critical problems is
merely the illegality of self-organisation of working people and
the enforcement of those rights rather than necessarily being
about lead times.
Q245 Ann McKechin: In a perfect world
if every worker had access to proper legal rights and the ability
to enforce them with independent trade unions, then a lot of these
defects and the ineffectiveness in the supply chain could be addressed?
Mr Tudor: A lot of them could,
and we would argue in particular, for instance, that is primarily
the way in which developed countries have reached that stage.
Obviously there was not anybody other than the developed countries
to liberate them from those chains, but in terms of the issue
of lead time and competition, which I accept has an enormous part
to play, although it is about a power relationship, one of the
key elements that we have got to change is the balance of power
between the purchasers and the suppliers. The way in which those
lead times work is a problem that needs to be addressed through
several different factors and that is one of the reasons why we
think fair trade is one of the ways of doing that but not the
only way. In terms of the Ethical Trading Initiative, for instance,
we think that it is more about attempting to encourage a particular
approach to entire supply chains rather than running the ends.
Q246 Joan Ruddock: I think Ann McKechin
has got you into the area I was going to discuss which was about
improving the relationships between the supermarkets and those
who are working for them. You pointed out that they had made profits,
for example Tesco, of £2.2 billion up from £1 billion
in 2001 but at the same time over that period they had cut their
prices by 15%. It is not just about the things that you rehearsed
with Ann McKechin but it is beyond that, driving down prices so
that whatever relationships they might have had and whatever,
presumably, trade unions or other representatives there were in
developing countries, if you are determined to get your prices
down to that extent inevitably you are going to drive down wages.
It is very difficult to see what people could be doing if driving
down the price to our consumer is the prime motivation.
Mr Tudor: I sort of agree. I have
to say, I have not got the backing of a Harvard education to do
this, but first year economics at Oxford suggests to me that it
is not necessary to pay workers less to produce goods cheaper,
there are other ways of doing it, you can improve the way the
production is organised and so on. You mentioned Tesco, in particular,
who I think were the people who invented "pile 'em high,
sell 'em cheap" as a way of increasing profits. I think there
is no necessary relationship between price and the proportion
of that price that goes back to the people who are producing things,
but I recognise that is a little bit of a hypothetical issue in
many of these cases. A lot of the circumstances that you are talking
about are derived from reducing margins from increasing turnaround
times, increasing the speed with which people have to change production
and so on in areas like textiles. I think that there is then an
argument about how far there is a market for higher-priced goods
which can provide more scope for people to take more out of that
price. The evidence of the last few years is that there are tensions
pulling in both directions, bluntly, and there is always a question
about, "If I save money on my jeans, am I more willing to
spend it on mangetout?" In my case, this is a fairly obvious
decision! One of the things that increases the purchasing power
of people in the West is cheaper prices on some things which means
that they are then able to spend more money on premium-priced
things. I do not know how far you want to go into an all-embracing
discussion of the world economics system, I think there are simpler
things to do.
Q247 Joan Ruddock: I think my colleague
might be interested!
Mr Tudor: He seems to be coiled
like a cobra and I am worried! There are simple things that can
be done in terms of things like fair trade, ethical trade and
development that do not necessitate going the whole way down some
of the discussions that we can go down in these areas.
Q248 Joan Ruddock: Before he is tempted,
let me take you to what is your field absolutely and that is trade
unions in this country. The major supermarkets are unionised—to
what extent do you involve your trade union members in discussions
of this kind? Are they aware of the issues of the wages of their
colleagues, as they are in a sense, in developing countries producing
the goods that they then market from their shelves?
Mr Tudor: Bert comes from one
of the unions that represents supermarkets so I will let him add
something to that. Just as a general point, we are attempting
to increase the amount that British trade union members know about
what is going on in other countries. We have a core labour standards
campaign that is attempting to educate trade union members about
the issue of ILO core conventions and how they are being implemented
in other countries. We attempt to increase the contact between
British trade unionists and trade unionists in less-developed
countries to make sure they have a better awareness of these issues,
and I should say we receive a substantial amount of money—semi-substantial,
it could be more—from the Department for International Development
specifically to educate our trade union members about exactly
those issues.
Q249 John Bercow: Is that evident
in published form?
Mr Tudor: Yes indeed.
Q250 James Duddridge: How much?
Mr Tudor: It is in our accounts.
Q251 John Bercow: Forgive me, Mr
Battle, I interrupted. I did not mean, is the fact of the receipt
of public funding evident in published form. Mr Tudor, what I
meant was, is the output of your work using that money available
for us to see? In other words, is it just discussions or do you
produce written materials?
Mr Tudor: We produce written materials
and all sorts of things which we can flood you with. Sorry, that
was not meant as a threat!
John Bercow: If I may request
a trickle rather than a flood, I would be very grateful.
Q252 Joan Ruddock: May I make it
clear I was interested in the work of members in this country
because I think one of my colleagues wants to talk about trade
unions in the developing world.
