Examination of Witnesses (Questions 300
- 319)
TUESDAY 17 APRIL 2007
MR GARETH
THOMAS MP, MR
OWEN BARDER,
MS LAURA
KELLY AND
MS AMANDA
BROOKS
Q300 Ann McKechin: But as you said
and as the Fairtrade Foundation in their evidence to us said there
is considerable scope for expansion of fair trade products into
different product lines. I just wondered to what extent you considered
that your own staffing will need to change to reflect that expansion
into different areas.
Mr Thomas: As I said, we are beginning
a conversation with the Fairtrade Foundation and we will need
to look at not only what the Fairtrade Foundation say to us but
also what other organisations in this area are also saying to
us. I do not think it is for us as a department to be developing
new fair trade products; that has to come from the individual
initiatives themselves. The judgment for us is about what else
we need to do in terms of giving information to consumers, what
other financial support if any—and as I say I think there
will be more financial support—we want to give and to which
organisation we want to give it.
Q301 Chairman: You say you are having
a conversation with the Fairtrade Foundation, but I thought it
was a little more formal than that, I thought they had asked for
a contribution towards a £50 million fund to develop new
fair trade products. You call it a conversation: is it a formal
application, is it being considered and what is the timetable?
Are you able to give us any update on that?
Mr Thomas: I use the word conversation
in its broadest sense; they have made an approach to us for a
contribution to the £50 million fund, as you have rightly
said, but we are not going to just make a decision simply on the
basis of a letter, we obviously wanted to have direct face-to-face
conversations with them. I have only recently had my first conversation
with them about their initial ideas and there will be further
contacts at official level this month and next month, and in that
way the conversation will move forward. Let me put it this way:
I am sympathetic to the direction that they want to move in but
I am not, if you will forgive me, going to conduct a negotiation
with them through the Committee.
Q302 Chairman: I would not expect
you to, Minister, but my understanding is that what they are looking
for is for DFID perhaps to take the lead amongst a number of donors
towards contributing to that fund because of the strength of the
fair trade market within the UK. Have they made a formal application
and if so is there a specific amount of money they are asking
DFID for or a contribution and is there a timetable for this because
clearly what the Fairtrade Foundation is saying, as I understand
it, is we are developing a lot of products and we have come forward
a long way, but we are going to make a step change to develop
more products with a wider reach and we need some additional funding.
Presumably they would like to know sooner rather than later whether
that is going to happen.
Mr Thomas: Sure, I am sure they
do want to know sooner rather than later. There is a series of
meetings taking place, some with other donors, and I recognise
that our financial support for the Fairtrade Foundation, the current
round, is coming to an end at the end of the year; they obviously
want to us to plan a way forward and we obviously want them to
continue to work and to grow their work, so we will need to bring
the conversations to a conclusion soon, I accept that.
Q303 Chairman: It is a big step change.
As I understand it hitherto you have given £1 million towards
the Foundation and although they have not specified what share
they are seeking, the UK's share of £50 million over five
years could be significantly more than that.
Mr Thomas: One of the reasons
we want to meet with Harriet Lamb and Mike Gidney, the chair of
the Fairtrade Foundation, is to try and establish just how much
they would like from us. They recognise that they are not going
to get the whole £50 million, but the larger the sum that
we will be talking about the more the opportunity cost of that
amount grows. There is a whole series of different ways in which
we could support with a large sum of money initiatives to support
the growth of trade, be it through trade-related capacity building
directly in country, or be it through an adjustment fund for the
EPAs which are coming. There is a judgment to be made, therefore,
internally within the Department about how much we will provide—indeed,
if any—and I do think we will offer a contribution to their
expansion plans, but that does partly depend on the outcome to
our comprehensive spending review discussions—it depends
in part but not exclusively on that. If you like, we are at the
beginning of a conversation with them and there are other donors
who are interested in the Fairtrade Foundation's proposals—the
Swiss have already said that they will take a lead in this.
Q304 Chairman: Can I say our advisers
told us that the money that the Swiss have put up is actually
to help with the existing operations of the Fairtrade Foundation
rather than developing new products, welcome though it is. I see
Laura Kelly shaking her head.
