Cultural Relativism in Fair Trade – an Exploratory Study on Trade Relationship Between Small Producers in Brazil and Their Market Interfaces in Switzerland
DISSERTATION of the University of St.Gallen, School of Management, Economics, Law, Social Sciences and International Affairs to obtain the title of Doctor of Philosophy in Organizational Studies and Cultural Theory
submitted by
Maria Angélica Miranda Rotondaro
from
Brazil
Approved on the application of
Prof. Dr. Yvette Sánchez
and
Prof. Dr. Thomas Dyllick
Dissertation no. 4059
Difo-Druck GmbH, Bamberg 2012
The University of St.Gallen, School of Management, Economics, Law, Social Sciences and International Affairs hereby consents to the printing of the present dissertation, without hereby expressing any opinion on the views of herein expressed.
St. Gallen, May 29, 2012
The President:
Prof. Dr. Thomas Bieger
To the small agricultural producers who, despite the odds, look for alternative trade options with a strong entrepreneurial mind-set.
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Foreword and Acknowledgements The decision to focus on the intercultural aspects of the commercial relationship between individuals from nearly opposite socio-economic contexts, in a sort of development system which aims to promote a better value distribution along the chain from producer to consumer, came from my previous experience in managing brands in different countries and cultures.
It was also motivated by an innate curiosity about Fair Trade and how the relationships indeed take place in daily life, rather than the consolidated messages communicated by the FLO label stuck on the bananas, tea boxes, coffee packages, and other products available on the shelves of large retail chains in Europe.
My own experience as a Brazilian expatriate in Switzerland allowed me to undertake the process of adjusting behaviors to a new cultural environment and to go through a self-questioning process about national identity.
Different people have been very supportive during my developing this study.
I am deeply indebted and thankful to Prof. Dr. Yvette Sánchez for her ideas, recommendations and holistic supervision, as one goes through a lot in life during the long years required for developing a doctoral thesis.
To Prof. Dr. Thomas Dyllick, I want to express my sincere appreciation for the insights about this dissertation’s implications and the guidance for the methodological session.
My special thanks to my life-partner Luiz Fernando Turatti for the many detailed reviews and valuable discussion sessions. To my parents, my sister and brother who gave me the ‘ regua e compasso ’ (ruler and compass).
I deeply value the main contacts in the cooperatives and buyers’ organizations for their trust, and greatly appreciate their openness and availability. ii
I also owe my gratitude to Max Leuzinger, my mentor when it comes to what a fairer trade system should stand for, and the provocative discussions which led to redefining this research topic during a visit to a cooperative in Brazil in early 2009.
Moreover, I would like to express my appreciation to Nísia Werneck and Fernanda Belizário for the insights about this dissertation’s conclusions from a South American point of view. And to Beat Gruenninger for the sounding board about Fair Trade in Brazil and for setting up the contact for access to interviews.
I am equally thankful to Prof. Dr. Juergen Bruecker, for his support and trust in my work as the HSG Sao Paulo hub representative. To Prof. Dr. Urs Jäger for the methodological sounding board during a research project in Peru. To Prof. Dr. Peter Ulrich for his advice to look for a more flexible type of job so I could develop and finish my research.
Furthermore, I would like to thank my colleagues from the Swiss-Brazilian Chamber of Commerce for their backing, to Marianne Rouiller who first took me to the University of St.Gallen and her ongoing support since then, and to Ann Puntch for her patience during the reviews of English and text consistency.
I would like to acknowledge that the conclusions express my own points of view and are solely my responsibility.
São Paulo, May 2012 Angélica Rotondaro. iii
Abstract This study deals with the intercultural dialogue in the trade relations between smallholder agricultural cooperatives in Brazil and their respective buyers in Switzerland, both of whom operate within a Fair Trade system. An exploratory research of qualitative nature, with an interpretative multiple case-study method was applied and three commercial relationships were selected. One of the main conclusions concerns the high influence of the constructs of fairness represented in the messages communicated to consumers – which are translated into the certification criteria – turning it into a self-fulfilling prophecy. Producer groups’ profiles, roles and “management models” are designed by the market and certification agencies, based on their expectations about socio-environmental issues from a predominately Eurocentric perspective. The results of this study will contribute to an increased self-evaluation of buyers and producers about their different business models, and on the influence of the role-play discourse and built-up stereotypes that permeate this alternative trade system.
