Imagine a boardgame called Globalization...; The object of the game is to
amass as much wealth as possible at the expense of the "opponent".
There are two players; one player we will refer to as G8 and the other as Rest of the World.
The G8 player sets the rules of the game in his favor, and is allowed to "cheat" when the rules are not working to his advantage; The Rest of the World has to strictly adhere to those rules even if they are unfair and biased in favor of
the G8 player. The motto of the G8 to the rest of the world is "
do as I say, not as I do..."
The pawns of the G8 are given tremendous power over the pawns of the Rest of
the world; they are allowed to move freely accross the globe, while the pawns
of the rest of the world
are severely restricted in their freedom of movement. The pawns of the G8 are allocated a highly valued moneraty currency of exchange
and are paid high wages for their labor; The pawns of the Rest of the world are allocated a worthless monetary currency of exchange - whose nominal value is set by the G8 player - and are paid "slave" wages for
their labor.
The G8 player use powerful corporate and commercial pawns called MULTINATIONAL CORPORATIONS to exploit both natural
resources and human labor in the rest of the world.
They use a
tactic - which they call "delocalization" - to tranfer technology,
machinery and capital
practices and then sell them back in high-wage countries,
pocketing the difference.
According to the rules of the game, machinery, technology, capital, goods, services and information are all allowed to move freely accross
the globe. However, humans from the Rest of the Word ( with the exception of the favored human pawns from the G8 countries) are severely restricted
and/or banned in their migration accross the globe.
The G8 player has a set of powerful economic, financial
and commercial pawns called IMF, WORLD BANK, WTO to design, implement and inforce the rules of the games upon the Rest of the world.
In the event that these pawns are unable to enforce the rules of
the game, powerful armed pawns are called upon to enforce the
rules of the game upon the rest of the world.
The stage is set for the globalization of poverty...
Wednesday, September 27, 2006
MAX HAVELAAR FAIR TRADE CLOTHING: HOW "ETHICAL" IS FAIR TRADE CLOTHING...?
"Ethical" Fair Trade clothing
A number of Fair Trade garment companies targeting a rising number of environmentally and socially conscious consumers in the West are selling “clean” clothes– i.e, clothes supposedly produced in an environmentally sustainable manner and in a non-exploitative social manner- and labeling and marketing their garments as “organic” “ethical", "alternative" or "Fair Trade”.
As far as the environmental aspect of cotton production is concerned, companies dealing with organic cotton are indeed making a significant and positive environmental impact - as clearly documented by a number of research - by helping farmers switch from the extremely environmentally damaging conventional cotton sector to the more environmentally sustainable organic cotton sector.
“Fair” price?
What is not so clear, however, is the so-called “Fair Trade” aspect of the venture. In fact, companies that market their garments under the “Fair Trade” label claim that the farmers from whom the cotton (both organic and conventional) has been purchased have been paid a “fair” price. One such company, MAX HAVELAAR, has recently ( 2005) launched a line of “fairly” produced clothing bearing the “Fair Trade” label, although the cotton used is not organic. They claim that the West African cotton farmers from whom they purchase the cotton have been paid a “fair” price. Their definition of a “fair” price is a price which is around 20% above the “market” rate. In this case, the “fair” trade price paid by Max Havelaar to West African small-scale cotton farmers from whom they purchase the cotton is Euro 0,36/kg. The normal world market price paid to these same farmers was Euro 0,32/kg at that time. Thus, the difference or Fair Trade “premium” is only Euro 0,04/kg.
I have written to Max Havelaar and to other "ethical" Fair Trade clothing companies to inquire about this venture. Please find below a copy of my written inquiry and their responses. I welcome your comments. Thank you.
TO PAN UK: in charge of cotton project
SIMON FERRIGNO
simonferrigno@pan-uk.org
Copy: info@cleanclothes.org
IFOAM ( b.geier@ifoam.org)
FLO
MAX HAVELAAR
Sustainablecotton.org
Organic exchange: terry@organicexchange.org
Copy: m.v.esch@boweevil.nl
Re: “ Clean” clothes
A number of garment companies targeting a rising number of environmentally and socially conscious consumers in the West are selling “clean” clothes– i.e, clothes supposedly produced in an environmentally sustainable manner and in a non-exploitative social manner- and labeling and marketing their garments as “organic” “ethical", "alternative" or "Fair Trade”.
As far as the environmental aspect of cotton production is concerned, companies dealing with organic cotton are indeed making a significant and positive environmental impact - as clearly documented by a number of research - by helping farmers switch from the extremely environmentally damaging conventional cotton sector to the more environmentally sustainable organic cotton sector.
“Fair” price?
What is not so clear, however, is the so-called “Fair Trade” aspect of the venture. In fact, companies that market their garments under the “Fair Trade” label claim that the farmers from whom the cotton (both organic and conventional) has been purchased have been paid a “fair” price. One such company, MAX HAVELAAR, has recently ( this year) launched a line of “fairly” produced clothing bearing the “Fair Trade” label, although the cotton used is not organic. They claim that the West African cotton farmers from whom they purchase the cotton have been paid a “fair” price. Their definition of a “fair” price is a price which is around 20% above the “market” rate. In this case, the “fair” trade price paid by Max Havelaar to West African small-scale cotton farmers from whom they purchase the cotton is Euro 0,36/kg. The normal world market price paid to these same farmers was Euro 0,32/kg at that time. Thus, the difference or Fair Trade “premium” is only Euro 0,04/kg.
Processing of cotton and manufacturing of garments?
Furthermore, Max Havelaar and other companies marketing and selling “Fair Trade” labeled garments do not provide any information on where and how the garments were made (i.e. the processing stages relating to the production of fabrics and garments ). Although the Fair Trade movement (FLO) has (recently) defined a set of Standards for the production of garments, there is no mention or information publicly available on the actual implementation, enforcement and independent monitoring of these standards. Thus, consumers are made to believe that garments labeled as “Fair Trade” have been made according to Fair Trade non-exploitative standards, which is not always the case. It is highly dishonest, morally repressible and fraudulent to market and sell garments as “Fair Trade” simply on account of the so-called “fair” price paid to cotton farmers, and then use sweatshop practices in the processing stages of the cotton and the manufacture the garments!
In view of the above, the following questions arise:
1) Does the so-called “fair” price paid to small-scale cotton farmers in sub-Saharan Africa by Max Havelaar and other such companies labeling and marketing “Fair Trade” garments REALLY contribute to the economic and social welfare of the small-scale cotton farmers, as they claim? (no quantitative data available.)
2) The “market” rate which is used by Max Havelaar as a reference in setting the “fair” price paid to cotton farmers is distorted by global cotton subsidies, and as such is not an appropriate parameter to determine or set the so-called “fair” price. A “fair” price should rather be set based on the actual cost of production of the farmers, taking into account the realities of the global Terms of Trade faced by the farmers.
3) Under this scheme, who benefits the most? The farmer who is paid a Fair Trade “premium” of Euro 0,04 cents/kg of seed cotton or Max Havelaar who labels and markets the garments at a much greater price in proportion to the “fair trade premium” paid to the farmers? What percentage does the “fair” price paid to cotton farmers represent in the final retail price of Fair Trade labeled garments sold to consumers in the West?
4) Simply buying the raw cotton from African cotton farmers and shipping it abroad for further processing (beyond ginning, and to a limited extent spinning as is currently done in sub-Saharan Africa), as is the case with Max Havelaar in Mali ( only ginning done locally- not organic), Boweevil in Uganda ( ginning and spinning to a limited extent) and Biore in Tanzania ( ginning only), fails to add-value locally to the cotton and as such fails to create much needed local employment and generate income along the supply chain and create economic growth within the sector – thus failing to “fight” poverty, contrary to claims made by these companies.
5) Fair Trade labels tend to limit their considerations strictly to the so-called “fair” price they pay the farmers and pay little attention in practice to the way the cotton is further processed along the supply chain ( i.e. spinning, weaving, knitting, dyeing & printing, garment manufacturing, etc.) Although Max Havelaar says that Fair Trade Standards have been recently defined for the processing stages of the cotton by FLO, no mechanisms have been put in place to effectively monitor and enforce these standards, as is reflected in the Clean Clothes Campaign overview presentation and remarks of “ethical” companies. ( see www.cleanclothescampaign.org).
6) Finally, as noted above, Fair Trade labeled garments do not necessarily integrate the environmental or ecological standards within their supply chains. Thus, while pretending to help the farmers, they do not help farmers improve the environment in which they work, by failing to help the farmers adopt organic sustainable practices in farming methods.
7) Similarly, “organic” labeled textiles and garments fail to take into account the Fair Trade non-exploitative social aspect of production. Thus, while improving farming methods, they do not necessarily improve the working conditions of those involved in the processing stages of the cotton and the manufacture of textiles and garments.
Are there any companies that respect both the ecological standards of organic cotton production as well as the non-exploitative Fair Trade social standards throughout their entire supply chain in the production of garments and textiles in sub-Saharan Africa?
I have written to Max Havelaar several months ago to get feedback on these issues, but have been met by utmost silence…Boweevil also admits that it processes only 30-35% of its organic cotton locally in Uganda and claims that it is processing its garments according to “Fair Trade” Standards, although it fails to provide any information on how and where the garments are made, and to describe what mechanisms are in place to effectively monitor and enforce Fair Trade Standards in the processing stages of the cotton. Failure to reveal this information - which ought to be made widely and openly available to environmentally and socially global whom they target and sell their garments to -would tend to indicate that these companies have a lot to hide about their “clean” activities. Hopefully you can shed some light on these issues…
Response from Pan-UK
Thank you very much for your very interesting and well-informed email. We are aware of all the issues you have raised, and are considering all of them. It is true that the multiplication of “eco” or “Fair” standards and labels may sometimes lead to confusion for the consumer. This is one of our main concerns. It is also true that a lot of work still need to be done with both Organic and Fairtrade textiles, which should be viewed as good (if not perfect) steps in the right direction.
I will assess your comments and discuss them with the direction, and get back to you.
Best Wishes
Damien Sanfilippo
Cotton Project Officer
Pesticide Action Network UK
Development House
56-64 Leonard Street
London
EC2A 4JX
www.pan-uk.org
Tel: +44 20 7065 0905/Fax: +44 20 7065 0907
Direct: +44 20 7065 0915
I have not forgotten about your letter expressing your concerns about fairtrade cotton. I am preparing a response to the issues you have raised. However, I would like to discuss some of those with the fairtrade organizations, before responding. I will meet with Fairtrade Foundation (UK) soon, and I am hoping to discuss those issues with max Havelaar France as well in the near future.
I will then be able to respond to your letter. I am considering publishing your letter and our response in our newsletter, or on our website, providing that you agree of course. Our goal is to provide fair and balanced information to consumers, as it will benefit the market for organic cotton. I need to emphasize on the fact even though we do share some of your concerns to some degree, we support fairtrade cotton initiatives. We aim to collaborate with them, and we hope that they will consider our comments, in the interest of small-scale cotton farmers.
Thank you for your patience,
Best Wishes
Damien Sanfilippo
Cotton Project
Pesticide Action Network UK
Development House
56-64 Leonard Street
London
EC2A 4JX
www.pan-uk.org
Tel: +44 20 7065 0905/Fax: +44 20 7065 0907
Direct: +44 20 7065 0915
Response from Max Havelaar
Dear Mr. Tajdin
Enclosed you find the answers to your challenging questions. To our view there is no competition between organic and fair-trade-movements, neither one between Clean Clothes and Fair-Trade. We all have the same idea – more equality for developing countries – but we start from different positions and points of view. Max Havelaar Switzerland is in close contact with the responsible person of Clean Clothes in Switzerland . Let’s work together!
Kind regards
Regula Weber
---------------------------------------------
Regula Weber Engweiler
Marketing/ Kommunikation
Max Havelaar-Stiftung (Schweiz)
Hornbachstrasse 50
CH-8034 Zürich
Tel.: ++41 (0)44 389 84 73
Fax: ++41 (0)44 389 84 14
Mail: r.weber@maxhavelaar.ch
Web: www.maxhavelaar.ch
Arif Tajdin a écrit :
Date: Sat, 14 Jan 2006 11:51:21 +0100 (CET)
De: Arif Tajdin
Objet: "CLEAN" CLOTHES...?
