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ASSESSING THE CONTEXT OF CHILD AND FORCED LABOR

Business practices designed to address the incidence of child or forced labor in a supply chain that leads to the production of imports to the United States operate in a complex social, cultural, economic, and governmental context. This section summarizes that section of Dr. Berkowitz’s presentation that provided a description of the context in which business practices must be implemented and the criteria for assessing practice must be applied. Integrated within this summary is commentary by presenters and audience members who raised issues relating to context.

Dr. Berkowitz began by describing how the planning committee’s notion of the framework had two components—the context and the criteria—that were connected but which would be focused on separately. Dr. Berkowitz then discussed the heuristic shown in Figure 3-1 that the planning committee developed as a way of starting a conversation at the workshop about the context. As Dr. Berkowitz discussed, context can be thought of as consisting of several dimensions: problem identification, sectors, actors, tools, and key questions, each of which is described and discussed in turn below.

Problem Identification

The committee argued that the first task is to identify the problem, that is, child and forced labor. These concepts were defined in Chapter 1, but participants offered three views of the problem that merit further discussion.

First, it was important to separate child and forced labor as distinct problems with different root causes. “It seems to me when we are talking about child labor, we have to take a look at the role that poverty plays in that. It is very different from forced labor. What the alternatives are for children, what the alternatives are for families in terms of surviving and what the alternatives are in some of the situations around the world where it is cultural practice. I am not saying that these are good things, but the poverty causes of child labor are very, very different from the institutional causes of forced labor. When we lump these two together, we are not really serving either of these two problems as comprehensively as we need to.”



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3 ASSESSING THE CONTEXT OF CHILD AND FORCED LABOR Business practices designed to address the incidence of child or forced labor in a supply chain that leads to the production of imports to the United States operate in a complex social, cultural, economic, and governmental context. This section summarizes that section of Dr. Berkowitz’s presentation that provided a description of the context in which business practices must be implemented and the criteria for assessing practice must be applied. Integrated within this summary is commentary by presenters and audience members who raised issues relating to context. Dr. Berkowitz began by describing how the planning committee’s notion of the framework had two components—the context and the criteria—that were connected but which would be focused on separately. Dr. Berkowitz then discussed the heuristic shown in Figure 3-1 that the planning committee developed as a way of starting a conversation at the workshop about the context. As Dr. Berkowitz discussed, context can be thought of as consisting of several dimensions: problem identification, sectors, actors, tools, and key questions, each of which is described and discussed in turn below. Problem Identification The committee argued that the first task is to identify the problem, that is, child and forced labor. These concepts were defined in Chapter 1, but participants offered three views of the problem that merit further discussion. First, it was important to separate child and forced labor as distinct problems with different root causes. “It seems to me when we are talking about child labor, we have to take a look at the role that poverty plays in that. It is very different from forced labor. What the alternatives are for children, what the alternatives are for families in terms of surviving and what the alternatives are in some of the situations around the world where it is cultural practice. I am not saying that these are good things, but the poverty causes of child labor are very, very different from the institutional causes of forced labor. When we lump these two together, we are not really serving either of these two problems as comprehensively as we need to.” 19

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REDUCING THE USE OF FORCED OR CHILD LABOR 20 FIGURE 3-1 Perspectives: Forced and child labor. Source: Susan Berkowitz, Chair, Planning Committee, Workshop Presentation, May 11, 2009 Second, it is important to consider migration and trafficking issues. Thea Lee, in her presentation, noted that with respect to forced labor it was important to consider how vulnerable migrant workers are to forced labor and trafficking. Her concern was that dealing with one particular forced labor situation (e.g., a brothel) could simply send the workers to another place without causing any positive effect. Third, often one labor problem goes hand in hand with another, so it is important to consider the broader context of international labor standards, which include child and forced labor. Thea Lee emphasized this in her presentation, arguing that it is not possible to do a good job of evaluating child and forced labor or working to eliminate child and forced labor if you cannot also talk about freedom of association, the right to organize and bargain collectively, and protections against discrimination. Toni Dembski suggested that “when you are dealing with child and forced labor issues, you are also going to have contractors who are bending the rules in other places.” Benjamin Smith from the ILO noted: “The inclusion of all of the fundamental principles and rights at work in multi-stakeholder initiatives and in efforts to clean up supply chains is really important as problems with the lack of freedom of association and collective bargaining or discrimination also contribute in a significant way to forced labor and child labor and vice versa. The interconnectedness of the fundamental principles and rights of work is reaffirmed in the 2008 Declaration on Social Justice for a Fair Globalization1 and is something that is very important to keep in mind in looking at these systems.” Problems in one labor area could be an indicator of possible problems in child or forced labor. Dan Viederman suggested integrating investigations for child and forced labor with the other investigations being done, learning how one indicator for one problem might lead to other indicators. 1 Text of the Declaration available at: http://www.ilo.org/wcmsp5/groups/public/---dgreports/--- cabinet/documents/publication/wcms_099766.pdf (accessed September 28, 2009).

