Having continued in a state of turmoil for a number of years, the global banana economy has taken a distinct turn for the worse since the disastrous price crashes of 1999/2000. “The market is in a state of rapid flux with a serious downward pressure on prices and continual over-production and the uncertainty of the trade proposals,” says Alistair Smith, co-ordinator of international campaigning body, Banana Link. “Things have been particularly bad this year for climate reasons and EU licenses being short in this quarter. There are just too many bananas wanting to be sold.”
It is partly the recognition of this annual recurrence of oversupply that prompted the European Commission to alter its trading agreements in such a dramatic fashion. In January this year the Commission announced plans to scrap the current tariff quota system, which has traditionally provided African Caribbean and Pacific (ACP) countries with protected access, and introduce a “tariff only” system with a single tariff of €230, imposing no limit on volumes.
However, despite the EU’s declared intentions to introduce measures which will create a neutral impact on the market, its proposal has been met with strong objections from all concerned, Latin American exporting states in particular. As such the proposal is under arbitration by the WTO, with a responsive ruling expected by August 1.
The ACP countries are concerned the proposed tariff change will result in a dramatic increase in imports and a depression of prices as traders compete for market share, says Gordon Myers, secretary of the Caribbean Banana Exporters Association and author of Banana Wars: The Price of Free Trade. On the other hand, Latin American producers claim a duty of €230 would grossly increase ACP preference and lead to a massive expansion of ACP supplies at their expense, regardless of EU assurances that ACP preferences will not be increased.
Myers says the crisis has not been helped by the publication of conflicting estimates of an appropriate amendment to the tariff, and suspicion surrounding the estimates’ authenticity. “The results have ranged from €272 per tonne to €33,” he says. “Not surprisingly, the level of tariff produced by any study tended to reflect the interests of the party sponsoring that study. Nevertheless, it does seem manifestly absurd to contend that a tariff of €33 or even €75 would be equivalent in an unrestricted market to the current effective limits on import volumes plus the existing tariff of €75. This implies that the difference between prices in the EU, under the quota system, and those in other markets was less than €75 euros per tonne. If this were so, traders paying the €75 euros tariff, not to mention any payment for licences, have for years been operating at a loss, a conclusion that is not borne out by companies’ annual reports.”
Ulrich Boysen managing director of Deutscher Fruchthandelsverband E.V., the German Fruit Trade Association, goes as far as to say the proposal has been derived from inaccurate market prices, following a survey carried out on all the major importers in Germany. In April this year, Boysen outlined this sentiment in a letter to the legal counsels of various exporting countries including Ecuador, Colombia and Costa Rica, and many of them have since used his findings as part of their arguments in the arbitration.
“The FAO, Food and Agriculture Organisation of the UN, measured the difference in prices, during the reference period from 2000-2002, of the protected internal prices compared with the international market and the Hamburg prices were taken as the official basis for calculations of the proposed tariff of €230,” says Boysen. “But the prices were only based on one single German company and the prices on the internal market are actually much lower.” While the commission has listed the banana price at €890 per tonne, the association’s survey suggests a price some 25 per cent lower, at around €696 per tonne. Boysen claims that in the last few days the FAO have accepted the results of the survey and he is hoping this will help to stall the introduction of a new regime.
Myers agrees that more time is needed to reach a workable system of trading, but emphasises the need for urgent action to avert the immediate crisis. “One is bound to ask whether a more sensible solution could not be found than this leap into the unknown that is currently scheduled to take place overnight on December 31 2005 and seems certain to entail serious casualties on both the ACP and Latin American sides,” he says. “A number of parties, both among the ACP and Latin Americans, have urged a more pragmatic approach, maintaining the present quota framework while tariffs are gradually adjusted.”
While Latin American countries insist they could not withstand a tariff in excess of the existing rate of €75, ACP producers fear they would suffer with a lesser tariff than the proposed €230, says Myers. In addition there is a widespread expectation that the more vulnerable suppliers would be driven out of the market, resulting in grave social and economic consequences, particularly for the small banana producing countries in the Caribbean. “Any compromise figure between the EU proposal and the Latin American demands would therefore be a catastrophe for them,” he claims.
However, President Abel Pacheco of Costa Rica expressed this same fear for his own country only last week at a summit of Latin American banana-producing nations. “If Latin American bananas are removed from European markets via discriminatory tariff policies, sooner or later we will have to export human beings displaced from their home countries for social and economic reasons,” said Pacheco. “Sooner or later, the land today used for legal products could be dedicated to the production of the plant bases of illicit drugs.”
Around 300,000 people are employed by the banana industry within the Latin American export block, according to the Costa Rican export group Corbana, and the seven nations produce some 75 per cent of global banana exports. President Pacheco has said his country is prepared to use the banana issue as a blocking tactic at the WTO meeting at the Doha round of trade talks scheduled to take place in Hong Kong in December.
According to Smith, European retailers would be the sole beneficiaries of the proposed tariff system. While the multiples are not wholly responsible for the global crisis, they have drastically accelerated it with the downward pressure on prices, he says. And despite having the potential to act as a positive influence on the industry, with their alleged policies on supplier standards, in reality they have very little stake in the industry he says. As such, there is a huge discrepancy between the paperwork and everyday practices, with the supermarkets’ voluntary code failing to achieve conditions necessary for a sustainable life, he claims. (See case study).
