Consumers Must Be Prepared To Pay More To End Banana War

Sarah Ryle

The Observer- Guardian Weekly 5-12-2002, page 26

As wars go, the banana conflict is a messy one. Just when you thought it had all gone quiet along comes another flare-up and this time the British supermarket price war is a key trigger. The banana is the number one edible commodity in Britain - and prices are being slashed.

Banana-lovers will remember that the trouble started when the Americans objected to a long-standing European quota system that was deemed detrimental to the "dollar banana" - distributed by multi-nationals including Chiquita, a company that donated money to the US Democrats at the time they called in the World Trade Organisation in 1996.

The WTO ordered the European Union to open up its markets even though the quotas were designed to sustain banana growing in impoverished former colonies such as the Caribbean's Windward Islands as opposed to, say, marijuana or coca growing. The US got its free trade, and banana farmers are going out of business at an astonishing rate: by 2000 only a third of the Windward Island farmers recorded in 1993 were still growing bananas. St Lucia's Banana Growers' Association reported that half its members went out of business between 1992 and 1997. It estimates that a third of the survivors have since gone under.

The banana boats still arrive every week thanks to a venture between Fyffes and Windward Isles. But a year after the quotas all but disappeared they collect far fewer bunches. Ralph Gonsalves, the Labour Prime Minister of St Vincent and The Grenadines, says their exports are worth $50m compared with $120m in 1993. Demand for bananas has not fallen. They are the number one edible item sold by British supermarkets. Only petrol and lottery sales outperform them. The banana overtook the apple in 1998 as the UK's most loved fruit. So it was unfortunate for independent farmers in the Windward Islands - as well as others in nations such as Ghana and Costa Rica - that the banana war happened to coincide with a conflict happening much closer to the British consumer: the supermarket price war.

Cheaper bananas do not, however, mean people buy more because they cannot stockpile them in the way they might freeze meat or store baked beans. So increased sales volumes do not compensate for lower price tags. "There is an obsession with driving prices down," says Bernard Cornibert, managing director of Windward Isles, the company that distributes the islands' bananas. "It is reaching the point when consumers will ask, 'Am I getting this too cheaply? Has somebody had to break his back?' We want a fair price, and a fair price means fair to everybody, not just the consumer. Cheap food means cheap food because corners have to be cut. We know we are less competitive. We pay good wages and good prices to the growers." All the Windward Islands bananas are sold to the UK, and Gonsalves says the more they can sell direct to supermarkets the better because wholesalers do not pay so much.

Sainsbury's has been to the islands to help farmers apply for EU grants to fund irrigation and other programmes that will make the farms more productive and competitive. But even Sainsbury's, with its cost-cutting strategy, will not wait for ever for the islands to modernise. The islands have just over a year, until March 2004, to shape up.

Gonsalves, a farmer's son with an economics masters degree at Manchester University, says that if St Vincents has to adjust quickly, "we will never be able to compete price-wise with the dollar bananas from the Latin American giants, but we can trump them on taste and quality. "We have restructured our growers' associations, taken out administrative costs and are introducing a certified scheme to guarantee the quality Europeans want."

Groups such such as AgroFair, the Dutch import company which brought the first trademark Fair Trade bananas into the UK in January 2000, say the answer is to persuade consumers that they should buy fruit from socially responsible suppliers. It has a deal with the Co-op and says Fair Trade bananas account for 11% of the supermarket's total sell and 40% of the packaged bunches. "There is a world crisis in tea and coffee as well as bananas from third world countries," says AgroFair's sales and marketing manager Jan Castle. "The producers are being squeezed. But more and more people are looking harder at what they buy." Demand for Fair Trade bananas is rising by 53% each year, guaranteeing more farmers a fixed price that reflects production costs.

Supermarkets hope that the day when shoppers buy bananas as selectively as they buy eggs, meat or milk is not far off. There will always be people who want the cheapest on offer. There are also increasing numbers who will pay a reasonable premium for something free range, organic or fairly traded, as all the supermarkets know. Gonsalves has asked the four Windward Islands high commissioners in Britain to help things along with a new campaign to persuade the British Caribbean community to "Buy Windward".

