One of the highlights of the parliamentary reception is the opportunity for MPs to hear directly from producers, mirroring what we aim to do with the Fairtrade Fortnight producer tour up and down the country. This year, we had hoped to be joined by Ivorian cocoa producers, Rosine and Leocadie, but as many Fairtrade supporters will know, their visa applications were refused – an issue that we are now following up with the Home Office. However, we were absolutely delighted that we were able to have Awa Traoré with us, Director of CAYAT Co-operative, who some may have met last October at the commercial and supporter conferences. Awa spoke from the heart about what it means to be a cocoa farmer, particularly as a female producer with all the added expectations of unpaid care work. At the end of the event guests were treated to some Fairtrade chocolate cake and given a chocolate coin (courtesy of Divine Chocolate), a symbolic reminder of how much a living income is estimated to be for a cocoa producer in Côte D’Ivoire. Only £1.86 a day – such a small sum and such a scandal that this seems so far out of reach.

Find out more about our living income campaign >>

We had a brilliant turnout at the event – which is testament to the hard work of campaigners up and down the country engaging with MPs at the local level. This year we had 75 MPs attend in person, a number of Lords, and a larger number represented by their office staff. We think that we also had every political party represented – including from the new Independent Group! We also know that an even more MPs have been involved in constituency events – bake sales, coffee mornings, school visits – and we’ve been hugely encouraged by all the support that has been shown for Fairtrade and the new campaign on social media and in local papers, from Totnes to Ilkley.

The challenge for us now, is to sustain the campaign, and to build on this initial enthusiasm and energy to see the change delivered that is so desperately needed in the chocolate industry. In our report we call for the UK Government to take a lead in bringing the industry and other government’s from major chocolate consuming countries together to commit to enabling living incomes for cocoa farmers. We’d also like to see more UK aid being spent on programmes to help cocoa farmers and see changes to regulation to ensure change across the whole industry.

The intention, after Easter, is to hold a further event for MPs when they can learn in more depth about these campaign asks, and we also hope to follow that up with a parliamentary debate on living incomes in cocoa. In the meantime, MPs are also taking the campaign forward in other ways – it was fantastic to hear Stuart McDonald asking the Trade Secretary about his support for the campaign in oral questions, and to hear Kirstene Hair also raise Fairtrade Fortnight with Leader of the House, Andrea Leadsom. A number of MPs have also submitted written questions to the government on the campaign, so a big thank you to Stephen Doughty, Jim Shannon, Stephen Morgan, Alex Sobel and Frank Field. If you think that your local MP might also be keen to ask further questions about the campaign, then do let us know!

Another way that MPs are showing their support for the campaign is via ‘Early Day Motions’ (EDM), which is a kind of parliamentary petition. They aren’t the perfect tool as not all MPs are keen on signing them, but they are a way to build momentum and demonstrate the level of interest in a campaign to the government. There are currently two EDMs that have been tabled on the campaign, EDM 2229 tabled by Christine Jardine and more recently EDM 2280 tabled by John Grogan, and other MPs can support by adding their names to one or both of these motions.  

This is just the start of the campaign, but thank you to everyone who has already signed the petition and raised the issue of exploitation in the cocoa industry with their local MP. Do continue to share that petition and to engage on the campaign. It may seem like Brexit is dominating everything at the moment (it is!), but it is still possible to cut through on other issues, and we are looking forward to all the future conversations with government on living incomes in cocoa, backed up by all this amazing support.

Sign to take exploitation out of our chocolate >>

* Will has subsequently had to step back from the APPG role due to his Ministerial promotion. A big thanks to Will for all that he has contributed to Fairtrade’s work in parliament!

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The post Fairtrade’s Living Income Campaign in Parliament appeared first on Fairtrade Foundation.

A common complaint from business is that “first mover disadvantage” can make it hard for individual companies to take action to tackle low incomes and wages on their own, especially in a value chain like cocoa where competition is high. So, if companies in supply chains work together to pay farmers and workers living incomes and wages it could make a difference to millions in some of the world’s poorest countries. But is competition law a barrier that prevents such joint action?

The Fairtrade Foundation has been researching options for encouraging a more favourable regulatory environment for sustainability initiatives in the grocery sector. As part of this work, we wanted to better understand the impact that competition law was having on the ability of businesses to collaborate together to tackle sustainability issues, especially those aimed at tackling low incomes and wages.

