Thursday, April 14, 2005

It all goes bananas

The WTO is going to have to step in to arbitrate between the EU and Latin American countries on how its import control system, based on a blend of tariffs and quotas, should be replaced by a tariff only system.

The EU seems relatively relaxed about the challenge from Ecuador, claiming that there was a 'gentleman's agreement' to resolve matters in this way. Less relaxed are the small Caribbean with a heavy reliance on banana exports.

Relatively few bananas are grown within the EU (mainly in the Canary Islands and Greece). The tropical fruit is popular as a snack, especially in Germany which has the highest per capita consumption in the EU. When the wall came down, many East Germans came in search of bananas. There were great celebrations in Britain when supplies of the energy boosting fruit became available for the first time after the Second World War.

It's cheaper to produce bananas on large plantations owned by American multinationals in Central America, countries such as Ecuador and in Hawaii. And these companies have a lot of political clout in the US through donations to both political parties. Hence, the 2001 agreement.

The Windward Islands and Jamaica have already taken a hit. Before the creation of the common market organisation for bananas in 1993, there were 24,000 banana farmers in the Windward Islands, a figure that had fallen to 7,000 in 2001. Production in 1999-2002 was 50 per cent of the 1989-92 figure. The fall in Jamaica has been smaller, but is still substantial.

However, there have been some gainers among ACP countries. Belize, Cameroon, the Dominican Republic and Cote d'Ivorie have all expanded production and exports. In particular, Cameroon and Cote d'Ivorie benefit from low production costs comparable with those of dollar banana producers.

The EU has proposed a common tariff of €230 per tonne which leaves no one pleased. The ACP producers want a higher tariff of €275/t, while the dollar area exporters want a zero tariff or at most the €75/t level applied at present to quota imports.

The likely outcome us that the EU will have to make further concessions on the tariff and compensate disadvantaged least developed countries through the Special Framework of Assistance that is to be used in relation to the sugar regime, as well as through other EU development policies.

That way EU consumers will have a reliable supply of reasonably priced quality fruit and it will not be necessary to revive the song 'Yes, I have no bananas.' But some LDCs could go the way of Suriname whose EU exports ended in 2002 with the bankruptcy of its banana export company.

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