Thousands of people gather daily in the center of Skopje, Macedonia to express their support for the president. Credit: Aleksandra Jolkina/IPS

By Frank Mulder
SKOPJE, Apr 18 2017 (IPS)

The political crisis in Macedonia is deepening. With the president and former coalition preventing the formation of a new government, the state threatens to disintegrate in a climate of corruption and nationalism.

The television is turned up loud in a hamburger shop in a suburb of Skopje called Šutka. The ethnic Albanian owner and his workers follow the parliamentary debate live. Their faces, however, are full of contempt. While the owner is preparing an impressively filled bread for less than a euro, he shakes his head despondently."Let's be open: the dispute with the EU about the name is partly the reason for all this mess." --Aleksander Kržalovski

“Those politicians are only getting more and more nationalistic,” one of his clients explains.

Outside we hear the call to prayer. The majority of the people here in Šutka are Muslim. A Roma woman with red-streaked hair is selling ten euro jeans from her market stall. A man with a fluffy salafi-like beard and prayer trousers sells knick-knacks ranging from facial masks and incense sticks to Albanian Korans from beneath a Zlatan Dab Pilsener umbrella.

Filibuster

It looks like nonsensical chatter, what happens on television, but it’s not. What we see is a so-called filibuster, which means politicians preventing any decision-making by just keeping on talking. The right-wing party VMRO-DPNME doesn’t want the social democrats to form a government because that would grant the Albanian minority too many rights.

This has had a disastrous effect on the small Balkan country, which a few years ago was still a promising economy. Since the collapse of Yugoslavia there haven’t been any serious tensions between the Macedonian orthodox majority (about one and a half million) and the Albanian Muslim minority (about half a million), except for limited clashes in 2001.

But corruption has grown since then, along with nationalist rhetoric. In this climate a kind of mini-Watergate scandal has broken out, starting two years ago. Leaked secret service documents showed that ruling VMRO politicians had tapped the phone conversations of 20,000 people, for dubious ends. The country burst out in revolt. Finally, last December, after protests and diplomatic pressure, new elections were held.

VMRO won most of the seats again. Yet, they didn’t manage to form a coalition. The quarrelling Albanian parties, brought together by Albania, decided to strike a coalition deal with the social democrats. To which President Gjorge Ivanov, member of the VMRO, responded with a veto, and the VMRO parliamentarians with a filibuster. Their motive is, they say, that the new coalition wants to accept Albanian as official language, and they will not allow this to happen.

‘Captured state’

“It went very well in Macedonia,” says Samuel Žbogar, ambassador on behalf of the European Union in Skopje. “But the last few years we’ve seen a serious backsliding. We call it a ‘captured state’. Independent institutions like the judiciary are used by politicians.”

The European Union itself is partly to be blamed for the misery. For years, Macedonia has been tempted to enact reforms with a carrot called EU Membership, but year after year Greece has demanded that the country change its name first, for fear of territorial claims on its own Macedonia province.

“People feel deeply hurt,” a source within the European representation in the country says. “They have long been a EU candidate member but are overtaken by other countries.” It is an invitation for countries like Russia to step into the void, although this consists more of vocal instead of financial support – so far.

Fake majority

Thousands of people, mostly grey-haired, gather daily in the center of Skopje to express their support for the president. “Ma-ke-donia! Ma-ke-donia!” they chant, waving red-yellow flags and whipped up by nationalist songs.

“We reject the fake majority of the social democrats and the Albanian parties,” says one young demonstrator, dressed in red and yellow and wearing a 130-year-old cap from anti-Ottoman rebels. He smells strongly of of alcohol but is sure about his case. “The Albanian parties are directed by Albania. We can’t let a neighboring country decide what happens here, can we? They want to create a Great Albania. They want the Macedonian country to disappear. We cannot let this happen.”

This is nonsense, says Nasser Selmani, an ethnic Albanian and president of the Association of Journalists in Macedonia. “I am a Macedonian, this is my country. I don’t belong to Albania, I belong here.” Yet others have more to lose if the state should collapse, he explains. “We have Albania with which we have good relations. But what do the ethnic Macedonians have? Do you think there is anyone who would acknowledge their identity? Greece and Bulgaria won’t.”

The breakdown of the state is not unthinkable. Because of the stalemate, the necessary decisions can’t be made anymore. In a few months, local elections are scheduled. If they don’t take place, the local authorities lose their legitimacy, too.

What also will end in June is the mandate of the Special Prosecutor researching the wiretapping scandal. This is the real reason that politicians have hijacked the country, insiders say. They want to escape prosecution by any means possible.

“They are using the fear of Albanians for their own interest,” says Selmani. “They are using more and more nationalist language. The orthodox church is also promoting this. The cathedral in Skopje is even the gathering place for the daily protests.”

Conservatives

In the big cathedral, however, beneath beautiful icons, all looks peaceful. Evening prayer is silently attended by not more than four people. Even among orthodox believers the Macedonian church, which has declared itself independent from the Serbian orthodoxy, is known as a very nationalistic branch. But demonstrators are not there.

A young orthodox priest in Skopje is willing to explain what he thinks about the current crisis, if only on the basis of anonymity. He serves tea with pieces of Turkish fruit. “We have a separation between church and state. We don’t call for demonstrations here and we don’t give any voting advice. That’s forbidden. But if you ask me personally, I’m against Albanian as an official language. I originally come from a region without Albanians. What if all public servants would be obliged to speak Albanian because it’s an official language? That would be impossible. Our only language is Macedonian.”

