Examination of Witnesses (Questions 277
- 279)
TUESDAY 27 MARCH 2007
MR PAUL
CHANDLER AND
MR MICHAEL
GIDNEY
Q277 John Battle: A word of welcome
and, in fact, if I could ask you a general opening question to
give you a little bit of space to say who you are and your perspective.
The fair trade movement has been going 15 years now and if you
would like to give us your impressions briefly of its strengths
and where you see there is a need for progress, perhaps picking
up on some of the points that Mr Quentin Davies has put in as
well.
Mr Chandler: Traidcraft has been
going for much more than 15 years, Traidcraft has been almost
30 years in existence so fair trade, as a concept, does go back
further than the Fairtrade certification mark. We think it is
very exciting, though, to have seen the rapid growth of recent
years and we have always welcomed and advocated the involvement
of mainstream companies. We do recognise that is now posing both
opportunities and significant challenges to the future of Fairtrade,
how it works and, in particular, how far we can ensure that it
keeps a tight focus on development and really reaching the poorer,
more marginalised workers not simply becoming a more generalised
ethical standard which would be more about doing no harm than
about really taking forward development to its best effect. There
are a number of areas we all need to address and some of those
relate very much to the question that Mr Davies posed. We do need
to make sure that the systems and standards which operate within
Fairtrade are made as robust as possible so they are properly
monitoring and controlling all the players in Fairtrade but in
doing so they do make sure that the focus on poverty is maintained
and the dedicated, more mission-driven organisations like Traidcraft
are able to innovate, pioneer and act as watchers on the overall
development of the movement. We also need to find ways of how
do we really maximise the impact of the private sector and make
sure that in supply chains as much benefit as possible does flow
back to producers. On the very specific question of are producers
getting a fair amount of the benefits of Fairtrade, I think there
are several levels on which I would like to answer that question.
First of all, we do ask our producers through our social accounting
processes, through independent research, "Do you feel what
you are getting is a fair payment for what you are doing and is
better than you see others getting?" Universally, they are
saying, "Yes, we think we are getting fair prices, we are
being dealt with fairly and our livelihoods are much improved
as a result of that". We sense that there is, however, a
need for maybe more regular reviews of some of the standards,
such as the minimum prices and premium levels for particular commodities
within the Fairtrade certification system, which at the moment,
frankly, the system does not have the resources to carry out as
frequently and methodically as we would like. One of my senior
directors sits on the standards body of the International Fairtrade
Labelling Organisations and one of the areas we want to encourage
is regular reviews to make sure as time goes on the fairness is
still definitely there. The second issue, which I think is very
relevant, is when Traidcraft and other small organisations created
Fairtrade products and started building up consumer awareness
of fair trade, as small companies, we did not benefit from all
the economies of scale of some of the big new entrants into fair
trade. The additional price premium that the consumer was paying
for goods, some of that was because the producer was getting more
money; some of it was because Traidcraft was a very small organisation
and was not getting all of the supply chain economies that others
could. We were just about breaking even or making losses, so we
certainly were not getting undue benefit compared with the producers.
It is not and never has been true that all the additional payment
the consumer is making flows through to producers because of our
scale. As we now find mainstream companies coming in, I think
we are beginning to see market forces ensuring that the additional
extra cost of our being small is not just being taken as extra
profit by the new players. I think when they first came in there
was a lot criticism, "Are Tesco's and others really exploiting
the consumer on bananas or coffee price", or whatever, but
we are now seeing own label Fairtrade product prices beginning
to come down. That poses some issues for us as there are still
small people competing against that, but that in itself is creating
some pressure. What we think is going to be absolutely essential
in making this work, and something we have been quite active on,
is promoting stronger requirements on big companies to report
on their supply chains and exactly what is happening within them.