"Bananas will flourish where we can give increased choice to our customers, which in turn provides new opportunities to our farmers and suppliers," said a Sainsbury's spokesperson. Shoppers' tastes will need to have refined in time for 2005, when the final protective quotas disappear, if the Windward Islands are to make a living from the kinds of cash crops which do not attract the attention of the anti-drugs squads.

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EU and US End Banana War

http://news.bbc.co.uk/hi/english/business/newsid_1271000/1271969.stm

Wednesday, 11 April, 2001, 13:01 GMT 14:01 UK

The EU-US trade war hit developing world banana growers The long-running dispute between the EU and the US over importing bananas has been settled.

EU trade commissioner Pascal Lamy announced an agreement to end the three year argument. And the US has agreed to suspend the sanctions imposed on European luxury goods because of the row.

The banana war was the most serious falling out over trade between the EU and the US in recent years, although other industries including beef, cashmere and steel have also been at the centre of disputes.

Suspending sanctions

"After many years and many difficulties, we struck a balance between all parties," said Mr Lamy. The EU says that it has managed to ensure both the protection of EU producers and banana growers in the Africa, Caribbean and Pacific nations.

The EU's banana tenders will no longer be received on a first-come, first-served basis, a system that favours local producers because they can respond fastest. The agreement still waits clearance from the European Parliament and each member state. If all goes ahead, the US will suspend its sanctions from 1 July, and withdraw them completely after that. The US accused the EU of favouring banana producers in former colonies over US owned plantations in Latin America, winning a landmark case with the World Trade Organisation in 1999.

Retaliation

This meant that the US was allowed to impose heavy tariffs on luxury goods imported from Europe, at an annual cost of $191.4m (215.2m euros) as retaliation. The US then threatened to instigate a "carousel" system of rotating trade sanctions against a wide selection of EU imports, ranging from French handbags to Scottish cashmere and Danish bacon.

Beef also became a centre of controversy, with the US threatening to go to the WTO over the EU's refusal to import genetically modified meat.

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Banana Firm Sues European Union
Chiquita says Latin American producers are favoured.

Thursday, 25 January, 2001, 17:49 GMT BBC

American fruit exporter,Chiquita, is suing the European Commission over loss of revenue from importing bananas into Europe.

This latest move by the US distributor of fresh fruit and vegetables escalates a bitter trans-Atlantic trade dispute between the European Union, the US and its banana exporters.

Chiquita is arguing that European restrictions on importing bananas into the European Union have cost it millions of dollars. It is claiming damages from the EU for its failure to reform its banana import regime to comply with the 1997 World Trade Organisation rulings. The company is seeking 564m euros ($520m; £357m) in damages and is reserving the right to claim future damages based on the alleged illegality of the regime. "The lawsuit we have initiated today is part of our continuing effort to bring about reform to the illegal banana regime," said Steve Warshaw, president and chief operating officer of Chiquita Brands International.

WTO ruling

The World Trade Organisation (WTO) has ruled that the EU import regime for bananas favours Britain's and France's former colonies over Latin American producers. At the end of last year the European Union adopted a new banana import system in an attempt to end the long-running trade dispute. But it is still waiting for the US to lift sanctions.

From the outset, Chiquita was critical of the revised import system. The European Commission proposed a transitional tariff quota system, which operates on a 'first come, first served' basis. Import licences would be granted to operators who could bring their bananas into the European market first. This scheme would be phased out by 2006, to be replaced by a tariff-only system.

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Banana Fraud Forces Plant Closures
Fyffes distributes more than 165 million cases of produce a year under a range of brands

By BBC News Online's Mike Verdin

Wednesday, 6 December, 2000, 21:01 GMT BBC

A profits slump exacerbated by banana smuggling has prompted Europe's biggest fresh foods firm to axe one quarter of its UK workforce.