On the wall behind the black-robed priest there is a small Macedonian flag with an orange-black Saint George Ribbon, a Russian nationalist symbol. When I ask him what he hopes what will happen, he says, “I hope the crisis will soon be over. That we can live in peace with each other again, without politics being between the people.” The priest doesn’t seem radical, rather very conservative.

Alexander

Through the window of a restaurant in Skopje I look down at the paragon of nationalistic Balkan kitsch, made possible by millions of taxpayers’ money. Between the statues of the Macedonian hero Alexander the Great, to the left, and the Father of Alexander, to the right, we see nobody less than the mother of Alexander, in fourfold. Alexander in her belly, Alexander at her breast, Alexander on her lap, and Alexander around her neck. It’s all completely over the top. It’s the way the current leaders want to bring the people together, at least the ethnic Macedonians.

Inside the restaurant I have a conversation with Aleksander Kržalovski, leader of the Macedonian Centre for International Cooperation, which is the second largest NGO of the country and funder of many small NGOs. He is critical of the current nationalistic wave, he says.

“But it doesn’t make sense to demonize the more conservative population. Many left-wing organisations are very radical. They don’t want to work with fascists, they say. We, instead, believe in cooperation. It’s necessary to bridge the divide between different groups.

“To be honest, it’s unfair to blame right-wing politicians for everything,” Kržalovski continued. “The social democrats use very polarizing rhetoric as well. And many Albanians show no respect for the progress we’ve seen, the rights they have got. Many don’t want to wave the Macedonian flag or sing the national anthem. That raises suspicion. Some people have seen their house burnt down by ethnic Albanians three times, in 2001. And now they see them having a much higher birth rate. It’s understandable that people have fear.”

This doesn’t mean that we have to accept corruption, he says. “Impunity has to end now, that’s very important. But let’s not blame one party. And let’s be open: the dispute with the EU about the name is partly the reason for all this mess. We see that reflected in the diminishing support for the EU in the polls that we do. The EU clearly hasn’t done the job.”

The post Politicians Hijack Macedonia appeared first on Inter Press Service.

By Frank Mulder
UTRECHT, Netherlands, Jan 4 2016 (IPS)

Venezuela doesn’t want investment treaties anymore if they give investors the right to drag the country before a commercial court. “The system has been set up to break down the nation-state.”

All is not going well for Venezuela. While the country is torn apart by poor governance, poverty and polarisation, it is attacked from the outside by oil firms claiming tens of billions of dollars.

The method these firms use is called ISDS, or Investor-State Dispute Settlement. This is a mechanism by which investors can sue a state by means of arbitration, which is a kind of privatized court. Many lawyers stress the advantage that plaintiffs don’t have to go before a local judge whom they feel they cannot trust. You can choose a judge for yourself, the opponent does the same, and the two of those choose a chairman. They are called arbitrators. The case is heard at a renowned institute, like the World Bank. How could it be more fair?

Biased

But Bernard Mommer, former vice-minister for oil in the time of Hugo Chavez, now the main witness in different claims against Venezuela, has to laugh a bit. “I won’t say that Caracas is a neutral venue. But don’t be so foolish to say that Washington is neutral. The whole arbitration system is biased in favour of investors.”

After Argentina, no country has been sued as much as Venezuela: until 2014 at least 37 cases have been filed against this Latin American state. However, the fine they can expect now exceeds all of the others. ConocoPhillips, a Texas-based oil company, claims 31 billion dollars and seems to be on the winning side. According to critics, that case represents everything that’s wrong with the ISDS system.

Oil dispute

The dispute about oil began in 2006. Under the activist leadership of Chavez, Venezuela decided to nationalise the oil sector. Also, higher taxes were announced. Mommer was responsible for the negotiations with international oil firms about compensation. Most of the 41 companies in the country agreed with the buyout. Two didn’t. Those were the Texas-based companies ConocoPhillips and Mobil (now ExxonMobil).

“When we started with the expropriation, they went for arbitration,” says Mommer. “I didn’t even know that this was possible. For arbitration two parties need to consent, don’t they? How could they sue a state?” But Mommer discovered that Venezuela signed Bilateral Investment Treaties (BITs) in 1991, among others with the Netherlands. Those treaties give all investors from the given country an offer to arbitration if they feel treated unfairly by the host state.

Dutch sandwich

ConocoPhillips and Mobil quickly moved their Venezuelan holdings to the Netherlands in 2006. That gave them the opportunity to claim, as Dutch investors, that the unexpected policy change violated their BIT rights. Together, they demanded 42 billion dollars.

“This is called the Dutch sandwich”, says George Kahale III, a top lawyer from New York, who defends Venezuela in different cases. “You put a Dutch holding in the middle of your company chain and you can call yourself Dutch.”

Companies are not allowed to do this if the dispute already started. ExxonMobil and Conoco said that their move was made independently of the dispute. However, a remarkable message has been found among the Wikileaks cables. In these a representative of Conoco told someone from the American embassy that they “already” moved to the Netherlands to “safeguard their arbitration rights.”

Unlawful

The cases are still dragging on. ExxonMobil has had no luck. The three arbitrators have judged that the expropriation was lawful. ExxonMobil gets compensation, but not much more than what they were offered earlier, around one billion dollars.