À: simonferrigno@pan-uk.org
Cc: info@cleanclothes.org, b.geier@ifoam.org, terry@organicexchange.org,
info@fairtrade.net
TO: PAN-UK
ATT: SIMON FERRIGNO ( in charge of cotton issues)
Mr. Ferrigno,
Re: “ Clean” clothes
A number of garment companies targeting a rising number of environmentally and socially conscious consumers in the West are selling “clean” clothes– i.e, clothes supposedly produced in an environmentally sustainable manner and in a non-exploitative social manner- and labeling and marketing their garments as “organic” “ethical", "alternative" or "Fair Trade”.
As far as the environmental aspect of cotton production is concerned, companies dealing with organic cotton are indeed making a significant and positive environmental impact - as clearly documented by a number of research - by helping farmers switch from the extremely environmentally damaging conventional cotton sector to the more environmentally sustainable organic cotton sector.
“Fair” price?
What is not so clear, however, is the so-called “Fair Trade” aspect of the venture. In fact, companies that market their garments under the “Fair Trade” label claim that the farmers from whom the cotton (both organic and conventional) has been purchased have been paid a “fair” price. One such company, MAX HAVELAAR, has recently ( this year) launched a line of “fairly” produced clothing bearing the “Fair Trade” label, although the cotton used is not organic. They claim that the West African cotton farmers from whom they purchase the cotton have been paid a “fair” price. Their definition of a “fair” price is a price which is around 20% above the “market” rate. In this case, the “fair” trade price paid by Max Havelaar to West African small-scale cotton farmers from whom they purchase the cotton is Euro 0,36/kg. The normal world market price paid to these same farmers was Euro 0,32/kg at that time. Thus, the difference or Fair Trade “premium” is only Euro 0,04/kg.
Answer
Information about the FT-prices paid by the producers clients (not MH is paying) you will find in the Fairtrade standards of FLO (www.fairtrade.net). The Fair-Trade-Price for cotton as well as for other products is fixed by FLO for a certain period (around two years). Every region (Africa, India ) has its own price. The price is counted bottom-up according to the costs of living in a region. The price is fair because it is counted bottom-up and because it is stable. If the world market price rises above the FT-Price, the buyers have to pay the higher price. Additionally there is also a Fair-Trade-Premium which goes to a special fund. Thus, the farmers have some extra money which is invested in better living and working conditions. For example wells, roads, medical treatment etc. So, the farmers get a stable price and the whole region can profit from the premium-projects.
Processing of cotton and manufacturing of garments?
Furthermore, Max Havelaar and other companies marketing and selling “Fair Trade” labeled garments do not provide any information on where and how the garments were made (i.e. the processing stages relating to the production of fabrics and garments ). Although the Fair Trade movement (FLO) has (recently) defined a set of Standards for the production of garments, there is no mention or information publicly available on the actual implementation, enforcement and independent monitoring of these standards.
Answer
There is no “standard for processed product situations” at the moment; but FLO is working on it. The overall aim of this project is to develop a standard that enables FLO to extend the impact of Fairtrade along the supply chain and to improve traceability of products in the chain. FLO expects to get stakeholders’ feedback during the next weeks on a first concept paper. The standard should be finished by the end of this year.
Max Havelaar Switzerland works with the FLO standard for fair-trade cotton. Furthermore we have our own monitoring system in order to control also the supply chain. The whole supply chain is controlled through external audits.
According to information published on FLO's website: "FLO guarantees that products sold anywhere in the world with a Fairtrade label marketed by a National Initiative conforms to Fairtrade Standards and contributes to the development of disadvantaged producers and workers."
Thus, consumers are made to believe that garments labeled as “Fair Trade” have been made according to Fair Trade non-exploitative standards, and " contributes to the development of disadvantaged producers and workers." However, there is no publicly available data to prove that claim. It would seem senseless ( if not dishonest ) to market and sell garments as “Fair Trade” simply on account of the so-called “fair” price paid to cotton farmers, and then use sweatshop or other exploitaive labor practices in the processing stages of the cotton and the manufacture the garments!
Answer
This is certainly not the case. Max Havelaar and FLO are well aware the process has to be controlled as well and we are working on this issue in order to consolidate the system.
In view of the above, the following questions arise:
1) Does the so-called “fair” price paid to small-scale cotton farmers in sub-Saharan Africa by Max Havelaar and other such companies labeling and marketing “Fair Trade” garments REALLY contribute to the economic and social welfare of the small-scale cotton farmers, as they claim? (no data available)
Yes, there is a contribution on two sides: The stable price is for the farmer, the fair-trade-premium is for projects. Furthermore the fair-trade-certification functions as a door to the European market. Take for example Senegal . Since they are fair-trade-certified they can sell their cotton to a big licencee in Switzerland . Since the cotton-project is new, we do not have impact stories on our website yet. But we know that in India f.e. they started first premium projects such as drinking water facilities.
2) The “market” rate which is used by Max Havelaar as a reference in setting the “fair” price paid to cotton farmers is distorted by global cotton subsidies, and as such is not an appropriate parameter to determine or set the so-called “fair” price. A “fair” price should rather be set based on the actual cost of production of the farmers, taking into account the realities of the global Terms of Trade faced by the farmers.
Answer
The price is calculated bottom-up and differs from country to country. You can check the actual minimum prices in the cotton-standards on www.fairtrade.net
3) Under this scheme, who benefits the most? The farmer who is paid a Fair Trade “premium” of Euro 0,04 cents/kg of seed cotton or Max Havelaar who labels and markets the garments at a much greater price in proportion to the “fair trade premium” paid to the farmers? What percentage does the “fair” price paid to cotton farmers represent in the final retail price of Fair Trade labeled garments sold to consumers in the West?
Answer
Max Havelaar does not market products. The final retail price is defined by our licencees, we can not influence the sales prices. The cost structure is similar to conventional imported products.
4) Simply buying the raw cotton from African cotton farmers and shipping it abroad for further processing (beyond ginning, and to a limited extent spinning as is currently done in sub-Saharan Africa), as is the case with Max Havelaar in Mali ( only ginning done locally- not organic), Boweevil in Uganda ( ginning and spinning to a limited extent) and Biore in Tanzania ( ginning only), fails to add-value locally to the cotton and as such fails to create much needed local employment and generate income along the supply chain and create economic growth within the sector – thus failing to “fight” poverty, contrary to claims made by these companies.
Answer
The complete supply chain of some of our partners is located in Africa (Marokko).
5) Fair Trade labels tend to limit their considerations strictly to the so-called “fair” price they pay the farmers and pay little attention in practice to the way the cotton is further processed along the supply chain ( i.e. spinning, weaving, knitting, dyeing & printing, garment manufacturing, etc.) Although Max Havelaar says that Fair Trade Standards have been recently defined for the processing stages of the cotton by FLO, no mechanisms have been put in place to effectively monitor and enforce these standards, as is reflected in the Clean Clothes Campaign overview presentation and remarks of “ethical” companies. ( see www.cleanclothescampaign.org).
Answer
Not true. See answer above.
6) Finally, as noted above, Fair Trade labeled garments do not necessarily integrate the environmental or ecological standards within their supply chains. Thus, while pretending to help the farmers, they do not help farmers improve the environment in which they work, by failing to help the farmers adopt organic sustainable practices in farming methods.
Answer
Some farmers are producing organic cotton and some conventional cotton. From the point of foreign aid it would not be a good point to restrict Fair-Trade to organic production since one would exclude many producers. The system wants to be open for all small farmers. However, the fair trade-standards and the criteria for the supply chain which takes SA 80000 as a reference include also ecological criteria. The farmers are assisted by promoting bodies.
7) Similarly, “organic” labeled textiles and garments fail to take into account the environmentally sustainable and the Fair Trade non-exploitative social aspect of production in the processing stages of the cotton. Thus, while improving farming methods, they do not necessarily improve the working conditions of those involved in the processing stages of the cotton and the manufacture of textiles and garments or the production methods themselves.
See answer above. The production chain is always controlled.
Are there any companies that respect both the ecological standards of organic cotton production as well as the non-exploitative Fair Trade social standards throughout their entire supply chain in the production of garments and textiles in sub-Saharan Africa ?
Answer
If you buy organic Max Havelaar-certified cotton you have both.
My response to Max Havelaar
Dear Mr. Weber,
Thank you for responding to my email dated 14 January with reference to the issue of “clean clothes”. I have noted down your answers and wish to briefly say the following.
It seems evident from your responses that the fair trade movement has yet to consolidate its action throughout the entire processing stages of the cotton supply chain in the production of textiles and garments to achieve a perfect balance between both the ecological aspects of (organic) cotton production and the social non-exploitative aspects relating to the processing stages of the cotton. However, I am happy to learn that Max Havelaar, FLO and other fair trade organizations are working towards achieving this end.
I. As far as the “fair” trade price of cotton is concerned:
I understand from your response that it is determined by FLO “bottom-up according to the costs of living in a region.”
According the FLO: "FLO guarantees that products sold anywhere in the world with a Fairtrade label marketed by a National Initiative conforms to Fairtrade Standards and contributes to the development of disadvantaged producers and workers."
However, it would be useful to evaluate the REAL impact this price has on improving the living standards of the small-scale cotton farmers in sub-Saharan Africa (SSA) using quantitative data. To my knowledge, there is no available quantitative statistical data to measure the real impact of the “fair” price vis-à-vis the cotton farmers, the cotton sector and the economies of the cotton producing nations in sub-Saharan Africa .
Finally, FLO should publish and make openly and publicly available the cost structure of the fair trade pricing mechanism along the entire supply chain so as to make the pricing process fully transparent. Furthermore, it would be useful to know what percentage the “fair” trade price paid to cotton farmers in SSA actually represents vis-à-vis the final retail price of the fair trade labeled garments sold to final consumers?
II. As far as the processing stages of cotton are concerned, you say:
You say:
There is no “standard for processed product situations” at the moment; but FLO is working on it. The overall aim of this project is to develop a standard that enables FLO to extend the impact of Fairtrade along the supply chain and to improve traceability of products in the chain. FLO expects to get stakeholders’ feedback during the next weeks on a first concept paper. The standard should be finished by the end of this year.
Max Havelaar Switzerland works with the FLO standard for fair-trade cotton. Furthermore we have our own monitoring system in order to control also the supply chain. The whole supply chain is controlled through external audits.
Unfortunately, Max Havelaar does not provide any information relating to the implementation, monitoring and enforcement of these external audits relating to the processing stages of the cotton along the entire supply chain. This information aught to be made publicly available to the public and to socially conscious consumers who purchase “clean” clothes.
Finally, you cite “Marokko” as an example of complete vertical-integration within the entire supply chain of cotton production in Africa: “The complete supply chain of some of our partners is located in Africa (Marokko).
Could you please tell me where I can get more information on “ Marokko”?.
My previous email and the following observations are not meant as criticism. They are only issues that I feel need to be raised and solutions found to if the Fair Trade movement is to effectively and successfully achieve its mission of combating poverty and helping the millions of small-scale farmers in sub-Saharan Africa and around the globe break free from the vicious (and ever-widening) cycle of poverty, misery and hunger.
However, I do not limit myself to pointing out the weaknesses within the system. I am also actively working at finding solutions. In fact, I have been conducting research on the collapse of both the cotton and the textile sector in sub-Saharan Africa . As you well know, the conventional cotton sector in SSA is near collapse mainly as a result of massive illegal cotton subsidies paid to cotton farmers in rich cotton producing nations and is seriously threatening the survival of both the cotton sector in SSA and the millions of farmers who rely on cotton farming for their livelihoods.
Structural over supply of cotton on the world market resulting from trade distorting cotton subsidies are driving down prices of conventional cotton on world markets, making it unprofitable for non-subsidized African farmers to grow conventional cotton, despite their absolute Comparative Advantage in growing cotton. As a direct result, the cotton sector in sub-Saharan Africa is near collapse and millions of small-scale cotton farmers throughout sub-Saharan Africa have been thrown deeper into poverty as they cannot sell their cotton on the world market.
Furthermore, the influx of cheap clothing from China and other high-volume/low-cost garment producing nations in the Far East coupled with the massive influx of cheap used clothing “dumped” across Africa over the last three decades have led the collapse of the entire textile sub-sector in SSA, further deepening the crisis within the entire sector. This has led to massive job losses within the entire textile sector, from cotton growing to garment manufacturing.
Finally, the expiry of the Multi Fiber Agreement (MFA) on 01 January 2005 and the expiry of the 3rd Country Clause of the African Growth and Opportunity Act (AGOA) in September 2007 is further threatening the future of the textile sector in SSA and the jobs of those employed within this industry.
Given the grim future prospects facing both the cotton sector and the textile industry in SSA, it is crucial and urgent to find and implement solutions to prevent the total collapse of these vital sectors.
