The banana issue is polarising the hemisphere
By David Jessop
Stabroek News
February 27, 2005
February 31 the European Com-mission (EC) proposed for bananas coming from non-ACP nations, a single tariff of 230 euros per tonne. They did so in order to create a tariff-only and quota-free European banana regime by January 1, 2006.
The proposal has met with criticism from both African, Caribbean and Pacific (ACP) producers and from the six principal Latin American banana exporting countries: Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Nicaragua and Panama.
For the ACP, the level at which the EC proposes to set its tariff is not high enough.
Caribbean and other ACP banana producers would prefer a figure of 275 euros per tonne. In contrast, Latin producers believe that the EC's suggested figure needs to be lowered dramatically to a level nearer to 75 euros per tonne.
Under the current quota system, Latin American producers supply up to 2.7M tonnes of bananas per year, at a tariff rate of 75 euros per tonne with additional exports beyond that subject to a 680 euros per tonne tariff.
The result is that once again the ACP, the EU and Latin producers are preparing for a bruising confrontation over bananas. So much so that there is the strong possibility that the matter will go to World Trade Organisation (WTO) arbitration in accordance with the guidelines that the EC established in 2001 if agreement were not to be achievable on a post 2006 tariff level.
Across the hemisphere positions are polarising. On January 26 the seven presidents of the Latin banana-exporting nations issued a statement in which they suggested that the proposed tariff does not comply with the development mandates of the Doha Round and would result in losses for them of up to US$400M per annum.
Caribbean heads of government meeting in February took an equally robust position. They noted the importance to the region of a remunerative banana regime in Europe and expressed grave concern for the future of the Caribbean banana industry if a tariff of 230 euros per tonne or lower were to be implemented.
For its part, the EC is arguing that its proposed tariff will preserve current levels of market access for all WTO members exporting bananas to Europe while maintaining preference for ACP countries.
Since the liberalisation of the European banana market first began, huge sums of European development assistance have been set aside for the restructuring of the ACP industry and to enhance its competitiveness. According to the EC, in the four years up to 2003 a total of 216M euros was assigned for such programmes.
But regrettably and largely through interminable bureaucratic delays in Europe, much of this money - fifty-one per cent is dedicated to the Windward Islands - was not spent in the timescale intended.
Europe's original fifteen states import roughly 82 per cent of the bananas consumed on its market. Eighteen per cent are produced domestically in the French DOM or the Balearics, 63 per cent come from Latin America and 19 per cent from the ACP.
In contrast around 98 per cent of bananas imported by Europe's new member states came as they had before enlargement from Latin producers.
EC figures suggest that liberalisation has reordered the principal ACP suppliers in the EU market at the expense of smaller Caribbean producers.
Overall, Caribbean banana exports to Europe have been falling. In the four years up to 2003, EC figures indicate that Caribbean banana exports fell by 9.6 per cent so that they now account for some 36 per cent of total imports from ACP countries.
The decrease has been especially marked in the case of the Windward Islands with exports falling by as much as 50 per cent. This is in contrast to those of the Dominican Republic, which over the same period increased its exports to the EU by 159 per cent so that it now accounts for around 14 per cent of all ACP banana exports to Europe.
Other figures suggest that the share of the market between ACP and Latin producers is little changed. In the original EU pre-enlargement market of fifteen member states, overall demand, which stands at around 4M tonnes of bananas a year, increased by five per cent during the period 1999-2003.
The banana issue remains as complicated as ever for the region.
Setting a single tariff requires it being fixed at a level that maintains the present degree of protection for ACP producers while ensuring that the market remains viable for the most vulnerable producers. Latin producers, irrespective of their complaints have significantly lower production costs and under the post 2006 regime will for the first time be freed from quotas.
Bananas like sugar makes clear that economic liberalisation is meaningless unless it can be proved that development is an integral part of the reform process.
Bananas in small vulnerable economies such as those in the Eastern Caribbean play a vital role in ensuring the stability of society. For this reason any further deterioration in preference and loss of market share will carry a strongly negative message about the process of trade liberalisation for economies that represent a miniscule element of global trade.
The ongoing difficulties over bananas also raise questions about deeper economic relationships with Latin neighbours.
In an attempt to bridge the gap between the Caribbean and Latin America on bananas, Heads of Government have proposed that there be a joint ministerial meeting with Latin counterparts. Unfortunately it seems that Latin governments seem unwilling to cede any ground until much of the Caribbean industry has ceased to exist.
The motivation of Latin nations - as opposed to large profit-oriented US corporations - to want to take even more European market share of bananas and sugar from small Caribbean producers should raise serious questions about their intent towards the region. It suggests that there are limits to solidarity in the WTO, UN, OAS and elsewhere and a reason for scepticism about their true objectives.
Some Caribbean banana-producing nations have made real strides in increasing their competitiveness. They have shown that it is possible to succeed with external assistance against a background of declining preferences. Latin nations do not seem prepared to understand that in seeking to drive down Europe's proposed single tariff for bananas they will create an economic environment in which any thought of closer ties or economic integration will become unachievable.