But the Conoco case evolved differently. Two of the three arbitrators found the expropriation unlawful. This means that Venezuela has to compensate the firm, not on the basis of the low oil price in 2006, but on the basis of the much higher price at the time of the claim. This will amount to tens of billions of dollars.

This is insane, says Kahale. “The fact is that four out of six arbitrators found that the expropriation was perfectly lawful. And yet Venezuela can expect a mega award.”

Unfair

Talking about fairness: among the Wikileaks cables another juicy anecdote has been found. In a cable from 2008, the Conoco representative tells the American ambassador that the negotiations are going well and that Venezuela is being reasonable. This is in contradiction to what Conoco was claiming in public. Yet the arbitrators – at least, two of the three – now say that they can’t change their conclusion anymore and now have to proceed to the next phase, about the damages.

“In other words”, says Mommer, “the investor can lie. We can’t sue them anyway. They alone can sue us. This shows why Western countries have invented this system. It has been set up to break down the nation-state.”

Disaster

ISDS is structurally flawed, says Kahale. “Who are the judges? They are investment lawyers. Their commercial background shines through in their decisions. Every judge of course always brings his own views to his job. But in arbitration these people are deciding no longer private commercial disputes, but megacases of international significance, with sometimes vital importance for individual states, involving billions of dollars, with very little training in international law.”

Too many, conflicts of interest arise. “You will never see a supreme court judge acting as a counsel in another case. But many arbitrators also act as a counsel. It’s very hard to preside over the legality of something one day, and advocate the same issue the other day. It is natural that I’m holding back in one or the other, depending on which case is more important to me. There are very few checks and balances. Too many mistakes are made.”

Venezuela is fed up with ISDS claims. Soon after the claims were filed, they pulled the plug, not only from the ICSID convention (which acknowledges the World Bank as arbitration court) but also from a number of BITs. The Dutch BIT was the first to be terminated a few years ago. Unfortunately for Venezuela, this treaty contains a clause giving investors the right to arbitration until 2023.

Don’t challenge us

Arbitration can be an elegant method for solving a dispute. But is has developed into an instrument for multinational companies to pressure states.

“These oil firms were offered a brilliant compensation,” says Juan Carlos Boue, a Venezuelan researcher at the Oxford Institute of Energy. “But when the oil price rose, they decided to leave the country with as much money as possible.” For ExxonMobil, a giant with a revenue of 400 billion dollars, twice as big as the GDP of Venezuela, there is more at stake. “They have unlimited resources. They want to let the world know what happens if you challenge them.”

And the arbitrators? “Some of them are on the boards of multinational companies. They just don’t want the countries to get away with it. They have an extreme dislike towards countries like Venezuela.”

ExxonMobil and ConocoPhillips refrained from any comment.

(End)

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The heavily criticized legal mechanism, known as ISDS, is an important tool for European companies to pressurize developing countries. This year Uganda joins the rank of developing nations asking themselves: “Why have we ever signed this?”

Earlier this year, the French oil company Total filed a request for arbitration against the government of Uganda. In essence, arbitration is a way to resolve a dispute, not by going to a public court, but by asking the verdict of a private court. Both parties choose an arbitrator, usually an investment lawyer, and the two of them choose a third one. The arbitration is hosted, in this case, by the World Bank.

This is a new step in the frustrating process of Uganda trying to turn its oil into cash.

Peaceful names

Crude oil reserves in Uganda are estimated by government geologists at 6.5 billion barrels, half of which lies beneath the famous Murchison Falls, a famous national park, known for its wild animals. Wells have been given exotic names, like Crocodile, Buffalo, Giraffe and Warthog.

These peaceful names contrast with the bitter fights that are being fought over the oil. Commercial production has been repeatedly delayed by disputes with explorers over taxes and development plans. Now it’s the French oil company Total refusing to pay tax. It acquired a 33 per cent share in a 2.9 billion dollar project owned by Tullow Oil. According to Ugandan law, when a stock is bought, a stamp duty must be paid.

However, the oil firm refuses to do so, citing no legal obligation to honor the government claims. Total has not disclosed how much tax is at the heart of the dispute or why it objects to the tax levy but a source at the Uganda Revenue Authority told Reuters earlier that the Production Sharing Agreement (PSA) includes a tax waiver.

Secret

From their offices in an eight-story glass building located in the lush green high-end Nakasero area in the capital city Kampala, Total’s Corporate Affairs Manager Ms. Ahlem Friga-Noy stated that “given the applicable confidentiality obligations, we are not in a position to comment further on the proceedings.”

The Office of the Attorney General of the Government of Uganda replies in the same manner: “We are under obligation not to disclose the content of the matter to the public until it is appropriate.”

This points exactly to the problem of arbitration. In a court room all affected parties and stakeholders have the right to speak, or at least listen, but an arbitration procedure is very secretive. No one is obliged to disclose details. Has the state really behaved badly? Or is it the company who abuses arbitration as a pressure to get a tax reduction? The public remains completely in the mist, until the final verdict of the tribunal is published, which can be a multimillion dollar fine.

The Dutch sandwich

The problem Uganda now faces has been made possible by the Bilateral Investment Treaty signed in 2000 with the Netherlands. According to the treaty, all Dutch investors in Uganda have the right to pursue arbitration before the World Bank court if they feel treated unfairly. The French company Total Uganda registered itself as a Dutch company.