I am presently working on a project to revive both the cotton and the textile sector in sub-Saharan Africa . Based on the findings and the evidence from organic cotton projects worldwide and in Africa, organic cotton production is proving to be an economically, socially and environmentally viable alternative to revive the cotton sector in sub-Saharan Africa . However, although organic cotton provides an economically viable and environmentally sustainable alternative for cotton farmers in Africa, efforts must be made to further process the organic cotton locally, from spinning yarn to weaving cloth to manufacturing garments, so as to create employment and generate income along the entire supply chain.
Processing the organic cotton locally would add-value to the cotton thus enabling African cotton producing and exporting nations to break free from the vicious cycle of cotton subsidies and from the dictates of the world market. Furthermore, adding value locally would create local employment and generate income throughout the local supply chain –from cotton growing to garment manufacturing – and enable African cotton producing nations to achieve self-sufficiency in garment production and consumption, thus saving much needed scarce foreign exchange currently being depleted to import (used) garments for local consumption. Thus, the production and local processing of organic cotton would revive both the cotton and the textile sector and positively reduce poverty among the local population.
I wish and aim to lay the foundation for the revival of both the cotton and the textile sector in sub-Saharan Africa through the development of a vertically-integrated economically viable, socially non-exploitative and environmentally sustainable textile and garment industry in sub-Saharan Africa- from organic cotton growing to garment manufacturing- for both local & regional consumption and export markets, while respecting both the ecological standards of production as well as the non-exploitative social standards set by the Fair Trade movement, thus reaching a perfect balance between ecological standards of organic production and Fair Trade standards throughout the supply chain in the production of garments and textiles. This would set a new standard and an example in the global textile industry and garments thus produced would find a ready local, regional and export market within the growing number of socially and environmentally conscious consumers worldwide.
Hopefully my observations will serve as constructive input for both the organic and the fair trade movement for the welfare of the cotton farmers and cotton producing nations in sub-Saharan Africa and throughout the world.
Regula Weber a écrit :
Dar Mr. Tajdin
Thanks for your response which I am going to forward to the communication department of FLO.
Kind regards
Regula Weber
----------------------------------------------
Regula Weber Engweiler
Marketing/ Kommunikation
Max Havelaar-Stiftung (Schweiz)
Hornbachstrasse 50
CH-8034 Zürich
Tel.: ++41 (0)44 389 84 73
Fax: ++41 (0)44 389 84 14
Mail: r.weber@maxhavelaar.ch
Web: www.maxhavelaar.ch
A number of Fair Trade garment companies targeting a rising number of environmentally and socially conscious consumers in the West are selling “clean” clothes– i.e, clothes supposedly produced in an environmentally sustainable manner and in a non-exploitative social manner- and labeling and marketing their garments as “organic” “ethical", "alternative" or "Fair Trade”.
As far as the environmental aspect of cotton production is concerned, companies dealing with organic cotton are indeed making a significant and positive environmental impact - as clearly documented by a number of research - by helping farmers switch from the extremely environmentally damaging conventional cotton sector to the more environmentally sustainable organic cotton sector.
“Fair” price?
What is not so clear, however, is the so-called “Fair Trade” aspect of the venture. In fact, companies that market their garments under the “Fair Trade” label claim that the farmers from whom the cotton (both organic and conventional) has been purchased have been paid a “fair” price. One such company, MAX HAVELAAR, has recently ( 2005) launched a line of “fairly” produced clothing bearing the “Fair Trade” label, although the cotton used is not organic. They claim that the West African cotton farmers from whom they purchase the cotton have been paid a “fair” price. Their definition of a “fair” price is a price which is around 20% above the “market” rate. In this case, the “fair” trade price paid by Max Havelaar to West African small-scale cotton farmers from whom they purchase the cotton is Euro 0,36/kg. The normal world market price paid to these same farmers was Euro 0,32/kg at that time. Thus, the difference or Fair Trade “premium” is only Euro 0,04/kg.
I have written to Max Havelaar and to other "ethical" Fair Trade clothing companies to inquire about this venture. Please find below a copy of my written inquiry and their responses. I welcome your comments. Thank you.
TO PAN UK: in charge of cotton project
SIMON FERRIGNO
simonferrigno@pan-uk.org
Copy: info@cleanclothes.org
IFOAM ( b.geier@ifoam.org)
FLO
MAX HAVELAAR
Sustainablecotton.org
Organic exchange: terry@organicexchange.org
Copy: m.v.esch@boweevil.nl
Re: “ Clean” clothes
A number of garment companies targeting a rising number of environmentally and socially conscious consumers in the West are selling “clean” clothes– i.e, clothes supposedly produced in an environmentally sustainable manner and in a non-exploitative social manner- and labeling and marketing their garments as “organic” “ethical", "alternative" or "Fair Trade”.
As far as the environmental aspect of cotton production is concerned, companies dealing with organic cotton are indeed making a significant and positive environmental impact - as clearly documented by a number of research - by helping farmers switch from the extremely environmentally damaging conventional cotton sector to the more environmentally sustainable organic cotton sector.
“Fair” price?
What is not so clear, however, is the so-called “Fair Trade” aspect of the venture. In fact, companies that market their garments under the “Fair Trade” label claim that the farmers from whom the cotton (both organic and conventional) has been purchased have been paid a “fair” price. One such company, MAX HAVELAAR, has recently ( this year) launched a line of “fairly” produced clothing bearing the “Fair Trade” label, although the cotton used is not organic. They claim that the West African cotton farmers from whom they purchase the cotton have been paid a “fair” price. Their definition of a “fair” price is a price which is around 20% above the “market” rate. In this case, the “fair” trade price paid by Max Havelaar to West African small-scale cotton farmers from whom they purchase the cotton is Euro 0,36/kg. The normal world market price paid to these same farmers was Euro 0,32/kg at that time. Thus, the difference or Fair Trade “premium” is only Euro 0,04/kg.
Processing of cotton and manufacturing of garments?
Furthermore, Max Havelaar and other companies marketing and selling “Fair Trade” labeled garments do not provide any information on where and how the garments were made (i.e. the processing stages relating to the production of fabrics and garments ). Although the Fair Trade movement (FLO) has (recently) defined a set of Standards for the production of garments, there is no mention or information publicly available on the actual implementation, enforcement and independent monitoring of these standards. Thus, consumers are made to believe that garments labeled as “Fair Trade” have been made according to Fair Trade non-exploitative standards, which is not always the case. It is highly dishonest, morally repressible and fraudulent to market and sell garments as “Fair Trade” simply on account of the so-called “fair” price paid to cotton farmers, and then use sweatshop practices in the processing stages of the cotton and the manufacture the garments!
In view of the above, the following questions arise:
1) Does the so-called “fair” price paid to small-scale cotton farmers in sub-Saharan Africa by Max Havelaar and other such companies labeling and marketing “Fair Trade” garments REALLY contribute to the economic and social welfare of the small-scale cotton farmers, as they claim? (no quantitative data available.)
2) The “market” rate which is used by Max Havelaar as a reference in setting the “fair” price paid to cotton farmers is distorted by global cotton subsidies, and as such is not an appropriate parameter to determine or set the so-called “fair” price. A “fair” price should rather be set based on the actual cost of production of the farmers, taking into account the realities of the global Terms of Trade faced by the farmers.
3) Under this scheme, who benefits the most? The farmer who is paid a Fair Trade “premium” of Euro 0,04 cents/kg of seed cotton or Max Havelaar who labels and markets the garments at a much greater price in proportion to the “fair trade premium” paid to the farmers? What percentage does the “fair” price paid to cotton farmers represent in the final retail price of Fair Trade labeled garments sold to consumers in the West?
4) Simply buying the raw cotton from African cotton farmers and shipping it abroad for further processing (beyond ginning, and to a limited extent spinning as is currently done in sub-Saharan Africa), as is the case with Max Havelaar in Mali ( only ginning done locally- not organic), Boweevil in Uganda ( ginning and spinning to a limited extent) and Biore in Tanzania ( ginning only), fails to add-value locally to the cotton and as such fails to create much needed local employment and generate income along the supply chain and create economic growth within the sector – thus failing to “fight” poverty, contrary to claims made by these companies.
5) Fair Trade labels tend to limit their considerations strictly to the so-called “fair” price they pay the farmers and pay little attention in practice to the way the cotton is further processed along the supply chain ( i.e. spinning, weaving, knitting, dyeing & printing, garment manufacturing, etc.) Although Max Havelaar says that Fair Trade Standards have been recently defined for the processing stages of the cotton by FLO, no mechanisms have been put in place to effectively monitor and enforce these standards, as is reflected in the Clean Clothes Campaign overview presentation and remarks of “ethical” companies. ( see www.cleanclothescampaign.org).
6) Finally, as noted above, Fair Trade labeled garments do not necessarily integrate the environmental or ecological standards within their supply chains. Thus, while pretending to help the farmers, they do not help farmers improve the environment in which they work, by failing to help the farmers adopt organic sustainable practices in farming methods.
7) Similarly, “organic” labeled textiles and garments fail to take into account the Fair Trade non-exploitative social aspect of production. Thus, while improving farming methods, they do not necessarily improve the working conditions of those involved in the processing stages of the cotton and the manufacture of textiles and garments.
Are there any companies that respect both the ecological standards of organic cotton production as well as the non-exploitative Fair Trade social standards throughout their entire supply chain in the production of garments and textiles in sub-Saharan Africa?
I have written to Max Havelaar several months ago to get feedback on these issues, but have been met by utmost silence…Boweevil also admits that it processes only 30-35% of its organic cotton locally in Uganda and claims that it is processing its garments according to “Fair Trade” Standards, although it fails to provide any information on how and where the garments are made, and to describe what mechanisms are in place to effectively monitor and enforce Fair Trade Standards in the processing stages of the cotton. Failure to reveal this information - which ought to be made widely and openly available to environmentally and socially global whom they target and sell their garments to -would tend to indicate that these companies have a lot to hide about their “clean” activities. Hopefully you can shed some light on these issues…
Response from Pan-UK
Thank you very much for your very interesting and well-informed email. We are aware of all the issues you have raised, and are considering all of them. It is true that the multiplication of “eco” or “Fair” standards and labels may sometimes lead to confusion for the consumer. This is one of our main concerns. It is also true that a lot of work still need to be done with both Organic and Fairtrade textiles, which should be viewed as good (if not perfect) steps in the right direction.
I will assess your comments and discuss them with the direction, and get back to you.
Best Wishes
Damien Sanfilippo
Cotton Project Officer
Pesticide Action Network UK
Development House
56-64 Leonard Street
London
EC2A 4JX
www.pan-uk.org
Tel: +44 20 7065 0905/Fax: +44 20 7065 0907
Direct: +44 20 7065 0915
I have not forgotten about your letter expressing your concerns about fairtrade cotton. I am preparing a response to the issues you have raised. However, I would like to discuss some of those with the fairtrade organizations, before responding. I will meet with Fairtrade Foundation (UK) soon, and I am hoping to discuss those issues with max Havelaar France as well in the near future.
I will then be able to respond to your letter. I am considering publishing your letter and our response in our newsletter, or on our website, providing that you agree of course. Our goal is to provide fair and balanced information to consumers, as it will benefit the market for organic cotton. I need to emphasize on the fact even though we do share some of your concerns to some degree, we support fairtrade cotton initiatives. We aim to collaborate with them, and we hope that they will consider our comments, in the interest of small-scale cotton farmers.
Thank you for your patience,
Best Wishes
Damien Sanfilippo
Cotton Project
Pesticide Action Network UK
Development House
56-64 Leonard Street
London
EC2A 4JX
www.pan-uk.org
Tel: +44 20 7065 0905/Fax: +44 20 7065 0907
Direct: +44 20 7065 0915
Response from Max Havelaar
Dear Mr. Tajdin
Enclosed you find the answers to your challenging questions. To our view there is no competition between organic and fair-trade-movements, neither one between Clean Clothes and Fair-Trade. We all have the same idea – more equality for developing countries – but we start from different positions and points of view. Max Havelaar Switzerland is in close contact with the responsible person of Clean Clothes in Switzerland . Let’s work together!
Kind regards
Regula Weber
---------------------------------------------
Regula Weber Engweiler
Marketing/ Kommunikation
Max Havelaar-Stiftung (Schweiz)
Hornbachstrasse 50
CH-8034 Zürich
Tel.: ++41 (0)44 389 84 73
Fax: ++41 (0)44 389 84 14
Mail: r.weber@maxhavelaar.ch
Web: www.maxhavelaar.ch
Arif Tajdin
Date: Sat, 14 Jan 2006 11:51:21 +0100 (CET)
De: Arif Tajdin
Objet: "CLEAN" CLOTHES...?