Through a series of interviews with stakeholders including major brands and retailers, we gathered evidence of the attitudes of market actors towards the issue.

The key finding of the research was the near-unanimous message that competition law is perceived to be a barrier to tackling low farm-gate prices.

In January, the Fairtrade Foundation was pleased to host a roundtable discussion bringing together retailers and brands, government, legal experts, and representatives from academia and NGOs, to reflect on the research findings and discuss possible ways forward.

Participants brought their own examples to echo those highlighted in the report. All the examples shared had fallen foul of competition law – even though these were not intended to benefit companies at the expense of the consumer. Examples raised included:

• Modern slavery in the Thai seafood supply chain: there had been calls for a collective boycott of these suppliers from UK companies but a collective boycott would have been considered anti-competitive (with some exceptions for public health risks etc.)
• UK dairy farmers: in a well-reported historical case, companies had sought to bring about price improvements for dairy farmers. This had, however, involved sharing sensitive information about price. Although the Office of Fair Trading (OFT) agreed that the intent wasn’t to benefit retailers it was found to be anti-competitive – and retailers were fined around £50m.
• Chicken welfare: a collaboration to improve the welfare of chickens in the Netherlands was prohibited. The regulator said it would lead to an increased producer price and therefore increased consumer price as well. A UK retailer said that this case was used in staff training on competition law as an example of the caution required in collaborative working.

Government Action

Participants agreed on the need for competition authorities to offer greater clarity on what they would and wouldn’t allow within sustainability collaborations. Discussion was in line with the recommendation from our research, for the UK’s Competition and Markets Authority (CMA) to issue clearer communications to companies and retailers on how businesses can collaborate for sustainability purposes, and in order to address low farm-gate prices in a manner that would be consistent with competition law. Specifically, this would mean providing guidance or policies that would clarify the application of the prohibition and the exemption criteria under Chapter 1 of the Competition Act 1998 and Article 101 of the Treaty on Functioning of the European Union.

Fairtrade has welcomed the opportunity for dialogue directly with the CMA at several points during our research. Our impression from these conversations is that the regulator does not want to stand in the way of sustainability collaborations and understands the concerns. There are also options for specific initiatives to seek approval from the regulator. The CMA have noted their willingness to consider issuing a ‘short form opinion’ if presented with a proposal for a specific collaborative initiative aimed at addressing low farm-gate prices, for example on cocoa.

At the same time, the CMA has indicated a number of constraints linked to their mandate regarding the provision of general guidance. In a letter to the Fairtrade Foundation in June 2018, a spokesperson stated that the CMA: “recognises the concerns you have raised over supply chains and supports the government’s action to address poor practices which could harm their sustainability and the environment” but continued, ”the legal framework within which the CMA operates is set for us by government and does not allow such factors (sustainability of supply chains) to drive our decision making (…) it is very unlikely that the CMA will issue specific guidance on how cross-business initiatives for sustainability purposes would be assessed under competition law (…) it will remain the case that it is up to individual businesses to assess whether their actions comply with the law.”

So there is an impasse here. Businesses and sustainability organisations are feeling constrained and calling for greater clarity from the regulator, but the regulator is unable or unwilling to offer general guidance. In the absence of clear guidance, and where the existing ‘case law’ is not encouraging, the tendency is of a ‘chilling effect’, a barrier to important initiatives aimed at improving wages and conditions moving forward.

A convenient excuse for inaction?

But also raised by those present at the roundtable was the fear that competition law is also used by business as a convenient excuse for inaction, and that businesses are unnecessarily risk averse in this area.

Stories were shared of lawyers at industry forum discussions shutting down even the suggestion of a discussion about low farm-gate prices, at times when these would not come close to commercially sensitive areas. A legal expert present at our discussion expressed their deep frustration at what they felt were overly cautious responses. They argued that the ‘toxic shock’ around anti-trust laws isn’t warranted, not least because participants in sustainability discussions are not going to be the involved in setting prices for consumers in their respective companies.

So it was argued that instead of asking lawyers ‘can we do this?’ – to which the answer is usually a cautious ‘no!’ – we need to be asking lawyers ‘how can we do this?’ If we see a need to work together on the challenges of low income and prices, we need to set our legal advisers the challenge of how to structure such work in a safe and legal manner.

What’s next?