This is known as the Dutch Sandwich; you put a Dutch company in between and then you become a Dutch investor. Which turns the treaty into a tool to drag a state before a tribunal of three men in Washington, having a commercial background and the ability to award billion dollar fines, without a possibility to appeal. If Uganda is condemned to a compensation but refuses to pay, the company has the right to seize Ugandan assets in the world.

Against Ugandan law

This is against Ugandan law, says the renowned Human Rights lawyer Isaac Ssemakadde. “According to the constitution, taxation is wholly the creation of the law of the state.” Which means that disputes have to be settled on the basis of the law alone. “Even an agreement between parties cannot supercede the obligation fixed in the law. There is therefore no room for arbitration on taxation,” he said.

“In an earlier tax dispute, between Heritage Oil and Gas against Uganda Revenue Authority, the High Court has forbidden the state to refer proceedings to the arbitration processes in London or anywhere else outside the jurisdiction of the Ugandan courts of law,” noted Ssemakadde.

In short, “Total is being treated differently to other business persons which is in violation of article 21 of the constitution of Uganda which states that all persons are equal before and under the law.”

Nobody can check Total’s claims about a tax waiver, because the Product Sharing Agreements are confidential. This is so despite the fact that Uganda has an Access to Information law that was promulgated in 2005. This limits the discussion, and knowledge, about the proceedings in the country’s oil sector to senior politicians and bureaucrats. The ordinary Ugandan is kept in darkness about what happens there.

The secrecy is not only advantageous for oil companies, but also for certain politicians, who seem to be interested in “personalizing” the oil resources. The Ugandan president Yoweri Museveni recently told Ugandans that those people who are challenging him politically in the forthcoming general elections “are after my oil.”

Why BITs?

A new interactive map made by Dutch journalists, with all known ISDS cases in the world, shows that ISDS is mainly used against developing countries. Sometimes because they clearly behaved badly towards an investor, but in other cases it’s more likely that it is used as a bargaining tool and a threat by multinational companies for better deals. Litigation costs amount to 8 million dollars on average, calculated the Organisation for Economic Co-operation and Development.

For lawyers and arbitrators this is simply an effective tool to defend the rule of law. “I’m happy there is arbitration”, a Dutch investment lawyer says. “There are many thug states in the world. And why do they complain? They signed the treaty themselves.”

“In the end, it’s the ordinary Ugandan taxpayer to bear the brunt and consequences for the enormous amounts of money that is going to be spent on this arbitration process,” says Ssemakadde. “Whereas Total can afford to maintain a given team of lawyers in Washington for, say, a month, Uganda can hardly afford this.”

The people remain ignorant about the deals that are made, and who exercises pressure on whom. Unless the general public starts to view the oil, as well as the treaties their government signs, as belonging to them and not the selected few in government, companies like Total will continue dragging the state into expensive arbitration processes, paid by the Ugandan taxpayers, who are the actual owners of the national resources.

This article is part of a research by De Groene Amsterdammer, Oneworld and Inter Press Service, supported by the European Journalism Centre (made possible by the Gates Foundation). See www.aboutisds.org.

The post French firm attacks Ugandan tax using ISDS appeared first on Inter Press Service.

By Frank Mulder
Utrecht, The Netherlands, Dec 21 2015 (IPS)

Many Europeans fear the Transatlantic Trade and Investment Partnership (TTIP) because it could enable American companies to file claims against their states. The strange thing, however, is that Western Europe is becoming a big hub in this mechanism, called the Investor-State Dispute Settlement (ISDS), leading to billion dollar claims against poorer countries.

Imagine this: a country is in the middle of the worst economic crisis in decades. One in four people is unemployed. Tens of thousands are homeless. Four presidents have been replaced in two weeks’ time. To halt the downward spiral, the government decides to nationalize previously privatized sectors and companies. In response, dozens of companies sue the government, because they feel disadvantaged by the new policy. The government is forced to pay hundreds of millions in financial compensation in the years after.

Surreal? It happened to Argentina after the economic crisis early this millennium. Argentina had signed dozens of bilateral investment treaties (BITs) meant to attract foreign direct investments (FDI). The treaties gave investors the right to sue the Argentinean government in case of a conflict. Argentina became easy prey. With 56 claims to date, it is the most-sued country in the world.

ISDS is a mechanism by which a company can sue a state without actually going to court. The investor can bring his dispute before a panel of arbitrators, which acts as a kind of privatized court. The hearings often take place at the World Bank. Both parties appoint one arbitrator, and these two appoint a third one, the chairman. They are usually investment lawyers. The trio then will decide if the state treated the investor unfairly, and if yes, what it has to pay. There is no possibility to appeal.

Explosion

The world of investment arbitration is very intransparent. After a few months’ research, journalists working for the Dutch magazines Oneworld and De Groene Amsterdammer have published a number of stories about the hidden world of ISDS. The stories are accompanied by an interactive map, showing all ISDS claims ever filed against a state. The database behind this map contains information about the disputes, the awards and the members of the tribunals.

What is remarkable is the rise of the popularity of ISDS. Whereas in 2000 just 15 claims were filed, in 2014 alone nearly 70 new claims saw the light. By 2014, there were a total of 629 ISDS cases filed. This may turn out to be even more, because not all cases are public. The number of billion-dollar claims is growing.

