---

Bananas

My Lords, my noble friend Lord Montgomery and I usually agree on almost everything—strangely, considering our different backgrounds and the other differences that we have. However, I am afraid that I do not agree with him today. Like my noble friend Lord Faulkner, I have interests to declare, but on both sides. I am president of the Caribbean-Britain Business Council, vice chairman of the Caribbean group in Parliament, vice-chairman of the Central American group and chairman of the Dominican Republic group, so I see both sides of the argument—a fatal thing for a politician sometimes. I see the argument that we should be moving towards free trade, but I must say to the noble Viscount that, at the same time, we must protect vulnerable countries, especially the small Caribbean islands whose economies have been so dependent—and remain so dependent—on bananas. There need to be helpful transitional arrangements. That is what the European Union has been trying to achieve. Like my noble friend Lord Faulkner, I commend what the Commission has been doing. It has been working extremely hard to try to square the circle in this very difficult situation where we must try to resolve genuine interests from Latin America as well as from the Caribbean. The European Union thought that it had found an acceptable solution, but it was challenged by the Latin American countries—the Central American countries in particular, as my noble friend Lord Faulkner pointed out. According to reports, Honduras, Panama and Nicaragua are threatening further legal action at the World Trade Organisation. Colombia, Costa Rica, Guatemala and Ecuador have been trying to establish a monitoring framework within the European Union with the object of demonstrating that their interests have been hurt. I hope that I will show today that they have not been hurt. However, Latin American bananas are mostly produced and marketed by big American companies such as Del Monte. The noble Viscount shakes his head, but I am not going to be critical—quite the reverse. Among Latin producers, marketers and distributors, Del Monte has made it clear that it supports the EU tariff-only regime at the €176  per tonne level. On 30 November 2005, its chairman noted that Fresh Del Monte Produce Inc was,"““well-positioned to take advantage of its vertically-integrated production, outstanding quality, a shipping, distribution, sales and marketing network to more effectively compete in the EU banana market with an open-market, tariff-only system””." If it is good enough for Del Monte, I do not understand why it is not good enough for the governments of Central American countries. Let us look briefly at the market share. In Europe’s original 15 member states, 18 per cent of bananas are produced domestically—which is a little misleading because we include the Départments d’Outre-Mer in that. Some 63 per cent come from Latin America and only 19 per cent from the ACP in the traditional 15 countries. Of course, with the new member states, about 98 per cent come from Latin America so even more come from Latin America in those countries. Latin America is doing pretty well. Overall, Caribbean banana exports to Europe have been falling. In the four years to 2003, EC figures indicate that Caribbean banana exports fell by 7.6 per cent, so that they now account for only 36 per cent of total imports from ACP countries. The decrease has been especially marked in the case of the Windward Islands—very small vulnerable economies that we, as the main country in the Commonwealth, should have some concern for—with exports in the Windward Islands falling by as much as 50 per cent. That is in contrast to those of the Dominican Republic. I welcome what has been happening in the DR, which, over the same period, increased its exports to the EU by 159 per cent, so that it now accounts for around 14 per cent of all ACP banana exports to Europe. Perhaps I may touch on the implications of the new regime for ACP producers in the Caribbean. They pay once they have sold 775,000 tonnes—the tariff-free quota. They then pay the full duty rate beyond that. Some lower cost ACP countries, particularly in Africa, can afford to incur duty payments on part of their exports and still secure a remunerative return overall. But, without certainty of duty-free entry on their exports, there is concern in the Windward Islands and Jamaica that their trade will collapse. If it were to collapse the economic consequences would be dire. There is deep concern in those countries over suggestions that the whole of the ACP quota should be allocated on a first-come first-served basis. Someone has described what will happen as a boat race, with boats racing each other to get to the European Union markets first. That may be to some extent an exaggeration, but I think it indicates what could happen. As part of the negotiation of economic partnership agreements, European Commission negotiators are quietly urging Caribbean negotiators to seek quota-free entry for bananas and, indeed, for sugar in order to achieve something close to the equivalent of the ““Everything But Arms”” arrangements for the world’s least developed nations. If that were to happen, it would effectively end the all-ACP banana protocol. It would also enshrine within a Caribbean EPA any new arrangement on bananas that some senior EC trade negotiators believe will be immune from any challenge. That certainly would be welcomed in the Caribbean. What happens now is far from clear. Lots of studies and options indicate different patterns of what might happen if we move forward on various scenarios. However, what unfortunately seems certain is that the losers will be the most vulnerable producer countries in the Caribbean. In contrast, the survivors, assuming some form of tariff protection of quota remains, will be those that have been able to enhance competitiveness, to diversify and to find higher-value market niches in fair trade bananas and organic bananas. All credit to them, because some of the Caribbean countries have been doing that effectively. But countries like Jamaica and Belize, where bananas and sugar grow side by side, will struggle to maintain a stable rural economy in the face of any new banana tariff regime, as envisaged by my noble friend Viscount Montgomery. The 36 per cent cut in the price paid by Europe to ACP sugar producers over the next three years will make it even worse: I do not like this phrase—a double whammy on these vulnerable economies. The Caribbean is in the process of restructuring—I know that well and I will turn to one aspect of that in conclusion—so that the newer economy of tourism and services can be better integrated. But that will take time. I think that, and I hope the Minister will agree, Europe and particularly the British Government have a responsibility in ensuring Caribbean stability. Without that the levels of narcotics and gun-related crime—and, I say to my noble friend Viscount Montgomery, that is not an idle threat—on British streets will rise. That will happen. I am off to the Caribbean tomorrow. I left that to the end because if I said it at the beginning it might colour noble Lords’ views of my remarks. I am looking forward very much indeed to being an observer at the UK-Caribbean Forum where our Ministers will be participating with Ministers from Caribbean countries. I hope that—and I say this to the Minister—I can take a message of some hope for the future from the United Kingdom Government and the United Kingdom Parliament.