Resumo
Este estudo envolve o diálogo intercultural na relação comercial entre cooperativas agrícolas de pequenos produtores do Brasil e seus respectivos compradores na Suíça, ambos operando dentro do sistema de Comércio Justo. Uma pesquisa exploratória de natureza qualitativa, utilizando-se do método de múltiplos estudos de caso foi aplicada e três relacionamentos comerciais foram selecionados. Dentre as principais conclusões está a elevada influência dos constructos de justiça representados nas mensagens aos consumidores – que são traduzidas nos critérios de certificação – tornando-se assim uma profecia auto- realizável. Deste modo, o perfil, papel e “modelos de gestão” desses grupos de produtores são formatados pelo mercado e agências certificadoras de acordo com suas expectativas sobre questões sócio-ambientais, dentro de uma perspectiva predominantemente Eurocêntrica. Os resultados desse estudo contribuem para uma melhor auto-avaliação de compradores e produtores sobre os seus diferentes modelos de negócios, e a conscientização da influência do discurso encenado e dos estereótipos que permeiam este sistema de comércio alternativo. iv
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Table of Contents
Foreword and Acknowledgements i
Abstract iii
List of Figures ix
List of Tables x
Acronyms xi
Part I – Introduction 1
1.1 Research Topic Justification 4 1.2 Research Question 7 1.3 Methodology 8
Part II – Theoretical background 11
2. The Fair Trade Movement – Back to the Origins 12
2.1 Distribution Chain in a Fair Trade System 20 2.2 Challenges Facing Fair Trade as an Alternative Socio-Economic Movement 21 2.2.1 Credibility and Transparency 24 2.2.2 The Fair Trade Minimum Price in a Global Food Supply Crisis 29 2.2.3 The Governance of Fair Trade Certification Definitions 30 2.2.4 Promoting a South-South Trade 32 2.3 Fair Trade in Brazil 34 2.3.1 Fair Trade for the domestic market 38 2.3.2 Fair Trade for Export 41
3. Intercultural Dialogue 42
3.1 Communication Patterns 49 3.1.1 Collectivist and Individualist Decision Making 49 3.1.2 Direct and Indirect Communication (High and Low Context) 54 3.2 Time Management 55 3.3 Image Studies in the Intercultural Dialogue 60 vi
3.4 Brazil Hetero-Image 69 3.4.1 Indigenous People & The Tropical Paradise 69 3.4.2 The Foreigner in the Brazilian Imaginary & When Yes Means No. 77 3.5 Switzerland Hetero-Image 78 3.5.1 Being Neutral 81 3.5.2 Overly punctual 84 3.5.3 Banks and Wealth 85 3.5.4 Orderly society 85 3.5.5 Stereotypes Germany – Switzerland 87
4. Fair Trade Image Constructs 89
4.1 The “Fairness” Construct 91 4.2 The Geography of Fair Trade – the North-South Construct 98 4.3 For Whose Benefit – the Marginalized Producer Construct 104 4.4 The Fair Trade Minimum Price Construct 108 4.5 A system of interconnected image constructs 111
Part III - Empirical Section and Case Study Analysis 118
5. Empirical Session 118
5.1 Methodology 118 5.2 Method Limitations 119 5.3 Case selection criteria 120 5.3.1 Selected trade partners for the case studies 121 5.3.2 Rationale behind the selected countries 122 5.4 Data Collection 124 5.5 Line of Analysis for each Individual Case Study 127 5.6 Case study structure 131 5.7 Cross-case Analysis 132
6. CooperCaju and Claro Fair Trade 133
6.1 The cashew nut cooperative - CooperCaju 133 6.1.1 Business Model 135 vii
6.1.2 Price Definition 136 6.1.3 Local Context and Self-Image 138 6.1.4 Collaboration Networks 143 6.1.5 Expected Challenges 144 6.2 Claro Fair Trade 145 6.2.1 Pre-assessment – Claro’s communicated fair trade messages to consumers 146 6.3 The Image of the Other (general) 147 6.4 The Image of the Other in the way of doing business 149 6.4.1 Communication 151 6.4.2 Trustworthy Relationship (and its different understandings) 154 6.4.3 Time Management 156 6.5 Conclusions 157
7. Gebana Switzerland and Gebana Brasil 161
7.1 Business Model 162 7.1.1 Price Definition 164 7.1.2 Local Context and Self-Image 165 7.1.3 Collaboration Networks 169 7.1.4 Expected Challenges 170 7.1.5 Pre-assessment – Gebana’s communicated fair trade messages to consumers 170 7.2 The Image of the Other (general) 171 7.3 The Image of the Other in the way of doing business 173 7.3.1 Communication and Trustworthiness 176 7.3.2 Future Orientation 178 7.3.3 Concern about Product Quality 179 7.4 Conclusions 179
