Perspectives in Responsible Sourcing

The “New Banana Agreement:” a rotten deal for small-scale farmers?

The recent decision by the EU to cut tariffs on Latin American bananas ended “the longest trade dispute in history.” In the deal, the EU, which is the world’s largest importer of bananas, agreed to gradually eliminate the preferential treatment that it provides to growers in former colonies.  

 

The decision will allow Latin American exporting countries such as Ecuador, Costa Rica and Guatemala to increase banana sales to Europe; however, the decision also means stiffer competition for many smaller countries in Africa and the Caribbean.  In the past, banana producers in these former colonies have argued that they were unable to compete with the expansive plantations in Latin America managed by large US-corporations such as Dole, Chiquita and Del Monte, thus justifying their preferential status.

 

What the EU’s decision means for labor conditions at plantations throughout banana exporting countries remains unclear. On the one hand, as the EU Trade Commission explains, the deal can potentially make the global banana market more stable, which will in turn encourage investment and growth, and hopefully “increased attention to wider production condition issues in the banana supply chains.” The EU also expects certain labor and environmental conditions from its trade partners and “does not tolerate” labor practices that fall below international norms.

 

On the other hand, the potential effects of this deal for small-scale banana exporters in former colonies could be devastating.  As opposed to the large corporate-owned plantations in Latin America, many bananas from the EU’s former colonies are grown by independent farmers, who, some argue, without protection will be disadvantaged and will have a hard time being profitable.  If this is the case the implications for farmers and their families are bleak.

 

In recent years stakeholders in the banana industry have made efforts to improve labor and environmental conditions on plantations and farms. For example, several of the large corporations have made genuineefforts to improve labor conditions on plantations, and global movements for sustainable business practices within the industry are gaining interest. Also promising is that as part of the deal, the EU has committed €200 million and proposed the creation of a support program to aid the transition in the countries that enjoyed preferential treatment.

 

Economists regularly point out that in free trade there are winners and losers. Let’s hope that the parties involved in this deal make responsible decisions that result in positive changes in the working conditions for both the “winners” and the “losers.”

The New Sheriff in Town - Part 2

Since our first article on the Department of Labor (DOL) and Secretary of Labor Hilda L. Solis back in April there have been a few report-worthy developments: 1) the Wage and Hour Division (WHD) recruited 250 new investigators; 2) the DOL plans to roll out a new public service campaign “We Can Help” in early 2010; and 3)the Occupational Health and Safety Administration (OSHA) has stated that it will hire over 100 new investigators if Congress approves the DOL’s 2010 budget.

Furthermore, during a live Q&A session on Tuesday December 8, WHD Deputy Administrator Nancy Leppink stated that WHD staff is currently undergoing intensive customer service training and a web site is being built specifically to assist with filing complaints. Her focus is on responding to complaints “in a more timely manner” and increasing “enforcement in industries that employ vulnerable workers” such as those in “agriculture, restaurants, janitorial [services], construction and car washes”. Secretary Solis, in addition, emphasized a revised training program for the new 250 WHD investigators.

New staff, training, and public outreach and access – it looks like the new sheriff means business.

It will be interesting to see how the enforcement statistics of the WHD and OSHA will change in 2010. I also look forward to future governmental studies like the one back in March 2009 from the Government Accountability Office (GAO) on WHD’s failure to address complaints or OSHA’s inadequate process of auditing health and safety records from October 2009, as well as non-governmental studies on labor violations, like the one published in September 2009 on “Violations of Employment and Labor Laws in America's Cities”. Perhaps they will share more positive news with us. Or perhaps I am just too optimistic.

If the public service campaign is rolled out successfully and the investigators are prepared to adequately enforce labor legislation, we will most certainly be hearing about more cases of collected fines and penalties. However, I also hope this heightened effort by the DOL will lead managers to take a look at their enterprises before the sheriff knocks on their door.

Washing a dirty human rights record green

In the run-up to the summit in Copenhagen there has been much talk about climate change and the need for immediate concerted global action. A very recent report has decreased the time-line for corrective action considerably and pressure for a successful summit has increased even more. But, unsurprisingly, the US has already dampened hopes for any binding agreement whilst China, surprisingly, has emerged as a front-running eco warrior.

In the mean time, commentators have suggested that maybe we should be looking to companies, as opposed to states, for climate leadership (see, for example,
http://www.nytimes.com/2009/12/06/opinion/06diamond.html?pagewanted=1&_r=1 ).
This is an interesting perspective and, in terms of social responsibility and sustainability, a great leap forward. Nevertheless, it may be prudent to take all this with a pinch of salt.

A perfect case study is the relationship between Indonesia and one of the world’s largest pulp and paper factories, Asia Pacific Resources International Limited (APRIL). On the one hand, Indonesia, the third-largest contributor to global warming (after the US and China), must desperately seek to limit its greenhouse gas emissions, much of which stem from the peat land in the Kampar Peninsula. However, to date, the only detailed plans for carbon-cutting action in the Peninsula have been submitted by APRIL who, as critics point out, is in fact a significant contributor to the problem in the first place and is desperately seeking further logging concessions.

Given the global crisis and the need for action sooner rather than later a proactive approach – for whatever reasons (see the New York Times for a discussion: http://www.nytimes.com/2009/11/30/science/earth/30climate.html?_r=2&ref=global-home ) – would appear to be the required step. And surely we should welcome any remedying action by contributors to the climate dilemma. But at what cost exactly is this pro-climate action being taken? A joint report by the NGOs Forest Peoples Programme (FPP) and Scale Up (http://www.forestpeoples.org/documents/asia_pacific/indonesia_rights_briefing_oct09_eng.pdf) explains that 33,000 people depend wholly or in part on the forests in Kampar Peninsula. However, APRIL’s proposed plans would “imply clearance of the degraded forests around the periphery of the Peninsula and, as presented, does not specify where local people would make their living or what rights they would have in the newly designated plantations, buffer zones or core conservation areas.”

