Parliament Grilled Starbucks over Ethiopia’s Trademark Issue

Part I. This is a transcript of the UK Members of Parliament questioning Starbucks and others. In this edition, only a section pertinent to the trademark dispute between Ethiopia and Starbucks is published. Future postings will present the other sections related to Fair Trade and other topics.

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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 356-i

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

INTERNATIONAL DEVELOPMENT COMMITTEE

FAIR TRADE AND DEVELOPMENT

Tuesday 27 February 2007


MS SANDRA TAYLOR, MR CLIFF BURROWS and MR MIKE BARRY

Evidence heard in Public Questions 1 - 82

Oral Evidence Taken before the International Development Committee on Tuesday 27 February 2007

Members present
Malcolm Bruce, in the Chair
John Barrett
John Battle
John Bercow
Richard Burden
James Duddridge
Ann McKechin
Joan Ruddock
Mr Marsha Singh

Examination of Witnesses

Witnesses: Ms Sandra Taylor, Senior Vice President, Corporate Social Responsibility, Starbucks Coffee Company, Mr Cliff Burrows, Senior Vice President and President of Starbucks Coffee Company, Europe, Middle East and Africa, and Mr Mike Barry, Head of Corporate Social Responsibility, Marks & Spencer, gave evidence.

Q40 Chairman: I thank you for coming along. Perhaps you would briefly introduce yourselves for the benefit of everybody here. We will then follow it up. We have heard the background of Fairtrade from the movement and the participants' point of view. I guess that it is now the UK end in which we are engaged.

Mr Burrows: Chairman and Members of the Select Committee, my name is Cliff Burrows. I have been a director of Starbucks UK for some six years. My current responsibility including the UK stretches across Europe, the Middle East and into Africa.

Ms Taylor: I am Sandra Taylor, Starbuck's senior vice president for corporate social responsibility based in Seattle, Washington. I appreciate the opportunity to be here today.

Mr Barry: My name is Mike Barry, head of corporate responsibility at Marks & Spencer.

Q41 Chairman: Thank you for coming. I start with the specifics, which will not come as a surprise given that the Committee has recently visited Ethiopia and an agreement with its government has just been concluded. First, could we explore that? One of the matters which I confess I have not quite got my head round is the trade-marking concept compared with other things. Does Starbucks accept that Ethiopian coffee has distinct and attractive characteristics? After all, you do market brand names relating to Ethiopia. Does Starbucks accept that fundamentally there is something about Ethiopian coffee that is distinctive and, presumably, adds value to its business?

Ms Taylor: We do believe that Ethiopian coffees are distinct. Our customers love and demand Ethiopian coffee, and we believe that Ethiopia should have the opportunity to brand its coffee names. We have expressed our public opposition to trade-marking because we are persuaded by 58 years of evidence of geographic certification of agricultural names. We have suggested that to the Ethiopian Government as an alternative. Recently, we reached an agreement with that government to pursue our shared vision around the promotion of Ethiopian coffees.

Q42 Richard Burden: You objected to the trade-marking of Ethiopian products. Do you still object to the trade-marking of those products?

Ms Taylor: We recently reached agreement with the Ethiopian Government that we would not oppose its trade-marking. We greatly regret the misunderstanding regarding our position. We look forward to research that is currently being conducted by economists from the World Bank and at a university in Costa Rica regarding the economic benefits of certification. We believe that geographic certification provides certainty of origin, direct value to the farmer and assurance to the consumer as to the quality of the product.

Q43 Richard Burden: Is it still your advice to Ethiopia not to go for trade-marking but you respect its right to do so if it so wishes?

Ms Taylor: Absolutely.

Q44 Richard Burden: As I understand it, at the time that you appeared to be against trade-marking, perhaps through a misunderstanding, the opposition to trade-marking in the United States directly came from the National Coffee Association. That body opposed trade-marking, did it not?

Ms Taylor: That is correct. The National Coffee Association took a position in opposition to trade-marking. We are one of 183 members of that association and have one vote. The US Patent and Trade Mark Office has made a decision regarding trade marks for Ethiopia.

Q45 Richard Burden: You are a member of the National Coffee Association. At the time it took the decision to oppose trade-marking in the United States did you support it?

Ms Taylor: As any member of a trade association, we see this issue as an industry matter, not one confined to a single company. Of course, we would work through a trade association in that regard.

Q46 Richard Burden: But even if you have only one vote you are a pretty significant member of that association. As I understand it, it still opposes trade-marking. Therefore, as a member of that association do you support that continued opposition to trade-marking?

Ms Taylor: No, we do not. As I indicated, Starbucks has one vote in the organisation. Despite the fact that we have many stores and a very well-known brand we buy only two per cent of the world's coffee. There are members of the National Coffee Association who buy much larger volumes of coffee than we do.

Q47 Richard Burden: But you still have a voice within it. Within the NCA are you making representations that it should change its position?

Ms Taylor: We have not sought to change its position. We have indicated to the Ethiopian Government that we will not oppose its efforts to trade mark - we respect its right to choose that as an option - nor will we block or try to inhibit the Ethiopian Government from forming a group of licensed distributors.

Chairman: I do not want this to go on for too long. It is a specific point and, having been to Ethiopia and had discussions on this matter, it is helpful to have your point of view.