So going forward, Fairtrade is planning to work with legal experts and NGOs in Europe who are looking at how stakeholders could discuss collective action to address farm gate prices in a way that is compliant with competition law as it currently is. We will also reflect on whether we, or a group of stakeholders, can bring a specific initiative focused on cocoa and living incomes before the CMA in the UK context.

Even if business and sustainability actors should be braver, we still need to challenge regulators to provide more support in finding solutions. Competition law is rightly designed to protect consumers from price-fixing and other practices that can harm consumers. However, unless farmers and workers receive higher incomes and wages, the medium to long term supply of commodities such as cocoa and bananas will be put at risk by loss of labour supply and the worsening impacts of climate change – and that’s not in the consumer interest.

Political support will also be needed. Here there are some early signs that politicians are interested in taking action. In April 2019, the European Parliament´s agriculture committee backed an amendment to new regulations for agricultural markets, enabling easier collaboration in order to work with higher standards for sustainability, especially for environment and animal welfare. Specifically, the amendment waives vertical initiatives for sustainability, in certain cases, from competition law (Art 101(1) TFEU – see below for further information).

There are few issues more complicated and complex than competition law (as we have discovered during the course of this research!) but the evidence is clear that the current constraints are blocking progress in achieving fair wages and incomes for some of the poorest people in the world.

Businesses and sustainability initiatives need to be braver in proposing ways forward but politicians and regulators need to be brave too, setting in place policy frameworks that don’t simply drive down prices for the short term, but back the fair and sustainable sourcing that is needed for the future.

We would like to acknowledge with thanks the support of the Esmee Fairbairn Foundation who sponsored this roundtable and our recent research into competition law and sustainability.

Further reading

• Amendment proposed by MEP Jan Huitema (ALDE, NL) and MEP Fredrick Federley (ALDE, SE), AGRI committee session 1 April 2019: “Article 101(1) TFEU shall not apply to vertical agreements, decisions and concerted practices relating to the products referred to in Article 1(2) aiming to apply environmental, animal health or animal welfare standards higher than those mandatory under EU or national legislation, provided that the advantages for the public interest that they bring about outweigh the disadvantages as regards consumers and provided that they only impose the restrictions indispensable to the attainment of their objective”. Read more
• In 2017 we published another report, Building sustainable supply chains through business collaboration – exploring the implications of competition law, which outlined the potential consumer benefits that could be gained from collaboration between businesses for sustainability purposes. The study considered a pre-competitive hypothetical collaborative sustainability initiative in the British retail market for fresh pineapples, and made the case that this initiative had a “reasonable case” for competition law-compliance. 

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The post Competition Law Fears – The Hidden Barrier to Living Income appeared first on Fairtrade Foundation.

Over in the House of Lords, the government has faced a series of defeats on its Trade Bill. This is the Bill designed to govern the process of “rolling-over” existing EU deals – some of which, like the UK-Chile agreement, have been signed already without the legislation in place!  Fairtrade campaigners have argued for some time that this Bill should be amended to deal with future trade deals too – the UK government is hoping to start trade negotiations from ‘Brexit Day’ but hasn’t brought forward any legislation to cover this new power.

Among other things, an amendment tabled by Lord Stevenson with wider cross-party support, requiring parliament to vote on negotiating mandates, and to approve final trade deals prior to ratification, was passed 215 votes for and 168 against. This is great news for the trade democracy campaign and a big thank you to the 16,000 Fairtrade supporters who signed our petition on this back in the summer. Our hope is that momentum will now build for the government to accept this amendment once it returns to the Commons in the next few weeks.

No-Deal Tariffs

Last week, the government published its no-deal tariff plans – these are the rates of import duty that would apply in the event of no-deal between the UK and the EU.

As a reminder, this is tax that is paid by UK importers, and it is neither a direct cost to developing country exporters, nor directly related to the retail price paid by UK consumers. However, the amount of import duty levied does have huge implications for market access. If you are a UK retailer deciding where you should source your bananas – then the amount of import duty you will have to pay, which may vary from country to country, will feed into your decision-making process.

If a deal is approved by parliament, then last week’s published plans will not apply and the UK government will have a much longer period to consult on any future tariffs, and to design a new trade policy, hopefully through a participatory and inclusive process. However given the possibility of no-deal, businesses have been crying out for the proposed schedule so that they can plan in any additional costs. UK producers and developing countries too, have been watching eagle-eyed in order to understand how their market access might be affected.

