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Caribbean Bananas And The EU

By David Jessop

CaribWorldNews, LONDON, England, Tues. Dec. 1, 2009: It is probable that at some time in the next two weeks Europe will announce that a final deal on bananas has been achieved. In so doing it will bring to a close the trade war that it has been fighting with Latin producers and the United States since 1993.

If documents now circulating in Brussels represent the outcome, the final solution will not be much to the Caribbean`s liking.  On agreeing a deal, Europe will reduce its banana tariff from Euro 176 per tonne (US$263) to Euro148 (US$221). Then, over a period of seven years, the tariff will fall to Euro 114 per tonne (US$131) for all non-preferential imports of bananas into Europe. In exchange, Latin American producers will agree to drop their complaints against the EU at the World Trade Organisation.

As with most matters of this kind the final outcome is not yet guaranteed. There are still sensitive exchanges underway on a small number of issues requiring resolution. ACP producers have yet to agree the level of compensation proposed. The European Commission (EC) has offered Euro 190m to Euro 200m (US$297m) over four years to support economic restructuring, compared with the ACP`s most recent counter proposal of Euro 250m (US$372m). For its part the US has to agree legal aspects of the agreement.

Under these new arrangements Caribbean and other ACP producers will retain their present levels of duty free access but will in practice come under greater competitive pressure as Latin and other producers benefit from economies of scale from large scale plantation production and the lower tariff levels.

Put another way this is not good news for higher-cost farmers in the Anglophone Caribbean and in the Windwards in particular. And while they and others may still object to a deal that only involves the EU, Latin producers and the US, this time the probability is that what is finally agreed will last. This is because the proposals on Bananas form a part of a much broader deal being struck in Geneva on tariff reductions on a wide range of tropical products including sugar that will eventually form a part of a completed Doha Round. 

Resolving the banana dispute marks the start of the last chapter of the story of European preference for Caribbean commodities and raises significant long-term questions about the future of Caribbean agriculture.

What is clear is that irrespective of the future outlook for the banana industry, the world is heading for another food crisis.

Food and commodity prices have fallen from their peak in 2007/2008. Then, soaring demand in the advanced economies like China and speculation caused shortages and pushed prices to levels that led to civil unrest in some nations. Alarmingly, there is again every indication that market prices are again set to soar.  However, global economic recovery, population growth, a weakening Dollar and a conviction among speculators that food is an `asset` worth holding, all convince experts that food prices are set to escalate rapidly and that high food prices will become a long term phenomenon.

For a region that already imports US$4bn of food per annum, has nations that are amongst the most heavily indebted in the world and are in the throes of seeking IMF support, it is therefore surprising that there seems to be so little attention being paid to rapidly developing a new Caribbean agricultural model.

With the notable exception of Jamaica, Guyana, the Dominican Republic and Cuba, the focus on national and regional food security that occurred after food prices reached a peak in 2007/2008 seems to have faded away.

Commenting recently on this, Guyana`s` President, Bharrat Jagdeo, told the media that he believes concrete policies are required that provide incentives and budgetary allocations for example for drainage, irrigation and research in order that the region can meet its food demand. `Unless we do these things, it will be just talk,` he said, `We simply cannot move forward unless there is the political will to do so.`

For the most part agricultural thinking in the region has been dominated by a cold war aberration: an agricultural model that only flourished because of European trade preferences. Recently some nations have been attempting to break out of this straightjacket by attempting to increase the production of food crops for domestic consumption and the tourism sector; moving into the export of higher value fair trade or organics fruit and vegetables; and by investigating the use of cane or agricultural waste for industrial processes such as ethanol of as biomass to generate electricity.

But for the most part the practical process of creating on the ground a new agricultural model and distribution system is still far from delivery.

In response to the 2007/8 food price crisis the Caribbean held a summit – in July 2009 – to try to find regional solutions. At that event a communiqué was issued containing a wish list, but little to indicate how its high language was to be delivered or paid for.  This month a follow-up workshop will try to form a common understanding on food security targets and outline a course of action. This is welcome but it is happening with little sense of urgency.

Forecasts suggest that in twenty years time ,regional demand for food will have grown by 50 per cent. Yet it is no clearer today than when Caricom convened its July conference where the political will or the finance or the incentives to the private sector will come from to deliver the actions necessary to address a pending crisis that is far more immediate than climate change.

All the signs are that food prices are again set to escalate dramatically. Hopefully the ending of the banana wars will change the nature of the region`s dialogue on agriculture. Delivering rather than discussing food security, for the people of the region, is an issue that will not go away.

David Jessop is the Director of the Caribbean Council and can be contacted at david.jessop@caribbean-council.org. Previous columns can be found at www.caribbean-council.org.