À: simonferrigno@pan-uk.org
Cc: info@cleanclothes.org, b.geier@ifoam.org, terry@organicexchange.org,
info@fairtrade.net
TO: PAN-UK
ATT: SIMON FERRIGNO ( in charge of cotton issues)
Mr. Ferrigno,
Re: “ Clean” clothes
A number of garment companies targeting a rising number of environmentally and socially conscious consumers in the West are selling “clean” clothes– i.e, clothes supposedly produced in an environmentally sustainable manner and in a non-exploitative social manner- and labeling and marketing their garments as “organic” “ethical", "alternative" or "Fair Trade”.
As far as the environmental aspect of cotton production is concerned, companies dealing with organic cotton are indeed making a significant and positive environmental impact - as clearly documented by a number of research - by helping farmers switch from the extremely environmentally damaging conventional cotton sector to the more environmentally sustainable organic cotton sector.
“Fair” price?
What is not so clear, however, is the so-called “Fair Trade” aspect of the venture. In fact, companies that market their garments under the “Fair Trade” label claim that the farmers from whom the cotton (both organic and conventional) has been purchased have been paid a “fair” price. One such company, MAX HAVELAAR, has recently ( this year) launched a line of “fairly” produced clothing bearing the “Fair Trade” label, although the cotton used is not organic. They claim that the West African cotton farmers from whom they purchase the cotton have been paid a “fair” price. Their definition of a “fair” price is a price which is around 20% above the “market” rate. In this case, the “fair” trade price paid by Max Havelaar to West African small-scale cotton farmers from whom they purchase the cotton is Euro 0,36/kg. The normal world market price paid to these same farmers was Euro 0,32/kg at that time. Thus, the difference or Fair Trade “premium” is only Euro 0,04/kg.
Answer
Information about the FT-prices paid by the producers clients (not MH is paying) you will find in the Fairtrade standards of FLO (www.fairtrade.net). The Fair-Trade-Price for cotton as well as for other products is fixed by FLO for a certain period (around two years). Every region (Africa, India ) has its own price. The price is counted bottom-up according to the costs of living in a region. The price is fair because it is counted bottom-up and because it is stable. If the world market price rises above the FT-Price, the buyers have to pay the higher price. Additionally there is also a Fair-Trade-Premium which goes to a special fund. Thus, the farmers have some extra money which is invested in better living and working conditions. For example wells, roads, medical treatment etc. So, the farmers get a stable price and the whole region can profit from the premium-projects.
Processing of cotton and manufacturing of garments?
Furthermore, Max Havelaar and other companies marketing and selling “Fair Trade” labeled garments do not provide any information on where and how the garments were made (i.e. the processing stages relating to the production of fabrics and garments ). Although the Fair Trade movement (FLO) has (recently) defined a set of Standards for the production of garments, there is no mention or information publicly available on the actual implementation, enforcement and independent monitoring of these standards.
Answer
There is no “standard for processed product situations” at the moment; but FLO is working on it. The overall aim of this project is to develop a standard that enables FLO to extend the impact of Fairtrade along the supply chain and to improve traceability of products in the chain. FLO expects to get stakeholders’ feedback during the next weeks on a first concept paper. The standard should be finished by the end of this year.
Max Havelaar Switzerland works with the FLO standard for fair-trade cotton. Furthermore we have our own monitoring system in order to control also the supply chain. The whole supply chain is controlled through external audits.
According to information published on FLO's website: "FLO guarantees that products sold anywhere in the world with a Fairtrade label marketed by a National Initiative conforms to Fairtrade Standards and contributes to the development of disadvantaged producers and workers."
Thus, consumers are made to believe that garments labeled as “Fair Trade” have been made according to Fair Trade non-exploitative standards, and " contributes to the development of disadvantaged producers and workers." However, there is no publicly available data to prove that claim. It would seem senseless ( if not dishonest ) to market and sell garments as “Fair Trade” simply on account of the so-called “fair” price paid to cotton farmers, and then use sweatshop or other exploitaive labor practices in the processing stages of the cotton and the manufacture the garments!
Answer
This is certainly not the case. Max Havelaar and FLO are well aware the process has to be controlled as well and we are working on this issue in order to consolidate the system.
In view of the above, the following questions arise:
1) Does the so-called “fair” price paid to small-scale cotton farmers in sub-Saharan Africa by Max Havelaar and other such companies labeling and marketing “Fair Trade” garments REALLY contribute to the economic and social welfare of the small-scale cotton farmers, as they claim? (no data available)
Yes, there is a contribution on two sides: The stable price is for the farmer, the fair-trade-premium is for projects. Furthermore the fair-trade-certification functions as a door to the European market. Take for example Senegal . Since they are fair-trade-certified they can sell their cotton to a big licencee in Switzerland . Since the cotton-project is new, we do not have impact stories on our website yet. But we know that in India f.e. they started first premium projects such as drinking water facilities.
2) The “market” rate which is used by Max Havelaar as a reference in setting the “fair” price paid to cotton farmers is distorted by global cotton subsidies, and as such is not an appropriate parameter to determine or set the so-called “fair” price. A “fair” price should rather be set based on the actual cost of production of the farmers, taking into account the realities of the global Terms of Trade faced by the farmers.
Answer
The price is calculated bottom-up and differs from country to country. You can check the actual minimum prices in the cotton-standards on www.fairtrade.net
3) Under this scheme, who benefits the most? The farmer who is paid a Fair Trade “premium” of Euro 0,04 cents/kg of seed cotton or Max Havelaar who labels and markets the garments at a much greater price in proportion to the “fair trade premium” paid to the farmers? What percentage does the “fair” price paid to cotton farmers represent in the final retail price of Fair Trade labeled garments sold to consumers in the West?
Answer
Max Havelaar does not market products. The final retail price is defined by our licencees, we can not influence the sales prices. The cost structure is similar to conventional imported products.
4) Simply buying the raw cotton from African cotton farmers and shipping it abroad for further processing (beyond ginning, and to a limited extent spinning as is currently done in sub-Saharan Africa), as is the case with Max Havelaar in Mali ( only ginning done locally- not organic), Boweevil in Uganda ( ginning and spinning to a limited extent) and Biore in Tanzania ( ginning only), fails to add-value locally to the cotton and as such fails to create much needed local employment and generate income along the supply chain and create economic growth within the sector – thus failing to “fight” poverty, contrary to claims made by these companies.
Answer
The complete supply chain of some of our partners is located in Africa (Marokko).
5) Fair Trade labels tend to limit their considerations strictly to the so-called “fair” price they pay the farmers and pay little attention in practice to the way the cotton is further processed along the supply chain ( i.e. spinning, weaving, knitting, dyeing & printing, garment manufacturing, etc.) Although Max Havelaar says that Fair Trade Standards have been recently defined for the processing stages of the cotton by FLO, no mechanisms have been put in place to effectively monitor and enforce these standards, as is reflected in the Clean Clothes Campaign overview presentation and remarks of “ethical” companies. ( see www.cleanclothescampaign.org).
Answer
Not true. See answer above.
6) Finally, as noted above, Fair Trade labeled garments do not necessarily integrate the environmental or ecological standards within their supply chains. Thus, while pretending to help the farmers, they do not help farmers improve the environment in which they work, by failing to help the farmers adopt organic sustainable practices in farming methods.
Answer
Some farmers are producing organic cotton and some conventional cotton. From the point of foreign aid it would not be a good point to restrict Fair-Trade to organic production since one would exclude many producers. The system wants to be open for all small farmers. However, the fair trade-standards and the criteria for the supply chain which takes SA 80000 as a reference include also ecological criteria. The farmers are assisted by promoting bodies.
7) Similarly, “organic” labeled textiles and garments fail to take into account the environmentally sustainable and the Fair Trade non-exploitative social aspect of production in the processing stages of the cotton. Thus, while improving farming methods, they do not necessarily improve the working conditions of those involved in the processing stages of the cotton and the manufacture of textiles and garments or the production methods themselves.
See answer above. The production chain is always controlled.
Are there any companies that respect both the ecological standards of organic cotton production as well as the non-exploitative Fair Trade social standards throughout their entire supply chain in the production of garments and textiles in sub-Saharan Africa ?
Answer
If you buy organic Max Havelaar-certified cotton you have both.
My response to Max Havelaar
Dear Mr. Weber,
Thank you for responding to my email dated 14 January with reference to the issue of “clean clothes”. I have noted down your answers and wish to briefly say the following.
It seems evident from your responses that the fair trade movement has yet to consolidate its action throughout the entire processing stages of the cotton supply chain in the production of textiles and garments to achieve a perfect balance between both the ecological aspects of (organic) cotton production and the social non-exploitative aspects relating to the processing stages of the cotton. However, I am happy to learn that Max Havelaar, FLO and other fair trade organizations are working towards achieving this end.
I. As far as the “fair” trade price of cotton is concerned:
I understand from your response that it is determined by FLO “bottom-up according to the costs of living in a region.”
According the FLO: "FLO guarantees that products sold anywhere in the world with a Fairtrade label marketed by a National Initiative conforms to Fairtrade Standards and contributes to the development of disadvantaged producers and workers."
However, it would be useful to evaluate the REAL impact this price has on improving the living standards of the small-scale cotton farmers in sub-Saharan Africa (SSA) using quantitative data. To my knowledge, there is no available quantitative statistical data to measure the real impact of the “fair” price vis-à-vis the cotton farmers, the cotton sector and the economies of the cotton producing nations in sub-Saharan Africa .
Finally, FLO should publish and make openly and publicly available the cost structure of the fair trade pricing mechanism along the entire supply chain so as to make the pricing process fully transparent. Furthermore, it would be useful to know what percentage the “fair” trade price paid to cotton farmers in SSA actually represents vis-à-vis the final retail price of the fair trade labeled garments sold to final consumers?
II. As far as the processing stages of cotton are concerned, you say:
You say:
There is no “standard for processed product situations” at the moment; but FLO is working on it. The overall aim of this project is to develop a standard that enables FLO to extend the impact of Fairtrade along the supply chain and to improve traceability of products in the chain. FLO expects to get stakeholders’ feedback during the next weeks on a first concept paper. The standard should be finished by the end of this year.
Max Havelaar Switzerland works with the FLO standard for fair-trade cotton. Furthermore we have our own monitoring system in order to control also the supply chain. The whole supply chain is controlled through external audits.
Unfortunately, Max Havelaar does not provide any information relating to the implementation, monitoring and enforcement of these external audits relating to the processing stages of the cotton along the entire supply chain. This information aught to be made publicly available to the public and to socially conscious consumers who purchase “clean” clothes.
Finally, you cite “Marokko” as an example of complete vertical-integration within the entire supply chain of cotton production in Africa: “The complete supply chain of some of our partners is located in Africa (Marokko).
Could you please tell me where I can get more information on “ Marokko”?.
My previous email and the following observations are not meant as criticism. They are only issues that I feel need to be raised and solutions found to if the Fair Trade movement is to effectively and successfully achieve its mission of combating poverty and helping the millions of small-scale farmers in sub-Saharan Africa and around the globe break free from the vicious (and ever-widening) cycle of poverty, misery and hunger.
However, I do not limit myself to pointing out the weaknesses within the system. I am also actively working at finding solutions. In fact, I have been conducting research on the collapse of both the cotton and the textile sector in sub-Saharan Africa . As you well know, the conventional cotton sector in SSA is near collapse mainly as a result of massive illegal cotton subsidies paid to cotton farmers in rich cotton producing nations and is seriously threatening the survival of both the cotton sector in SSA and the millions of farmers who rely on cotton farming for their livelihoods.
Structural over supply of cotton on the world market resulting from trade distorting cotton subsidies are driving down prices of conventional cotton on world markets, making it unprofitable for non-subsidized African farmers to grow conventional cotton, despite their absolute Comparative Advantage in growing cotton. As a direct result, the cotton sector in sub-Saharan Africa is near collapse and millions of small-scale cotton farmers throughout sub-Saharan Africa have been thrown deeper into poverty as they cannot sell their cotton on the world market.
Furthermore, the influx of cheap clothing from China and other high-volume/low-cost garment producing nations in the Far East coupled with the massive influx of cheap used clothing “dumped” across Africa over the last three decades have led the collapse of the entire textile sub-sector in SSA, further deepening the crisis within the entire sector. This has led to massive job losses within the entire textile sector, from cotton growing to garment manufacturing.
