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.

The New Sheriff in Town

The Government Accountability Office (GAO) recently concluded a nine month investigation into the complaint processes of the Wage and Hour Division of the Labor Department. The investigation, sponsored by the House Education and Labor Committee, conducted fictitious undercover calls to Wage and Hour Division employees. The study concluded that complaints were inadequately handled in various ways, including failure to follow-up on employee complaints, failure to be persistent with unresponsive employers, closing cases after employers stated inability to pay back wages, and advising callers to seek legal assistance.

Of the 10 fictitious complaints posed to the Labor Department, two cases concluded with Division employees falsely recording the successful payment of back wages in the Division database.  Five cases were completely left out of the database, one of which was a child labor complaint involving heavy machinery work at a meat packing plant. The remaining three cases failed to be investigated.

The investigation also included an examination of various real complaints handled by the Division in the last nine months. One such complaint, issued by a group of restaurant workers, involved $230,000 in off-clock labor and misappropriated tips. After taking 22 months to initiate an investigation into the complaint, the Division closed the case once the restaurant agreed to pay back wages, not including tips.

What does this mean to the social responsibility professional? An immediate response might be one of indignation: without scrupulous enforceability from the powers that be, why utilize resources to ensure that high levels of labor standards exist within your supply chain? Government enforceability of labor standards always acted, along with brand protection, consumer confidence and pure ethics, as an impetus for proactively assessing supply chain labor standards. Thus, if enforceability is apparently falling short, what should be done?

If you find yourself treading down this thought path, stay calm.  Remember, the GAO investigation focused on the last nine months of Wage and Hour Division complaints. Rather than highlighting the lack of performance of the current Labor Department, the investigation is a “shame on you” to the previous department. In other words, the investigation will set precedence for the “new sheriff in town”, Secretary of Labor Hilda L. Solis, who was confirmed by the Senate just a few weeks ago. Solis already plans on increasing the Labor Department workforce by 30%, hiring 150 more wage and child labor law investigators, as well as 100 additional wage and hour investigators to focus solely on stimulus project contractors.

Thus, government enforceability of labor standards will not only remain an impetus for proactive supply chain labor standard assessments, but will play an even more important role in the next few years.

 

Furthermore, the GAO investigation highlights the value of checks and balances. One mechanism alone should not be assumed to be sufficient. It is essential to “check the checker” to ensure effective enforcement, and to identify weaknesses as opportunities for improvement. Although the Wage and Hour Division fell short in its mission, the GAO investigation acted as a balance by checking the checker. Using the shortcomings identified by the investigation, the new Department under Solis can implement any changes needed to improve processes. 

This case shows that a system of checks and balances is essential to any monitoring effort, whether internal, external, governmental or non-governmental. Companies that rely solely on one monitoring mechanism should implement a check the checker system, or diversify their program to include additional components to act as a balance. When it comes to storing eggs, we all know the dangers of only one basket.

 

Rishi Arora

Research Associate