Mr Schouwenburg: We aim to make
our members very aware of the global position. One of the supermarkets
we organise in is Asda and we see no contradiction between organising
our members in Asda and organising trade union members, or helping
to organise trade union members, in our case, in Latin America
that supply us with bananas. We see no contradiction in that at
all and, in fact, as part of the scheme that Owen has mentioned
we participate in something called the "Union to Union Project"
which is financed by a relatively small amount of money from DFID
whereby we try and support how we see our colleagues in struggle
in Central America.
Q253 Joan Ruddock: Would this education
of your workers here have any impact at all on the company for
which they work?
Mr Tudor: One example that I immediately
call to mind is not necessarily about suppliers in other countries,
but it is the way in which British trade unions used the Ethical
Trading Initiative to improve the terms and conditions of strawberry
pickers in the Midlands. I do not think there is any necessary
reason why this same model could not be applied to strawberry
pickers in any other country. The way the union did it was that
the union that was recruiting the strawberry pickers and attempting
to get a better deal for them used its links with the supermarkets
which it had through the Ethical Training Initiative, and the
fact that the union is involved is recognised by some of the major
supermarkets, to say to the supermarkets, "You ought not
to be buying from a supplier who is treating its workers so unfairly
to provide goods which our members are then selling to the general
public". If that chain works—I accept that is a fairly
small chain—one could certainly expand that to cover other
examples and there may well be other examples I simply cannot
call to mind.
Q254 Mr Davies: I might just say,
in case anybody is anticipating the reverse, that I quite agree
with the economics that have been put forward by the TUC this
morning, that when labour productivity is rising falling producer
prices might be quite consistent with stable, rising real wages.
Could I ask a question to Mr Schouwenburg. I think we have agreed
this morning, Mr Schouwenburg, that Fairtrade is a brand. The
peculiarity of this brand is that it was created not by people
who wanted to exploit it themselves but by people who wanted producers
of developing countries to benefit from the added value. Do you
think that purpose has been largely achieved? That is to say,
do you think the distribution of the enhanced value created by
that very successful brand has been reasonable as between distributors
and retailers in the north and in the developed world and as between
the producers in the south, or do you think the benefit has been
disproportionately gained by distributors and retailers in the
north?
Mr Schouwenburg: I think the benefits
of producers are far more equitable than non-fair trade commodity
products. Whether the—
Q255 Mr Davies: That is not quite
the issue because here you created a new source of value, a brand
that did not exist before, and the question is, how do you distribute
that value as between these two categories?
Mr Schouwenburg: That is more
of a technical question I think you are asking me, is it not?
Q256 Mr Davies: It seems to me a
fundamental question. The object of the operation was to create
value for producers of every country, was it not? It was an altruistic
purpose, it was not people creating a brand as usually happens,
the examples we had this morning, Coca-Cola or Harley-Davidson
or something, in order to benefit their own shareholders, to invest
in a brand and then they get greater value in the future, that
is not the case here. This is an altruistic project, I understand.
Fairtrade wanted to create a brand as a way of getting value for
somebody else, for producers in developing countries. You created
the brand, it has been very successful, well done. The question
is whether you are satisfied at the distribution of the value
created, that is my question. Are you satisfied or are you not?
If you are not satisfied, the next question is what are you doing
about it? If you are satisfied that terminates the argument.
Mr Schouwenburg: Personally, I
am not satisfied, I would like to see more value go to the producers.
Whether that is possible depends on the price that the retailers
in this country, for example, are prepared to pay for those products.
As we have seen, they are prepared to pay.
Q257 Mr Davies: That is not the problem.
You created the brand and you see the consumers are prepared to
pay the premium price that is benefiting the brand, just like
people would be prepared to pay for my shirt at a higher price
if it had a Versace label on it than they would pay for it as
it stands. They are prepared to pay for the brand, you established
that, it has been a success. I am talking to you about the distribution
of that value. You just answered the first question, which is
that you were not satisfied with the distribution of the value,
you thought an insufficient portion of that value was being distributed
to producers in the developing world. So my next question, that
I already warned you was going to be my next question if you gave
an answer, is what are you doing about it, Mr Schouwenburg?
Mr Schouwenburg: Unfortunately,
we have not got complete power over world markets.
Q258 Mr Davies: You have got power
over the Fairtrade Foundation which is creating this value. You
are on the board, that is what I think we were told.
Mr Schouwenburg: I am the trade
union representative on the board of the Fairtrade Foundation.
Q259 Mr Davies: The Fairtrade Foundation
has created all this value for a purpose that has not been achieved,
it created this value for the benefit of developing producers.
What is the Foundation now doing about this?
Mr Schouwenburg: I disagree. Although
it occupies a small niche in world trade, I think it has been
of value to a great many producers around the world who otherwise
would not have been able to eke out a sustainable living on the
products they provide for the reasons we heard earlier.
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