Further enquiries by the NGOs revealed that APRIL had already secured 97,000 ha of plantation permits in the Peninsula. “None of the communities had been given clear information about the project, no efforts had been made by the company to assess communities’ land use systems or customary rights, no measures had been taken to identify their representative organizations, and no negotiations had been undertaken to secure their agreement to the proposed project.”

As commentators have pointed out, APRIL’s green plan appears to have finally gained them access to an area protected by permit requirements. There is no doubt that climate action must be taken now and that companies play an invaluable role, however, it would be tragic if we allowed ourselves to become blinded to rights abuses covered up by greenwashing campaigns. Although green efforts are welcome, they don’t paint the whole picture.

Daphne Guelker
Research Associate

8 hours of Q&A with the U.S. Department of Labor

The eight-hour Q&A session with the Department of Labor has just kicked off at 1:00pm EST on Monday, December 7.  Secretary of Labor Hilda L. Solis took live questions from the public for about an hour.  Next sessions running from today until Wednesday, December 9 include live Q&A with the Occupational Safety and Health Administration and the Wage and Hour Division.

For more information go to: http://www.dol.gov/regulations/index.htm#chats

100% scanning rule developments

GAO criticizes lack of analysis by DHS into roll out of rule, while Napolitano delays action until 2012

GAO recently issued a report on the progress made by DHS to prepare for the roll out of the 100% container scanning rule, part of the SAFE Ports Act of 2007. The study focused on the progress of the Secure Freight Initiative (SFI) as a sort of pilot project of the wider rule. The report found that the SFI program is being carried out with limited success in five international ports, three representing relatively low volume of total container traffic to the US, and two representing high volume ports. Even in the low volume ports 100% had not been achieved,  whereas in the high volume ports less than 5% is being scanned.

The 100% scanning rule has been the subject of controversy since it was approved by congress. Many business leaders, foreign government officials, logistics professionals and CBP itself have expressed strong concern about the viability of this project, its actual effectiveness, the cost of implementation, and the international policy implications of a program with heavy costs for foreign governments. According to an article in Logistics Management “’ "[The GAO} findings are absolutely not surprising at all,’ said Albert Saphir, president of international trade consultants ABS Consulting in Fort Lauderdale, Fla. ‘Any practical on the ground study, approach or discussion certainly all point in the same direction in that the mandate that was put out...cannot be met. We cannot impose U.S. law onto foreign soil…’” (See link to full article below)

The GAO report went on to find the following points:

• CBP has made limited progress in scanning containers at the initial ports participating in the SFI program, leaving the feasibility of 100 percent scanning largely unproven
• CBP has not developed a plan to scan 100 percent of U.S.-bound container cargo by 2012, but has a strategy to expand SFI to select ports where it will mitigate the greatest risk of WMD entering the United States.
• CBP, while identifying some SFI program costs, has not developed a complete estimate of U.S. program costs because of the lack of a decision on a clear path forward.
• CPB faces a number of potential challenges in integrating the 100 percent scanning requirement into its existing container security programs

In concluding, GAO recommends CBP “complete a feasibility analysis, cost estimates, and a cost-benefit analysis, and provide these results to Congress.”

In a related news item, Janet Napolitano, Secretary of Homeland Security, announced that DHS will issue a two year extension for requiring the 100% cargo scanning rule to be implemented in all ports where US imports originate. As reported in an article in Sandler, Travis and Rosenberg,  “Napolitano said meeting this deadline with existing resources and technology is virtually impossible due to numerous challenges” and that “[a]according to reports, there was little opposition to Napolitano’s plan among senators attending the hearing.” This last point is interesting, as it indicates that among the congress members who are aware of the challenges, this delay tactic was anticipated and not entirely unwelcome. The fact that these possible extensions were built into the legislation from the beginning seems to point to a realization by Congress that this legislation would not be enforeceable for years to come.

Moreover, apart from the aforementioned concerns with the 100% scanning rule, CBP has speculated that it have the negative and somewhat perverse effect on supply chain security in that it will reduce the incentive for partners to participate in the SFI, CSI or C-TPAT program.  As mentioned in the ST&R article, the requirement of scanning all cargo in ports of origin essentially negates any incentive for companies to dedicate resources to implementing a minimum security standard throughout their company or their supply chain, as they will not receive noticeably fewer security inspections that non-C-TPAT members.
While this action by DHS essentially “kicks the can down the road”, the question remains what will need to take place in the long run: whether DHS must eventually enforce the rule, or whether Congress will have to reverse its decision regarding this contentious issue.

Sources:
1. SUPPLY CHAIN SECURITY: Feasibility and Cost-Benefit Analysis Would Assist DHS and Congress in Assessing and Implementing the Requirement to Scan 100 Percent of U.S.-Bound Containers
United States Government Accountability Office, Report to Congressional Requesters. October 2009.

2. Ocean shipping/cargo security: GAO report indicates 100 percent cargo scanning has a long way to go Jeff Berman, Group News Editor -- Logistics Management, 12/3/2009

http://www.logisticsmgmt.com/article/409024-Ocean_shipping_cargo_security_GAO_report_indicates_100_percent_cargo_scanning_has_a_long_way_to_go.php

3. DHS to Push Back Deadline for 100% Cargo Scanning
World Trade Interactive
Sandler, Travis and Rosenberg
http://www.strtrade.com/wti/wti.asp?pub=0&story=33416&date=12%2F4%2F2009&company=