We have been a leading advocate of social accounting which is
one way of doing that, but during the recent company law review
that was going on last year we were one of the very active agencies
lobbying to try and make sure that better reporting on supply
chains came in. If companies become more transparent about who
is getting what, then there will be pressure from the media, people
like ourselves and people like yourselves in government to make
sure those are being managed and managed properly and that undue
profit is not being taken out of the system. I do not know if
that is a sufficient answer, but that would be my response and
what we are doing.
Mr Davies: I am grateful for that.
Q278 Ann McKechin: I wonder, given
the rapid expansion of fair trade over the last few years, what
do you think the role of donors, such as the UK Government, should
be in engaging with fair trade? There have been some arguments
presented to us over the last few weeks that it should be helping
people to develop new products to put onto the market or should
it be a general consumer awareness and civic education programme?
What do you, as one of the Fairtrade retailers, think should be
the emphasis?
Mr Chandler: I think there is
a very valuable contribution for UK Government, DFID, to support
the further development of fair trade. It has made some contributions
in the past, I sense it is making less direct contributions at
present, perhaps feeling "well, the market is going to deal
with this anyway". Indeed, we must make sure that where big
companies are getting involved they are putting proper resources
into developing fair trade and producing new products not simply
relying on external subsidy. However, there are areas in which
you cannot make a good commercial business case always for investing
in some of the supply chain development that is needed. I think
there are huge areas for development, for example taking fair
trade beyond the food sector, where it has been hugely successful,
into more non-food products. Traidcraft started as a crafts-importing
organisation, there is a little bit of movement now with Fairtrade
cotton fibre being certified, but we have got to look much more
at other supply chains. That is quite a long-term investment process
in developing standards, making them robust and creating consumer
awareness of that and I do not think we are going to find that
coming out of the commercial sector or what the small dedicated
Fairtrade organisations are able to fund. I think there is some
help potentially to invest in scaling up some of the producer
groups to be able to cope with the huge market growth we have
got now, particularly to make sure in the rapid expansion of the
market what we do not see are simply existing reasonably well-treated
workers on estates or plantations being given a few marginal extra
benefits to qualify for full Fairtrade status and that swallows
up the fair trade opportunity. What I am keen to see, as a mission-driven
organisation, is that we make sure small producers who have really
got much further to travel before they get to a standard level
of benefits have equal access into the market but to do that is
quite challenging, it is much easier for a big company to buy
from a bigger, better-organised supply group. We need organisations
like Traidcraft and Café Direct and others to work alongside
some of the smaller producer groups to help get them ready for
the market, but we are all finding our margins hugely squeezed
at the moment by this competitive pressure. I think there is a
role for government to find ways of using the expertise of the
dedicated Fairtrade organisations to really make sure that small
producers get a fair opportunity here because that small producer
poverty-focus of fair trade is to me one of the absolutely fundamental
aspects of what the movement has been trying to create.
Q279 Ann McKechin: Does that then
mirror what the relationship should be between the Government's
approach to mainstream trade and fair trade because, for example,
they may be saying with products like bananas or coffee we are
now getting mainstream producers coming in on a massive industrial
scale into those markets? Are you trying to say, perhaps, that
they should be looking at different products to try and replicate
that similar pattern? I know there is a distinction between small
producers and industrial producers but sometimes if you are a
worker on an industrial site, are you much better or worse off
than someone who is an independent small producer and why do we
make that distinction?
Mr Chandler: We agree entirely
that we want to reach the needs of poor workers wherever they
are and whatever the structures they are within. For those involved
in larger structures I think there is more onus on the companies
to treat those workers fairly and in accordance with ILO conventions
and all the rest of it, anyway, without necessarily getting the
added fair trade dimensions. Where that is not the case then certainly
we are keen and we have always advocated that we need to develop
standards for workers on plantations and estates as well. Commercial
fair trade should be able to make good progress in those areas;
where additional government support would be particularly valuable
is in helping the smaller producers who otherwise would be further
marginalised through these processes, so making sure that development
edge is maintained to me is important, but I am not trying in
any way to denigrate the importance fair trade is bringing to
other areas.
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