As another reminder, under existing EU arrangements:

• The Least Developed Countries (LDCs), such as Ethiopia, have duty-free, quota-free access (i.e. 0% tariffs). A broader set of developing countries also qualify for reduced tariffs through the EU’s unilateral preference scheme.
• Other African, Caribbean and Pacific (ACP) countries also have duty-free, quota-free access via Economic Partnership Agreements (EPAs). These countries include Ghana, South Africa and the Dominican Republic. The difference is that these agreements are reciprocal and require those countries to liberalise and reduce their own tariffs over time.
• A wider set of developing countries have reduced tariffs, and often zero tariffs, as a result of other Free Trade Agreements (FTAs) which they have signed with the EU. For example, Chile, Panama and Colombia.

Fairtrade exporters are affected by all of these deals – from flower producers in Kenya and coffee growers in Rwanda, to banana producers in Ecuador and sugar producers in Fiji.

So what were we looking out for in the no-deal tariff proposals?

1. Preference Erosion – the value of preferential deals for developing countries is relative rather than absolute. Lower tariffs provide an incentive for UK importers to source from those countries, but if everyone has the same rate, then developing countries could lose out to competitor countries who can cut costs in other ways. Historically, this has been a particular problem in the banana trade where Caribbean exporters have struggled to compete with multi-national corporations operating out of neighbouring Latin American countries. Closer to home, it has been a recent challenge for developing country cane sugar producers who have lost out to EU beet sugar producers.

2. Maintaining Existing Preferences – there is still a big risk that some developing countries might initially lose their market access through a no-deal Brexit. This is because some of the bilateral deals which grant preferential rates, often at zero, are not yet ready for ‘roll-over’. And you can understand why from a developing country perspective. Some of those governments may want to wait and see what happens over the coming weeks and will resist signing new deals under pressure. The UK has not yet signed roll-over deals with:  

• CARIFORUM (Caribbean countries) – important for bananas and sugar
• SADC, including South Africa – important for sugar
• Ghana and Côte D’Ivoire – important for bananas and cocoa butter and paste

3. Tariff Escalation – NGOs like Traidcraft and the Fairtrade Foundation have long highlighted the issue of tariff escalation. Whilst it’s important to recognise that zero tariffs is the existing norm for a lot of developing country imports, including manufactured and finished products, like processed cocoa and roasted coffee, this preference is all too often granted in exchange for something else. Our argument has been that the UK and EU’s unilateral offer should be more generous, especially in relation to value-added products.

So what did we end up with? Unsurprisingly the no-deal tariff plans were a bit of a mixed bag but we are reassured that the UK government has tried to integrate development concerns into its calculations. That being said, (and as we said last week), this is no way to make trade policy. We would hope for much more consultation and participation going forward, as well as worked through impact assessments, things that should be achievable within an implementation period. For now, things that we noted:

• The UK government has retained an import tariff on bananas. On the one hand this is a positive, as it is an attempt to avoid preference erosion affecting the smaller Caribbean producers. On the other hand, it is risky in the short term, given that a good number of relevant roll-over deals have not been signed.
• No more tariffs on cut flowers. Another uncertainty had been the future UK-Kenya relationship. Rather than doing a bilateral deal with Kenya, the UK has attempted to address key sectors, like cut flowers, by rolling them into its ‘zero tariff’ offer. This means that Kenyan roses will be no more expensive to import than Dutch roses, but neither will they be any cheaper.
• Development gain from sugar? The EU sugar regime was recently reformed with the abolition of a quota on EU beet production, impacting negatively on developing countries. The Fairtrade Foundation has argued that there should be a rethink of sugar policy and early indications from the no-deal tariff schedule are positive, with an attempt to rebalance cane and beet supply through tariffs and a new quota. However, as with bananas, there is a short-term risk to sugar producers if the CARIFORUM and SADC deals aren’t agreed in time.
• Integrated Supply Chains protected. For the most part, complex products which require inputs from a number of countries, including other EU member states, will remain tariff-free when entering the UK. Fairtrade products manufactured in other EU countries, products like chocolate and roasted coffee, will not face any new tariffs, so those UK Fairtrade companies that source in this way can breathe a sigh of relief. There are of course exceptions to that rule – those tariffs that have been set out by the UK government, would apply equally to EU imports (where they haven’t done before). And of course no-deal, means that the EU is free to levy tariffs on imports from the UK, potentially hitting domestic producers.
• Preference erosion hard to calculate. The wider impact of preference erosion for developing countries, beyond those products with which we are familiar at Fairtrade, is hard to ascertain. However, one has to assume that there would be a knock-on effect from the proposed unilateral liberalisation but this is hard to analyse without considering the different dynamics sector by sector. One sector to watch is wine (much debated in the tabloid press!) where preferential deals currently enjoyed by countries with EU deals like Chile and South Africa, may face more competition from places like Australia and New Zealand as a result of tariff abolition.