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ASSESSING THE CONTEXT OF CHILD AND FORCED LABOR 21 Sectors Another dimension of the context consists of sectors (or types of products and means of production) where child or forced labor might be found. Two concepts were discussed: (1) the differentiation among employment sectors and (2) the distinction between the formal and informal sectors or economies. A commonly applied set of standards is the United Nation’s International Standard Industrial Classification of All Economic Activities (ISIC).2 The classification breaks economic activities into 23 high-level categories that are further disaggregated into divisions and groups. For example, “agriculture, forestry, and fishing” is a high-level category that includes 3 divisions and 13 groups. The committee, according to Dr. Berkowitz, “had a fairly elaborate breakdown of sectors, but we finally decided that for simplicity’s sake, rather than try to find every last industry or every last farm activity we would just keep it at a more general level of looking at agriculture, manufacturing, and service sectors and both informal and formal activities within each of those sectors.” According to the ILO, “The agricultural sector comprises activities in agriculture, hunting, forestry and fishing. The industry sector consists of mining and quarrying, manufacturing, construction and public utilities (electricity, gas and water). The services sector includes wholesale and retail trade, restaurants and hotels, transport, storage and communications, finance, insurance, real estate and business services, and community, social and personal services.”3 Employment sectors can also be broken down into the formal and informal sectors. Formal-sector employment is often associated with salaried or wage-based labor which is typically captured in national labor statistics and subject to national laws and legislation. The informal sector, by contrast, includes those activities outside the formal sector, both legal and illegal, such as trade in stolen goods, prostitution, or wages from unreported work.4 A related concern has to do with counterfeited goods. As one participant noted, there are many such goods produced in the world. Companies may be working to reduce child labor in their factories, while others are producing what appear to be the same goods in less protected labor situations. In any case, an important point is that the formal and informal sectors operate side by side in countries and the informal sector can constitute a large part of a country’s economy, sometimes even most of it.5 Much child and forced labor occurs in the informal sector. 2 Revision 4 was adopted in 2008. See United Nations Statistics Division, Classifications Registry at: http://unstats.un.org/unsd/cr/registry/isic-4.asp (accessed September 28, 2009). 3 ILO, The End of Child Labour: Within reach, pp. 7-8. “The agricultural sector comprises activities in agriculture, hunting, forestry and fishing. The industry sector consists of mining and quarrying, manufacturing, construction and public utilities (electricity, gas and water). The services sector includes wholesale and retail trade, restaurants and hotels, transport, storage and communications, finance, insurance, real estate and business services, and community, social and personal services.” 4 Paul E. Bangasser, The ILO and the informal sector: an institutional history. Geneva: ILO, 2000. World Bank, “Concept of Informal Sector” Available at: http://lnweb90.worldbank.org/eca/eca.nsf/1f3aa35cab9dea4 f85256a77004e4ef4/2e4ede543787a0c085256a940073f4e4?OpenDocument (accessed September 28, 2009). 5 See for example: Friedrich Schneider, “Size and Measurement of the Informal Economy in 110 Countries Around the World.” Paper presented at a Workshop of Australian National Tax Centre, ANU, Canberra, Australia, July 17, 2002. Available at: http://rru.worldbank.org/Documents/PapersLinks/informal_economy.pdf (accessed September 28, 2009). 21