8. Coagrosol and Rivella’s Michel FT Orange Juice 181
8.1 The cooperative Coagrosol 181 8.1.1 Business Model 183 8.1.2 Price definition 184 viii
8.1.3 Local Context and Self-Image 185 8.1.4 Collaboration Networks 187 8.1.5 Expected Challenges 187 8.2 Rivella AG and the product brand Michel 188 8.2.1 The trading company Fruitag 190 8.2.2 Pre-assessment – Michel’s communicated fair trade messages to consumers 191 8.3 The Image of the Other (general) 193 8.4 The Image of the Other in the way of doing business 194 8.4.1 Time Management 197 8.4.2 Future Orientation 198 8.4.3 Trustworthiness 198 8.5 Conclusions 199
9. Cross Case-Study Analysis 201
9.1 The cross-cultural contact zone in different distribution channels 201 9.2 Communication Patterns, Time Management and Collectivism 202 9.3 Constructs of Fair Trade 206 9.4 Country Hetero-Image 207 9.5 Regionalism 208 9.6 Not all mismatches are based on image and culture 208
Part IV – Implications and Final Considerations 212
10. Implications for Practitioners 212
10.1 Awareness about the stereotyped Fair Trade messages 212 10.2 For the intercultural different ways of doing business: The Bridging Actor 213
11. Implications for the Labeling Organization 215
11.1 FLO System – better to lose the saddle than the horse? 215 11.2 Minimum Price and Fair Trade Premium 217 11.3 From a Social into an Environmental Certification Agency 217 ix
11.4 The FLO System Could Possibly Pass a Public Opinion Audit, but (only) with Corrective Actions 218
12. Implications for Future Research 220
13. Final Considerations 220
Epilogue 223
Bibliographic Reference 225
Annexes 243
List of Figures Figure 1: Fair Trade product distribution chain (Source: Transfair, 2009) and Price breakdown for a 100g Fair Trade Chocolate Noir on a supermarket shelf (Source: 20 Minutes Paris, no. 1592 published on March 31, 2009) 21
Figure 2- The nine value dimensions of the GLOBE study checked as is and how they should be . 44
Figure 3: GLOBE Study value dimensions. (Globe 2004) 45
Figure 4: Comparative value dimensions scores for Brazil and Switzerland (german speaking part) according to the GLOBE study (2004). 46
Figure 5: The relations between image of the other, self and meta image 62
Figure 6: Brazil’s constructed image associations from early travel letters, culture shock books and Hollywood movies. 76
Figure 7: Comic Strip: (translation) ‘Halt! Who goes there? Friend or foe?’ ‘Neither one, I am neutral’. …Another guy from Switzerland.’ 83
Figure 8: Fair Trade Labeling Initiatives (shaded in dark green) are the ones that can license the Fair Trade Certification Mark on products and promote Fair Trade in their territory. Credit: FLO 101
Figure 9: Self-fulfilling image constructs process in Fair Trade. Source: Researcher. 113 x
Figure 10: Researched producer groups geographic location in Brazil 122
Figure 11: Amount of qualitative interviews according to interviewee profile. 125
Figure 12: Field work/interview date and location. 126
Figure 13: Image checked relations in the commercial relationship small Brazilian agricultural producer organizations and their respective Swiss buyers. Source: Researcher. 131
Figure 14: CooperCaju distribution chain for exports in FT. 136
Figure 15: Valued cultural differences in the way of doing business accessed during the interviews for Case Study A. 150
Figure 16: Gebana’s distribution chain for soybeans from Brazil. 164
Figure 17: Valued cultural differences in the way of doing business accessed during the interviews for Case Study B. 174
Figure 18: Coagrosol Distribution Chain to Switzerland 184
Figure 19: Michel campaign about Fair Trade and the producers behind the product. Credit: Michel/Rivella 192
Figure 20: Valued cultural differences in the way of doing business accessed during the interviews for Case Study C 196
List of Tables Table 1: Cases’ Institutional Set-Up, Producers’ Local Context and Self-Image, and Constructs of Fair Trade. 210
Table 2: Perceived differences in the way of doing business’ Generic Image of the Other (Country). 211
