Global Trade Mailing List Archive

[Andrew Parnell <<address removed>>]

Dear Participants

Since both Kate and myself have concentrated on issues to do with the 
lack of competition in global supply chains and recognising DFID's 
capacity to influence international competition policy is at best 
limited, I feel that the best approach so far is to build upon Peter 
Robbins ideas of Supply Management, and try to make it work better this 
time round. Peter and others who have worked on Supply Management 
solutions will be best placed to discuss this and therefore, I'm going 
to concentrate on other interim solutions whilst we await a new SM 
regime to be established internationally. I think the good thing about 
Supply Management agreements is that even companies like Nestle seem to 
be saying its a good idea so opposition will come mostly from the 
'Doubting Thomas' types and the neo-liberal Washington Consensus types 
but fierce competition from within the existing industry to the idea 
may not eventuate. This presents a golden opportunity to set up a 
system that works for the poor by cutting back production based upon 
agreed percentages. If producers could be convinced of its merits (who 
will no doubt be highly skeptical) then world prices would rise.

There seems to be general agreement within this discussion forum that a 
'free market' approach hasn't actually worked (due in part to lack of 
competition in reality?) and that market intervention at this stage to 
benefit poor producers is indeed what is needed. In an effort to 
stimulate pro-poor solutions I thought a 'brain storming approach' may 
just work to help generate some of the answers we need. I don't think 
this will detract from some of the well researched strategies as 
expressed by Peter and Vinay but may build upon some of their ideas.

1. Building the key principles of Fair Trade as IFAT mention 
(www.ifat.org) into existing Northern Government Procurement contracts 
is one of my main ideas. This would increase the Fair Trade market by 
increasing demand (government procurement of tropical commodities must 
be quite extensive???). It doesn't just have to be fair trade but 
ensuring that pro-poor procurement policies are adopted in the £15 
billion or so that the government spends on procurement each year would 
go a long way to helping the poor. If even 10% of the money spent on 
procurement of supplies from developing countries was confirmed, the 
possible pot of funds going back to poor producers in developing 
countries would be no small victory for them. Nor does this break 
competition laws because 'best value' doesn't necessarily mean lowest 
price but best value for the purpose required. It can be well argued 
effectively that reaching our MDG's on target is part of that best 
value in government tenders. Of all the ideas in this post, I think 
this one has the most merit in acting as a major driver for cleaning up 
the global commodity markets as governments have enormous contractual 
and buying power on suppliers. By designing in pro-poor policies into 
contractual arrangements, governments could lead the way on ensuring 
that trade works for the poor and set us all a sterling example of it 
in practice.

2. Including a 'tobin' style tax onto the trades done on commodity 
markets which, could then be used to set up your international supply 
management system for example or used as a resource to take away other 
constraint issues towards such a system in developing countries. Is 
this beyond DFID's capacity? As commodity prices are largely controlled 
on the New York and London stock exchanges, it would have to be a 
bilateral agreement with the USA...so this solution would more likely 
work in a few years time perhaps? What's to stop commodity market bids 
moving to other stock exchanges though...in otherwords, I acknowledge 
the difficulties in setting up such a tax but there may be a workable 
solution to these barriers?

3. Building up an 'Ethical Sector' based on the industrial nodes theory 
(e.g., an 'Ethical Silicon Valley') that can learn the value of ethical 
trade and hopefully make ethical and fair trade systems become 
mainstream enough to rival conventional traders. This would compliment 
a Supply Management system by increasing support for ethical and fair 
trading arrangements. Instead of Special Economic Zones and Free Trade 
Zones, we'd have Fair Trade Zones and Special Ethical Zones where 
Ethical Businesses get tax breaks from Northern governments and other 
incentives to set up FDI in developing countries and in congregating in 
special areas in Britain where these companies could feed off each 
other in terms of building an ethical culture of innovation. In order 
for this to happen, we perhaps need more support from other agencies 
such as the DTI and the WDA for example.

4. We could try and introduce more competition.  I think this is where 
firms like Cafe Direct have been quite successful (ranked 6th instant 
coffee in the UK for example) but there is probably a limit to what 
they can do because the cheaper end of the coffee market is marketed on 
price competition not quality.

5. DfID have already shown their willingness to support a new 
international division of labour by helping to move processing and 
value added techniques to developing countries. It makes sense to dry 
fruit for example in developing countries BEFORE exporting it over to 
Northern markets and Fruits of the Nile in Uganda is a good case study 
on how this could be achieved. Increasing support for niche markets is 
a short term solution though and will not break either mainstream 
oligopsonies on supply chains or indeed overproduction by the masses of 
farmers. Still, my vote is that demonstration projects such as these 
help 'prove' that sustainable agriculture can be achieved and work in 
the poor's favour and believe support for moving value added production 
techniques to developing countries does more good than harm.

6. I like Kate's ideas of ensuring that any quality standards set in 
the EU should be participatory in nature and currently things like Food 
Health Standards and other barriers to trade are determined within the 
EU Bureaucracy and by the Food Standards Agency here in Britain. In the 
case of Brazil nuts coming from Bolivia for example, was DfID involved 
in setting those 'health standards' in levels of toxicity despite being 
way above the standards recommended by WHO? I presume that DFID or 
other development agencies in the EU had little input into that 
'consultation' process? Whilst the WTO settles disputes that can take 
years and lots of money, some of these disputes could be resolved long 
before that by allowing development agencies to input into this process 
in the EU earlier on.

7. Whilst Fairtrade and Fairly Traded commodities are only tiny 
percentages of the market, lets not forget the difference it really is 
making. For example, The Kasinthula Cane Growers Association in 
southern Malawi produced about 10,000 tons of sugar last year with 
about 700 tons of it going to the Fair Trade market. Yet its this 700 
tons that is allowing them to build a health clinic, place water pumps 
into the village and send their kids to school. The other 9, 300 tons 
of sugar where they get the world market price, puts food on the table 
and keeps the farmers 'ticking over'. In this instance, quality over 
volume is making the difference needed. Support by DFID should 
therefore continue to increase market access by the use of Fair Trade 
trading terms. If Fair Trade were to take 10% of the world market share 
of commodities, with or without a Supply Management system, farmer's 
lives would be greatly improved. The problem is the lack of capacity of 
bodies such as the Fair Trade Foundation (who really need triple the 
staff) and marketing of Fair Trade is mostly still confined to pressure 
groups, charities and the small FT companies. Tropical Wholefoods for 
example, don't have the capacity to produce an extended range of 
merchandise and could greatly benefit from government business 
development grants. I'm not singling out any company as more favourable 
than others but believe we should give real life examples in our 
discussion. A special grant fund could be set up within the Welsh 
Development Agency and other business development funding agencies for 
ethical and fair trade businesses or even DFID. This would help in 
developing an increase in market access for poor producers in 
developing countries. Currently, this kind of funding is available for 
other business sectors so the case can be made for developing this 
sector too.

Some of these ideas are perhaps better than others but I feel its 
important to give as many ideas as possible during the consultation 
process so that the best ones can be 'cherry picked' for further 
development or research.

Kind regards



Andy Parnell
Business Links Coordinator
 
<address removed>

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