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REDUCING THE USE OF FORCED OR CHILD LABOR 22 FIGURE 3-2 Defining the challenge and context in West African cocoa production. Source: Jeffrey Morgan, Mars, Inc., Workshop Presentation, May 11, 2009. Participants in the workshop debated how aggregated one should consider economic sectors. Jeff Morgan, in his presentation, argued that agriculture might be too broad and suggested one should disaggregate the sector, in particular to differentiate between subsistence and commercial farming. Mr. Morgan argued that there is a relationship between the employment sector and how the actors are organized, which is relevant for discussing the criteria. In Figure 3-2, he laid out a continuum for production from agriculture to manufacturing. He gave the example of banana plantations in Central America as contrasting significantly with cocoa farms in West Africa, due in part to their size and organization. A second point of discussion was that different sectors can occur in the same geographic location and different labor practices can occur in the same sector but be organized differently. Kevin Bales gave the example of gold mining in Ghana, where you have tiny artisanal operations with the worst forms of child labor and forced labor within a quarter mile of a large, regulated international company’s factory mine.6 One is operating with medieval technology and one is operating with 21st-century technology and has careful safety controls and so forth. Mr. Bales noted that this provides an immediate alternative to the less attractive situation. It may be that 6 See for instance: ILO-IPEC, Prevention and Elimination of Child Labor in Mining in West Africa, Project Document, Geneva, September 30, 2005. Gavin Hilson, “Challenges with Eradicating Child labour in the Artisanal Mining Sector: A case study of the Talensi-Nabdam District, Upper East Region of Ghana. Undated. Available at http://www.yorku.ca/cerlac/EI/papers/Hilson.pdf (accessed September 28, 2009).

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ASSESSING THE CONTEXT OF CHILD AND FORCED LABOR 23 workers can be moved into safer environments, with better labor protections, and that the workers need new skill training to be able to work in a better environment. Actors The focus of this report is on business practices,7 but getting a product to market often involves a series of relationships among business entities that have a range of characteristics, including domestic and multinational enterprises or playing a range of roles as employers, producers, purchasers, vendors, or contractors. In confronting child or forced labor the focus sometimes seems to be on large multinational companies because they have the potential for significant reach and are connected to many other actors. By the same token, these companies may be somewhat removed from day-to-day operations of their various factories, vendors, and subcontractors. In this section we focus on workshop presentations that covered company supply chains and business engagement with external partners. Supply chains Supply chains represent the processes by which goods are produced from raw materials. Figure 3-3, for example, illustrates a relatively simple supply chain for soccer ball production. Jeff Morgan, from Mars Inc. presented as another example the cocoa supply chains originating in Cote d’Ivoire and Ghana (Figure 3-4). Mr. Morgan commented that the cocoa sector is characterized by an extensive, complex, and disconnected supply chain. Unlike coffee, cocoa is primarily a small-holder crop in West Africa with over 1 million family farms producing cocoa and few farms belonging to co- operatives. Estimates are that in Côte d’Ivoire, less then 15 percent of the farmers would be members of a co-op and probably less than half of those are financially viable. In Ghana, the number of farmers and co-ops may be a bit larger but there is only one major co-op, Kuapa Kokoo.8 Beyond the farm, the supply chain differs between Cote d’Ivoire and Ghana. The Ghanaian government sets the price and handles all of the transactions as they collect cocoa from the farm. 7 An issue that is not explored is the degree of business responsibility or accountability for solving the problem of child or forced labor. This is an important issue but outside the scope of this report. A second issue not explored in this report but raised by a participant during the discussion had to do with how best to encourage businesses to take action. The participant saw a tension between using the media to expose problems in companies’ supply chains, when often these high-profile companies were the ones taking the best steps among companies to deal with the problem. Additionally, the participant wondered whether the threat of criticism would lead companies to want to keep problems quiet so as not to invite The criticism. A few of the presenters thought that companies would be willing to share best practices and certainly would be willing to work together to improve the labor situation. As Anna Walker of Levi’s noted, “If we have a critical mass in our industry that is following the same standards and applying the same conditions and then having the same dialogue, it’s just going to make life easier for us.” Another participant noted that companies’ codes of conduct and reports were widely available on the Internet. 8 A cocoa producer cooperative founded in Ghana in 1993. See Kuapa Kokoo at http://kuapakokoogh.com/kuapa/ (accessed September 28, 2009).See also Transfair USA, “Fair Trade Cocoa Co-op.” available at http://www.transfairusa.org/content/certification/producer.php?floid=1475 (accessed September 28, 2009). 23