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Acronyms ATO Alternative Trading Organization BRA Brazil CH Switzerland CLAC La Coordinadora Latinoamericana y del Caribe de Pequeños Productores de Comercio Justo (The Latin American & Caribbean Network of Small Fair Trade Producers) EFAT European Fair Trade Association ECLAC Economic Commission for Latin America and the Caribbean FAO United Nations Food and Agriculture Organization FBES Forum Brasileiro de Economia Solidaria FCOJ Frozen Concentrate Orange Juice FLO Fairtrade International FLO-Cert Certifying Organization linked to the Fairtrade International FT Fair Trade GMO Genetically Modified Organism ILO Internacional Labor Organization MDA Ministério para o Desenvolvimento Agrário (Ministry for Agricultural Development) M-Time Monochronic Time NSF New Standards Framework (from FLO Fairtrade International) PAA Programa de Aquisição de Alimentos (Food Acquisition Program) PNAE Programa Nacional de Alimentação Escolar (National School Feeding Program) P-Time Polychronic Time PRONAF Programa Nacional de Fortalecimento da Agricultura Familiar UNICAFES União Nacional de Cooperativas da Agricultura Familiar e Economia Solidaria SEBRAE Serviço Brasileiro de Apoio as Pequenas e Medias Empresas (Brazilian Service to Support Small and Mid-Size Companies) SNCJS Secretaria Nacional de Comercio Justo e Solidário WFTO World Fair Trade Organization WTO World Trade Organization
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1
Part I – Introduction
How far the will to peace can assert itself once the interest in peace which sprang from nineteenth-century economy has ceased to operate, will depend upon our success in establishing an international order. (Polanyi, 1957).
There are several image constructs in Fair Trade which have been built up over the last twenty-three years 1 of this socio-economic movement.
Such constructs have been communicated to the final consumer in a way that the values of justice, the definitions of what “development” stands for, as well as the images of the producer organizations, their socio-economic condition and locations, follow a self-fulfilling prophecy in line with an ideal ethical discourse aiming at calling socially conscious consumers in the North for action.
At the end, it is the producer who needs to follow a set of criteria with around one hundred twenty (120) must do’s about what fair stands for, from the perspective of the so called Global North.2
This poses two problems, the first is that such constructs translated into social certification criteria may not mean much in the producers’ context of norms, values and life-styles (Goodman, 2004; Bacon 2010; Besky, 2010), the second one is that the imagined narratives of Fair Trade form a set of preconceived images of the other have a hold upon the intercultural relation.
1 Considering that the first coordinated effort towards FT was the Max Havelaar foundation establishment in the Netherlands, in 1988. 2 In the case of FLO-Cert (Certifying Agency of Fair Trade International Organization) these certification criteria are reviewed by their assigned experts, most of them based in Europe. 2
In this sense, as stated by Goodman (2004, p. 894), “development is influenced by consumption, marketing and product placement”, and both constructs and the certification criteria, which determine what is fair or not, interrelate and interact, constituting and shaping the commercial relationship, in a neo-power-play and role-relationship where those in the North still hold the most cards.
In Latin America there are approximately 15 million small family-run farms. Only less than half of them are integrated into the market or make a living from this activity rather than just subsistence.3
Producing half the population’s daily food supply, these small-holder producers watch out for the preservation of local bio-diversity, hire the largest number of agricultural workers and provide wealth benefits to their communities 4. Although they are the key element of the food value chain, they retain the lowest amount of total revenues (Daviron &Ponte, 2005; Bacon, 2010).
It was in this context and in support of those left out of the global trade system, and aiming to fight against rural poverty, that several inclusive trade initiatives started, among them the Fair Trade 5 movement in the late 1980s.
