IDC Enquiry: Fair Trade and Development

Do existing government guidelines on procurement of ethical and fair trade products provide an enabling environment for the development of this market and the opportunities for producers?

The UK Government’s Sustainable Development Strategy, published in 2005, sets out HMG’s desire to be amongst the leaders in the EU on sustainable procurement by 2009. As many contracting authorities within Europe—including the European Commission itself—have already procured fair trade goods, it is surprising that the existing Office of Government Commerce (OGC) guidance on procurement [i] does not do nearly enough to promote the development of the fair trade market in the UK, due to its unnecessarily restrictive interpretation of EU legislation [ii].

It is true that, for the purposes of EU procurement law, fair trade needs to be defined not just as products which have received FLO / Fairtrade Foundation certification but, more broadly, as products which are made according to specified fair trade principles (for e.g. a fair producer price, a long-term contract etc). These can include, but cannot be restricted to, products with the FLO / Fairtrade Foundation label. Companies do not have to have official fair trade certification but must prove, by ‘any form of evidence’, that they are abiding by fair trade principles.

However, procurement of fair trade goods as thus defined is perfectly compatible with EU legislation and if the government was to wholeheartedly support fair trade procurement, this would have considerable implications for the growth of the fair trade market in the UK.

However, in order for this to happen, the Office of Government Commerce critically needs to reassess its current guidance on this issue. In its current form, it does not so much enable fair trade procurement as constrain it, as illustrated by the following examples.

• No-where does the guidance mention that several authorities—ranging from local authorities in Scotland (e.g. Aberdeen) and local authorities in Italy, France and Spain to the Austrian government in its Presidency of the European Union and the European Commission itself—have successfully procured fair trade products.
• Neither does it emphasise that the whole purpose of EU procurement legislation is to ensure that ‘contracting authorities shall treat economic operators equally and non-discriminatorily and shall act in a transparent way’. In other words, EU legislation is not concerned with what is being procured (be it fair trade or otherwise) but rather how it is being procured. As such, although it would be possible to procure fair trade goods in a manner incompatible with EU procurement legislation, there is no inherent reason why the two should come into conflict [iii].

This has a significant knock-on effect as it means that contracting authorities who might wish to procure fair trade are not receiving the information that they need to enable them to do so as effectively as possible.

• For example, if authorities wish to buy fair trade, they need to mainstream fair trade procurement from the very beginning of this process. This can be quite easily done by ensuring that there is an explicit reference to fair trade in the title (subject matter) of the contract, and this then makes provision of fair trade products (which need to be defined later on in the contract) mandatory.
• However, the OGC Guidance implies that provision of fair trade goods cannot be made mandatory and that ‘a bid cannot be rejected or considered non-compliant simply because it does not include any desired fair trade options’. In fact, as long as fair trade is mentioned in the subject matter and is defined later on, it is necessary by definition to reject a bid not offering fair trade products!

These are just a few of several examples illustrating how current guidance does little to enable fair trade procurement. (For other examples, and more details on the examples given, please consult the accompanying full-length document on public procurement [iv]).

It is crucial that the government provides a strong sense of direction on this issue, indeed, the government’s ‘Sustainable Development Taskforce’ has recommended that the OGC needs to ‘lead by example,’ by providing a ‘clear commitment from the very top of government’ downwards.

SCIAF thus recommends that the OGC:

• Re-issue guidance clarifying that the scope for fair trade procurement under EU law is wider than previously advised
• Make clear the different options that are available to authorities, including advice on how to mainstream fair trade goods as effectively as possible.
• Encourage and support authorities in their efforts to apply fair trade principles, including holding workshops / training if appropriate.

These actions, if undertaken, will bring several direct and indirect benefits to communities in the UK and in developing countries. SCIAF has calculated that if the Scottish Executive was to spend just 0.5% of its procurement budget according to fair trade principles, this would double the fair trade market in Scotland. And if converting just a small part of Scotland’s consolidated procurement spend of £8 billion [v] could produce such a large impact, imagine the effect if the UK committed to spend a significant proportion of its £150 billion budget [vi] according to fair trade principles.

The direct benefits that such large scale, guaranteed procurement could have on poor communities overseas would be considerable and it could also have enormous ‘spin-off’ effects when it comes to persuading other contracting authorities both within in the UK and in Europe more broadly to procure fair trade goods.

The OGC should thus implement these recommendations at the earliest available opportunity in order to ensure that the government is able to meet its target of becoming a European leader in sustainable procurement.

[i] Office of Government Commerce Guidance on Fair and Ethical Trading.

[ii] The relevant document being Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts

[iii] In fact, the Directive is quite clear about this and states that there are indeed ‘possibilities for the contracting authorities to meet the needs of the public concerned, including in the environmental and/or social area’ and that ‘nothing in this Directive should prevent the imposition of enforcement measures necessary to protect public morality…human or animal life… in particular with a view to sustainable development provided that these measures are in conformity with the Treaty’ (emphasis added).

[iv] TJM Scotland/CORE Scotland draft submission on proposed revision of Local Authority Procurement Circular – LAPC (02) 2005. This focuses on guidance issued by the Scottish Executive Procurement Department, but which is substantively the same as, and based on, the OGC guidance analysed here.

[v] McClelland, J. F. (2006) Review of Public Procurement in Scotland: Report & Recommendations.

[vi] http://www.sustainable-development.gov.uk/government/task-forces/procurement/index.htm