i.want.world

Fair Trade - Just Another Scam

Nestlé has just announced that KitKat – Britain's biggest-selling chocolate bar – will carry the Fairtrade logo from next month. But how much do consumers really know about the Fairtrade movement? Is it, as some say, an essential safety net that helps poor farmers earn a better living or, as others say, an example of western feel-good tokenism that holds back modernisation and entrenches agrarian poverty?  

We might think of sub-Saharan subsistence economies when we think of Fairtrade, but the biggest recipient of Fairtrade subsidy is actually Mexico. Mexico is the biggest producer of Fairtrade coffee with about 23% market share. Indeed, as of 2002, 181 of the 300 Fairtrade coffee producers were located in South America and the Caribbean. As Marc Sidwell points out, while Mexico has 51 Fairtrade producers, Burundi has none, Ethiopia four and Rwanda just 10 – meaning that "Fairtrade pays to support relatively wealthy Mexican coffee farmers at the expense of poorer nations".

The article additionally points out:

Another criticism is over institutional inefficiencies. The vast majority of the money from Fairtrade sales remains in the west – with only about 5% of the Fairtrade sale price actually making it back to the farmers. As Philip Oppenheim says, "any intelligent person will ask why I should pay 80p more for my bananas when only 5p will end up with the producer". Fundamental to the failure of wealth transfer are issues such as the fact that while 90% of the world's cocoa is produced in the developing world, only 4% of the chocolate is produced there. Developing countries remain locked in the primary sector commodities market, while the west cashes in on their value-added conversion.

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How do you like your chicken: with or without chemicals?

Roughly speaking, that's the issue in the EC - Measures Affecting Poultry Meat WTO dispute (DS389), for which the U.S. recently announced it will request a panel. The panel request describes the issue as follows:

The EC prohibits the import of poultry treated with any substance other than water unless that substance has been approved by the EC. The EC has not approved any other substance. Consequently, the EC prohibits the import of poultry that has been processed with chemical treatments ("pathogen reduction treatments" or "PRTs") designed to reduce the amount of microbes on the meat, effectively prohibiting the shipment of virtually all US poultry to the EC. The EC has not published or otherwise made available the process for approving a substance. The EC also maintains a measure regarding the marketing standards for poultry meat, which defines "poultrymeat" as only "poultrymeat suitable for human consumption, which has not undergone any treatment other than cold treatment."

In 2002, the United States requested the European Commission ("Commission") to approve the use of four PRTs in the production of poultry intended for export to the EC: acidified sodium chlorite, trisodium phosphate, peroxyacids, and chlorine dioxide. However, after more than six years, including unexplained delays, the EC has not approved any of these four PRTs and instead has rejected the approval of their use.

The EC's failure to approve is despite the fact that various EC agencies have issued scientific reports regarding a number of different aspects related to the processing of poultry with these four PRTs. Those reports did not find any scientific basis for banning the use of these PRTs. To the contrary, the conclusion of these reports is that the importation and consumption of poultry processed with these four PRTs does not pose a risk to human health.

In a nutshell, the trade issue is the following: U.S. producers use chemicals to clean their poultry, but the EC does not allow the sale of poultry cleaned this way, so U.S. producers can't sell their poultry in the EC.

For SPS disputes, I'm always interested to see how the substance of the dispute is presented, in particular whether the claim is mainly about "discrimination," "necessity," or "science," or some combination of these three.  Here, the parties seem to want to take different approaches to characterizing the dispute. From the USTR press release:

"The U.S. poultry subject to the EU ban is safe. There is no scientific evidence that the use of pathogen reduction treatments pose any health risk to consumers," said Nefeterius McPherson, a USTR spokeswoman.

By contrast, from the DG Trade press release: "we will defend our food safety legislation, which does not discriminate against imported products."  So, in the battle of the press releases, it's about science for the U.S., whereas for the EC it's about discrimination (or lack thereof).

Of course, it's the panel request that really matters in this regard.  Here are some of the key provisions the U.S. cited in the request and what they are mainly about:

SPS Agreement Article 2.2 - Necessity and Science

SPS Agreement Articles 5.1 and 5.2 - Science 

GATT Article III:4 - Non-Discrimination

GATT Article XI:1 -  Quotas and other Import Restrictions.  (This one could be interesting if it explores the intersection between import restrictions and domestic regulations, given that the measure bans all such poultry, not just imports)

TBT Agreement Article 2.1 - Non-Discrimination

It's interesting that the U.S. press release does not mention discrimination, but the panel request cites some discrimination provisions.  I'm not sure what to make of that.  I would have thought it would be a good idea to sell the case as being about discrimination, at least in part.

It's also worth noting that in the consultations request, the U.S. left out explicit references to the non-discrimination provisions.  There, the U.S. cited SPS Agreement Articles 2.2, 5, 8 and Annex C(1); GATT Articles X:1 and XI:1; Agriculture Agreement Article 4.2; and TBT Agreement Article 2 (without mentioning which sub-provisions).

The substance of the discrimination claims will also be worth following.  From what I can tell, this will be a claim of de facto discrimination, as the measures apply to all products regardless of origin.  It is these kinds of claims that often give the most insights into the scope of the non-discrimination standard.

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the Economist on buying local

 via International Economic Law and Policy Blog by Simon Lester on 8/7/09

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