Canada, the US and Mexico are on the top list of most-sued states. The reason is NAFTA, the free trade agreement of which ISDS is a part. However, the US has never lost a case. If we exclude the cases won by the state, a completely different picture emerges: Argentina, Venezuela, India, Mexico, Bolivia. In other words, developing and emerging countries. Many of these countries have now come to the conclusion that this arbitration system is unfair, or even neocolonial.

Dutch sandwich

Where do the claims originate from? In the list of home countries of investors the US is still number one, but in the last few years they have been surpassed by Western Europe. In 2014, more than half of all claims were filed by Western European investors. Claimant country number one is the Netherlands, with more claims than the United States.

However, a closer look at the companies involved shows that more than two-thirds of all Dutch claims have actually been filed by so-called mailbox companies. They choose to settle in the Netherlands for its attractive network of investment treaties, 95 in total, which are deemed investor-friendly.

“This is known as the Dutch sandwich,” says George Kahale III, an American top lawyer, who defends states in large investment cases. “You put a Dutch holding in between, and you can call yourself Dutch. This is how the system is misused.”

White men

In 88 per cent of the cases, the researchers found the names of the arbitrators involved. From this a picture emerges of a highly select club of men – and two women – who are assigned time and again to judge. A top-15 of arbitrators have been involved in a striking 63 per cent of all cases. In 22 per cent of the cases, even two members of the top-15 were involved, which means that they have been able to make or break the case.

“This is not strange,” says Bernard Hanotiau, a Belgian arbitrator who is also a member of the top-15. That a few arbitrators dominate the scene, he says, is just because they are the best ones. “If you look for lung cancer specialists in Belgium, you also end up with a small group. We are specialists.”

Yet this is problematic. After all, the arbitrators are not judges who have sworn an oath and have been appointed publicly. Most of them are commercial lawyers, who even continue to act as counsels next to their work as arbitrators. It is possible that a state is condemned by a judge whose law firm partner is a lawyer for an investor in a comparable case. The possibility of conflicts of interest is big.

According to Kahale, this leads to too many legal mistakes. “Their business background shines through in their decisions. Their background is commercial arbitration. The aim there is not to create correct legal precedents, but to get parties back to business again as soon as possible. Which is very bad. This is not about some little disputes, this is about multi-billion dollar claims, about principles that are crucial for countries, many of which have just a small GDP.”

Future

Criticism against the current system of investment arbitration is rising, as a growing number of countries decide to terminate the investment treaties behind ISDS. Not only countries like Venezuela, but also Indonesia, South Africa, Ecuador and India. Brazil is working on a model in which only states can file a claim on behalf of an investor.

Even the European countries, in their negotiations with the United States about TTIP, have now decided to plead for an independent investment court, in which investment cases are handled by former judges. The Dutch government has announced it will renegotiate existing investment treaties and make it harder for mailbox companies to abuse the system.

Whether these good wishes will be translated into real policy remains to be seen.

(End)

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By Frank Mulder
UTRECHT, The Netherlands , Mar 24 2012 (IPS)

The share of organic cotton is increasing in an unstable cotton market, thanks to big European retailers like H&M and C&A who’ve jumped on the bandwagon of offering organic clothing at a low price. But whether this benefits the farmer is another matter.

The worldwide demand for cotton is a heavy burden for the planet. About 2,600 litres of water are needed to grow the cotton for one T-shirt.

Moreover, cotton uses more insecticides than any other single crop, not only degrading the soil and drinking water, but also placing many farmers in debt.

Organic cotton offers a partial solution to this problem, because it is grown without pesticides or synthetic fertilisers. Until recently, it was sold mainly by fashionable shops targeting high end consumers. They are now being beaten by popular retailers like Swedish H&M and Dutch C&A. In 2010 they were the two biggest users of organic cotton globally, according to Textile Exchange, a U.S.-based organisation committed to textile sustainability.

For a responsible consumer used to paying a fair bit for good stuff, a price of just 29 euro (39 dollars) for a 100 percent organically produced pair of jeans arouses suspicion. Is organic really organic?

“All our organic cotton complies with the global OE100 standard set up by Textile Exchange,” explains Philip Chamberlain, head of Sustainable Business Development at C&A. “However, we decided to sell it at the same price as products made of conventional cotton. It’s an investment in our margin.

“We hope to accelerate sales in order to gain the same net result. In recent years, we see the sale of organic cotton products growing much faster than the sale of products made of conventional cotton.”

The company is looking at a tighter grip on the supply chain, not to set a lighter standard. In the past all players, from traders to spinners and manufacturers, included a premium for organic textile, although the additional costs were small for them. Organic cotton was expensive before it arrived in a shop.

“In our supply chain, we succeeded in lowering the total premium for organic cotton products,” says Chamberlain, “which made them far more accessible for the average consumer. In 2011 we sold more than 32 million pieces of 100 percent organic clothing. That’s more than 10 percent of the total amount of cotton we sold.”

In 2011, H&M took first position in the organic cotton market in absolute terms, although they haven’t disclosed how much that is as a share of their total use.

Janet Mensink, cotton expert at Solidaridad, a Dutch NGO working for fair and sustainable supply chains, welcomes the development. “It makes organic cotton much more accessible. The certificate is recognised internationally. In the past, the organic label was often misused, but that has improved a lot.