Finally, the expiry of the Multi Fiber Agreement (MFA) on 01 January 2005 and the expiry of the 3rd Country Clause of the African Growth and Opportunity Act (AGOA) in September 2007 is further threatening the future of the textile sector in SSA and the jobs of those employed within this industry.
Given the grim future prospects facing both the cotton sector and the textile industry in SSA, it is crucial and urgent to find and implement solutions to prevent the total collapse of these vital sectors.
I am presently working on a project to revive both the cotton and the textile sector in sub-Saharan Africa . Based on the findings and the evidence from organic cotton projects worldwide and in Africa, organic cotton production is proving to be an economically, socially and environmentally viable alternative to revive the cotton sector in sub-Saharan Africa . However, although organic cotton provides an economically viable and environmentally sustainable alternative for cotton farmers in Africa, efforts must be made to further process the organic cotton locally, from spinning yarn to weaving cloth to manufacturing garments, so as to create employment and generate income along the entire supply chain.
Processing the organic cotton locally would add-value to the cotton thus enabling African cotton producing and exporting nations to break free from the vicious cycle of cotton subsidies and from the dictates of the world market. Furthermore, adding value locally would create local employment and generate income throughout the local supply chain –from cotton growing to garment manufacturing – and enable African cotton producing nations to achieve self-sufficiency in garment production and consumption, thus saving much needed scarce foreign exchange currently being depleted to import (used) garments for local consumption. Thus, the production and local processing of organic cotton would revive both the cotton and the textile sector and positively reduce poverty among the local population.
I wish and aim to lay the foundation for the revival of both the cotton and the textile sector in sub-Saharan Africa through the development of a vertically-integrated economically viable, socially non-exploitative and environmentally sustainable textile and garment industry in sub-Saharan Africa- from organic cotton growing to garment manufacturing- for both local & regional consumption and export markets, while respecting both the ecological standards of production as well as the non-exploitative social standards set by the Fair Trade movement, thus reaching a perfect balance between ecological standards of organic production and Fair Trade standards throughout the supply chain in the production of garments and textiles. This would set a new standard and an example in the global textile industry and garments thus produced would find a ready local, regional and export market within the growing number of socially and environmentally conscious consumers worldwide.
Hopefully my observations will serve as constructive input for both the organic and the fair trade movement for the welfare of the cotton farmers and cotton producing nations in sub-Saharan Africa and throughout the world.
Regula Weber
Dar Mr. Tajdin
Thanks for your response which I am going to forward to the communication department of FLO.
Kind regards
Regula Weber
----------------------------------------------
Regula Weber Engweiler
Marketing/ Kommunikation
Max Havelaar-Stiftung (Schweiz)
Hornbachstrasse 50
CH-8034 Zürich
Tel.: ++41 (0)44 389 84 73
Fax: ++41 (0)44 389 84 14
Mail: r.weber@maxhavelaar.ch
Web: www.maxhavelaar.ch
Can Equitrade REALLY "end poverty..."?
I have recently discovered a new trading concept called "EQUITRADE" which claims that it can "end poverty..." According to information published on its website ( www.equitrade.org ), it claims that:
“ Equitrade facilitates added value international trade to end poverty in poor nations and aims to end poverty through sustainable commercial international trade.” It further claims that "Equitably traded product creates a more equitable share of the value for the poor nation", by adding-value to local commodities in the country of origin, instead of exporting raw agricultural commodities to be processed in the industrialized countries.
Please see www.equitrade.org for details.
Unfortunately, there is no quantitative data to support the poverty eradication rhetoric preached by the Equitrade model. I have written to Equitrade to obtain quantitative data, figures and facts to demonstrate how the wealth generated though local value addition is shared equitably, “more widely” and “fairly” among the different local actors within the supply chain ( i.e cocoa farmers, plantation laborers, factory workers, etc.), thus allowing to effectively and accurately measure the impact of this model on "ending poverty".
Unfortunately (but not surprisingly), Mr. Terry Horne ( Chairman of Equitrade and of Malagasy (the first Equitrade chocolate company in Madagascar) has failed to provide quantitative data, figures and facts to support his poverty eradication rhetoric.
Please find below a copy of the letter addressed to Mr. Terry Horne on this and other important issues and questions relating to the Equitrade model and his response. I welcome your comments and reflections. Thank you.
COPY OF LETTER ADDRESSED TO EQUITRADE AND RESPONSE BY MR TERRY HORNE, CHAIRMAN OF EQUITRADE AND OF MALAGASY.
---------- Original Message ----------------------------------
From: Arya
Date: Fri, 18 Aug 2006 13:51:47 +0200 (CEST)
>TO: EQUITRADE
> Langthwaite House
>Lancaster
>LA2 9EB
>United Kingdom
>
> To whom this may concern,
>
> I have recently discovered and read about the "equitrade" trading system. I agree in principle that the solution to reducing poverty in so-called developing nations is to add-value locally to primary commodities. However, I would like to get more information on this initiative as I could not find any information relating to the following important issues:
>
> 1) Equitable distribution of wealth generated through local value-addition
>
> According to information published on your website, you claim that: "Equitably traded product creates a more equitable share of the value for the poor nation".
>
> However, could you provide quantitative data to demonstrate how the wealth generated through local value addition is shared among the different local actors throughout the local supply chain ( i.e. farmers, laborers, factory workers, etc.) Furthermore, how is the price paid to local farmers for their commodities determined (ex: cocoa in Madagascar) and what percentage does the price paid to farmers for their commodities represent vis-a-vis the final retail price of the final product sold to consumers? What is the average monthly wage paid to factory workers in your chocolate factory in Madagascar?
>
> 2) Martket access
>
> How does Equitrade overcome the insurmontable trade barriers ( i.e. escalating tariffs, import tariffs, quotas, etc. ) erected in industrialized countries such as the EU against value-added products originating from developing nations?
>
> 3) Local tax revenue
>
> In your model, ( with the madagascar chocolate example), 11% of the revenue generated from local-value addition would be allocated to tax revenue for the government with the stated objective to: "Pay local taxes in a due and timely manner, so that education and health needs can be funded by local government."
>
> How can you guarantee that this amount will in fact be dedicated to "education and health" and other social development projects by the recipient government? What mechanisms have you put in place to make sure that the tax revenue generated from your project will indeed benefit the local population and serve the development needs of the country as a whole?
>
> I thank you for shedding some light into these interrogations and I look forward to hearing back from you in the near future.
>
> Best regards,
>
> Arya Tajdin.
> An environmentally and socially conscious global consumer.
>Dear Arya Tajdin,
Thank you for your interest in Equitrade and your interesting and useful questions.
Not all your questions are new and many we have needed to ask ourselves. Some we have answered already for other organizations.
I will take your questions in the order they appear in your letter:
1. Distribution of Wealth
(a) Share between farmers and labourers
We encourage the formation of co-operatives, governed by the rules of the International Cooperative Movement. Cooperative surpluses are shared between farmers and labourers, according to these rules.
(b) The price paid for commodities e.g. fermented cocoa beans in Madagascar
The price is determined by local market conditions and, since Malagasy have the opportunity to add value locally, Malagasy can afford to pay more than the export agents. This is turn enables growers to bargain for a better price from the exporters, since they have an alternative outlet.
Last year, beans typically traded at around £400 a ton (a premium over average world commodity prices-perhaps because of our promotion of Malagasy chocolate and Madagascar products generally?).
Fairtrade buyers (mainly from France) paid around £500 a ton-a premium of around 20-30%.
At the moment, we are paying the farmers about £600 a ton which is better than the best
fair-trade price available in Madagascar.
(If market conditions so dictated, Malagasy might be able to pay up to £800 a ton (double the world commodity price for similar beans) and still create sufficient added value in the Malagasy chocolate factory to support its inward investment in market and product development. This would again increase the bargaining power and price for other growers and pickers on the island and could positively affect the world price of beans, especially Criollo beans).
(c) The percentage of the final consumer price
As a percentage of what?
Equitrade cannot control the end prices paid by consumers- that is determined by retailers.
When Malagasy Mora Mora chocolate sells at a premium in gourmet London West End shops like Fortnum and Masson, that makes the percentage paid in Madagascar seem smaller, but when Sainsbury retails a 100gram bar for £1.27, or Booths wish to do a promotion of 2 bars for £2, that makes the local percentage seem higher. What Malagasy people need, is not percentages, it’s money. And that amount of money stays the same, whatever the retailer does.
The money received is about 10 times more than the money previously received for unprocessed beans. The percentage that that money represents of the UK consumer price, depends on the promotional policies of the UK retailers.
Equitrade cannot (and do not wish to) control the pricing policies of retailers. That is the retailer’s business and the retailer’s expertise.
(d) The average monthly wages paid to factory workers in Madagascar
Again these are determined by local market conditions. Any different arrangement would make Equitrade an unsustainable solution to poverty.
Having said that, Malagasy factory workers earn about 5 times more than pickers and growers. On the other hand, the living costs of factory workers are higher. Unlike their rural cousins, they need to rent housing and pay for utilities, electricity, local taxes etc. Their rural cousins often have no utilities and often their taxes are not collected.
[Incidentally, Arya, teams of investigative journalists from the Guardian newspapers group have visited the growers and the pickers, the plantations and the factory, and have written lengthy (and positive) evaluations of the quality of Malagasy and the economic impact of Equitrade. Perhaps, you can trace their reports on their websites (www.societyguardian.co.uk and www.observer.co.uk/food-monthly)]
2. Market Access
How does Equitrade overcome insurmountable trade barriers?
Equitrade does not overcome insurmountable trade barriers.
By definition, if the barriers are really insurmountable, Equitrade cannot surmount them.
In the case of Malagasy chocolate, marketing techniques were used to create consumer demand and an economic case for entry to the European market. EU officials were very helpful- they too have targets to meet for percentages of trade from developing countries and many local government authorities have set targets for the availability of Fairly Traded or Ethically Traded goods in the towns and cities for which they are responsible.
For example, our local town, Garstang, was the first Fair Trade Town in the world, and Preston, our nearest large city, has just become the 50th Fair Trade City in Europe. [Incidentally, Arya, the limitation on the spread of Ethical status to EU towns and cities is availability of supply!].
In the case of dairy products, the barriers remain unsurmounted, for the moment. Madagascar does not collect sufficient tax to provide the veterinary control infrastructure required to meet EU standards. (Eventually, Equitrade will help with that, because factory processors are easier to tax than rural pickers .You cannot pick up a factory and disappear with it into the forest!).
Equitrade is based on Noetic Applied Thinking (see www.noeticassociates.co.uk) and ways have been found through the barriers that could not be surmounted.
For example, the populations in the rural areas- especially in the coastal forest- were found to be decalcified. Cows were imported from New Zealand and ways found to keep them cool. Cheese and yoghurt are made from the milk. Cheese and yoghurt can be traded for commodities which can be processed and exported to the EU. In this way, hard currency is still earned for Madagascar and the bones of the Malagasy children are healthier on the higher calcium diet.
3. Local Tax Revenue
Can Equitrade guarantee that tax will be spent on education and health
No, Equitrade cannot guarantee that tax will be spent on education and health.
What we can say is that no taxes collected equals no pay for teachers and doctors.
When there is tax revenue, the people in developing countries want it to be spent on health and education, not on arms and palaces, for example. The task is to help government to be more responsive to the wishes of their people.
Noetic analysis indicates that political change is more likely to follow economic change and that economic change is more likely to be led by technological change. Hence, Equitrade emphasizes the use technology and knowledge transfer, especially marketing knowledge, to enable the economic retention of higher added value in developing countries. Political changes driven by government’s desire or need, to please or appease, the people, will follow (as Noetic thinking predicted they would in Eastern Europe, and today predicts that they will do in China).
In the case of Madagascar, workers in food factories helped to organize the rural vote for a democratic President. As the time now approaches for the President to seek re-election, the President is able to demonstrate to the people the progress that has been made in the areas of jobs, health and education.
Finally………………,
I am sure that our responses are not all that you hoped or expected.
However, we do hope that you will continue to help us think about the important issues which your useful questions have raised. You ask questions that are already in our minds and surely, in the minds of others.
May we print your letter and our reply (and perhaps your subsequent responses!) on our website?
Thank you.
