FAIR TRADE IN FOOD Church of Scotland Church and Society Council Summary of the Report to the General Assembly 2007 Church and Society Council Church of Scotland 121 George Street, Edinburgh, EH2 4YN Phone: 0131 225 5722 www.churchofscotland.org.uk Charity Number: SC011353 May 2007 Fair Trade in Food How can we help maintain a strong Scottish agriculture that does not disadvantage producers in the developing countries and which is also fair to consumers? When you reap the harvest in your land, do not reap right up to the edges of your field or gather the gleanings of your crop. Leave them for the poor and for the alien. Leviticus 23.22 When you have plenty to eat and live in fine houses of your own building, when your herds and flocks, your silver and gold and all your possessions increase do not become proud and forget the Lord your God. Deuteronomy 8.12-14 The field of the poor may yield much food, but it is swept away through injustice. Proverbs 13.23 Putting the Issues in Context “Food is a central theme throughout the Bible because of the web of interactions it evokes: interactions between people and the land, between people as social actors and between people and the divine. How food was produced, distributed, prepared and eaten had consequences which went far beyond the supply of nourishment to peoples bodies.”(1) The frequency of references to food and to meals in the Bible indicate the central importance of food related issues, the centrality of food to the structure of societies and the contribution of food production to environmental and heritage issues. Agriculture has long been recognised as “multifunctional” (2). The preoccupation of looking at food and trade in food as purely economic issues is of recent vintage. Over recent years agriculture has changed greatly both in Scotland and throughout the world. By 2020, it is estimated that the world’s population will reach around 7.5 billion (current estimate 6.4 billion). Yet both food security globally, and levels of malnutrition throughout the world (measured as a percentage of total populations) have improved greatly in the last 30 years (3). In all continents except Africa, (4) the number of underweight children has declined; however, malnutrition among African children continues to increase. Overall, the number of hungry people in developing countries, excluding China, grew from 630 million to 673 million between 1990 and 2002. An estimated 824 million people in the developing world were affected by chronic hunger in 2003 (5). These are major challenges for international food policy. World wide over the past 50 years food supply has increased at a faster rate than population growth. (6) This has sometimes led to stability but also to reductions in the world market prices of many food products, such as wheat, rice, beef and soya. Looking ahead it seems improbable that such a situation can continue. World population continues to grow. The factors which have permitted increases in agricultural production, especially those related to bringing new land into cultivation, the use of water for irrigation and the use of chemicals, seem less capable of increase in the future. Trade is increasingly vital to secure food supplies and so global issues have an increased importance to those who live in Scotland. International institutions have become increasingly important. The current shape of Scottish agriculture is largely a product of the EU Common Agricultural Policy (CAP). Until recently it influenced what was grown and how much was grown. It still provides much of the funding for most of agriculture. The Single Farm Payment, which effectively gave farmers freedom over what they might grow, became effective as recently as 2005. It will change again and seems likely to decrease in 2013. International trade is ruled by the deliberations of the World Trade Organisation (WTO), by organisations such as the World Bank and by multinational companies such as Wal-Mart. If we wish to influence trade in food, at home or in the developing countries then we must affect the deliberations of such organisations. In Scotland, as in other developed countries, the overall quantity and choice of foods available has improved greatly in the past 50 years. However, in a mainly urban society, the pattern of food consumption has changed as society itself has changed. This has resulted in changes in where we buy food, the variety of food we consume, the amounts of food consumed outwith the home, and the sources of the food which is “eaten out”. Traditional school meals have decreased while consumption of “fast foods” has increased, and there are large social structural issues around changes in who we eat with. The increasing dominance of supermarkets and large commercial food processing companies in the mass market has dramatically changed the way people shop, eat, and think about food. The strength of the supermarket sector and the small number of players has meant that many of the crucial decisions about food have moved beyond the control of governments and into the hands of companies which may not be UK based. The issue of fair trade in food thus clearly goes far beyond