“However, the most important thing for us is whether the farmer benefits. It takes a lot of time and investment to switch to organic farming. But organic certification doesn’t say anything about his income.”

It’s hard to check whether organic farmers get a fair price, since the supply chain is very complex, says Henrik Lampa, corporate social responsibility manager at H&M in Sweden. “We don’t have direct relationships with farmers. The spinner is the one who buys the cotton. When we place an order, it’s at the garment maker, who in rare cases can be integrated with the spinner.”

Organic cotton is a higher value crop on the market, says Liesl Truscott, farm engagement director at Textile Exchange, the organisation behind the OE100 label. “It’s not guaranteed who receives the reward for the sustainable efforts – the farmers or the middlemen. We’ve seen price squeezing particularly in India where over 70 percent of the world’s organic cotton is grown.”

“However, it’s not just the premium that’s beneficial for the farmers. Organic production requires crop rotation, to make the soil more fertile. This improves food security and increases productivity in the long term, but also biodiversity and water efficiency. Organic soils are much better at retaining moisture, they hold rain water like a sponge.”

Moreover, there is less drinkwater pollution, since farmers use biological alternatives to chemical fertilisers and pesticides.

“Farmers may be vulnerable, but they are no fools. If their investment in organic is not working for them, over time they will not bother with certification if there’s no incentive.”

Most of all cotton farmers need security of business. Textile Exchange encourages its member companies to learn who their producers are and what’s going on at the farms. Some companies, like the Swiss company Remei, a supplier to the Swiss Coop, go as far as supporting farming units in Tanzania and India to make the transition to organic farming.

C&A also wants to take this approach. The company has started working with five farm groups in India connected to later stages in the supply chain. C&A carried out projects to improve education and drip irrigation, which improve the productivity of the farmers.

Together with experts from NGOs and the industry, Textile Exchange will produce a good business guide later this year, with tools for brands to make their supply chains more transparent and responsible.

Mensink is happy with this new trend. “Until now many companies tried to ‘solve’ the issues with simple certification systems, which are top-down models based on the control of farms and suppliers. What we need is suppliers and retailers working together to improve living conditions and to make agriculture more sustainable.”

Solidaridad now cooperates with multinationals like Levi Strauss, Adidas and H&M through the Better Cotton initiative to improve the cotton sector. “The requirements for pesticides are less stringent than for certified organic cotton, and therefore more accessible. We want the farmers to be able to organise themselves. We also look to issues like water managment and decent work, but in a holistic way. We measure progress instead of compliance with a checklist.”

Both C&A and H&M aim to source all cotton in their range from more sustainable sources by 2020.

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Many people are appalled by the anti-Polish website established recently by the Dutch Freedom Party (PVV). The site encourages complaints against migrant workers from Central and Eastern Europe, particularly from Poland. The Poles are hitting back with their own hotlines, and humour.

The European Commission and ambassadors from ten eastern European states have expressed concern. They say the website runs counter to European principles of freedom and free movement.

The anti-immigrant PVV of Geert Wilders set up the online hotline because of what it considers problems caused by the “massive influx” of “mainly Polish” migrant workers. People are asked to complain about nuisance or about losing their jobs to Poles or other Eastern Europeans.

“Complaints are often not filed because of the idea that nothing would be done with them anyway,” the site says. According to the PVV, they have already received above 41,000 complaints.

The Polish community in the Netherlands reacted quickly, with the launch of a website called ‘Pro-Poles’. The site supported by the employers’ organisation VNO-NCW invites people to share positive experiences with Polish workers, and explains the benefits of free movement of labour between the Netherlands and Eastern Europe.

Hotlines against discrimination have received about 2,000 complaints against the PVV hotline. The Dutch- Polish rapper Polska set up the hotline ‘Valuable Company’ to share stories about Eastern Europeans who are good company.

“Have you had an extremely wild night out with some Poles? Do you employ hard working Eastern Europeans you are very happy with? Send your stories to this hotline.” The look and the language of the site takes a similar form to the original.

New hotlines are springing up like mushrooms online. There is one against Belgians that complains that nuisance such as bags of French fries on the streets is caused by the free movement of labour between Belgium and Holland. “It seems that Belgian beer is made darker, consciously,” it says, and “Belgian fries appear to contain fat.”

The launch of this website was followed by a hotline for complaints against people from Limburg (in the south of the country), because some of them drink too much and others it says have become politicians, resulting from the free movement of labour between the Netherlands and Limburg since 1866. Geert Wilders, the leader of the PVV, comes from Limburg.

The hotline was closed because some people took it seriously. But complaints can now be sent to a new hotline for complaints against citizens from the north, middle, east, south and west of the country.

Despite the humour there is reason for real concern. “Poles are increasingly in the population’s bad books,” says Malgorzata Bos-Karczewska, editor-in-chief of Polonia.nl, the website of the Polish community in the Netherlands who set up ‘Pro-Poles’. “There are more and more instances of discrimination and insults. The anti-migrant virus has spread throughout large sections of the Dutch population.”

Locally, there are real problems related to Eastern European immigrants, Bos-Karczewska acknowledges. “If the house next to me would be packed with Polish employees who make noise and do not know how to behave, I would not be happy either. But it’s the Dutch who haven’t tackled those problems for five years.