Terry Horne
Chairman, The Equitrade Foundation
COPY OF MY RESPONSE TO MR. TERRY HORNE'S ABOVE RESPONSE
Dear Mr. Terry Horne,
Thank you for your response to my inquiry dated 18 August with reference to Equitrade. I have gone through your answers to each one of my specific questions, but unfortunately you did not provide answers to the following formulated specific questions:
1) Equitable distribution of wealth generated through local value-addition
Previously formulated question:
According to information published on your website, you claim that: "Equitably traded product creates a more equitable share of the value for the poor nation". However, could you provide quantitative data to demonstrate how the wealth generated through local value addition is shared among the different local actors throughout the local supply chain ( i.e. farmers, laborers, factory workers, etc.)
Your answer
1. Distribution of Wealth
(a) Share between farmers and labourers
We encourage the formation of co-operatives, governed by the rules of the International Cooperative Movement. Cooperative surpluses are shared between farmers and labourers, according to these rules.
There is no available information on your above-stated claim in your model (i.e. what mechanisms have you put in place to encourage the formation of co-operatives? Furthermore, are these cooperatives encouraged to take part in value-addition activities ( if so, what support do you or your model provide to enable cooperatives to process & market processed commodities?) or is their role simply to supply Equitrade companies such as Malagasy with non-processed primary commodities?
With reference to my initial question:
According to quantitative information published on your website, you claim that under Equitrade ( with the Malagasy chocolate example/model), 51% of the value of the product is retained in the country of origin, out of which 11% of the revenue generated is paid in taxes to the government and the remaining 40% is retained and distributed within the local supply chain.
QUESTION? Local value-addition wealth distributional breakdown
Can you provide quantitative data to demonstrate how the 40% wealth generated through local value addition is distributed among the different local actors within the local supply chain: (i.e farmers, pickers, etc., transporters, factory workers, etc.)?
Previous question: How is the price paid to local farmers for their commodities determined (ex: cocoa in Madagascar)
Answer
The price paid for commodities e.g. fermented cocoa beans in Madagascar
The price is determined by local market conditions and, since Malagasy have the opportunity to add value locally, Malagasy can afford to pay more than the export agents. This is turn enables growers to bargain for a better price from the exporters, since they have an alternative outlet.
:
Since prices of primary commodities “dumped” (i.e. sold at prices below and unrelated to the cost of production) on the world market are distorted by global agricultural subsidies (+300 billion/year), using “local market conditions” ( which are simply a reflection of world market commodity prices) to set prices of local commodities seems an inappropriate and an ineffective approach to “end poverty…” since ruinously low world commodity prices are at the root cause of poverty in rural economies around the world.
Agricultural subsidies leading to structural over-supply are at the root cause of declining agricultural commodity prices on the world market, with disastrous economic and social consequences for small holder farmers living off agriculture and for the countries producing and relying heavily on the export revenue from these commodities. Furthermore, declining world prices lead to further increases in production to make up for the loss in income resulting from lower prices, which in turn leads to further over-supply and further price declines. This is a vicious cycle.
Example: Ghana (2nd largest producer of cocoa in the world)
In response to declining prices of cocoa on the world market, Ghana increased its production from 320,000 MT to 450,000 MT between 1996 and 2000. This led to an excess supply of cocoa on the world market, with a resulting further 40% decline in the price of cocoa during the same period.
“Structural over supply in the commodity market lies at the heart of global poverty and instability.” ( Brandt Report, 1980)
Setting prices of local commodities based on actual local cost of production (using –non-exploitative labor practices) seems – in my humble opinion - like a more appropriate and consistent approach to attain your ambitious stated aim “to end poverty through sustainable commercial international trade.
Also, can you please provide quantitative data relating to the actual cost of production for small-scale cocoa farmers in Madagascar?
Also, what percentage of the cocoa currently processed by Malagasy is respectively grown by small-scale cocoa growers and by private cocoa plantations?
Question: what percentage does the price paid to farmers for their commodities represent vis-a-vis the final retail price of the final product sold to consumers?
Answer:
The percentage of the final consumer price
As a percentage of what?
Equitrade cannot control the end prices paid by consumers- that is determined by retailers.When Malagasy Mora Mora chocolate sells at a premium in gourmet London West End shops like Fortnum and Masson, that makes the percentage paid in Madagascar seem smaller, but when Sainsbury retails a 100gram bar for £1.27, or Booths wish to do a promotion of 2 bars for £2, that makes the local percentage seem higher. What Malagasy people need, is not percentages, it’s money. And that amount of money stays the same, whatever the retailer does. The money received is about 10 times more than the money previously received for unprocessed beans. The percentage that that money represents of the UK consumer price, depends on the promotional policies of the UK retailers. Equitrade cannot (and do not wish to) control the pricing policies of retailers. That is the retailer’s business and the retailer’s expertise.
Let me rephrase this question:
What is the percentage cost of the price paid to farmers for their cocoa vis-à-vis the export price (FOB Madagascar) of the chocolate produced and marketed by Malagasy?
Question: What is the average monthly wage paid to factory workers in your chocolate factory in Madagascar?
Answer:
(d) The average monthly wages paid to factory workers in Madagascar
Again these are determined by local market conditions. Any different arrangement would make Equitrade an unsustainable solution to poverty.
Having said that, Malagasy factory workers earn about 5 times more than pickers and growers. On the other hand, the living costs of factory workers are higher. Unlike their rural cousins, they need to rent housing and pay for utilities, electricity, local taxes etc. Their rural cousins often have no utilities and often their taxes are not collected.
Question 2:
Can you provide quantitative data (i.e. actual average monthly salary paid to Malagasy factory workers, farm/plantation laborers, and other local laborers working within the supply chain.)
[Incidentally, Arya, teams of investigative journalists from the Guardian newspapers group have visited the growers and the pickers, the plantations and the factory, and have written lengthy (and positive) evaluations of the quality of Malagasy and the economic impact of Equitrade. Perhaps, you can trace their reports on their websites (www.societyguardian.co.uk and www.observer.co.uk/food-monthly)]
I read with great interest all the articles written on the Equitrade model (with Malagasy taken as a reference) in both the sources quoted above. Unfortunately, I did not find any quantitative data to support the “poverty eradication” rhetoric that your model preaches… Hopefully you can support these claims with supportive quantitative data.
Final words…
lthough I agree in principle that the solution to breaking the vicious cycle of poverty in sub-Saharan Africa - and in other non-industrialized countries heavily dependent on producing & exporting non-processed agricultural commodities - is to process their commodities locally so as to break free from the dictate of the world market and from the vicious trap cycle of trade distorting global agricultural subsidies, which result in continuously declining prices of commodities on the world, thus further marginalizing and impoverishing small-scale farmers throughout the so-called “Third World”.
However, what I question in Equitrade is the EQUITABLE DISTRIBUTION of the wealth generated from local value-addition among the poor local economic actors throughout the supply chain (i.e. farmers, laborers, factory workers,etc.) Local value addition without distributional justice in the wealth created will NOT “end poverty” contrary to claims made by Equitrade. Hopefully, you will provide quantitative data – with quantitative figures and facts – to support these claims and demonstrate the real economic benefits that Equitrade brings to those it claims to help – the millions of poor who are daily exploited, marginalized and excluded from the fruits of global trade.
I look forward to hearing back from you in the near future.
p.s. You are welcome to publish my inquiries and your responses on your website or on any other media. Thank you for informing me and providing the reference of the source if you chose to do so. Thank you.
Truthfully,
Arya.
COPY OF EMAIL ADDRESSED TO GUARDIAN AND OBSERVER NEWSPAPER RECENTLY WITH REFERENCE TO THEIR ARTICLES OF EQUITRADE. ( Have not heard back from them yet; will post their response as soon as I get it).
September 24, 2006
TO THE GUARDIAN & OBSERVER
I am writing to you with reference to a series of articles published in the Guardian on Equitrade and the Malagasy chocolate model in Madagascar. In an article called “A square deal” written in the Observer by Lucy Siegle on August 21, 2005, Terry Horne of Noetic Associates (also the chairman of Malagasy) is quoted as saying that “ equitrade will eradicate poverty in Madagascar in 10 years.”
Andrew Purvis, in his article on Equitrade published in the Observer on August 14, 2005, further writes:
“Terry Horne has advised Tiko ( a company owned by president Ravalomanana of Madagascar) on the management of its factories and shared with President Ravalomanana his strategy for ending poverty in Madagascar.”
Excerpts of the article on Equitrade/Malagasy titled “Full of beans” by Andrew Purvis
“It is one of the poorest countries on earth, but a chocolate production scheme that involves local people, from growing the beans to shipping the finished product to Fortnum & Mason, could make poverty history on one tropical island, discovers Andrew Purvis
If a system new to Britain, called Equitrade, takes root on the Indian Ocean island 250 miles off Africa, its people could shake off the legacy of being among the poorest 10 nations on earth - by making gourmet chocolate. Jaomanoro's daughter, Rasoaricalaina Anistitia, 15, could realise her dream of becoming a doctor instead of helping with the cooking at home; her mother, Volanosy Augustine, could feed her four children better. Young men such as Tsiminday Wenceslas, 21, might finish their education and not feel compelled to work through their teens. 'It's a back-breaking job,' he says, 'helping my father on the plantation. I cut down 750 pods a day and carry them in 50kg sacks, so I have to be fit….Yet these farmers are the lucky ones…Fifty per cent of Madagascar's population earn less than one US dollar per year, scratching a living from the parched red earth or feeding themselves by fishing. In coastal areas especially, Madagascar seems like a palaeolithic time warp, the fishermen returning by dugout canoe to primitive huts of mud and reeds, lit by lanterns and without running water.
Even in the capital, Antananarivo - a shadow of its French colonial past, and brought to its knees by frequent power cuts - people go to extraordinary lengths to earn a crust. When we stop at traffic lights, our 4x4 is besieged by children begging and there are other signs of inventiveness - or desperation. On one side, men shuffle through the rain carrying garbage and bales of collapsed cardboard boxes on their shoulders, hoping for a resale. On the other, a young mother stands under an umbrella with her toddler, trying to sell two bananas and a handful of cashews. She is unlikely to make a dollar a day - the minimum required for a city dweller, according to aid workers.
All this could be about to change, however - thanks to a British management firm, Noetic Associates, which is advising Madagascar on how to bring its quality foods to the European market. It has helped set up Malagasy, a company that sells and markets finished chocolate bars. under the system known as Equitrade. A distant cousin of Fairtrade, equitable trade (to use its full name) is likely to bring huge financial benefits to the people of Madagascar - simply by dealing in finished, packaged products rather than cash crops like cocoa beans.
According to Neil Kelsall, Malagasy's marketing director,With Equitrade, the proportion of revenue remaining in Madagascar would be 51 per cent (87p per bar) - 40 per cent in added value retained by the manufacturer and packager, plus a further 11 per cent paid by them in taxes to the Madagascar government. This would then be reinvested in the country's Equitrade business.
'All it would take to end poverty in Madagascar is £750m a year,' Kelsall maintains, 'but there aren't enough cash crops to do that.' Ninety per cent of the cocoa grown on the 6,000-hectare plantation that Malagasy uses in Ambanja goes to the northern hemisphere. 'If we changed all that to equitable trade, poverty would be ended,' says Kelsall.
Eequitable trade relies on private companies - and national governments - to distribute 'added value' fairly. It is a capitalist system that lacks transparency but, by maximising the money in the economy, is said to benefit more people than Fairtrade.
The idea that Equitrade can end world poverty is an important change in the message coming from the northern hemisphere. Before, it was all about cancelling the debt of poorer countries which, in my view, isn't the right way forward. Now, it is about those poorer countries actually helping themselves, working with private enterprise to end poverty.' says Marcel Ramanandraibe, head of the group,
Finally, in another article called “ New Choc on the Block” published in The Guardian Society by John Vidal on May 25, 2005, Vidal writes “According to Neil Kelsall, Malagasy's marketing director, “Equitrade tries to improve the quality of life of the majority of people in a poor country by increasing the money in the economy…We need more companies to add value in poor countries. That way the benefits are shared more widely and more tax can be collected.
REFLEXIONS/QUESTIONS?
Terry Horne of Noetic Associates and chairman of Malagasy claims in the above quoted article that “ equitrade will eradicate poverty in Madagascar in 10 years.”
Neil Kelsall, Malagasy's marketing director, says that “equitrade tries to improve the quality of life of the majority of people in a poor country by increasing the money in the economy….We need more companies to add value in poor countries. That way the benefits are shared more widely and more tax can be collected.