Ms Kelly: We have a proposal from
the Fairtrade Labelling Organisation International which the Swiss
Government has provided some funds to develop. It is three scenarios,
a €15 million, an €18 million and a €22 million
fund which is about new product development and an expansion as
well, so it does include the same things as the Fairtrade Foundation
have proposed to DFID.
Q305 Chairman: There seems to be
a little difference of view with our advisers on that. I know
Hugh Bayley wanted to come in on this, but before he does we have
had evidence from a number of retailers who have said that they
have invested significant amounts of money themselves and they
are looking to international donors to do rather more. Sainsbury's
told us they have invested £4 million in the banana sector
alone and they think the Government could do more; Marks &
Spencer say "We know the UK market for fair trade is undersupplied.
Therefore we believe donors"—I think that means donors
such as DFID—looking to fund market access programmes should
consider putting money into fair trade—specifically by investing
on the ground at the supply end to enable expansion." You
have done that in small amounts in the past, but is that something
that you would respond to?
Mr Thomas: Sure. They are right
that there is more that we could do, though we do perhaps much
more than some of them are aware, we have had a Business Linkages
Challenge Fund to fund a variety of work and to build the ability
of poor producers to access the international markets, to achieve
the standards, be they for fair trade certification or the standards
more generally to get into the European market. We are just about
to move into a new Africa Business Challenge Fund which we estimate
will be about a $60 million fund which again will help to fund
a variety of initiatives, including initiatives such as the supermarket
chains which will actually help poor producers meet the standards
of the food producers themselves.
Q306 Hugh Bayley: I would ask the
Minister to consider the application very carefully. It would
be quite wrong in my view for DFID's resources to be used for
product development or for the development of self-regulation
services for large retailers such as Tesco or Sainsbury's or large
manufacturers like Nestlé. Should not the Fairtrade Foundation
be working on the basis of full cost recovery from the commercial
sector? This is a £700 million business in the UK alone and
the Fairtrade Foundation provides an international service; why
is it that they are seeking to divert money from development work
overseas to change the regulatory regime for retailers in developed
countries?
Mr Thomas: We do want the Fairtrade
Foundation to achieve financial sustainability. When we looked
back in 2005 at the progress that they were making we were encouraged
by the fact that almost 70% of their income does come from those
who use the Fairtrade mark and we obviously want that to move
forward. There is a role for the Department, through the challenge
funds that we offer, to help make it easier for producers in a
developing country to achieve the standards to enable them to
sell their goods into international markets; that is where we
have a role. I do think it is reasonable to ask supermarkets to
look at what else they can do, working with us, and that is where
the Food Industry Challenge Fund will play a role, to provide
some support from Government to catalyse them into looking at
their supply chains in a lot more detail and into looking at what
else they can do to mainstream across that supply chain fair and
ethical standards. We also work with an organisation called Euregap
which sets standards across 70-odd countries; we are working with
them to try and make sure that their technical committees, when
they set standards, do not set standards in such a way that they
will automatically preclude producers in poor countries, so there
are a variety of ways in which we work.
Q307 Joan Ruddock: Minister, you
have spoken about a number of different schemes and you have indicated
as you have gone along that there are some new initiatives coming
out on funding. My first question to you would be: is the development
assistance fund that DFID has been offering and from which a number
of fair trade companies have directly benefited something which
is planned to continue?
Mr Thomas: I think you are referring
to our Development Awareness Fund rather than development assistance
fund.
Joan Ruddock: Yes, I meant development
awareness.
Mr Thomas: Development awareness
funding is going to increase. The way it works is that each year
we get a series of proposals for funding and each year we take
decisions on which proposals to fund against a set of published
criteria. Over the years a whole range of organisations have secured
funding for fair trade awareness work including, I believe, the
Fairtrade Foundation but a variety of others too.
Q308 Joan Ruddock: We have heard
evidence from a number: Divine Chocolate, for example, made a
successful application which was very, very important to their
early development, but they said they found it invaluable to have
the assistance of Comic Relief in making that application, an
indication that they might have found it difficult initially to
achieve that themselves. We then heard that Tropical Wholefoods
had suggested that it was easier to access some of the DTI funds
than to access DFID funds, which was something of a surprise to
us. People Tree indicated that they thought that such grants were
not very well publicised and indeed were rather difficult to apply
for and that they had not managed to get round to making such
an application. I wonder if you acknowledge that there is some
difficulty here and perhaps a lack of publicity for these funding
arrangements for development awareness.