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REDUCING THE USE OF FORCED OR CHILD LABOR 24 FIGURE 3-3 Soccer ball production and distribution. Source: U.S. Department of Labor, By the Sweat and Toil of Children (Volume IV): Consumer Labels and Child Labor, 1997, p. 99. Mr. Morgan drew particular attention to the area below the horizontal line in Figure 3-4 that focuses on the global market and the manufacturer, noting that companies like Mars do not take possession of cocoa until after the good has been exported. Along the supply chain the cocoa will change ownership at least six times and often many times more. The challenge facing Mars has been how to affect behavior on a family farm that is a great distance removed in the supply chain. Ms. Hauchère also gave an example of a soya supply chain in Brazil (Figure 3-5). At the request of the government Reporter Brasil, an NGO, with the support of the ILO, identified the production and supply chains of an estate on the “dirty list” of employers involved in forced labor. Two studies were done, in 2004 and in 2007, mapping estates appearing on the dirty list and the companies working with them. Ms. Hauchere noted that she chose the soya example not because it is a supply chain with substantial forced labor but because it is relatively simple. Most forced labor cases in Brazil are found in the meat processing supply chain, which is too complex to be represented like this.

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ASSESSING THE CONTEXT OF CHILD AND FORCED LABOR 25 FIGURE 3-4 Cocoa supply chains in Cote d'Ivoire and Ghana. Source: Jeffrey Morgan, Mars Inc., Workshop Presentation, May 11, 2009. Partnerships Presenters and audience members noted that there are any number of partnerships that can be formed between business and other entities, including governments, other companies, NGOs, trade unions, workers, and local communities in order to address child and forced labor. Presenters such as Bill Guyton, with the World Cocoa Foundation, noted that many groups were involved in the effort. To look just at the industry or one group to fix the problem is not going to work. You need to bring all of the players to the table together, and that is where agencies like U.S. State Department and DOL can help by being the convener, inviting governments, civil society members, and industry to sit down together. We have seen that happen on several occasions. That is the right path forward. Presenters and audience members mentioned the important role of government. Jeff Morgan commented that in the case of cocoa, in both Ghana and Cote d’Ivoire the government is highly engaged in the sector. They grant cocoa purchasing licenses and the sector has historically been a source of much tax revenue. The Cote d’Ivoire government is quite strict in allowing actors to go into the country and work in communities. Mr. Morgan noted that one cannot do that without the approval of the government and trying to find out who gives that approval can be challenging, given the less than stable current governance situation in the country. Ms. Roggensack noted in her presentation (detailed in the next chapter) that countries need to adhere to the international labor standards. Mark Neuman reminded the audience that 25

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REDUCING THE USE OF FORCED OR CHILD LABOR 26 FIGURE 3-5 Soya supply chain in Brazil. The red dots are estates on the dirty list. The blue dots are wholesalers buying from those estates but not selling directly to customers. At the next level are two types of companies: the yellow ones selling directly on the national market; the black are exporting companies. Source: Aurelie Hauchère, International Labour Organisation, Workshop Presentation, May 12, 2009. See also Patricia Trinidade Maranhão Costa, Fighting Forced Labour: The Example of Brazil, Geneva: ILO: Special Action Programme to Combat Forced Labour, 2009, p. 94. it is not just the country where child or forced labor may occur that should act, but also the trading nations that could leverage their influence to make a difference. Mark Neuman began his presentation by noting that child labor is a well-known problem in Uzbekistan.9 Even though the Uzbek government signed ILO convention No. 182 in 2008, it has not been taking steps to implement the convention, according to Mr. Neuman. Mr. Neuman suggested that the U.S. government could do more to influence the Uzbek government, however, 9 See for instance, Environmental Justice Foundation. The Children Behind Our Cotton. London, UK: Environmental Justice Foundation, 2007; U.S. Department of Labor, The Department of Labor's 2007 Findings on the Worst Forms of Child Labor. Washington, DC: U.S. Department of Labor, 2008; Uzbek Human Rights Activists and Journalists, Forced Child Labor in Uzbekistan’s 2007 Cotton Harvest: Survey Results. 2008. Available at: http://www.laborrights.org/files/Survey%20report%20on%20child%20labour% 20in%20Uzbekistan%20April%202008.pdf (accessed September 28, 2009).