Q48 Richard Burden: To make a last point in the NCA, you say in your written evidence: "Starbucks respects the right and choice of the Government of Ethiopia to trade mark its coffee brands and to create a network of licensed distributors." There are different views about whether certification can be effective. Do you think that the NCA should also respect the right and choice of the Government of Ethiopia to trade mark its coffee brand and create a network of licensed distributors?

Ms Taylor: I do.

Q49 Chairman: Starbucks does?

Ms Taylor: That is correct.

Q50 Mr Bercow: That may have resolved the dilemma. Listening to Ms Taylor's answers to my colleague, I was slightly anxious that, although she was immensely courteous and forthcoming, no clear and very clear position appeared to emerge. You said that you did not support the NCA in its opposition to trade-marking, to which the obvious follow-up question would be: if you do not support the NCA in that mission do you oppose it?

Ms Taylor: I believe that we did express opposition to trade-marking. As we look at the positions that governments around the world have taken regarding trade-marking of geographic names there are different views. Starbucks believes that this is really a matter for other governments and the WTO. The Australian Government has taken one position; the EU has taken a different one, as have Canada and the US Patent and Trade Mark Office. We believe that this is a matter for trade-related intellectual property rights. For our part, we are very committed to Ethiopian farmers and look for ways to enhance their livelihoods and expand our purchases of coffee from that country.

Q51 Mr Bercow: I appreciate that. I was slightly concerned because on the one hand I feel that Starbucks is and would consider itself to be a very significant market operator and global player but, on the other hand, it is sometimes characteristic of large organisations faced with a political difficulty, if I may say so politely, to adopt a tone of self-effacement that is not altogether characteristic of its usual public utterances or behaviour. You said that Starbucks was one member of the association, that it had its views but was just "little us", but, as my colleague Mr Burden pointed out, you may have one vote but you are very significant players. It is important to be clear about that. If you want to exert influence you can; if you feel that politically and diplomatically in a sense you want to try to get out of what is a rather embarrassing situation that is a legitimate stance to take, but I am not sure that self‑effacement and Starbucks go together, if I may say so. You talked about how you looked forward to forthcoming serious weighty evidence and so on, and yet you admitted to the Committee that as an organisation you had recently changed your position on trade-marking. I refer to the announcement on 20 February. Ordinarily, one observes the evidence and then considers whether or not to change one's position. You appear to have changed your position in advance of publication of the evidence to which you say you look forward. Therefore, I believe we are entitled to ask: why did you change your position?

Ms Taylor: There is 58 years' evidence regarding geographic certification. I can refer to Columbian coffee, Antigua Guatemala coffee, Jamaica blue mountain coffee, Kona coffee, Florida oranges and Parmesan cheese. There are many examples of geographic certification of agricultural products and names. We were persuaded by those examples that that had created both quality and value for those producers, as well as certainty for consumers as to the origin and quality of those products. That is the evidence to which I refer. We very much value our relationship with Ethiopian farmers. We regret the misunderstanding that has arisen between Starbucks and the Ethiopian Government, and we respect the right of that government to choose the direction that it feels is right for it. Respectfully, we have expressed our view that geographic certification would be better for farmers, but that is based on the experience we have had with other coffees in other countries. But we respect the right of the Ethiopian Government to choose that direction. It is not our decision whether or not a trade mark is granted; that is for governments around the world.

Q52 Joan Ruddock: As a matter of history, one wonders whether it was Starbucks that raised with the NCA its own objection to trade-marking of Ethiopian coffee or whether the association had taken a position and Starbucks fell in line with it.

Ms Taylor: We expressed our position to NCA. The NCA's position was based on other members' perspectives and points of view.

Q53 Joan Ruddock: But Starbucks raised it with the association first?

Ms Taylor: I believe that we were asked our opinion by the NCA. That is correct.

Chairman: We have an article written by Professor Douglas Holt of the Saïd Business School of the University of Oxford, of which you are probably aware. The tenor of his article is that this did deep damage to the image of Starbucks as a fair trading company. Is that the case, and is that the reason you changed your position? The whole row over the Ethiopian trade mark damaged your position which it has articulated over a long period of time, namely that Starbucks is proud of its fair dealings in coffee and this row compromised its credibility in the area of fair trade. Is that a factor?

Q54 Mr Bercow: I believe some of us feel that it is a repeat play of the McDonald's saga of some years ago. Eventually, the PR damage from conflict with smaller players is such that it is thought to be politic to shift one's position. I do not personally think there is anything dishonourable about that in itself, but it is perhaps better to be candid about it. Politicians and the hon gentleman do it all the time. If that is at least part of the reason for changing your position why not say so?

Ms Taylor: Starbucks has had at its core from the start, and for the past 35 years, a social consciousness. It has always sought collaborative relationships with farmers and to pay premium prices. We are the largest purchaser of Fairtrade coffee in North America. Last year that amounted to £18 million. We believe in fair trade. We purchase a lot of certified and organic coffee. Three years ago we launched our own ethical purchasing guidelines covering coffee and farmer equity practices. We do this because we want a partnership with farmers. As we grow we want farmers to grow. We have invested in agronomy centres in Costa Rica. We have recently announced that we shall be opening a farmer support centre in East Africa primarily to help farmers throughout that region improve their quality for Starbucks purchasing. We care about what farmers think about our position and the point of view of African governments about our business. We have always wanted to have this kind of relationship with farmers. Our primary concern is not to have Ethiopian farmers or farmers in East Africa question our commitment to continued purchases of coffee. I can say that that is the reason why we articulated a different position and agreed not to block any efforts by the Ethiopian Government.

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To be continued in Part II