Mr Thomas: I am obviously happy
to look again at how we publicise the Development Awareness Fund.
I should say on Divine Chocolate that certainly a part of the
chocolate company's operation was in a sense helped to be created
by a loan guarantee from our staffing in Ghana, so I would be
a bit disappointed if they were giving us a lot of grief—
Q309 Joan Ruddock: No, Divine Chocolate
were not; they were very happy because they have been very successful
but other people were not as happy and I think there was a sense
that perhaps one company has got to do very well and has been
very encouraged and has got lots of things and been very successful,
but others are finding it much more difficult to make that connection
with your funds.
Mr Thomas: We do host from time
to time our open days for organisations to come and meet with
us and see how we run our Development Awareness Fund or our other
sources of civil society funding at a central level. I can certainly
look at this, particularly if the Committee recommends it, and
I will look again at whether or not we need to hold such a session
and whether or not there are others things that we can do to try
and open up to a wider range of organisations the possibility
of getting development awareness funding. There is always some
grief each year from organisations who have put in good bids,
who have not got funding, perhaps because there is cash-limited
pot, but I do not know the particular circumstances that the two
organisations you refer to were in. The general point of can we
do more I am happy to look at.
Q310 Joan Ruddock: Obviously, it
seems to us that that would be helpful. I wondered—because
you indicated that there would be an increase—if you are
able to say what kind of future funding will be able to go into
this scheme.
Mr Thomas: Forgive me, I cannot
say that at this stage because it does depend partly on the outcome
of the Comprehensive Spending Review and the internal conversations
that will obviously follow once we know what our settlement is
going to be.
Q311 Joan Ruddock: We see this funding
as essential, because we were told very clearly—of course
it is obviously about developing markets—that it means that
the small fair trade companies cannot perhaps exist.
Mr Thomas: I have been to a whole
range of projects in the course of my getting on for four years
that we have funded through the development awareness programme,
and I am a great fan of what we have done. I do see the programme
continuing and if we can increase the amount of finance that is
available then I would be sympathetic to them.
Q312 Richard Burden: Could we move
away from specific fair trade to the Ethical Trading Initiative
which, you have rightly said, is very good, very helpful and the
Department gives it a lot of support, £3 million. It is obviously
much more specific in terms of what it focuses on, in other words
core ILO[2]
standards, and I just wonder if you have any concerns about its
voluntary nature? Fair trade has a very clear process of auditing,
a very clear process of independent inspection and so on, but
when it comes to the ETI it can be a lot more disparate and very
much down to what particular companies choose to do in their own
areas, and suffice to say we have had some contradictory evidence
about how much independent auditing is going on. Would you like
to comment on whether there is any more you think the Department
can do in that area?
Mr Thomas: The role for the Department
is through the funding that we give to the Initiative and we wanted
to give some financial sustainability and some guarantees to the
Initiative, which is why we are funding it in the way that we
are. One of its strengths is its voluntary nature and if there
were any attempt to make things compulsory it would meet with
a considerable amount of resistance from some of the people who
joined the Ethical Trading Initiative. There has been some assessment
of the effectiveness of the ETI done by the Institute for Development
Studies and they have charted improvements in impact as a result
of those, for example in the Ethical Trading Initiative, wages
have gone up, the number of children working in supply chains
for companies in the ETI scheme has been reduced, but they also
acknowledge that there have been problems. There are problems
in terms of organisation by trade unions in some cases. There
is clearly more, therefore, that the members of the ETI scheme
can do, and when you consider that the members of ETI together
have a turnover of about £100 billion, the improvements that
are made through the ETI can potentially reach a considerable
number of people. This is why I say our approach to allow a thousand
flowers to bloom is right; we are not backing one particular initiative
over another initiative, we are trying to support a variety of
initiatives and in that way make progress in a variety of fields.
The good thing about ETI is that it focuses specifically on the
broader supply chain. The Fairtrade Foundation has focused on
specific products and the publicity and awareness that has been
generated around those products I think is helping the climate
for a whole variety of companies, both through ETI and through
other sources, to look at their supply chains as well, so there
is synergy and that is why it is right that in a sense we provide
support to a variety of initiatives without getting too heavy-handed
about which one works and which one does not.
