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Monday, 31 October 2011
Page: 12242


Mr CRAIG KELLY (Hughes) (20:48): I congratulate the member for Werriwa on moving this motion, as I know he has been having a bit of a hard time in his electorate with the carbon tax and pokies debates. I welcome the opportunity that he has given me to contribute to his motion on the Harkin-Engel Protocol and the practice of forced child labour.

Chocolate is the final product in the manufacturing process that begins with cocoa beans, the seeds of a tree that only thrives within 10 degrees on either side of the equator. Some 70 to 75 per cent of the world's cocoa beans are grown on small farms in West Africa, including in Ivory Coast, which is the world's leading supplier of cocoa. However, the production of chocolate has a dark side.

In 2001, following various media stories of trafficked children and forced labour in cocoa production in West Africa, US Congressman Eliot Engel introduced a bill requiring the US Food and Drug Administration to develop 'slave-free' labelling requirements for all cocoa products. Although the bill passed the US House of Representatives, it never made it through the Senate, and a compromise known as the Harkin-Engel Protocol was reached that required chocolate companies to voluntarily certify that they had stopped the practice of child labour. But, 10 years on, the effectiveness of this protocol is questionable. The US Department of State recently estimated that more than 109,000 children in the Ivory Coast cocoa industry work under 'the worst forms of child labour' and that another 10,000 or more are victims of human trafficking and enslavement. This evidence demonstrates that the original intent of the protocol has not been achieved.

It is poverty that is the root cause of child labour, and it is the low cocoa prices received by farmers that causes this poverty and drives farmers to employ children as a means of survival. Although there has been a recent modest increase in cocoa prices, today the price of cocoa is only marginally higher than it was 25 years ago, despite increasing costs. Therefore, to tackle the problem of child labour in the chocolate supply chain it is necessary to tackle the reasons that cocoa prices received by farmers are depressed. As US congressman Wright Patman once famously noted:

The farmer must have competition in the marketplace. If he has to deal with giant monopolies either buying or selling, he perforce becomes an economic slave.

That appears to be the problem in the chocolate supply chain. A United Nations publication titled Cocoa Study: Industry Structures and Competition recently noted that the cocoa-chocolate supply chain is marked by significant concentration at various stages along the chain and the market has become increasingly concentrated over time following a series of mergers between large multinationals. For example, the three largest purchasers of cocoa produced by Cameroon are reported to control some 95 per cent of that country's production, and following a series of mergers and acquisitions in the chocolate industry five companies alone—Nestle, Ferrero, Mars, Kraft and Cadbury—have come to control more than half of the European market for consumer chocolate. This aggregate figure masks a high degree of concentration in specific national markets and for specific product categories.

The UN study further noted that, at origin, producers do not have bargaining power vis-a-vis a handful of large and major exporters, and that there seems to be a structural imbalance, upstream in the cocoa supply chain, between cocoa producers, with a structure of production characterised by the predominance of small-scale producers, and large buyers with monopsony power. Everywhere that we see excessive market concentration, it is the consumer that pays more and more while the producer receives less and less. Exactly the same applies to chocolate. The UN report concluded that legislation may well need to be considered by commodity-producing countries in designing competition laws and in developing rules to deal with abuse of market power in the cocoa sector.

In conclusion, the extreme poverty in East Africa means that simply boycotting all non-Fairtrade labelled products could have the opposite of the intended effect. If we are to tackle the problems identified by the Harkin-Engel Protocol where that protocol has failed, competition authorities worldwide need a greater understanding of the link between increased poverty, child labour and monopsony or buyer power arising from increased market concentration.