From issue: Free Trade and Market Access (Winter 2011)
From Tradition to Trade
Helping small artisanal producers compete on the global market is essential to reducing inequality.
Uriel Arroyo is a ceramics producer from Capula, a small community in Michoacán, Mexico, whose family-run business used a centuries-old method to craft clay table- and cookware. Arroyo, like roughly 10,000 artisanal ceramacists across Mexico, used lead-oxide glaze to finish his pieces. Now, with the help of nongovernmental organizations (NGOs) and Mexican public agencies, Arroyo is weighing the difficult and career-changing decision to break from the traditional method of production and embrace a lead-free alternative glaze.
More than anything, Arroyo’s choice hinges on his need for increased access to markets and higher profits for his small business. Local ceramicists had made a decent living off their trade for generations, but business seemed to dry up in the mid-1990s. The primary market force at work during this time was the 1994 North American Free Trade Agreement (NAFTA) that united the U.S., Canadian and Mexican economies. The trilateral agreement promised increased commercial opportunities for small- and medium-sized enterprises (SMEs) like Arroyo’s, but NAFTA came with a catch.
Gaining access to American markets also meant complying with a 1991 Food and Drug Administration (FDA) ruling that regulated the permissible levels of soluble lead in cookware and tableware (currently between 0.5 and 3.0 micrograms/ml). Growing popular concern about lead levels in the environment translated into stricter standards in other developed-country markets too, such as Canada, the European Union, Australia, and Japan. Without the financial or technical capital to upgrade to lead-free glaze, Arroyo and other potters found themselves locked out of new export markets in developed countries.
The FDA ruling effectively created a nontariff trade barrier for Mexican exporters. At the same time, SMEs faced severe constraints in information about the need and requirements of new markets beyond their borders and the capital to meet those demands. The challenges illustrate the economic and technical hurdles that small producers in developing countries face when exposed to the global market. “We don’t want a handout from the government,” Arroyo says, while standing beside a large adobe kiln, his apron and hands smeared red-brown from wet clay. “We want to earn our own living, but we need assistance finding other markets and exporting.”
Mexican public agencies and NGOs have responded with programs that provide tailored interventions, such as skills training and credit, that reduce the economic obstacles to the adoption of lead-free glaze. Assistance with strategies to market exports has also given entrepreneurs like Arroyo a chance to adapt their industry to changing markets and make their living. But governments and NGOs must make a greater effort to distribute information to ceramicists about the markets they seek to enter.
New Markets, Old Technologies
According to a recent estimate, one-third of Mexicans (some 30 million) prepare and eat food from table-service items produced in traditional family workshops. The figure, admittedly conservative, was much higher before the economic reforms of the late 1980s and early 1990s, which liberalized Mexico’s trade policies and opened its market to foreign imports.
While the FDA ruling in 1994 closed lead-based ceramics producers off to U.S. markets, Mexican producers were also losing market share at home. By the early 2000s, nearly half of all ceramic goods sold in Mexico were imported, the majority from China. Less expensively produced, the lead-free Chinese products were sold at prices between 10 and 40 percent lower than the domestic variety. The crimp in the domestic market made the need to adapt for export all the more urgent.
Enter the Fondo Nacional para el Fomento de las Artesanías (Fonart). The Mexican agency, located within the federal Ministry of Social Development, undertook a sector-wide effort to facilitate an upgrade to lead-free, exportable glaze. The project was not a small one. Fonart developed a suitable lead-free, boron-based glaze in 1996 and initiated the lead eradication program in 1998. Along with a variety of state agencies and NGOs—most notably the Casa de las Artesanías de Michoacán and World Bank-funded NGO Barro sin Plomo (Ceramics without Lead)—Fonart began the task of promoting the safer, exportable glaze to local ceramics producers.
Fonarts’s support for the ceramics producers of Michoacán is suggestive of what scholars Andrew Schrank and Marcus Kurtz call “open economy industrial policy.” In the new free-trade environment, government intervention is designed to help domestic producers become more competetive globally, rather than protect them behind trade barriers. These interventions frequently include efforts to help firms and sectors overcome market imperfections that are endemic to developing countries: lack of information about export markets, poorly developed credit markets, low levels of human capital, and limited research and development.