Fair Trade began as a social justice cause, a kind of “self protection” movement to re-regulate and check the effects of a globalized market economy with the objective of including small producers in global trade of agricultural products and providing them with the minimum conditions to be able to survive on income from their own production (Nicholls & Opal, 2005). This is one side of the distribution chain.
3 IFAD (International Fund for Agricultural Development). Latin America: the state of small-holders in agriculture (Bedergué and Fuentealba) paper presented at the Conference on New Directions for Smallholders in Agriculture in January 2011 in Rome. 4 RIMISP – Centro Latinoamericano para el Desarrollo Rural. www.rimisp.org accessed on July 1, 2011 and CEPAL (2003) report by Abramovay et al. 5 Some organizations make a distinction between Fair Trade written all together, which is the socio- economic movement represented by FLO and its members, and written separated which is overall Fair Trade non-FLO. Along this study I opted for Fair Trade (separated) for all, except when it is a proper name. Nevertheless, the analysis of Fair Trade certification criteria is always based on the FLO and FLO-CERT ones. 3
On the other side, were the socially-conscious consumers who gave preference to products coming from small-holder farmers and the buyers and product processors, all following the credo of a fairer, more transparent, inclusive and long-term trustful commercial relationship.
As more-fairly traded product sales started to move from a niche market to the mainstream, when they gained a place on the shelves of the large retail chains, certification labels were necessary.
Such social labels became a sign to final consumers that guarantees that products were indeed acquired along the lines of a more inclusive trade system, therefore bringing small producers better commercial conditions, including the opportunity to participate in international trade (Zadek, Lingayah and Fortstater 1998; Murphy et al, 2005; Conroy, 2007).
The outcome was a broad assortment of highly competitive social and environmental certification labels and systems where each of them claims to have the most complete and balanced selection of social, economic and environmental criteria.6
The other point related to increasing the offer 7 of goods marketed under Fair Trade principles is that since production is limited by land size and type of processing (hand-made or small/mid-size processing industry), in order to guarantee a constant supply level, retailers and distributors start looking for a diversified portfolio of cooperatives they can buy from. Another movement in this line is FLO’s decision, for some of the mainstream products, to certify large plantations as far as these would follow some of the ILO requirements, but this topic will be further discussed in the chapter about Fair Trade current challenges (Renard & Pérez-Grovas, 2007; Hutchens, 2009).
6 For reference on the international social and environmental/organic labels and respective requirements and claims please go to UNCTAD (United Nations Conference for Development) portal of Sustainability Claims. http://193.194.138.42/en/Sustainability-Claims-Portal/ accessed on June 2, 2011. 7 From 2008 to 2009 FLO certified product sales grew 15% totaling €3.4 billion worldwide. 4
If developing international trade relations between large companies already includes many more challenges than selling to local markets, this can get even more complex in the case of companies operating in a Fair Trade system, in which mid to large sized companies in mature markets search and buy from small-sized agricultural producer organizations in regions with an economy in development.
To achieve a guaranteed and trustworthy long-term supply agreement and to develop new producers in the non-traditional Fair Trade countries, it is fundamental to understand the perceived image buyers have about producers and vice-versa, their cultural backgrounds, and how these impact cross-cultural communications in the trade relationship.
Although this may seem obvious, in practice it is not.
In this study, I looked at the intercultural trade relationships between small- holder family farmers in Brazil and their commercial partners in Switzerland, both operating in a Fair Trade system.
The objective was to identify and analyze how the culture-bound elements of image of the other; generic country image; and constructs of fairness unfold and influence the development – or not – of a long-term and trustful commercial relationship.
1.1 Research Topic Justification Intercultural or cross-cultural communication has for long been the subject of academic studies with classic works which range from nations’ bi-polar comparative values’ system from authors like, Hofstede (1980;1998), Trompenaars (2004) and the Globe Study (2004; 2007), which not only have been for long applied and referred to, but also been exposed to critics due to their tendency to generalize, and many times create or support an stereotyped national behavior; to the work of E. T. Hall (1959), also a classic in the intercultural literature, Sarangi (1994), Bolten (2007; 2009), and many more.