consideration of markets and of economics. It is a microcosm of most of the major issues where global economic drivers and wider societal values, especially Christian values, are in tension. In seeking to address current issues related to the fair trading of food a wider range of issues such as the role of government and the striking of an appropriate balance between economic drivers and sustainability, particularly of the environment and of social structures, must be considered. Domestic Issues Seen from a Scottish perspective many of the issues as they influence those who produce our food and manage our countryside can be summarised by the views expressed to us by a single Scottish producer. Comments from Ron Duncan, a Scottish Farmer My farm is 500 acres in total – 400acres cereal, 100acres grass for 150 breeding cattle. I have no full time labour – three sons all interested, helping out when available. My wife is now working part time away from the farm to help support our life style. Like pawns in a game, we jump through hoops to produce the standard and safety of food/raw materials society demands, (while the same unregulated produce can be imported from the other side of the world at a much lower price). Direct subsidies have all but disappeared in this country. They have been replaced by the Single Farm Payment, which is already being eroded at an alarming rate and will almost certainly disappear completely by 2010/12. Lots of farms like mine will simply vanish and be swallowed up by much bigger enterprises if the price for our produce does not increase substantially. Eg the best year on our farm for many years was two years ago but take away the SFP from the bottom line and our income was £4000. Our grain is all on contract. I will eventually receive £80/tonne for 2006 produce. I received £160/ per tonne for the same produce 20 years ago!! At the same time, the price of fuel and fertiliser has doubled. How can this work? Without some form of subsidy, it can’t. Our industry is under the microscope from all sides. We have inspectors (whose salaries farmers can only dream of) for everything we produce. This ensures that only the highest quality produce is presented to the public. This may not be the case worldwide. We farm under environmentally considerate conditions in this country and have the paperwork to prove it. Legislation comes in large doses in our industry and that is the biggest “turn off”. Duplication from various departments increases by the year. What’s good? We have to keep very close records of everything we do on the land. Everything we produce, how it was treated ie fertiliser, chemicals, what the weather was like the day we sprayed the crop has to be noted. Every animal born (cattle) has to be individually registered and recorded and ear-tagged. These are some of the disciplines that make our business more efficient. What’s bad? Everybody wants to know – eg SEERAD, SEPA, BCMS, QMS, QAFC, OTMS, to mention but a few! Unless we are prepared to pay more for our food, there will be no conflict with Third World farming because there will be no farming left in this country in a very short time. In Scottish political terms, issues of food and agriculture are complicated by being the responsibilities of different levels of Government. Responsibility for agriculture and rural development is devolved to the Scottish administration. But negotiations regarding European policy development, and hence the CAP, are conducted at the UK level, while negotiations with the WTO are conducted by the European Commission, with input from London. The Scottish Executive has discretionary powers when it comes to the administration of the single farm payment, and processing and marketing grants; but Scottish ministers have only a marginal influence when it comes to trade negotiations, although they can negotiate on behalf of Scottish farming on such things as the recent removal of the beef export ban. One question is how can Scottish concerns be adequately reflected at these international levels? A related one is how individual Christians or Churches can influence these international organisations and multi-national businesses? The above economically driven ideas envisage Scottish and UK agriculture competing effectively and efficiently in global agricultural markets freed from barriers that inhibit trade and production. However it would seem to us that the key issue within the food sector is that currently there are no free and fair markets in the trading of food. In addition these markets impact socially upon people as much as they impact economically on production. Any just vision for Scottish agriculture must therefore be concerned with the wider issues of trade justice. Solutions for Scottish agriculture must take account of the social impact of global trading systems on people, especially on those in the developing countries. Developing Country Issues Effects of EU and US export subsidies Dairy - Jamaica Winston Tailor, a Jamaican dairy farmer, inherited his land and everything he knew about dairy farming from his grandparents. He delivered fresh milk from his 25 dairy cows to locally based processors who turned