Fyffes, which sells fruit under brands including Cape, Carmel and Outspan, on Wednesday ordered the closure of three UK sites and the axing of 200 jobs.

The closures, at operations run by Fyffes and its part-owned daughter company Geest Bananas, are part of a restructuring of banana operations prompted by falling profits.

The Dublin-based company has blamed the division's poor performance on the weakness of the euro, and a banana smuggling scam initiated by fraudsters who have been selling fake import certificates. About one-in-17 bananas sold in the EU has been imported under a fraudulent licence, Fyffes believes.

Market flooded

Company secretary Philip Halpenny told BBC News Online that it suffered because there were more bananas on the European market as a result of fraudsters manufacturing counterfeit licences. "This has depressed the price we get for our bananas," he said. Most of the imports have come from Ecuador, the world's biggest banana producers, via Italy, Mr Halpenny said. "But it is not necessarily the shippers who are at fault, because they may have bought the licences in good faith," he said.

Arrests

EU trade investigators are thought to have ordered arrests in Spain and France in connection with the fraud. Profits have been further hit by the weakness of the euro, the currency in which Fyffes takes the bulk of its earnings. As the firm generally buys bananas in dollars, from Central American and Caribbean countries, producers' bills have become increasingly difficult to pay. "I do not think anybody forecast the decline we have had in the euro, and sterling, against the dollar," Mr Halpenny said.

UK closures s

Geest ripening centres in Lanarkshire and Chippenham, and a Fyffes site in Leicestershire, are to close. Geest Bananas, which Geest sold in 1996, is jointly owned by Fyffes and Windward Island Banana Development Company. Fyffes, which employs 800 staff in the UK, traces its history back more to operations started in London in 1888, and Ireland in the 1890s.

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Ecuador Turns On US In Trade War

Friday, 6 October, 2000, 19:31 GMT 20:31 UK BBC

The EU has favoured banana exports from some former colonies of member states Ecuador has broken rank with Latin American neighbours to censure the US in the banana trade dispute which has escalated into a transatlantic trade war.

Ecuador, the world's leading banana exporter, has supported EU proposals for ending a seven-year row over access to Europe's restricted banana market.

The EU has proposed a "first come, first served" reform to its existing arrangements, which favour banana imports from some former colonies of member states. The World Trade Organisation in 1997 said the arrangements violated trade regulations.

While the proposal has been rejected by the US, which has led protests against the EU's banana restrictions, and by six Latin American states, Ecuador has backed the scheme.

'Taken hostage'

"Ecuador is satisfied with the report provided by the EU's technical commission," foreign minister Heinz Moeller said. The country would be able to double its exports to Europe under the plans, Mr Moeller said. Alfredo Pinoargote, Ecuador's ambassador to the EU, on Friday pressed European leaders to call in WTO help. "Since Ecuador and the EU have been virtually taken hostage by the [US]... it is timely and necessary to break the impasse by asking the WTO to arbitrate," he said.

'Real questions'

The US has said it has "real questions" about whether the proposals, which EU heads are to discuss on Monday, meet WTO rules.

The six Latin American countries said the plans would only lower the banana price, and spell disaster for all exporters of the fruit, including the Caribbean nations the EU has tried to protect. The EU proposal, an interim measure until permanent arrangements are introduced in 2006, would see quotas arranged around fortnightly or weekly slots. Banana-bearing ships closest to Europe would be allowed priority in unloading their cargo. Ships that missed a deadline would have to wait until the next quota period before docking.

Threat to cashmere

Approval of the reforms would end a trade war which has seen the US impose punitive duties on selected EU exports in retaliation to the banana restrictions. The WTO last year granted the US powers to impose the tariffs, after the EU failed to open its banana market, despite the 1997 ruling.

Scottish cashmere among the latest products threatened by the US with punitive duties.

The six Latin American countries condemning the EU's latest concessions were Colombia, Costa Rica, Guatemala, Honduras, Nicaragua and Panama.

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