Q313 Richard Burden: I am not suggesting
that you choose one over another, it is more about how the ETI
specifically could be made perhaps more effective, accepting that
it does do a lot of very good work and it has led to improvements.
To give an example, we have had evidence from Tesco about the
kind of auditing they do of the factories in their supply chain
and so on. We have then had evidence from War on Want who said
it is not really quite like Tesco are saying because whilst they
have clearly signed up to this they have apparently refused to
meet War on Want to discuss their findings, which showed a slightly
different picture, and War on Want were saying that one of the
problems with the Tesco approach to their own audit of their supply
chain was that they warn factory managers in advance when the
inspectors are coming in to have a look and therefore what is
revealed by those audits may be representative, but on the other
hand it may not. I am in no position to judge who is right and
who is not right on that, but precisely because of the reasons
you say the ETI has got huge potential, and because it is very
clearly focused on ILO standards—it is not like fair trade
where it can mean all sorts of things—it is very clear what
it should mean and who it applies to. Could there not be some
role that, as far as the UK is concerned, DFID could do or internationally
could be done to try and say well here are the standards, these
are the kinds of monitoring that should take place and if those
companies that do sign up to it are not prepared to do it voluntarily,
to look at whether something else might be appropriate.
Mr Thomas: I started out, when
we did look at these issues being instinctively sympathetic to
that point of view. Should there be some sort of regulation, some
sort of standard? My worry about going down that route is that
it will put some people off from engaging in the Initiative. I
do not think at the end of the day it is for the Government to
try and dictate how particular companies or particular NGOs should
engage. Our role is to try and catalyse debate and that is what
the Ethical Trading Initiative is doing; it is for War on Want
and for Tesco to resolve the specific issues that they have together
between themselves and I hope there will be a conversation. I
do not think it is for the Government to get into that conversation
I am afraid.
Q314 Richard Burden: Is there an
angle around perhaps—even if the Government does not have
a direct role to get involved in making things like ETI mandatory—around
where there are these disputes, and if a company in the UK signs
up to the ETI and publicises itself as signed up to the ETI in
the UK and there is an allegation by workers overseas that those
standards are not being met overseas, then there could be something
in terms of trying to facilitate the access of those workers to
secure redress through the UK courts.
Mr Thomas: I do not think that
is an issue for the Ethical Trading Initiative as such, access
to the UK courts, and where there are particular allegations that
a particular NGO has or a particular trade union has about standards,
it is for them to take their concerns to the ETI secretariat and
see if through the ETI scheme some of those tensions and discussions
could be taken forward. As I say, I come back to what the role
of the UK Government should be and that is to try and catalyse
a forum where those discussions take place and we are doing that
through the funding that we give to the Ethical Trading Initiative.
There are obviously a whole variety of other international fora
in which discussions about workers' standards can take place through
conversations at the ILO. We have a series of other ways in which
we try and fund improvements in governance, where we try and create
a stronger civil society, a stronger free media, stronger trade
unions so that there are those other accountability mechanisms
in place and available to those organisations who might be part
of ETI who might feel they cannot get redress, cannot get their
issues resolved. There may be other ways in country or in other
international fora in which they could get their concerns aired
and resolved. Again, I come back to the point I do not think it
is for the British Government to be, if you like, the last point
of reference for people who have particular concerns about what
is going on through the Ethical Trading Initiative: that has to
be the secretariat. Our role is to try and catalyse the debate
and that is what we are doing by funding the ETI.
Q315 Hugh Bayley: The impact that
fair trade has on raising the incomes of the poor seems to us
from this inquiry to be patchy. The TUC point out that some of
the services which are traditionally provided by the state such
as schools and health clinics can be undermined by a Fairtrade
dividend being used to provide these services, or at least it
leaves without services those people who are unable to become
Fairtrade producers because the products they produce are not
amenable to Fairtrade regimes. My question is this: your department
is putting an increasing amount of money into strengthening fair
trade which is something that generally we would welcome because
where it reaches poor people it has a real effect, but what analysis
has the Department undertaken about how widespread the effect
is and how you compensate people who are not involved in fair
trade initiatives in the sense of ensuring that equal opportunities
through health education and other basic needs are there?