“They’ve left the temporary employment agency sector self-unregulated after liberalisation. There are 10,000 agencies in the Netherlands now, the majority of which are illegal. When it goes wrong, the migrants are blamed. But for the Dutch rational arguments don’t count any more, they have been overcome by uncertainty and fear for migrants.”

From left to right, all political parties have distanced themselves from the PVV campaign. Prime Minister Mark Rutte, who needs PVV support for his Liberal-Christian Democratic minority coalition, says it’s not for him to comment on positions taken by individual political parties.

The PVV has a history of hotlines. They opened a hotline for complaints against a traffic tax and a hotline against “street terror”. Last month a list of complaints about a traffic plan in The Hague appeared to have been filled partly with complaints by people working for the party.

In the meantime, the Dutch seem to be turning their custom of complaining into something positive. The number of hotlines has exploded, on Facebook and elsewhere on the web. There is a new hotline against Central and Eastern European DJs, and a hotline against native Dutchmen (“there are 12 to 14 million of them”). Now there is a hotline against PVV hotlines.

The post Poles Apart in These Online Wars appeared first on Inter Press Service.

Rosy figures tempt China to postpone much-needed reform, says a renowned Chinese economist. “Much growth is non-productive, with enormous speculation widening the gap between rich and poor.”

The Chinese government is “too much focused on speed”, says Prof. Wang Jianmao, a liberal economist at the China European International Business School in Shanghai. “But just as a ship needs to slow down in order to repair its engines, our economy needs to slow down if it wants to tackle structural problems which endanger future growth.”

There are different economic engines, like exports, investments and consumption. “The vital engine of consumption, however, is not working in China. If we delay repair the other two will stop at the same time. Not a single country can sustain growth when its economy keeps growing with double- digits.”

From 2004 to 2007 the Chinese gross domestic product increased by more than ten percent each year, peaking in 2007 at 14.2 percent. That slowed down to 9.6 and 9.1 percent in 2008 and 2009, but Beijing hopes to return to rates above ten as soon as possible. “That would be very dangerous”, says Wang. “That kind of growth is a growth borrowed from the future. To unleash our potential, we need institutional reforms which are long overdue.”

In the midst of success, it’s easy to postpone painful measures. This year, as many as 54 Chinese companies made it into the Fortune 500 list of biggest companies. Three Chinese companies, a refiner and two electric conglomerates, rank among the top ten.

“That doesn’t mean they are productive”, says Wang. “They have had access to unlimited amounts of cheap money. The interest rate for them has been lower than inflation. They keep on investing up to the point of serious overcapacity, which has a negative effect on both the returns and the prices. In other words, they waste people’s money.”

Big profits without adding value and creating jobs is a bad strategy for a country that urgently needs more consumer spending, says Wang. “Labour income as a share of gross domestic product has been declining for years. Instead of supporting capital-intensive industries, we need small and medium enterprises, in order to create labour-intensive jobs, up the value chain. We have the world’s largest market for luxury cars, but at the same time too many people earn just the minimum wage.”

According to official statistics, unemployment is low, just four percent. “Don’t believe them. They just count formal, registered unemployment in the cities. Short-term contracts on the countryside are counted as full employment. Unemployment is high, but companies can’t find enough people because there is a big mismatch between demand and supply.”

Jan van der Putten, a Dutch advisor to companies that want to invest in China, recognises the problems, but thinks it’s to easy to blame the goverment. “They know just as well that consumption has to grow. But it’s very hard to implement. The average Chinese spends 30 percent of his income on food. That’s just too much. It’s the result of the development model that has been chosen, focused outwards instead of inwards.”

Fortunately, the preparations for the new five-year plan (2011-2015) call for focus on structural reforms, writes the World Bank in its Quarterly Update on the Chinese economy, published two weeks ago. “Changing the growth pattern is rightly a key target. Rebalancing will not happen by itself – it will require significant policy adjustment.”

But it’s very hard to change patterns in China, Van der Putten says. “As the proverb goes: ‘The mountains are high and the emperor is far away.’ There are so many laws and regulations that local leaders feel free to choose which ones they want to implement.”

The biggest obstacle to the much-needed transition is the enormous speculation, says Wang, who once served at the World Economic Forum as a China expert. “Living in the city has become unaffordable for many people. Prices will continue to rise, leading to an ever growing gap between rich and poor. Moreover, it slows down urbanisation, which is absolutely necessary for rising consumption. Capital gains aren’t even taxed. And we call ourselves a socialist country!”

Wang says he sometimes feels a bit lonely in his pleas for a capital gain tax to combat speculation. And he has more reforms on his wish list. One of the most important is getting rid of the “ridiculous” one-child policy. “People will never spend more and save less when they can’t have more children in order to care for them when they’re old. The government could allow every couple to have two children, or even three if both the husband and the wife are single children themselves. It’s necessary, moreover, if we want to be ready for the time the Chinese workforce dwindles.”

According to Van der Putten, this is something the government is well aware of. “They already allowed a second child if both parents are single children themselves. There is an open debate about the policy. In one region they have now started an experiment, by which people are allowed to get a second child if just one of them is a single child himself.”

Since 2009 China is the world leader in clean energy investments. With 52.5 GW of renewable energy, China is second in the world for installed capacity, the Pew Environment Group reported earlier this year. Its targets are among the world’s most ambitious.

“The bottleneck for sustainability, however, is innovation,” says Wang. “We spend less on innovation than other countries and we do it ineffectively, through state companies.”