it into various dairy products for Jamaican markets. However, a surge of milk powder imports into the Jamaican market – 67% from the EU – squeezed Winston out of business. He simply could not compete with cheap, subsidised EU milk powder flooding into Jamaica. The EU was estimated to be subsidising milk powder exports into Jamaica to the tune of € 4 million annually – with most of those subsidies going to European processors and exporters rather than European dairy farmers. In the end (2002) Winston was forced to sell his dairy cows to the butchers for meat. Maize - Mexico US corn producers receive US$10 billion a year in government subsidies and credits, enabling them to export cheap corn into Mexican markets, destroying livelihoods for poor Mexican farmers. The NAFTA agreement, concluded between the US, Canada and Mexico in 1994, changed the structure of Mexican agricultural production and trade. Large-scale producers, often linked to United States agribusiness interests, expanded exports of fruits and vegetables (such as tomatoes) to the United States. But maize imports from the US to Mexico more than trebled as import licensing was replaced by tariff quotas in Mexico. Mexican maize prices fell by 50 percent. This benefited livestock producers and consumers. However, the brunt of the price decline was borne by the 3 million small-scale maize farmers producing on non-irrigated hillside fields, who did not have the flexibility to shift into other crops. (6) Jose Manuel Gonzales, a peasant farmer from Chiapas, one of Mexico’s poorest regions, saw the price for his home-grown corn collapse by half under the pressure of this competition from subsidised imports. He now works 6-7 days every week to earn less than US$2 a day. Chicken - Ghana Francis Kumajor runs up and down a busy road in the centre of Accra, trying to sell chickens to commuters in the sweltering heat. Few drivers, in their air-conditioned vehicles, stop for him. “For the whole day I have not managed to sell enough to pay my rent” complains Kumajor, with three cages of birds still standing by the roadside. The cause of Francis’ plight is not difficult to find; in fact, he articulates the problem well. “Walk into any supermarket and you will find they are bulging with imported frozen chicken”, he says. People do not want to buy local chicken because imported ones are much cheaper.” For the last few years the Ghanaian market has been flooded with cheap imported chicken from the EU and the US. Demand for local poultry has collapsed, threatening the livelihoods of over 400,000 poultry farmers in Ghana. In 2004, imports were estimated to be as high as 40,000 tonnes. In 1992, domestic farmers supplied 95% of the Ghanaian market, but in 2001 their share was only 11%. Importers pay a duty of 20% on poultry shipped into Ghana. Under WTO rules, the tax could be as high as 99%. In 1994, the Ghanaian parliament passed a law allowing an additional 20% duty to be imposed on imported chicken, bringing the overall tax to 40% - perhaps still not high enough to combat the subsidized chicken imports. However, under pressure from the IMF, the duty increase was reversed two months after its increase. And in 2006, the Ghanaian Government overturned the Act under which the duty was raised, even though a court had recently ruled in favour of farmers seeking the duty protection. The matter will likely go to Ghana’s Supreme Court. (Sources: Oxfam and CorpWatch) The principle of comparative advantage suggests that each country should specialize in production of things it can produce at relatively lower cost. This economic rule has not worked in practice in relation to agriculture because other factors have intervened. In addition, in practice the protection and subsidies given to processed farm products in developed markets have resulted in developing countries being restricted to producing raw materials, and even being prejudiced in these products. Agriculture, apart from tropical products, was almost completely excluded from trade negotiations on goods under the General Agreement on Tariffs and Trade (GATT), the predecessor of the present World Trade Organization (WTO). While GATT succeeded in reducing tariffs on industrial products, and on tropical products in their raw form, agriculture was not included in the negotiations until the Uruguay Round (1988-1995) which led to the creation of the WTO, and its Agreement on Trade in Agriculture, in 1995. In the absence of effective trade negotiations on agriculture, developed markets have been able to protect their farmers from external competition through high tariffs and various non-tariff measures. In addition, subsidized exports from developed countries have for years undercut the prices that farmers in developing countries are able to get for their produce. Millions of small farmers throughout the developing world have thus been unable to gain a viable living from agriculture and are unable to meet their own or their community’s food needs. The Commission for Africa identified increasing Africa’s share of global trade as a key driver of sustainable economic growth and poverty reduction for the continent. Elsewhere, twenty