EXCERPT FROM BANANA WARS - THE PRICE OF FREE TRADE BY GORDON MYERS
The EU-US deal contained two major threats to the ACP. The more distant, but potentially the most lethal, was the final termination of the quota regime at the end of 2005. This was fore-shadowed from the very beginning of the negotiations. It was seen as a precondition for any transitional quota.
But this was a purely political decision, based on a judgement of what was negotiable in the light of the WTO rulings, not on the needs of the ACP.
It was totally at variance with the view of the European Parliament, which had earlier called for a transition period of 10 years, more than double that actually conceded; and which had insisted that there should be no automatic transition to a tariff-only regime.
Parliament wanted this final step to be decided only after, and in the light of, a review of the impact of the transitional arrangements on EU and ACP producers and adoption of any supplementary measures that the review showed to be necessary. But while the European Parliament now has power in several key policy areas, such as the budget, to oblige the Council of Ministers to take account of their views and to hammer out a compromise, there is no such obligation in respect of the banana regime. The Council had to receive the opinion of Parliament but not necessarily follow it.
The commitment to end the tariff quota regime put in jeopardy the future of the Caribbean banana industry. ACP bananas would continue to enter the EU free of duty, so the tariff to be applied once quotas were removed would provide their one protection against cheaper imports from Latin America.
But the level of the tariff remained to be negotiated, nearer the time, in accordance with the provisions of the GATT and there was no guarantee that this would be high enough to enable the ACP trade, and that of the Caribbean in particular, to survive in the absence of any limit on the volumes entering the market. Given the structural surplus of bananas in the world, higher volumes and still lower prices seemed inevitable.
So total uncertainty remained beyond the brief period of transition. It could mean the end of the industry in the more vulnerable ACP countries.
The more immediate threat to the ACP trade arose from changes to the tariff quotas. In return for the waiver permitting a separate, exclusive, quota for the ACP, and the existing ACP provision of 850,000 tonnes was cut by 100,000t. That volume was simply transferred to the dollar quota. Superficially this appeared both reasonable and painless, since the ACP had never used the whole of their quota; total EU imports from the ACP rarely exceeded 750,000t.
But since the whole of the augmented dollar quota would be used, this transfer resulted in an increase in the total volume on the market. Predictably, this seriously depressed prices.
The effect was to render permanent much of the oversupply caused by the illegal imports described in the preceding chapter. The impact of those imports was reflected in a sharp fall in the unit value of exports. For the Windward Islands the average fell from US$530 per tonne in 1999 to US$420 in 2000, a fall of 21 per cent. The EU-US agreement effectively consolidated much of the oversupply that had caused this collapse and thus removed any prospect of a significant recovery in price.
In June 2002, the ACP Council of Ministers addressed a formal resolution to the EU Commission and Council warning that the new regime had ‘resulted in prices plummeting to levels which threaten to displace ACP suppliers, most of whom have no alternative markets’; and that this was ‘already creating tremendous social and economic dislocation and eroding the achievements in the fight against poverty’. In practice, this problem could only be resolved by some reduction in the quota, but the Commission insisted that a reduction was simply not politically feasible.
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FOOD DUDES TO TACKLE DIET
Fyffes brand manager and Banana Group director Paul Barrett takes a look at the issues surrounding the growing obesity problem and how Fyffes itself is tapping into the health debate to support the government message.
With the level of obesity having grown three fold over the past 20 years, the cost to the NHS now exceeds £500 million per year. Worrying too is the soaring incidence of type two diabetes - generally attributed to obesity. Hospital specialists in some regions are all but overwhelmed by the increase in this particular disease alone. Suffice it to say that obesity has become a very significant issue.
