October 22, 2017
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Arancha González: ‘Fair’ is a bit of a difficult word

 Arancha González, executive director of the International Trade Centre (ITC). Photo: ITC

Arancha González, executive director of the International Trade Centre (ITC). Photo: ITC

In an exclusive interview with EPA's partner EURACTIV.COM, the International Trade Centre’s executive director managed expectations about fair trade, as well as broaching the subject of child labour and transparency in the value chain.

Arancha González is executive director of the International Trade Centre, the joint agency of the United Nations Conference on Trade and Development and the World Trade Organisation.

She spoke to EURACTIV Senior Editor Georgi Gotev.

What is the International Trade Centre doing and how does it compare to other international institutions that deal with aid and trade? As the world gets more complicated and more crazy, what do you do about it?

The International Trade Centre is a development agency that is co-owned by the World Trade Organisation and the United Nations. Our mandate is very clear and very simple: helping small and medium enterprises in developing countries participate in international trade. Because we belong to the WTO, our DNA is that you can use trade as a means to growth. And because we are part of the United Nations, we are very clear that you have to use trade to eradicate poverty. And what we do is essentially empower SMEs, in the bottom of the pyramid, to participate in international trade.

What is at the bottom of the pyramid?

For us, the bottom of the pyramid is the least developed countries, post-conflict and fragile states, sub-Saharan Africa, small island developing states. There, the market is not taking care of helping SMEs and ecosystems around SMEs trade across borders. So what we do essentially is five things. First, with global public good we support the SMEs understand where market opportunities are, which products, which tariffs, which certifications, which prices, who’s competing there. Two, we help SMEs become more competitive. We do this working in countries in specific sectors, company by company. So in country A we work with textiles, in country B we work with sugar, etc. Three is access to credit. We are not a bank, but we are a connector between banks and institutions that lend, and those who need it., helping SMEs understand how to access finance, and helping banking institutions, financial institutions assessing the risks of lending to SMEs. Finally we help companies connect to buyers, to markets.

But who is your counterpart? The government? Or the SMEs?

In countries, we have three types of counterparts. Number one is governments. Number two is trade and investment support institutions. And number three is companies themselves. But we don’t cherry-pick companies. We work on a sector. And in order to identify which sector, we have a dialogue with the government.

Fair trade is easier said than done. When we look at the decreasing prices of coffee or cocoa, this means more child labour, it means a lot for the producers. At the end, the products are costly enough in our supermarkets. How can you make sure there is a fair value chain?

‘Fair’ is a bit of a difficult word. Fairness depends on whom you ask. And the sense of fairness depends on on which part of the value chain you are situated. We prefer to say that we would like to have a better distribution of benefits and costs across the value chain. There are many ingredients to do that. But a very fundamental ingredient is transparency in those value chains. That’s why part of our global public good is to introduce transparency along the value chains, to help the producer understand that markets require certain quality standards, which are very often the standards consumers are demanding. And consumers are not only in the north, they are also in China, in Brazil, in Korea, they are also in the south. As a consumer I want more and more information what’s behind the product I’m buying.

Sometime there is slave labour behind the product.

There is slave labour in the value chains, that’s for sure.

If there was more transparency, probably such products could not be marketed?

We have rules that forbid slave labour but the rules are not enough. What we are saying is that in addition to these rules, and to the mechanisms to enforce these rules, what we need is more transparency. We know for example that in the fishing sector there is slave labour. Then we need more transparency in the fishing products that we buy. At the International Trade Centre we are introducing more and more this concept of transparency, and we are working with partners. We are working with Pepsi Cola at the moment to map their entire supply chain, to put their suppliers online, and to help these suppliers meet certain quality standards, among which there is of course no child labour, no slave labour, there is respect for food safety, for food security. It is also important for Pepsi to understand and be able to manage the value chain, knowing they won’t have, by working with certain suppliers, to face the negative consequences.

Let’s come back to child labour. Say coffee prices fall, this means that children that used to go to school will not go to school. This means that farmers will have no other resource except using their children to work in the fields. If legislation against child labour were enforced, maybe this would not allow prices to fall so low…

But prices are not only dependent on legislation against child labour. Coffee prices are dependent on production and consumption. And production varies a lot. There are years when production is booming in many of the production countries, and the prices go down.

But does it mean there is nothing you can do?

There is a lot you can do. What I’m saying is that prices of commodities like coffee, like tea, are very influenced by climatic conditions. And this is why there is a link between climate change, agriculture, trade and trading conditions. Because if we have more and more countries where production fails, prices would be very high, but jobs will not be available in these coffee plantations which would have disappeared, because there was a flood or a drought. I want to introduce here a concept of climate change, of sustainability, because it has a huge impact on agriculture. Regarding child labour, there are international conventions, but what we know is that these conventions are not enough to eradicate child labour. What I’m saying is that in addition to the conventions, and in addition to mechanisms to enforce these conventions, we need also peer pressure on those value chains, and this pressure can come from greater transparency, to scrutinise what is happening in those value chains.

So transparency is the cure for all diseases?

Transparency is the best disinfectant.

Useful links:

European Commission DG Trade

World Trade Organization (WTO)

What the EU does for SMEs? (EC)

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