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ASSESSING THE CONTEXT OF CHILD AND FORCED LABOR 27 he was critical of U.S. legislation and the generalized system of preferences. Neuman noted that 19 USC §1307 of the U.S. Code prohibited the importation of goods made by forced labor, but an exception clause10 could be seen as an escape clause and he suggested that this loophole needs to be closed. He also noted that 19 USC §2462 (the Generalized System of Preferences program) makes countries ineligible for designation as beneficiaries of the program if they fail to implement their commitments to eliminate the worst forms of child labor. Neuman noted that the United States imported $3 million in mined and agricultural products under the GSP program from Uzbekistan in 2008. Neuman further contended that there was a lack of coordination between various U.S. agencies charged with focusing on labor issues, including: DOL, U.S. Department of Agriculture, U.S. Department of State, and U.S. Department of Homeland Security (Customs and Border Protection and Immigration and Customs Enforcement). The U.S. government could act in a more coordinated way, and with its various laws and enforcement capabilities, the government could affect child labor in Uzbekistan.11 Tools A third dimension of the context pertains to tools that could be employed to combat child and forced labor. There are a number of types of business practice. The ILO provides one typology, stating “The range of actions on child labour taken by employers and their organizations to date can be broken down into the following categories: • general awareness-raising and policy development initiatives; • prevention of child labour in specific sectors; • direct support for initiatives aimed at the removal and rehabilitation of child workers; • certification schemes for specific goods, and corporate and industry codes of conduct.”12 • The International Finance Corporation identifies several steps companies can take: • addressing the issue in the workplace: o awareness raising; o policy development (including identifying and complying with relevant laws; focusing on positive incentives); o implementation (for example, establishing procedures and practices, providing training, building accountability); o monitoring;, and o forging partnerships with other companies and organizations. 10 In no case shall such provisions be applicable to goods, wares, articles, or merchandise so mined, produced, or manufactured which are not mined, produced, or manufactured in such quantities in the United States as to meet the consumptive demands of the United States. 11 Uzbekistan had submitted an instrument of ratification regarding Convention No. 138 in July 2008, but it was not registered until June 3, 2009. (See: http://webfusion.ilo.org/public/db/standards/normes/appl/index.cfm?lang=EN) (accessed September 28, 2009). 12 International Program on the Elimination of Child Labour, Action Against Child Labour: Lessons and Strategic Priorities for the Future, A Synthesis Report. Geneva: ILO: 1997, p. 228. 27

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REDUCING THE USE OF FORCED OR CHILD LABOR 28 • responding when child labor is detected; and • managing risks in companies’ supply chains, via o selecting quality suppliers; o prohibition clauses in contractual agreements; o establishing subcontracting safeguards; o labeling and certification; o consolidating production centers; o providing supplier training and incentives; o monitoring, compliance and corrective action; and o scaling up efforts with suppliers.13 More recently, ILO developed 10 principles for business leaders to combat forced labor and trafficking:14 1. Have a clear and transparent company policy, setting out the measures taken to prevent forced labor and trafficking. Clarify that the policy applies to all enterprises involved in a company’s product and supply chains. 2. Train auditors, human resource, and compliance officers to identify forced labor in practice and seek appropriate remedies. 3. Provide regular information to shareholders and potential investors, attracting them to products and services where there is a clear and sustainable commitment to ethical business practice, including prevention of forced labor. 4. Promote agreements and codes of conduct by the industrial sector (as in agriculture, construction, and textiles), identifying the areas where there is risk of forced labor, and take appropriate remedial measures. 5. Treat migrant workers fairly. Monitor carefully the agencies that provide contract labor, especially across borders, blacklisting those known to have used abusive practices and forced labor. 6. Ensure that all workers have written contracts in language they can easily understand, specifying their rights with regard to payment of wages, overtime, retention of identity documents, and other issues related to preventing forced labor. 7. Encourage national and international events among business actors, identifying potential problem areas, and sharing good practice. 8. Contribute to programs and projects to assist, through vocational training and other appropriate measures, the victims of forced labor and trafficking. 9. Build bridges between governments, workers, law enforcement agencies, and labor inspectorates, promoting cooperation in action against forced labor and trafficking. 10. Find innovative means to reward good practice, in conjunction with the media. There are commonalities across each of these examples of classificatory schemes, including: • Businesses have multiple avenues to affect child or forced labor. 13 IFC, Addressing Child Labor in the Workplace and Supply Chain. Good Practice Note. Number 1. June 2002. 14 ILO, Strengthening Employers’ Activities against Forced Labour, 2008, p. 3.