years of trade expansion in China and India has led to accelerated economic growth in both of these important developing countries. (7) However, the relationship between trade liberalisation, sustainable economic growth and poverty reduction is far more complex than these bald assertions would suggest. Liberalising national markets and increasing the nation’s share in global trade certainly has the potential either to improve or to worsen the livelihoods of poor people. The problems of producers in the developing countries can be illustrated by examining specific case histories. Commercialised agriculture exploits economies of scale through intensive farming and monoculture. There is no place for the small farmer who makes up the majority of the world’s population surviving on the equivalent of less than a $1 a day. These pressures can result in environmental degradation. If one of the main planks underpinning our support for our agriculture is the protection of the environment then it cannot be acceptable for our agriculture to result in environmental damage elsewhere. The probable impact of global climate change makes this increasingly important for all of the world’s population: “The populations of the world’s poorest countries have been growing rapidly, increasing the demand for food. At the same time environmental degradation, both natural and man-made, has reduced the ability of farmers to grow food in many areas. An increasingly commercialised agriculture has helped total yields keep pace with needs but has often cut small farmers out of the equation.” (8) Societal Issues In addition to the above traditional trade and economic related issues there are also societal issues. Within our society, the importance of family and even of communal eating, such as school meals, has diminished. Links between consumers and local producers have weakened, resulting in a poorer understanding of the links between the use of land for food production and a range of societal and heritage issues. In addition, changes in diet, particularly among poorer people, have paralleled increases in obesity and linked ailments such as diabetes and cardio-vascular disease. It is important therefore to ask whether recent changes in food supply have led to a society which is more content with itself or one which is more generous to the less well off. An example from the work of an individual church illustrates some of the problems of our current society. It also provides hope that changes affecting the lives of individuals can be made. Transformation: a parable for our times. At the Greyfriars Kirkhouse in the heart of Edinburgh’s Old Town, a fascinating project is taking shape in which vulnerable people are rediscovering the culture and power of food as a means of transformation. A traditional soup kitchen that has for many years offered food and hospitality to vulnerable and homeless people in the Grassmarket area is being transformed into a place where people are learning how to cook and to appreciate healthy food. They are being encouraged to experience all that goes with eating well and they are doing so in a caring and communicative environment. This project is being supported by Edinburgh Cyrenians who have pioneered a project called Good Food in Tackling Homelessness. Along with Community Food and Health Scotland (formerly the Scottish Community Diet Project) they are developing a nation-wide programme that is rediscovering the culture of food as a tool for positive transformation. By sharing food around a table and opening up lines of communication and fellowship that did not previously exist, positive change has taken place in people’s circumstances. For many people, and not just those who have experienced homelessness, the idea of sitting at a table and taking time to serve one another and listen to other people’s stories is both novel and empowering. Peter is homeless and has all the scars of homelessness upon him. He has low self-esteem, suffers loneliness and there are times when he is tempted by drug abuse and is prone to despair. He signed up for a cooking class. After several weeks of tuition and support, he cooked and served a meal to his peers in the drop-in centre. Many compliments were offered for the delicious meal he had cooked and Peter beamed with satisfaction. It was clear that he was delighted with the outcome and explained later that this was the first occasion on which he had been praised for something he had done for as long as he could remember. The boost to his self-esteem and the sense of accomplishment that went with the cooking class has led to new opportunities opening up and an end to the cycle of homelessness in which Peter was locked for many years. In addition to being able to move on in his life, Peter now eats better food, is healthier and making healthy eating choices and has learned a new and very satisfying skill. Something else has happened that is of inestimable value too; he has rediscovered the culture of food. He has discovered the infinite value that comes from taking the time to share a meal at table with friends and the communications of life that flow from that as a part of the cement of community living. The culture of food is more than just nutrition and for many people in today’s society the age-old customs of table fellowship and hospitality that are common to almost every culture are being downgraded in the rush for convenience and speed. Wider issues Clearly there are issues in respect of trade in food which affect farming in Scotland and producers in the developing countries.  