In spite of the divisive nature of the current sourcing structure, Smith says there are some potential areas of accord among the producing groups: “The first priority is to reach a common agreement across the industry, an international, intergovernmental declaration from all the major players, that is, private companies, governments and the civil society - the trade unions and small farms - which was agreed to be the short term need at the second international banana conference in Brussels two weeks ago.” All parties present at the conference were asked to pledge their support for the establishment of a multi-stakeholder forum “to find ways of tackling the social, economic and environmental issues in the industry”, and agreed “to explore the feasibility of an International Banana Agreement with a social and environmental chapter in order to address structural overproduction and endemic low prices, and to promote sustainability.”
In an attempt to alleviate the problem of overproduction, Ecuadorian producers have taken 20 per cent of their exports off the market which has contributed to the price rise over the last couple of weeks with prices up from just more than 70p per kg to 85p per kg, says Smith. “That’s a necessary trend that allows players along the chain to negotiate a better deal for at least a living wage. If you are not going to bring prices up to a reasonable level there’s no room to manoeuvre as far as working conditions and environmental standards are concerned, especially if you add the issue of control over trade.” However, this drop in export volumes has spelled trouble for the country’s reefer markets, with freight rates and bunker prices up by around 40 per cent on the same period last year.
Alongside the actions being discussed at government level, consumer pressure is vital, Smith says: “They can make a difference by taking an interest in where their fruit comes from and the conditions in which it is produced, by placing pressure on their local supermarkets to stock Fairtrade products, and choosing them, or if not, Caribbean. They can find out what their retailers are actually doing. The rhetoric is all very well but the question is does it actually guarantee a minimum wage for banana workers? And, of course, the answer is no.
“The price situation has improved very recently but as long as there is such a big gap between the cost of Fairtrade and other bananas then it is very difficult for the retailers who want to be ethical, and there are some, to bring customers forward to thinking about Fairtrade. The supermarket price game is not quite killing people but it is seriously creating more poverty than it is alleviating which is not only against what most consumers would wish but what the British government, at least, must stand for.”
Given consumer interest, there is no reason why the whole trade could not be brought up to Fairtrade standards, he claims: “It is certainly possible without prices being significantly higher than they have been in the last few years. The fact that as much as 53 per cent of bananas in the Swiss market are Fairtrade, which is coming out of the mainstream market, and the numbers are also increasing steadily in the UK, suggest that people are prepared to spend a bit of their extra money on an already cheap product. They agree that it is just not acceptable that workers can be doing around 80 hours a week on a banana plantation and not be taking money home that allows them to eat properly.”
Smith is optimistic that positive changes are afoot. “I think we are starting to gain some ground in a big way and Fairtrade has pioneered the way for the possibility of, over the next five to 10 years, getting to the point where producers are paid a fair deal, a remunerative price for their product,” he says. “The Fairtrade labelling movement and other voluntary standards movements have led the way. We are now at the point where all the major players are involved in Fairtrade in some way, but the question now is how to move the other 95 per cent of the market in that direction.”
However, the current global attention on ‘aid and trade’ may prove advantageous to the campaign. “With the focus on making poverty history, now is a good time to be making changes and bananas could well be an ideal spearhead for change,” says Smith. “We are not expecting the likes of Tesco to change over night but supermarkets seeing 80-90 per cent of the profits in this industry, with the producers unable to take home a decent wage is unacceptable. It’s not just a Utopian dream, we are confident we will get somewhere.”
“THE TESCO TAKEOVER”
Didier Leiton Valverde started as a banana worker aged 15 and spent 19 years on plantations before choosing to campaign for workers’ rights. At the recent FOE briefing, ‘The Tesco Takeover’, he implored delegates to take immediate action on behalf of banana workers world-wide.
“I worked for Delmonte for 14 years. They sacked me in 2000 because I was a trade unionist. Two years ago I visited the UK to talk about the conditions for Costa Rican banana producers. I’d like to say things are better than they were but it’s quite the contrary. Day-by-day things are getting worse.
“The working days are extremely long. There is no such thing as a living wage. The sexual harassment to all women is still horrendous.
“Companies just tell workers that they are at the mercy of low returns for their product and can’t afford to increase the cost of production to improve conditions and, in the name of that, they abuse every legislation that is in place. Many banana companies don’t pay their contribution to social security, even though it is required. For example, one company hasn’t paid a single penny of taxation from workers for the last nine years and owes £1bn to the CCS. Most of the people working for them are not insured. One of my colleagues was hit in the mouth by the handle of a knife and lost his front teeth and having no insurance, he was not able to claim any compensation.
“A few days ago, 40 workers were sacked from this company. They justified this by saying they needed to reduce their costs of production. Workers who choose to join my union are generally sacked the same day they join....I could tell you a lot more, a lot of others have similar tales to tell.
“So, I think someone has to do something, some kind of power or legislation, some kind of protocol or contract, something that guarantees the rights that our workers should have, something that guarantees a living wage, that guarantees a life of dignity, that guarantees our right to education. Somebody has to have the power to do that.
Our natural resources are being exhausted on a daily basis. We have perfectly good legislation but the companies ignore it. If there is going to be some kind of binding code of conduct, from my point of view that has got to somehow involve the workers. We have to find a way that is binding not just in Britain but in other parts of the world.”
No comments yet