We all now wait with baited breath to see what will happen over the next two weeks – for whilst MPs have voted to rule out ‘no-deal’, this is not legally binding and we are still due to leave the European Union in nine days. All the talk is of an extension but with nothing yet agreed between the UK and EU, the clock is ticking.

Image by European Parliament from EU – May at the EP, CC BY 2.0, Link

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The post Brexit Update: Trade Democracy and No-Deal Tariffs appeared first on Fairtrade Foundation.

Fairtrade supporters know that we have been keen followers of the Brexit process. Our trading relationship with the EU and with the rest of the world is at stake, and so whilst the debate can often feel quite distant from our everyday lives, decisions that government and parliament make over the coming weeks and months, will have a real impact.

Unfortunately no one has really been talking about the impact on developing country farmers and producers. Debates have touched on UK jobs, consequences for EU citizens living in the UK, and the potential implications of Brexit for peace on the island of Ireland. All of these things matter hugely. But we also want to make sure that the people who produce much of the food that we eat are not forgotten. Trade with developing countries is sometimes discussed as an alternative to trade with the EU. But in reality, whether we’re talking about flowers, coffee or chocolate, things are much more intertwined.

Earlier this year we published a briefing which outlines some of the risks of a ‘no-deal’ Brexit (pdf) which include:

• A depreciation in Sterling which could hit Fairtrade companies and producers hard. Traidcraft have estimated that after the 2016 referendum, the fall in the pound cost the business around £350,000.
• Market access in key sectors like flowers or chocolate may be lost as governments miss deadlines for ‘rolling over’ existing EU deals.
• Trade in fresh produce like bananas and flowers may be disrupted by additional administration and checks at ports. The increased cost of trade could be passed down to producers.
• Pressure for unilateral tariff reduction in a no-deal scenario could undermine the preferential market access that many developing countries receive through schemes like ‘Everything But Arms’ (EBA) which grants duty-free, quota-free access to the Least Developed Countries (LDCs).
• Pressure to reduce environmental and labour standards could undermine global efforts to reach the Sustainable Development Goals (SDGs).

We continue to urge all involved in the political decision-making to avoid this scenario which could disrupt so many people’s lives and livelihoods, both in the UK and abroad.

With so much uncertainty about, it’s important that we prepare for all eventualities and don’t drop the ball on something like the Trade Bill, which comes back to the House of Lords for debate this week. Over 15,000 Fairtrade campaigners signed a petition over the summer, calling for a more transparent and participatory process to govern the agreement of any new trade deals.

Whilst we don’t yet know where debates on the Withdrawal Agreement will end up, the government could start negotiating new deals in April without any requirement for parliamentary debate or votes. From our perspective, this means less opportunity for MPs to ‘ask the development questions’, and more likelihood that trade deals will completely ignore the needs of developing country farmers and workers. The need for more trade democracy has been highlighted far and wide, including by the International Trade Select Committee, which published a report on the issue over Christmas.

A range of positive amendments have now been tabled in the House of Lords and it is our hope that we may see these improvements supported and agreed – through this current committee stage, and when it comes to key votes later this month. Thanks to everyone who has been with us on this journey and do look out for more ways in which you can support our campaigns – sometimes it’s very tempting to switch off the radio at mention of the dreaded ‘B’ word. But it’s important for everyone who cares about the future of trade and the future of Fairtrade, to stay engaged!

Trade Democracy Update: Our campaign for greater trade democracy took a step forward this week, with the House of Lords voting for the government to bring back full proposals on the process for agreeing future trade deals. Without these proposals, the Trade Bill won’t be able to progress to its next stage. The debate on the Bill continues for now and we await the government’s response!

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