Wang thinks the Chinese are well aware of the importance not to copy the U.S. example. “Japan is our benchmark. Japan succeeded in becoming very energy-efficient. Our habits are different from the Americans, too. We will never eat as much meat as they do, to mention an example.”

Wang fears the scramble for resources that Beijing is pursuing in developing countries. “China needs to realise that cheap extraction of resources is not the smartest thing to do. We must understand that if we help countries develop, they will be able to buy our products.”

The post Overspeeding China Must Slow Down appeared first on Inter Press Service.

Forget speculators, forget biofuel farmers. The real cause behind the permanent food and agricultural crisis is the imperial food regime, squeezing money out of agriculture, a Dutch professor says.

Last month, the Food and Agriculture Organisation invited experts to talk about the increasing price of wheat. “Global cereal demand and production still appears in balance,” they concluded, “and there is no indication of an impending world food crisis.”

“Lazy thinking,” says Jan-Douwe van der Ploeg, professor of rural sociology at Wageningen University in the Netherlands. “Almost one billion people are hungry and another one billion are chronically malnourished, while one billion others are obese. Isn’t this a food crisis? Hunger has always existed, but for 50 years the phenomenon has been global and permanent.”

Behind the food crisis we face a severe agrarian crisis, he says. “Farmers have to struggle harder and harder in order to survive, because of low prices and turbulent markets. This is a paradox: for consumers prices keep rising, but for farmers, prices are too low to earn back their investments.”

Where does the difference go to? “To food empires,” Van der Ploeg says. “The market is more and more dominated by industrial trade conglomerates, like Ahold, Nestle, Cargill, and many more, governing production, processing, distribution and consumption of food. Those empires are able to manipulate markets and squeeze wealth out of agriculture. In this regime, small disequilibria in the markets translate into huge price fluctuations.”

Empires don’t usually own resources, but control the networks. “Both farmers and consumers are dependent on their entry points and exit points. They can set standards and prices.” Governments are called upon not to distort markets and to liberalize trade, but these empires are the ones that distort the market, says Van der Ploeg. “If it’s in their financial interest to grow asparagus, chicken, green beans or flowers in poor countries and sell it to rich countries, they do it, even if the population is starving.

That is not necessarily bad for poor countries, says Anoesjka Aspeslagh, spokesperson for the Dutch supermarket division of the multinational Ahold. “Our demand creates thousands of jobs, and income for people in the exporting countries. Especially because we cooperate very closely with producers to improve labour conditions and living standards.”

Van der Ploeg points to the side effects. “Peru, for example, was turned into the world’s biggest asparagus exporter. The country, however, is very desertous, so the local farmers are deprived of their much-needed water. Besides, the situation is not stable. Now already the asparagus production is shifting to China.”

Aspeslagh does not accept such views. “We are not as powerful as people often think. We don’t set prices and standards, we are as subject to the market and to government regulations as anyone. That’s why it’s in the interest of both us and the producers to build stable relationships and to both agree on prices. If China becomes cheaper, we don’t move all of a sudden. That’s not the way we work.”

“Yet supermarkets have become the most powerful players among the food empires,” says Myriam Vander Stichele, senior researcher at the Centre for Research on Multinational Corporations in Amsterdam. “They have acquired a very strong role as gatekeeper between consumers and the processing industry. For example, even the big banana multinationals have to accept low prices and short-term contracts nowadays. Moreover, many supermarkets are now becoming producers as well, making them even more powerful.”

Their power is not just economic, but also political. “They lobby like hell against stricter regulator,” says Stichele. There’s really a lack of good regulation on the contracts between supermarkets and other companies.”

The power of food empires is worrying, says Van der Ploeg, because their only interest is cash flow. “They have to pay off their debts, created to acquire other companies and to monopolise large segments of the global food supply chain. Expansion is the keyword. This debt made some companies almost stumble over their own legs, as Parmalat did.” This Italian food empire left a total debt of 14 billion euros.

The imperial, or ‘corporate’, food regime also affects farmers. Food empires prefer large-scale industrial farming, for its predictable and standardised output. However, not only are these industrial farms often less productive and less efficient than the small farms they replace, they appear to be extremely vulnerable to economic shocks. “The companies are highly dependent on stability, easy credit and ongoing growth,” says Van der Ploeg. “When this disappears, as now is the case, they go broke.”

Governments and researchers are quick to call on technological innovation to boost production, especially in developing countries. “They are almost autistic in their simplistic solutions. They don’t see that hi-tech systems are the very reason that farmers are competed away.”

The division between entrepreneurial farming and peasant-like farming is growing, says Van der Ploeg. “Fortunately, more and more farmers acknowledge that farming is more than producing commodities. They look for an integrated, multifunctional approach and become less dependent on articificial resources.”

This is a trend in developing and developed countries alike. “In western Europe, multifunctional farming already creates billions of euros of added value, in a sector that stagnates as a whole. In Brazil it’s the same: while some farms keep growing bigger, the number of small farms has increased from 3.6 to 4.2 million in the last eight years.”

This is a very important undercurrent, according to Van der Ploeg, who warns that the food empires have no future. “With their short-term policies they undermine the very agriculture they need. It’s very dangerous, but eventually they will collapse.”

The post ‘Food Empires Creating Agricultural Crisis’ appeared first on Inter Press Service.