Marcel Ramanandraibe, head of the group says that “the idea that Equitrade can end world poverty is an important change in the message coming from the northern hemisphere. Before, it was all about cancelling the debt of poorer countries which, in my view, isn't the right way forward. Now, it is about those poorer countries actually helping themselves, working with private enterprise to end poverty.
Furthermore, the Equitrade website ( www.equitrade.org) claims that “ Equitrade facilitates “added value” international trade to end poverty in poor nations” and “aims to end poverty through sustainable commercial international trade.”
Unfortunately, there is no quantitative data to support the poverty eradication rhetoric preached by the Equitrade model. I have written to Mr. Terry Horne to obtain quantitative data to demonstrate how the wealth generated though local value addition is shared “more widely” and “fairly” among the different local actors within the supply chain ( i.e farmers, farm laborers, factory workers, etc.), thus allowing to effectively and accurately measure the impact of this model on poverty alleviation.
Unfortunately (but not surprisingly), Mr. Terry Horne has failed to provide quantitative data, figures and facts to support his poverty eradication rhetoric. I am also disappointed to read the same poverty eradication rhetoric in your articles on Equitrade without ANY quantitative data, figures and facts to support these claims.
I am hereby enclosing a copy of the letter addressed to Mr. Terry Horne on this and other important issues and questions relating to the Equitrade model and his response.
Hopefully, you too ( Andrew Purvis) can provide some facts and quantitative figures to support your claims on how Equitrade “could make poverty history on one tropical islands…” and “ is likely to bring huge financial benefits to the people of Madagascar…”
I look forward to hearing back from you in the near future.
Truthfully,
Arya Tajdin.
A seeker after Truth...
“ Equitrade facilitates added value international trade to end poverty in poor nations and aims to end poverty through sustainable commercial international trade.” It further claims that "Equitably traded product creates a more equitable share of the value for the poor nation", by adding-value to local commodities in the country of origin, instead of exporting raw agricultural commodities to be processed in the industrialized countries.
Please see www.equitrade.org for details.
Unfortunately, there is no quantitative data to support the poverty eradication rhetoric preached by the Equitrade model. I have written to Equitrade to obtain quantitative data, figures and facts to demonstrate how the wealth generated though local value addition is shared equitably, “more widely” and “fairly” among the different local actors within the supply chain ( i.e cocoa farmers, plantation laborers, factory workers, etc.), thus allowing to effectively and accurately measure the impact of this model on "ending poverty".
Unfortunately (but not surprisingly), Mr. Terry Horne ( Chairman of Equitrade and of Malagasy (the first Equitrade chocolate company in Madagascar) has failed to provide quantitative data, figures and facts to support his poverty eradication rhetoric.
Please find below a copy of the letter addressed to Mr. Terry Horne on this and other important issues and questions relating to the Equitrade model and his response. I welcome your comments and reflections. Thank you.
COPY OF LETTER ADDRESSED TO EQUITRADE AND RESPONSE BY MR TERRY HORNE, CHAIRMAN OF EQUITRADE AND OF MALAGASY.
---------- Original Message ----------------------------------
From: Arya
Date: Fri, 18 Aug 2006 13:51:47 +0200 (CEST)
>TO: EQUITRADE
> Langthwaite House
>Lancaster
>LA2 9EB
>United Kingdom
>
> To whom this may concern,
>
> I have recently discovered and read about the "equitrade" trading system. I agree in principle that the solution to reducing poverty in so-called developing nations is to add-value locally to primary commodities. However, I would like to get more information on this initiative as I could not find any information relating to the following important issues:
>
> 1) Equitable distribution of wealth generated through local value-addition
>
> According to information published on your website, you claim that: "Equitably traded product creates a more equitable share of the value for the poor nation".
>
> However, could you provide quantitative data to demonstrate how the wealth generated through local value addition is shared among the different local actors throughout the local supply chain ( i.e. farmers, laborers, factory workers, etc.) Furthermore, how is the price paid to local farmers for their commodities determined (ex: cocoa in Madagascar) and what percentage does the price paid to farmers for their commodities represent vis-a-vis the final retail price of the final product sold to consumers? What is the average monthly wage paid to factory workers in your chocolate factory in Madagascar?
>
> 2) Martket access
>
> How does Equitrade overcome the insurmontable trade barriers ( i.e. escalating tariffs, import tariffs, quotas, etc. ) erected in industrialized countries such as the EU against value-added products originating from developing nations?
>
> 3) Local tax revenue
>
> In your model, ( with the madagascar chocolate example), 11% of the revenue generated from local-value addition would be allocated to tax revenue for the government with the stated objective to: "Pay local taxes in a due and timely manner, so that education and health needs can be funded by local government."
>
> How can you guarantee that this amount will in fact be dedicated to "education and health" and other social development projects by the recipient government? What mechanisms have you put in place to make sure that the tax revenue generated from your project will indeed benefit the local population and serve the development needs of the country as a whole?
>
> I thank you for shedding some light into these interrogations and I look forward to hearing back from you in the near future.
>
> Best regards,
>
> Arya Tajdin.
> An environmentally and socially conscious global consumer.
>Dear Arya Tajdin,
Thank you for your interest in Equitrade and your interesting and useful questions.
Not all your questions are new and many we have needed to ask ourselves. Some we have answered already for other organizations.
I will take your questions in the order they appear in your letter:
1. Distribution of Wealth
(a) Share between farmers and labourers
We encourage the formation of co-operatives, governed by the rules of the International Cooperative Movement. Cooperative surpluses are shared between farmers and labourers, according to these rules.
(b) The price paid for commodities e.g. fermented cocoa beans in Madagascar
The price is determined by local market conditions and, since Malagasy have the opportunity to add value locally, Malagasy can afford to pay more than the export agents. This is turn enables growers to bargain for a better price from the exporters, since they have an alternative outlet.
Last year, beans typically traded at around £400 a ton (a premium over average world commodity prices-perhaps because of our promotion of Malagasy chocolate and Madagascar products generally?).
Fairtrade buyers (mainly from France) paid around £500 a ton-a premium of around 20-30%.
At the moment, we are paying the farmers about £600 a ton which is better than the best
fair-trade price available in Madagascar.
(If market conditions so dictated, Malagasy might be able to pay up to £800 a ton (double the world commodity price for similar beans) and still create sufficient added value in the Malagasy chocolate factory to support its inward investment in market and product development. This would again increase the bargaining power and price for other growers and pickers on the island and could positively affect the world price of beans, especially Criollo beans).
(c) The percentage of the final consumer price
As a percentage of what?
Equitrade cannot control the end prices paid by consumers- that is determined by retailers.
When Malagasy Mora Mora chocolate sells at a premium in gourmet London West End shops like Fortnum and Masson, that makes the percentage paid in Madagascar seem smaller, but when Sainsbury retails a 100gram bar for £1.27, or Booths wish to do a promotion of 2 bars for £2, that makes the local percentage seem higher. What Malagasy people need, is not percentages, it’s money. And that amount of money stays the same, whatever the retailer does.
The money received is about 10 times more than the money previously received for unprocessed beans. The percentage that that money represents of the UK consumer price, depends on the promotional policies of the UK retailers.
Equitrade cannot (and do not wish to) control the pricing policies of retailers. That is the retailer’s business and the retailer’s expertise.
(d) The average monthly wages paid to factory workers in Madagascar
Again these are determined by local market conditions. Any different arrangement would make Equitrade an unsustainable solution to poverty.
Having said that, Malagasy factory workers earn about 5 times more than pickers and growers. On the other hand, the living costs of factory workers are higher. Unlike their rural cousins, they need to rent housing and pay for utilities, electricity, local taxes etc. Their rural cousins often have no utilities and often their taxes are not collected.
[Incidentally, Arya, teams of investigative journalists from the Guardian newspapers group have visited the growers and the pickers, the plantations and the factory, and have written lengthy (and positive) evaluations of the quality of Malagasy and the economic impact of Equitrade. Perhaps, you can trace their reports on their websites (www.societyguardian.co.uk and www.observer.co.uk/food-monthly)]
2. Market Access
How does Equitrade overcome insurmountable trade barriers?
Equitrade does not overcome insurmountable trade barriers.
By definition, if the barriers are really insurmountable, Equitrade cannot surmount them.
In the case of Malagasy chocolate, marketing techniques were used to create consumer demand and an economic case for entry to the European market. EU officials were very helpful- they too have targets to meet for percentages of trade from developing countries and many local government authorities have set targets for the availability of Fairly Traded or Ethically Traded goods in the towns and cities for which they are responsible.
For example, our local town, Garstang, was the first Fair Trade Town in the world, and Preston, our nearest large city, has just become the 50th Fair Trade City in Europe. [Incidentally, Arya, the limitation on the spread of Ethical status to EU towns and cities is availability of supply!].
In the case of dairy products, the barriers remain unsurmounted, for the moment. Madagascar does not collect sufficient tax to provide the veterinary control infrastructure required to meet EU standards. (Eventually, Equitrade will help with that, because factory processors are easier to tax than rural pickers .You cannot pick up a factory and disappear with it into the forest!).
Equitrade is based on Noetic Applied Thinking (see www.noeticassociates.co.uk) and ways have been found through the barriers that could not be surmounted.
For example, the populations in the rural areas- especially in the coastal forest- were found to be decalcified. Cows were imported from New Zealand and ways found to keep them cool. Cheese and yoghurt are made from the milk. Cheese and yoghurt can be traded for commodities which can be processed and exported to the EU. In this way, hard currency is still earned for Madagascar and the bones of the Malagasy children are healthier on the higher calcium diet.
3. Local Tax Revenue
Can Equitrade guarantee that tax will be spent on education and health
No, Equitrade cannot guarantee that tax will be spent on education and health.
What we can say is that no taxes collected equals no pay for teachers and doctors.
When there is tax revenue, the people in developing countries want it to be spent on health and education, not on arms and palaces, for example. The task is to help government to be more responsive to the wishes of their people.
Noetic analysis indicates that political change is more likely to follow economic change and that economic change is more likely to be led by technological change. Hence, Equitrade emphasizes the use technology and knowledge transfer, especially marketing knowledge, to enable the economic retention of higher added value in developing countries. Political changes driven by government’s desire or need, to please or appease, the people, will follow (as Noetic thinking predicted they would in Eastern Europe, and today predicts that they will do in China).
In the case of Madagascar, workers in food factories helped to organize the rural vote for a democratic President. As the time now approaches for the President to seek re-election, the President is able to demonstrate to the people the progress that has been made in the areas of jobs, health and education.
Finally………………,
I am sure that our responses are not all that you hoped or expected.
However, we do hope that you will continue to help us think about the important issues which your useful questions have raised. You ask questions that are already in our minds and surely, in the minds of others.
May we print your letter and our reply (and perhaps your subsequent responses!) on our website?
Thank you.
Terry Horne
Chairman, The Equitrade Foundation
COPY OF MY RESPONSE TO MR. TERRY HORNE'S ABOVE RESPONSE
Dear Mr. Terry Horne,
Thank you for your response to my inquiry dated 18 August with reference to Equitrade. I have gone through your answers to each one of my specific questions, but unfortunately you did not provide answers to the following formulated specific questions:
1) Equitable distribution of wealth generated through local value-addition
Previously formulated question:
According to information published on your website, you claim that: "Equitably traded product creates a more equitable share of the value for the poor nation". However, could you provide quantitative data to demonstrate how the wealth generated through local value addition is shared among the different local actors throughout the local supply chain ( i.e. farmers, laborers, factory workers, etc.)
Your answer
1. Distribution of Wealth
(a) Share between farmers and labourers
We encourage the formation of co-operatives, governed by the rules of the International Cooperative Movement. Cooperative surpluses are shared between farmers and labourers, according to these rules.
There is no available information on your above-stated claim in your model (i.e. what mechanisms have you put in place to encourage the formation of co-operatives? Furthermore, are these cooperatives encouraged to take part in value-addition activities ( if so, what support do you or your model provide to enable cooperatives to process & market processed commodities?) or is their role simply to supply Equitrade companies such as Malagasy with non-processed primary commodities?
With reference to my initial question:
According to quantitative information published on your website, you claim that under Equitrade ( with the Malagasy chocolate example/model), 51% of the value of the product is retained in the country of origin, out of which 11% of the revenue generated is paid in taxes to the government and the remaining 40% is retained and distributed within the local supply chain.
QUESTION? Local value-addition wealth distributional breakdown
Can you provide quantitative data to demonstrate how the 40% wealth generated through local value addition is distributed among the different local actors within the local supply chain: (i.e farmers, pickers, etc., transporters, factory workers, etc.)?