Since interest in this subject has grown with transnational companies increasingly outsourcing their production activities or opening new international 5 market operations, several books and practical guides on “how to do business with” or “how to communicate with” have been published (Novinger, 2003; Moran, Harris and Moran, 2004).
There are also the “culture shock” books and those for travelers and expats, which tend to be based on personal experiences and past similar reports rather than to follow any sort of deeper study about different cultures. Most of the time these books serve much more a source of stereotypes than presenting cultural aspects from specific regions.
In the area of rural communities’ cultural studies, these are most often related to the specificities of human and cultural capital (Freidberg, 2003; Flora & Flora, 2008) and several working groups promoting knowledge exchange in this field, such as the Rural Sociological Society (RSS) 8 and the International Rural Sociology Association (IRSA).9
Fair Trade has been the main research topic of many scholars, analyzing both its positive or negative impacts on small producer organizations. Such studies range from an overall view about how it was formed and who the main players are (Nicholls, Opal, 2005; Raynolds, Murray and Wilkinson, 2007; Bezencon & Blili, 2009; Lyon & Moberg, 2010), to success stories from ATOs (Alternative Trading Organizations) (Lamb, 2008).
Studies and books about Fair Trade also show it as a certification system, discuss the role of the label (Anholt, 2005; Conroy, 2007) or question the effectiveness of Fair Trade in supporting small farmers in finding their way out of poverty (Bacon, 2005; Daviron & Ponte, 2005; Barrientos & Dolan, 2006).
However, a gap is revealed when it comes to analyzing the influence of the intercultural and actors’ image associations in these commercial relationships.
Although there is a representative set of studies about the constructs of Fair Trade (Freidberg, 2003; Renard, 2003; Goodman, 2004) and the governance structures that define what is fair (Bacon, 2010) these are not directly related to
8 http://ruralsociology.org/, accessed on June 4,2010 9 http://www.irsa-world.org/, accessed on June 4 ,2010 6 the influence of the pre-conceived images of cross-cultural dialogue. And up to now, the analysis of fair trade encounters lacks the symbolic dimensions as consolidated in the form of image constructs, and the role of consumer expectations and certification agencies in shaping productive practices and producers’ cultural identities (Dolan, 2010; Wilson, 2010).
At the beginning of 2009, the WTO (World Trade Organization) and ECLAC (Economic Commission for Latin America and the Caribbean) published a report about the first outcomes of the Aid for Trade program for the region. It brings up very interesting and constructive discussions about a needed paradigm shift also for the aid and cooperation programs in relation to the developing communities in Latin America.
The report points out the disregard of trade as a development instrument in beneficiary countries or by donor agencies. It also calls attention to the absence of internal appropriation of assistance programs by the supported groups and cites as a possible reason the conflicting agendas of donor agencies and that aid programs do not necessarily coincide with the objectives and needs of the targeted groups.
This doctoral was elaborated at a time when the FLO (Fairtrade International) was re-analyzing its strategy and role, and released a set of revised standards 10 in May 2011. After 20 years of movement, with members mostly in the countries of the Global North 11 , now FLO is considering expanding its labeling trademark license to some of the producer countries. 12
For researchers, this study aims at contributing to the intercultural and image studies in the context of Fair Trade focused on the trade and collaborative relationships between Brazil and Switzerland.
10 In this study we have focused on the generic criteria for small producers. 11 Mexico is up to now the only exception, as their Fair Trade organization was invited to become a FLO member after the development of a country-based certification and labeling system. 12 FLO announced it is considering including Brazil and the ABCJ (Brazilian Association for Fair Trade) as one of its members. This would allow the local organization to grant the FLO label to products to be sold in the internal market. http://www.fairtrade.net , accessed on June 1, 2011. 7
For practitioners, including buyers and sellers/producers and traders, it aims at providing evidence of critical behavioral patterns based on the different ways of doing business and the stereotyped images of each other and how these influence commercial agreements beforehand. This research brings in as a new element the “constructs of fairness”, created by the certification criteria and the messages communicated to final consumers, as a possible source of misunderstanding.
1.2 Research Question
The main research question can be summarized as:
How do the image of the other and the constructs of fairness come into play and design the commercial relations in a Fair Trade system?
The three perspectives from which I will look at the commercial relationships are: