By Ryan Young, Competitive Enterprise Institute
Private regulation is an excellent alternative to government regulation, if done right. One form it can take is independent certification. For decades, groups like the non-profit UL Solutions (formerly Underwriters Laboratories) (UL) have been certifying electronics, appliances, and even construction projects for safety, quality, and efficiency. That UL logo tells consumers they can trust that a product meets certain standards. But that trust is fragile. It depends on reputation. And at least one certification group is finding out that letting ideology and politics into the certification process risks undermining that reputation.
The Rainforest Alliance (RA) is part of a larger fair trade certification movement that began a couple of decades ago for goods like coffee, chocolate, and produce. In addition to quality, RA and similar groups check for such things as guaranteed minimum prices for farmers, working conditions, and environmental impact. Many of those goods come from developing countries, and relatively wealthy consumers in America and Europe are often willing to pay a premium for socially conscious goods.
At its best, independent certification can be a way of ensuring high labor and environmental standards in places that might not have them yet. At its worst, ideological and political interests can hijack certification for their own ends. It can also be disrespectful of countries’ institutions, which is a common theme among well-meaning, if condescending, activists.
This may be happening in Costa Rica, where a banana producer laid off some workers, and the Rainforest Alliance yanked its certification in response, cutting them off from retailers who insist on that certification. The trouble is that RA’s certification may have more to with an ideological commitment to labor unions than with actual worker treatment.
Western activists are not always aware of this, but not all Latin American countries are the same. For example, The Economist Intelligence Unit gives Costa Rica a higher Democracy Index score than the United States, 8.07 compared to 7.85. Compare this to next-door Nicaragua’s 2.69 score or Venezuela’s 2.11 score. It’s a diverse region. There are still some basket cases, but there are also stable democracies with high regulatory standards. Certification programs like RA offers might be useful to importers from countries with no or low standards. In better-off countries like Costa Rica, that isn’t necessarily the case.
In Costa Rica, laid-off workers are legally entitled to four weeks’ notice. The laid-off banana workers were given six weeks. Costa Rican law requires a number of other steps, including severance payments and an alternative conflict resolution process overseen by a judge. Six of the banana workers opted out of this process, which they are allowed to do. Instead, they signed settlement agreements in the presence of their union’s lawyers. The RA argues that this legal process violates worker’s rights, which justifies removing its certification.
The union itself, which has European ties, is partially responsible for the firings in the first place. The company traced its losses to its packaging plant. Packaging workers are typically paid by how many boxes they pack. The union encouraged the workers to advocate for an hourly wage instead. The resulting drop in productivity ultimately cost the workers their jobs.
RA does not allow companies to appeal its certification audits. That may be because on the merits, it would likely lose cases like this one, and RA employees probably know it. None of the laid-off workers filed any complaints or lawsuits, and a court found no violations of the law.
In fact, the Rainforest Alliance lost the resulting lawsuit over its withdrawn certification in front of Costa Rica’s Constitutional Court and was ordered to pay damages.
It’s looking more and more like the Rainforest Alliance is becoming an advocate for unions, rather than for workers. RA even recently had a job listing on its website for a Senior Officer for Trade Union and Worker’s Organization Relations—basically a full-time labor union liaison (the listing has since been either filled or removed).
It’s bad enough that the Rainforest Alliance is risking its own reputation. It is risking the viability of an entire regulatory model.
For example, if UL testers were to take bribes, falsify results, or award or deny certifications because of politics, the UL seal would lose its value. Consumers wouldn’t bother looking for a UL logo when comparing labels. Companies would stop seeing UL certification as a selling point, and would stop paying UL for testing.
Independent certification is a private regulatory model with a successful history. But when activists in developed countries presume that they know better than people in developing countries what is best for them, they become vulnerable to capture by politics and special interests, threatening their hard-won reputations. More importantly, workers in developing countries stand to lose much more.
Ryan Young is a Senior Fellow at the Competitive Enterprise Institute (CEI).