Previous question: How is the price paid to local farmers for their commodities determined (ex: cocoa in Madagascar)
Answer
The price paid for commodities e.g. fermented cocoa beans in Madagascar
The price is determined by local market conditions and, since Malagasy have the opportunity to add value locally, Malagasy can afford to pay more than the export agents. This is turn enables growers to bargain for a better price from the exporters, since they have an alternative outlet.
:
Since prices of primary commodities “dumped” (i.e. sold at prices below and unrelated to the cost of production) on the world market are distorted by global agricultural subsidies (+300 billion/year), using “local market conditions” ( which are simply a reflection of world market commodity prices) to set prices of local commodities seems an inappropriate and an ineffective approach to “end poverty…” since ruinously low world commodity prices are at the root cause of poverty in rural economies around the world.
Agricultural subsidies leading to structural over-supply are at the root cause of declining agricultural commodity prices on the world market, with disastrous economic and social consequences for small holder farmers living off agriculture and for the countries producing and relying heavily on the export revenue from these commodities. Furthermore, declining world prices lead to further increases in production to make up for the loss in income resulting from lower prices, which in turn leads to further over-supply and further price declines. This is a vicious cycle.
Example: Ghana (2nd largest producer of cocoa in the world)
In response to declining prices of cocoa on the world market, Ghana increased its production from 320,000 MT to 450,000 MT between 1996 and 2000. This led to an excess supply of cocoa on the world market, with a resulting further 40% decline in the price of cocoa during the same period.
“Structural over supply in the commodity market lies at the heart of global poverty and instability.” ( Brandt Report, 1980)
Setting prices of local commodities based on actual local cost of production (using –non-exploitative labor practices) seems – in my humble opinion - like a more appropriate and consistent approach to attain your ambitious stated aim “to end poverty through sustainable commercial international trade.
Also, can you please provide quantitative data relating to the actual cost of production for small-scale cocoa farmers in Madagascar?
Also, what percentage of the cocoa currently processed by Malagasy is respectively grown by small-scale cocoa growers and by private cocoa plantations?
Question: what percentage does the price paid to farmers for their commodities represent vis-a-vis the final retail price of the final product sold to consumers?
Answer:
The percentage of the final consumer price
As a percentage of what?
Equitrade cannot control the end prices paid by consumers- that is determined by retailers.When Malagasy Mora Mora chocolate sells at a premium in gourmet London West End shops like Fortnum and Masson, that makes the percentage paid in Madagascar seem smaller, but when Sainsbury retails a 100gram bar for £1.27, or Booths wish to do a promotion of 2 bars for £2, that makes the local percentage seem higher. What Malagasy people need, is not percentages, it’s money. And that amount of money stays the same, whatever the retailer does. The money received is about 10 times more than the money previously received for unprocessed beans. The percentage that that money represents of the UK consumer price, depends on the promotional policies of the UK retailers. Equitrade cannot (and do not wish to) control the pricing policies of retailers. That is the retailer’s business and the retailer’s expertise.
Let me rephrase this question:
What is the percentage cost of the price paid to farmers for their cocoa vis-à-vis the export price (FOB Madagascar) of the chocolate produced and marketed by Malagasy?
Question: What is the average monthly wage paid to factory workers in your chocolate factory in Madagascar?
Answer:
(d) The average monthly wages paid to factory workers in Madagascar
Again these are determined by local market conditions. Any different arrangement would make Equitrade an unsustainable solution to poverty.
Having said that, Malagasy factory workers earn about 5 times more than pickers and growers. On the other hand, the living costs of factory workers are higher. Unlike their rural cousins, they need to rent housing and pay for utilities, electricity, local taxes etc. Their rural cousins often have no utilities and often their taxes are not collected.
Question 2:
Can you provide quantitative data (i.e. actual average monthly salary paid to Malagasy factory workers, farm/plantation laborers, and other local laborers working within the supply chain.)
[Incidentally, Arya, teams of investigative journalists from the Guardian newspapers group have visited the growers and the pickers, the plantations and the factory, and have written lengthy (and positive) evaluations of the quality of Malagasy and the economic impact of Equitrade. Perhaps, you can trace their reports on their websites (www.societyguardian.co.uk and www.observer.co.uk/food-monthly)]
I read with great interest all the articles written on the Equitrade model (with Malagasy taken as a reference) in both the sources quoted above. Unfortunately, I did not find any quantitative data to support the “poverty eradication” rhetoric that your model preaches… Hopefully you can support these claims with supportive quantitative data.
Final words…
lthough I agree in principle that the solution to breaking the vicious cycle of poverty in sub-Saharan Africa - and in other non-industrialized countries heavily dependent on producing & exporting non-processed agricultural commodities - is to process their commodities locally so as to break free from the dictate of the world market and from the vicious trap cycle of trade distorting global agricultural subsidies, which result in continuously declining prices of commodities on the world, thus further marginalizing and impoverishing small-scale farmers throughout the so-called “Third World”.
However, what I question in Equitrade is the EQUITABLE DISTRIBUTION of the wealth generated from local value-addition among the poor local economic actors throughout the supply chain (i.e. farmers, laborers, factory workers,etc.) Local value addition without distributional justice in the wealth created will NOT “end poverty” contrary to claims made by Equitrade. Hopefully, you will provide quantitative data – with quantitative figures and facts – to support these claims and demonstrate the real economic benefits that Equitrade brings to those it claims to help – the millions of poor who are daily exploited, marginalized and excluded from the fruits of global trade.
I look forward to hearing back from you in the near future.
p.s. You are welcome to publish my inquiries and your responses on your website or on any other media. Thank you for informing me and providing the reference of the source if you chose to do so. Thank you.
Truthfully,
Arya.
COPY OF EMAIL ADDRESSED TO GUARDIAN AND OBSERVER NEWSPAPER RECENTLY WITH REFERENCE TO THEIR ARTICLES OF EQUITRADE. ( Have not heard back from them yet; will post their response as soon as I get it).
September 24, 2006
TO THE GUARDIAN & OBSERVER
I am writing to you with reference to a series of articles published in the Guardian on Equitrade and the Malagasy chocolate model in Madagascar. In an article called “A square deal” written in the Observer by Lucy Siegle on August 21, 2005, Terry Horne of Noetic Associates (also the chairman of Malagasy) is quoted as saying that “ equitrade will eradicate poverty in Madagascar in 10 years.”
Andrew Purvis, in his article on Equitrade published in the Observer on August 14, 2005, further writes:
“Terry Horne has advised Tiko ( a company owned by president Ravalomanana of Madagascar) on the management of its factories and shared with President Ravalomanana his strategy for ending poverty in Madagascar.”
Excerpts of the article on Equitrade/Malagasy titled “Full of beans” by Andrew Purvis
“It is one of the poorest countries on earth, but a chocolate production scheme that involves local people, from growing the beans to shipping the finished product to Fortnum & Mason, could make poverty history on one tropical island, discovers Andrew Purvis
If a system new to Britain, called Equitrade, takes root on the Indian Ocean island 250 miles off Africa, its people could shake off the legacy of being among the poorest 10 nations on earth - by making gourmet chocolate. Jaomanoro's daughter, Rasoaricalaina Anistitia, 15, could realise her dream of becoming a doctor instead of helping with the cooking at home; her mother, Volanosy Augustine, could feed her four children better. Young men such as Tsiminday Wenceslas, 21, might finish their education and not feel compelled to work through their teens. 'It's a back-breaking job,' he says, 'helping my father on the plantation. I cut down 750 pods a day and carry them in 50kg sacks, so I have to be fit….Yet these farmers are the lucky ones…Fifty per cent of Madagascar's population earn less than one US dollar per year, scratching a living from the parched red earth or feeding themselves by fishing. In coastal areas especially, Madagascar seems like a palaeolithic time warp, the fishermen returning by dugout canoe to primitive huts of mud and reeds, lit by lanterns and without running water.
Even in the capital, Antananarivo - a shadow of its French colonial past, and brought to its knees by frequent power cuts - people go to extraordinary lengths to earn a crust. When we stop at traffic lights, our 4x4 is besieged by children begging and there are other signs of inventiveness - or desperation. On one side, men shuffle through the rain carrying garbage and bales of collapsed cardboard boxes on their shoulders, hoping for a resale. On the other, a young mother stands under an umbrella with her toddler, trying to sell two bananas and a handful of cashews. She is unlikely to make a dollar a day - the minimum required for a city dweller, according to aid workers.
All this could be about to change, however - thanks to a British management firm, Noetic Associates, which is advising Madagascar on how to bring its quality foods to the European market. It has helped set up Malagasy, a company that sells and markets finished chocolate bars. under the system known as Equitrade. A distant cousin of Fairtrade, equitable trade (to use its full name) is likely to bring huge financial benefits to the people of Madagascar - simply by dealing in finished, packaged products rather than cash crops like cocoa beans.
According to Neil Kelsall, Malagasy's marketing director,With Equitrade, the proportion of revenue remaining in Madagascar would be 51 per cent (87p per bar) - 40 per cent in added value retained by the manufacturer and packager, plus a further 11 per cent paid by them in taxes to the Madagascar government. This would then be reinvested in the country's Equitrade business.
'All it would take to end poverty in Madagascar is £750m a year,' Kelsall maintains, 'but there aren't enough cash crops to do that.' Ninety per cent of the cocoa grown on the 6,000-hectare plantation that Malagasy uses in Ambanja goes to the northern hemisphere. 'If we changed all that to equitable trade, poverty would be ended,' says Kelsall.
Eequitable trade relies on private companies - and national governments - to distribute 'added value' fairly. It is a capitalist system that lacks transparency but, by maximising the money in the economy, is said to benefit more people than Fairtrade.
The idea that Equitrade can end world poverty is an important change in the message coming from the northern hemisphere. Before, it was all about cancelling the debt of poorer countries which, in my view, isn't the right way forward. Now, it is about those poorer countries actually helping themselves, working with private enterprise to end poverty.' says Marcel Ramanandraibe, head of the group,
Finally, in another article called “ New Choc on the Block” published in The Guardian Society by John Vidal on May 25, 2005, Vidal writes “According to Neil Kelsall, Malagasy's marketing director, “Equitrade tries to improve the quality of life of the majority of people in a poor country by increasing the money in the economy…We need more companies to add value in poor countries. That way the benefits are shared more widely and more tax can be collected.
REFLEXIONS/QUESTIONS?
Terry Horne of Noetic Associates and chairman of Malagasy claims in the above quoted article that “ equitrade will eradicate poverty in Madagascar in 10 years.”
Neil Kelsall, Malagasy's marketing director, says that “equitrade tries to improve the quality of life of the majority of people in a poor country by increasing the money in the economy….We need more companies to add value in poor countries. That way the benefits are shared more widely and more tax can be collected.
Marcel Ramanandraibe, head of the group says that “the idea that Equitrade can end world poverty is an important change in the message coming from the northern hemisphere. Before, it was all about cancelling the debt of poorer countries which, in my view, isn't the right way forward. Now, it is about those poorer countries actually helping themselves, working with private enterprise to end poverty.
Furthermore, the Equitrade website ( www.equitrade.org) claims that “ Equitrade facilitates “added value” international trade to end poverty in poor nations” and “aims to end poverty through sustainable commercial international trade.”
Unfortunately, there is no quantitative data to support the poverty eradication rhetoric preached by the Equitrade model. I have written to Mr. Terry Horne to obtain quantitative data to demonstrate how the wealth generated though local value addition is shared “more widely” and “fairly” among the different local actors within the supply chain ( i.e farmers, farm laborers, factory workers, etc.), thus allowing to effectively and accurately measure the impact of this model on poverty alleviation.
Unfortunately (but not surprisingly), Mr. Terry Horne has failed to provide quantitative data, figures and facts to support his poverty eradication rhetoric. I am also disappointed to read the same poverty eradication rhetoric in your articles on Equitrade without ANY quantitative data, figures and facts to support these claims.
I am hereby enclosing a copy of the letter addressed to Mr. Terry Horne on this and other important issues and questions relating to the Equitrade model and his response.
Hopefully, you too ( Andrew Purvis) can provide some facts and quantitative figures to support your claims on how Equitrade “could make poverty history on one tropical islands…” and “ is likely to bring huge financial benefits to the people of Madagascar…”
I look forward to hearing back from you in the near future.
Truthfully,
Arya Tajdin.
A seeker after Truth...
THE WORLD IS NOW TOO SMALL FOR ANYTHING BUT TRUTH…
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