Select Committee on International Development Minutes of Evidence

Examination of witnesses (Questions 374 - 399)




  374.  Good morning to you and welcome to this Committee. Thank you very much indeed for submitting to us your very important paper on the renegotiation of the Lome Convention as it affects bananas, which we have read with great attention, and thank you very much for coming this morning to give us further evidence on this very important topic, which we hope to be able, first of all, to understand where exactly you find yourselves and to seek resolutions to the problems you face. We very much hope that you will feel at home here and tell us exactly how you think we might be able to assist. I think I know all of you, except Mr Junior Lodge who comes from the Jamaican side of affairs—the Jamaican Marketing Company.
  (Mr Lodge)  Yes.

  375.  Gordon Myers, of course, was a long-term civil servant in the Ministry of Agriculture and is now a CBEA advisor. Is that right?
  (Mr Myers)  Yes.

  376.  John, you are the Banana king of Fyffes. What is your proper title?
  (Mr Ellis)  I am Chairman of the Fyffes Group, Chairman, and part of the CBEA in London.

  377.  Bernard Cornibert is Banana king of the Windward Islands.
  (Mr Cornibert)  I am not sure about that.

  378.  You are Managing Director of WIBDECO. Anyway, you are very welcome. I understand you will help us by making an opening explanatory statement, so perhaps you would like to do that.
  (Mr Ellis)  Thank you, Chairman. We explained in our memorandum last September why we felt the Banana Protocol is critical to the banana business in this country and the protective mechanism. Principally, it is because it gives access and a viable return to the Caribbean producers, and has done so demonstrably not only since our accession to the EC but before that. So, naturally, we became very worried when the WTO ruling comes out and says that the mechanism put in place to honour the Lome agreement and protocol is now under threat. We have to say, Chairman, ladies and gentlemen, that we are pleased with the way things seem to be going forward with Brussels, inasmuch as they are rehashing or rewriting the Regulation 404/93, rather than throwing it out of the window and going to a tariff-only solution, which would put our access in serious doubt. We can demonstrate, and have brought a chart along based on Ministry of Agriculture figures, that the viability which is so important to these countries and to these producers has been generated from the prices in the United Kingdom (and I will pass copies round) inasmuch as in 1996—unfortunately we have only got 1996 figures because the Ministry figures would be somewhat behind—show a price of 42p per pound for bananas, on an average, in the United Kingdom. That demonstrates that from the 42p per pound, a price back to the Caribbean producers has been in excess of $10 for a 40 pound box equivalent, which compares with the $5 for a 40 pound box equivalent that generally goes to Latin American countries. So we are demonstrating, with this chart based on official figures, that the return going back to the producers in the protected areas that should give them viability is, indeed, doing that. This is what we are concerned about, that this viability is maintained in the new regime that currently Brussels has been drawing together. We also believe there is a question about improvements taking place in the Caribbean. We also believe that that needs a longer time-scale, and we would like to see whatever goes in position durable, because farmers back home have to have confidence in it if they are going to invest in the system. So we would like to see that durable. We also feel, and I do not necessarily think this wholly relates to the banana issue, that the way the WTO handled this was not very fair towards small, developing economies, inasmuch as there were conflicts in the way evidence was accepted from lawyers, and things like that. We do not think the WTO is taking enough recognition of small, developing economies when it is handling matters in the way it handled this particular panel. However, the real key for us is to see that the Commission's proposals to replace the present regime in Europe leaves us with access and viability. Those are our two messages, Chairman, and maybe there will be other issues, in the way of questioning, that we can clarify.

  379.  Can I just ask you, immediately: you say you are satisfied with the way in which the commission is rethinking, re-interpreting or rehashing their system. There was an article published in The Financial Times which suggested the way in which they were thinking of doing it. I would like to ask you whether you think that that is the right solution, or on the right lines. My own interpretation of it was that it would benefit hugely Belize, which is, of course, one of your concerns; it would not benefit the Windwards or Jamaica, but it would hugely benefit West African producers and could have the result of reducing the price on the British market. That was my interpretation. What is yours?
  (Mr Ellis)  That is a very fair point, Chairman, ladies and gentlemen. There is a proposal on the table but, in fairness, we do not know what the proposal is, as you are also aware. The method of dealing with licences has not been announced yet.