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ASSESSING THE CONTEXT OF CHILD AND FORCED LABOR 29 • Businesses can use both positive and negative incentives to tackle these problems, as noted by a few audience members during the workshop. • Businesses can operate both by themselves and in partnership with a variety of other partners. • There are a number of different points where businesses can apply leverage. Key Questions Having examined many dimensions of the context, Dr. Berkowitz also presented several key questions the planning committee identified as important for assessing business practice: • How can I be sure I am not doing harm? Dr. Berkowitz noted that the planning committee identified risk assessment and prevention activities as additional components related to the context that businesses should engage in as part of any business plan targeting child or forced labor. • How do I avoid the use of forced and child labor? Dr. Berkowitz noted that compliance monitoring and regulation are sets of activities that would be responsive to this question. • What do I do when I find child or forced labor? Dr. Berkowitz indicated that remediation, mitigation and enforcement are key business practices that would come into play in response to findings from this question. • How do I influence the broader issue? Businesses can address their specific situations in the instances where they find problems, but they may also combat child and forced labor through broader action. Additional Comments Several participants felt that a contextual element missing from the discussion concerned the overall environment of the country where child or forced labor occurs, including such elements as the rule of law, relevant legislation, governance, taxation, and economic development. Examples of comments follow: • Kevin Bales suggested that the most powerful predictor of whether or not there are forced labor violations is the quality and content of the rule of law. • One audience member asked whether the country even recognized the ILO Conventions. Has it signed them? Is it actively trying to push for adherence to those Conventions? Is there a functioning Department of Labor? Are there activities in the field? Are there deputy ministers who have staff that have ever visited the field? • Thea Lee asked whether there is enough attention being paid to the underlying economic forces, the policy issues, the labor law, implementation, the labor law reform that might be needed in order to get compliance. Is the legal structure adequate to do the job? Are the laws enforced? Does the government have adequate resources for enforcement and is the government using those effectively? • Another audience member added, I am also wondering if we should not have something about the impact on the wider population and the wider economy, or the wider society 29

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REDUCING THE USE OF FORCED OR CHILD LABOR 30 when an economic boycott is used to intervene in a forced labor or child labor situation. For example, Uzbekistan has serious problems with forced labor in cotton production, but if there were a boycott what would happen to those families who obviously are not responsible for this but in fact would be very significantly, very powerfully, detrimentally affected by an economic boycott of the primary export product of that country? While the government is certainly culpable, the average citizen is possibly not and may not be able to agree to the idea that they should be asked to sacrifice significantly because of our concerns about what happens in producing their product. That is an illustration of what I mean by the broader impact. • One participant noted that it was critical to get at root causes. This individual described a case where a girl was found working in a factory—a case of child labor. The company offered to pay for the girl’s schooling. For whatever reasons the family had—the participant speculated it was underlying poverty—the girl continued to work. • Another noted that in Côte d’Ivoire one of the big problems is that basically farmers get to retain very little money for what they produce. They are taxed for more than two- thirds of what they produce, so they have to make children work, otherwise they cannot make ends meet. We may very well build the schools or organize the community, but the problem is with the government and with all of the corruption surrounding the cocoa industry. • Jeff Morgan noted that many cocoa farmers do not use modern farming techniques and, as a result, yields are lower than they could be. With the combined pressures of taxation and little access to loans, farmers do not have the resources to hire labor. Farm labor is thus more likely to fall on the family.