The statistics are truly frightening - obesity is thought to cost the country 18m sick days each year and cause 30,000 premature deaths. It has reduced the average lifespan by nine years and now affects over 20 per cent of the adult population - yet it’s the number of youngsters that are overweight or obese that is most alarming. According to the Office of National Statistics, 27 per cent of girls and 20 per cent of boys aged two to 19 years are overweight, and seven per cent of girls are obese compared with five per cent of boys - and the numbers are growing year-on-year. Sensationalist perhaps, but there are some who fear that the current generation of teenagers will be outlived by their parents.
Diet is not totally to blame, of course - lifestyles are changing too. For example, the proportion of school children spending less than one hour per week on physical education rose from five per cent in 1994 to 18 per cent in 1999. In the same year, children spent on average 11.4 hours a week watching television and videos compared with 7.5 hours spent on physical activity out of school.
Like others within the fresh produce industry with an eye to the future, Fyffes takes every opportunity to support those who promote healthy eating and exercise - as our work with the Department of Health on 5-a-Day and Fruit for Schools demonstrates. Sponsorship at the grass roots level of organisations with a clearly defined youth development programme and provision of free educational materials to schools also helps to spread the word. Encouragement and support during the formative years can help to establish healthy lifestyle habits for life.
Governments have reacted to the threat of an obesity epidemic in different ways and the UK government has moved relatively swiftly to initiate the Fruit for Schools Scheme, in which it has invested millions of pounds. The EU (as a collective) has been slower to react, but seems to be moving towards a more holistic approach. As Professor Lowe’s Food Dude Programme has proven, the success rate of initiatives set up to alter youngsters’ eating habits can be improved if the provision of fruit and vegetables is combined with a programme of incentives, role modelling and behaviour modification.
If DG Agri can be convinced of the efficacy of the Food Dude Programme, it is possible that pilot schemes will be set up across Europe as a precursor to an EU-wide initiative. If Freshfel can convince the CMO of the need to provide pull through as well as push through in terms of increasing fresh fruit and vegetable consumption - that is to say that increasing the volumes of fresh produce coming on to the market must be accompanied by promotion and education targeted at the consumer in order to encourage them to buy - then we could see real and demonstrable change.
But have initiatives of this kind been helped or hindered by the apparent epiphany experienced by certain fast food companies and fried potato snack internationals? Do claims that the latest nibble is lower in fat or higher in vitamin C, or that the salad available with your super-sized burger equals two of your 5-a-day portions add impetus to the healthy lifestyle call-to-action or merely create a distraction? And let’s leave for another time discussion of the inequalities which make it possible for these companies to commission multi-million pound advertising campaigns.
If the threat of an obesity epidemic is to be averted, there is much to be done, and quickly. It is time for all those involved in fresh produce - growers, distributors, suppliers, retailers and government - to work in concert to educate and inform the consumer and to increase the perceived value of our products.
FAIRTRADE FEELS THE EFFECT
With the ongoing banana price war slowly driving the value out of the category, Fairtrade banana producers are beginning to feel the effects as well.
While prices are being maintained in the Fairtrade sector, plans to grow the movement’s share of the banana market by expanding out of bagged produce into loose is being restricted, says Duncan White, director with Fairtrade suppliers Agrofair.
“There is lots of potential for Fairtrade bananas, but the market price for conventional is unviably low at the moment and we expect that this will result in a squeeze on supply in the future. In the meantime, while the price is so low, it restricts our ability to compete against conventional product on loose.”
He says the challenge for Fairtrade bananas is to compete in the mainstream with a loose offer on supermarket shelves.
Agrofair’s bananas are currently stocked by the Co-operative Group and White says they are maintaining a 12 per cent share of the retailer’s banana sales.
“We’re a strong part of the overall Co-op fresh fruit offer and the challenge going forward is to maintain that percentage and position, given the competitive nature of the sector.”
He says the gulf in price between Fairtrade fruit and conventional bananas has obviously widened with the current retail pricing policies, however he maintains the fruit is competitive.
“Although there is an increased difference compared with conventional, Fairtrade prices are very much on a par with other bagged and added value fruit.”
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