Mr Thomas: One of the elements
of the conversation that we had with the Fairtrade Foundation
was around this whole question of impact assessment, and one of
the further conversations that is going to take place at official
level is around the detail of what impact assessment has taken
place already independently by the Fairtrade Foundation and what
further impact assessment might be necessary. Certainly, before
we make a decision about funding we will want to have greater
confidence about the quality of the impact assessment that has
been done or that is available to us as a department, about not
only the work of the Foundation—because I would not want
to give the impression that it is not doing good work, I think
it is—but we also want to have a sense of what other initiatives
are being done as well so that we have got a full range of information
to help us make an informed choice about further resources.
Q316 Hugh Bayley: I do not know whether
you or your officials are able to comment on the sort of indicators
that are being used at the moment or that you would like to use
in the future to measure impact in terms of poverty alleviation.
Ms Kelly: In terms of fair trade
specifically?
Hugh Bayley: Yes. The public buy
these products because they believe it improves the quality of
life for poor producers in developing countries. What indicators
are used to determine whether it has that impact and what the
degree of impact is?
Ms Kelly: Some of our own assessment
that we have done when DFID sets up projects, a set of indicators
around income, access to healthcare and schools is put in place,
and when we have done some reviews of our support to fair trade
initiatives by the Fairtrade Foundation in the past it has actually
been quite difficult to collect that kind of information in terms
of actually this group of fair trade producers, their children
have access to these schools. One of the things we would like
to do with the Fairtrade Foundation and others is to have a discussion
about actually how you can collect that information when you are
just looking at one particular group of producers and also think
about those producers versus the others that you mentioned earlier
that do not have access to fair trade markets. That is an important
aspect of the actual impact assessment of fair trade. In terms
of the overall poverty assessment, a lot of DFID's work with small
producers and small farmers in developing countries anyway is
trying to take an approach that is more participatory, that actually
the farmers themselves assess this is what we see would be a sustainable
improvement to the quality of our lives, regular access to market
trading facilities is available and actually using those sorts
of indicators in projects.
Q317 Hugh Bayley: It seems to me
that impact measurement is quite an appropriate use of Government
funding and, as the Minister said earlier, enabling poor farmers
to develop their product to a point where it is attractive to
fair trade buyers is an appropriate use of Government money. I
think that point in comparison with subsidising development of
new product lines for retailers which they should be paying for
themselves, even if the Fairtrade Foundation does this work they
should be seeking to recover the costs from licences that they
themselves sell to suppliers.
Mr Thomas: If I can come back,
we think there is more to be done on impact assessment and that
is part of the conversation we are having. Whilst there has been
good progress in terms of financial sustainability, we think there
is more that is possible from the Fairtrade Foundation and that
is part of the mix of things that we continue to talk to Harriet
Lamb and her team about.
Q318 Mr Singh: DFID recognises that
there is a beginning of south-south trade in fair trade products
and, for example, Mexican consumers purchase fair trade Mexican
coffee. There must be a potential for enormous growth in those
markets but one of the problems is the cost of raising consumer
awareness and launching new products in a new market, and that
seems to be a huge stumbling block. What is DFID's attitude to
this trade—are you taking any positive steps to encourage
it—are there wider donor discussions in terms of how to
encourage that trade and how to grow it? Do you have a policy?
Mr Thomas: I would not say we
have a policy as such but we are obviously aware of the potential
for south-south fair trade. I believe this is one of the areas
where there might be potential for a large fund such as the Fairtrade
Foundation is proposing to perhaps start looking at that, but
I do not think it is for the Government specifically to be saying
you should do this or you should do that, it is for the various
initiatives that are out there to consider whether or not they
want to move into south-south fair trade or not. For us it is
a conversation about whether we should give continuing funding
or more money to any of the specific initiatives and, as I say,
I am sympathetic to that case and it is not a point where we have
concluded our discussion in that area.
Q319 Mr Singh: We have many British
companies trading in the south and doing business in the south;
is there any Government advice to them in terms of fair trade?
Mr Thomas: There are a number
of initiatives. There is what the Fairtrade Foundation are doing
in terms of Fairtrade products and there is then, as I have said,
the work that a number of other initiatives are doing to try and
mainstream fair and ethical standards across supply chains, and
that potentially has reach into benefit for the south-south trade
as well. In that indirect way, therefore, there is potentially
a lot of things that could be done and are happening already.
2 International Labour Organisation. Back
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