Although far short of a unified policy, there is much to be learned from the varied efforts of the Mexican government to help SMEs compete on the international level. A network of federal and state programs has been established in the last decade to assist small businesses in riding out market failures and improving their capacities to export.
Among the most noteworthy programs are FONDO PyME, established in 2000 to provide seed money, innovation, financing, and training for groups of firms; ProMéxico, which is specifically dedicated to deepening Mexico’s involvement in the international economy, largely by promoting linkages between domestic and foreign businesses; and Cexporta, a state agency in Michoacán that provides assistance in improving competitiveness for small businesses, such as creating barcodes, helping design effective brands and publishing foreign legal requirements for labels.
At the heart of the effort to increase the use of lead-free production is the diffusion of technology and skills through guided training. In 2008, Fonart trained 3,425 heads of family in Michoacán through workshops in the use of lead-free glaze, and an additional 450 in 2009 alone. Training sessions allow producers to finish unglazed wares with lead-free glaze provided by the government agency, and then fire them in a variety of kilns. The program helps to alleviate the costs of experimenting and gives the producers the hands-on knowledge they need to implement the technological change in their own workshops, while demystifying what the change entails.
In addition to disseminating know-how, efforts have been made to overcome the cost barriers to upgrading. For example, Casa de las Artesanías has tried to address this issue both by subsidizing inputs, like the lead-free glaze itself, and by funding construction of more efficient, hotter burning closed kilns. Similar to Fonart, the agency provides free glaze and kiln fuel, lowering the costs of learning and experimentation. Since 2003, Casa de las Artesanías has overseen the construction of nearly 100 kilns in ceramic-producing communities around Michoacán. Beyond the direct provision of kilns, a variety of small, subsidized loans provide the credit necessary for upgrading them. In 2009, despite complaints from local producers that the loans were too small or too risky, Fonart lent almost $80,000 (1 million pesos) in financing across the state.
Despite all these efforts, Mexican producers and consumers remain skeptical of the dangers of lead, and Mexican laws restricting lead-based glaze in cookware are rarely enforced. That has been a major hurdle to the widespread adoption of the exportable glaze by family workshops. But there are others as well—such as the lack of training in the skills needed for applying the new finish, the lack of appropriate equipment and the cost of switching to the new process.
One might imagine that the health risks posed by handling and firing lead, particularly around one’s home, might serve as motivation to adopt new methods. But according to Laureano Martínez, a trainer who teaches other ceramicists how to incorporate lead-free glaze in their operation, profit is the only factor that matters in the decision to upgrade. Martínez says of his students, “Those who have changed to lead-free glaze have done so because it has been demanded by their customers.”
Small-scale ceramicists often operate on a thin profit margin, with little time or resources to commit to mastering new materials like lead-free glaze. This is by no means unique to the ceramics sector. It is also true for family workshops across industries, especially given that business and household budgets are intertwined and that sales income is simultaneously used to meet house, workshop and dependents’ needs.
Experimenting with a new firing method also brings added costs and risks. Rather than trying out a new technique with only one or two pieces, observing the outcome and then making adjustments, producers are compelled to fill kilns to capacity in order to achieve maximum efficiency. Typically, artisanal workshops have an open-topped, circular kiln above a small, subterranean firebox. Once the kiln is fully loaded, a wood fire is lit below and stoked for hours until it attains sufficiently high temperatures to set the glaze. As a result, a small batch requires as much fuel as larger one, raising the cost of pieces produced in small runs.
Not only does the traditional kiln discourage the development of new skills, but it is also not suited for upgrading to lead-free glaze. The new boron-based glaze must be fired at slightly higher temperatures for a longer period, which is tricky to accomplish in open-top kilns. Replacing or modifying such a central component of the workshop is costly. So even though the new glaze is less expensive than lead-based glaze, few producers see it as an overall benefit.
A commonly cited claim is that an inexpensive fan costing no more than $50 would allow existing kilns to attain higher temperatures, but producers remain skeptical. Many of those who continue to use the lead-oxide glaze believe that the boron-based glaze would require a new kiln. Estimates range from about $550 for a closed, wood-burning kiln to about $2,000 for a gas-fueled adobe kiln...