While the history and the detailed mechanisms which have generated current problems are different, some issues in both cases relate to the weight given to economics in an area which is more complex than this. The situation is exacerbated by the apparently low value placed on food by consumers in the developed nations. For all producers this is accentuated by the unequal distribution of power and resources within the food trading chain. In Scotland this is seen in the power of the supermarkets and, in the developing countries in the power of the developed world. This situation makes some kind of support, via the CAP, essential to sustaining agriculture in Scotland but also identifies the need for WTO rules that are sensitive to the needs of small producers in the developing countries. The importance of issues related to food and agriculture has led to them being discussed at a number of recent General Assemblies. The present work both updates those considerations and looks at new issues, such as the continued existence of CAP, the continuing failure of WTO rounds, and current discussions on food security. We examine what might be achieved through church members acting collectively as both selective and informed consumers and as citizens who lobby on trade issues. Key Questions At the heart of this we find a value-driven communication problem. Food and agriculture are most commonly discussed by governments in economic or in cost benefit terms. The most important areas are increasingly regarded by governments as the prerogative of the markets or of international business. There is a real need to introduce social and Christian values into the equation, as elements balancing economic factors. This is just the sort of area where churches have clear and unique potential to act as advocates and to orchestrate discussions. Such discussions should be around the issues below. Farm Size The issues facing Scottish farming are not unique. The EU, as a whole, has similar problems within all areas dominated by small farming. Structural issues of this type need action at EU levels. Both the future development of CAP and society’s view of domestic agriculture will be critical. If food security is no longer the primary justification for farming then the future role of all farming needs to be clarified. Supermarkets The major buyers of domestic production are the supermarkets and their suppliers. They control most of the food bought for home consumption. Major catering outlets service much of the third of meals eaten outwith the home and much of public procurement. Directly or through the food supply chain farmers must sell to large multinational businesses. The current distribution of resources within the food supply chain is out of balance with effort and risk. The food supply chain represents a market failure. There is need to increase the bargaining power of primary producers if they are to survive. The power of the multiples and the detached attitude of Government seem likely to result in an increasing proportion of UK consumption being sourced from outwith the UK. In the short term this may result in lower prices at the till, but in the long term this may be less good for consumers. These are issues needing consideration by OFT. To pay more for food than the market rate might seem contrary to supermarkets responsibility to their shareholders. However this market rate is determined by these major buyers. Change in practice would require a revision of the current concept of corporate responsibility. This and the attitude of Government can only be changed by public opinion, especially the buying decisions of church members. There are other ways in which farming can be helped. Developing local procurement; which is possible under EU rules, more creative use of country of origin labelling (9) more use of fresh foods and emphasis on traceability would all help. Making primary producers more effective sellers (eg through increasing the quality of market information), developing alternative outlets (eg electronic bazaars), facilitating value adding activities (eg turning milk into cheese), and a real opening of public procurement would make the distribution of resources within the chain fairer. Common Agricultural Policy Support through the single farm payment is independent of particular commodities. The current rationale is to maintain a wider rural sector, a quality environment and the ability of farm businesses to restructure. A revised CAP, or a new mechanism for rural support, is needed if agriculture is to remain a substantial industry. The current CAP results in the low cost export of foods surpluses to developing country markets. In Scotland probably only skimmed milk powder is within this category. Fairness dictates