Usual last-minute banana peels

08.FEB.08

by Alistair Smith, International Coordinator of Banana Link

It is traditional that on the eve of multilateral treaties and trade agreements being signed, bananas are the last and most controversial bone of contention. This happened before the signing of the Treaty of Rome, the creation of the European Single Market or the signing of the Marrakech Agreement to establish the WTO itself. The 31st December 2007 deadline for negotiating the six regional EPAs was no exception.{{more}}

Three ACP regional groupings were concerned: seven members of CARIFORUM (Dominican Republic, Belize, Suriname, St Lucia, Jamaica, St Vincent and Dominica, in descending order of their current export volumes); two members of ECOWAS (Ivory Coast and Ghana), and Cameroon from CEMAC. In the space of less than ten days in December, all these countries were involved in last-minute signings of either an EPA or interim deals. Despite pressure from the Africans to extend the waiver, the EC refused to consider this. Despite pledges of regional solidarity, the three African governments ceded to pressures stronger than the argument against regional ‘dis-integration’.

There is little doubt that, as well as the constant pressure from Brussels negotitators, the three West African banana exporters applied strong corporate pressure on governments. Commodity companies had a major influence in persuading Abidjan, Accra and Yaoundé to break ranks with fellow members of their regional groupings. For example, it is known that the Compagnie Fruitière, controlled by the world’s biggest fruit company Dole, was actively lobbying for the three countries where it has plantations to sign EPAs. Late on, when it was clear that only an interim deal would save the company from having to pay the 176 euros/tonne tariff into the EU, the company even wrote to request the support of the Ghanaian trade union which represents their workers despite the clear public position of the union against the EPA as it had been proposed.

WTO banana panel: an ironic twist of fate?

The longest and most complex of WTO disputes was always likely to muddy the waters for ten African and Caribbean banana exporting countries, most of which need to continue with their duty-free access to the EU market if their industries are to survive. During 2007, Ecuador had challenged both the level of the EU banana import tariff and the ACP tariff preference in the DSB; the USA had launched a separate challenge over the ACP tariff preference. Although the Ecuador panel recommendations reached in November were not made public, it was made clear that the EU had been found in breach of WTO rules over its ACP duty-free treatment and quota.

Presumably, the intention of the WTO complainants was to make the renewal of the Cotonou waiver secured in Doha in 2001 impossible; and, presumably, the EU knew that it was likely to lose the panel, because it had been insisting – with those non-LDC ACP partners with a major export sector benefitting from Cotonou commodity preferences – that renewing the waiver was not an option.

Ironically, being condemned in the WTO for its ACP banana tariff preferences not only gave Brussels more leverage with countries showing resistance to EPAs, but, now that the ACP banana exporters have all got deals giving them WTO compatible duty-free treatment, it has taken some of the wind out of Ecuador’s sails. Unlike the last time it won a panel against the EU, Ecuador has little to gain as a country from further action at the WTO. It will continue to pursue a reduction in the EU banana import tariff, but any reduction will benefit the exporting companies like Dole that actually pay the tariff far more than it will Ecuador’s economy.

So is everybody happy now?

CEO of the Windward Islands Banana Development and Exporting Company, a company 50% owned by the island governments, Bernard Cornibert, told regional media that they were left “holding the short end of the stick and that the deal will not come anywhere close to resolving the problems that the industry has faced over the years”. On the wider value of the EPA for the Caribbean, CARICOM’s President Bharrat Jagdeo was very critical indeed, describing regional EPAs as a: “well thought-out ploy by Europe to dismantle the solidarity of the ACP by dividing the ACP into six negotiating theatres and playing one off against the other.”

The Windward Islands always had duty-free entry, so it is the quota-free component that threatens the survival of their industry, as ACP exporting countries will now compete head to head to retain a place in the lower and lower price EU market. Duty-free and quota-free favours producers with low labour costs or high externalised environmental costs like the Dominican Republic or Belize. If the Ghanaian expansion really takes off now that duty-free access for any volume is guaranteed or the fruit companies choose to expand in the Ivory Coast, Cameroon… or even Angola, then the smaller Caribbean exporters will be increasingly squeezed. Although the rhetoric of the EC was about social and environmental linkage in the EPAs, nothing has been done. What is certain is that the end of the ACP quota suits corporate players for whom any volume restrictions complicate their strategic planning and operations.

It is not yet known whether EU governments with major banana production interests, notably France and Spain, will continue to lobby for bananas to be treated as a “sensitive” product along with rice and sugar. However, what is certain is that European banana producers cannot be happy that, for the first time since the single market was set up in 1993, there are no longer restrictions on ACP duty-free imports into the EU. Given that other major consumer markets are not a realistic option for expanding African banana exports, any increase is likely to come at the expense of the highest cost fruit on the market. Despite high levels of subsidies, the highest cost fruit is produced in the EU.

1Carbbean Broadcasting Corporation, Bridgetown, 2nd January 2008

2Stabroek News, Guyana, 8th January 2008

3Fruit company Chiquita has been investigating a major new operation there for several years.