that EU policies should not damage the prospects of third world farmers and their markets. This is a significant issue for WTO. Food Pricing There is need to increase the status of food. Scottish consumers need to understand cause and effect better in relation to food production. Food has long been at the heart of societal interactions. The relative cheapness of food and increasing urbanisation, have reduced food’s importance. For others the struggle to make ends meet reduces the importance of quality. Despite current Government attitudes, home produced food seems likely to remain important both for its contribution to heritage and because of its links to natural environment. Developing Countries We fail to recognise the core issues at the heart of the current world trade structure if we discuss subsidies to agriculture within the EU and USA without acknowledging that: (a) there is little or no free trade in agriculture, (b) bargaining and buying power is seriously imbalanced, (c) it is in the hands of large and rich countries and companies, who (d) determine access to developed country markets and administer the current subsidies. On a world wide basis trade rules need to be re-orientated in favour of the less powerful. Developing world farmers often sell produce at prices which do not provide an adequate margin and in the worst cases do not cover production costs. Competition from European and American farmers who receive support in a variety of ways from their governments is an element in this. Such support lowers both home and world market prices to levels below where they would be in the absence of subsidies. Home market stability for developing countries is damaged by subsidized exports. Small developing world farmers struggle to have influence and impact in the market. To earn exchangeable currency developing country farmers must produce commodity crops for export. This exposes them to the pressures of world market trading. The present unfair structure of world trade in agriculture may be valuable for the developed world, but it inhibits the development of home markets and damages communities in developing countries. It may also lead to damage to the local and global environment. The World Trade Organisation has the potential to protect the interests of the developing countries. Ineffective as it may have been in the past it is the one world body which has the potential to encourage trade to work under agreed rules and to restrain the financial power of the major world powers. The alternative is bilateral or regional agreements. Here the power of the individual developing country is liable to be less than in a WTO where working alliances among countries with common interests can be concluded. The WTO needs to be developed, not abandoned. The Role of Church Members While the needs of supermarkets and global food businesses control the range of crops being produced, and power and control of our food has in too many cases passed out of UK hands, we still have more power and influence as consumers than as citizens – and we need to find ways to develop that influence. This is particularly important both in relation to traditional ways of life (such as the types of production and environmental care which characterize the crofting counties) and in international trade, where we can help the wider recognition of the importance of issues beyond economics. Consumers can influence those who make decisions on world trade. Churches should provide advocacy for the FairTrade and Trade Justice positions. They can support existing FairTrade programmes and argue for the extension of this approach. Trade benefits need to be seen in relation to associated environmental and sociological costs. It will be important to find means of helping developing countries to benefit from the income that trade can bring but without the disadvantages to the environment and to the stability of communities. This is becoming of greater importance as we become aware of the impact of global climate change. 1 La Bianca OS (2000) Food pp466-467 in Eerdmans Dictionary of the Bible, Eerdmans, Grand Rapids Michigan, USA 2 Vanzetti D and Wynen E (2001) The Multifunctionality of Agriculture and its Implications for Policy, p74 in Ingco and Nash (Eds) Agriculture and the WTO: OECD, Multifunctionality 3 FAO Hunger Map, interactive version http://www.fao.org/es/ess/faostat/foodsecurity/FSMap/flash_map.htm 4 Joachim von Braun, (2005) “The World Food Situation: An Overview”, Director of the International Food Policy Research Institute http://www.ifpri.org/pubs/agm05/jvb/jvbagm2005.pdf 5 Anon (2006) United Nations Millennium Development Goals Report 6. Anon (2006) Food Security: an evidence and analysis paper Defra, fig 5-1 7 Commission for Africa (2005) Our Common Interest, section 8 8 Bundell K (2002) Forgotten Farmers: small farmer’s trade and sustainable agriculture, Christian Aid 9 Cameron D (2007) Clearer Labelling to Boost British Food, speech to Oxford Farming Conference A much fuller report on these issues is available. If you would like this, please contact the Church and Society Council, Church of Scotland, 121 George Street, Edinburgh, EH2 4YN.