  380.  So it is a speculative piece.
  (Mr Ellis)  That is right. We have pleaded that the individual countries need a specific country quota as they did under the present regime to protect that access. Therefore, if there is a global quota, they are not in such a good position as having a specific country quota. For example, taking the Windwards, they have a specific country quota at present of 295,000 tonnes for the four islands. This would become part of a global quota of 857,700 and, therefore, it could be bid for by other countries and they could find themselves short on quota at some point. I take your point. We are still trying to negotiate for specific country quotas, and that would protect access much more than the proposal on the table. We think the proposal is in the right direction, but there are a lot of negotiating points still to do, Chairman. That is one we are concerned about. Perhaps Bernard himself might like to speak, because it does affect the countries.
  (Mr Cornibert)  Thank you, Chairman. You are quite right that a global ACP quota would resolve some residual problems for Belize and, indeed, it would put the West African countries in a much stronger position, vis-a-vis some of the weaker traditional suppliers like the Windwards—weaker in the sense of being less competitive than the West African countries. Whilst we accept that this would involve some benefits to countries like Belize, we have expressed our concerns to the Commission on the fact that the Windward Islands would no longer have a specific quota and its access to the market would not be guaranteed. There are also some concerns, from our side, with regard to the licensing arrangements. We do not know what the details of the licensing arrangements would be, but these may impact as well on our abilities to access the market, particularly in a globally ACP quota. John is right, we in the CBEA have already expressed those concerns to the Commission. Indeed, only yesterday we had a consultation meeting between the ACP and the Commission, and we put that case very forcefully to the Commission. Admittedly, there are some ACP countries who welcome the global quota, for reasons which have already been explained, but it remains a matter of very grave concern for the Windward Islands—and, indeed, for some of the other ACP countries, like Jamaica—that our access to the market would be weakened. We understand why the Commission did not apply country quotas for the ACP, because that was ruled against by the Appellate Body of the WTO.

  381.  That is the essence of the WTO ruling.
  (Mr Cornibert)  That is right. However, we have pointed out to the Commission that it is possible to still provide country specific quotas to the ACP but only if they allowed quotas for all countries, i.e. to all suppliers to the market. That would not be inconsistent with the WTO ruling, but the Commission, in the discussions we have had with them, have indicated that administratively they would find that somewhat difficult—not that it would infringe the WTO rules but, administratively, they would not want to allocate quotas to every country that supplies at least one box of bananas. So that is an area of concern to us. We are discussing with the Commission ways in which our specific concerns could be addressed—ie, for example, if the Windward Islands were to produce 200,000 or 250,000 tonnes of bananas, as they have done in the past, what guarantees would they have that those bananas would be marketed in the Community market? At the moment the proposals do not address that.

  382.  Would you like to add something, Mr Lodge?
  (Mr Lodge)  Yes. Bernard has already pointed out that, as Caribbean countries, we are not adverse to the notion of sharing part of the quota that we now presently enjoy with other countries whose capacity to produce in excess of their present quotas is long-recognised. Among Caribbean countries, we recognise the precarious nature of the Belize industry and its need for greater access. However, last year, Jamaica, as a country, produced 80,000 tonnes—25,000 tonnes less than its quota—and we would have no problems in having the right to transfer that 25,000 tonnes to whichever country we think would benefit from it. However, we want to do so on the basis of having respect for our traditional rights in terms of accessing this market. As you will recognise, the banana industry is a volume based one and there is no other instrument in the present regime or in that proposed by the EU which accommodates increased market growth for the ACP countries. This is a major concern.

Mr Grant

  383.  I was going to ask you this question later on, but you raised the subject and I wanted to raise it. I noted from your paper that you said that there is no ability for the ACP countries to increase their market share of bananas. Has that been addressed by the European Union solution? As more countries come into the European Union, as you know, there is no requirement for the ACP countries to increase their quota. Has than been addressed as well?
  (Mr Cornibert)  In a way, the Commission feels that it has addressed that particular issue because, for the moment, what the Commission is planning, although it is not detailed in the proposal, is that the 2.2 million tonnes tariff quota, and the autonomous quota of 353,000 tonnes, would be allocated to those countries that are described as substantial suppliers—and I think there are four of them: Ecuador, Colombia, Costa Rica and Panama. I understand that those countries would probably account for something like 80 to 85 per cent of the tariff quota, and the balance would be left unallocated for others. The Commission's idea is that the ACP countries would be able to access some of thati.e. the others. We had a long discussion with them yesterday and we felt that was unlikely because the 75 ecu tariff preference within the 2.2 million tonne quota is not adequate to protect the ACP. Even with the additional autonomous quota we feel that although there is a 200 ecu tariff preference, when you average out the tariff for the two quotas, the ACP countries—traditional and non-traditional—would still be at a disadvantage. Although, theoretically, they could access that additional quota, from a practical point of view that is not possible.
  (Mr Ellis)  Could I add one point to that? The regime as it is now, that is being replaced, capped the ACP countries and did not provide for any growth, and any growth that came forward only went to the dollar countries. So there was a specific cap—you are quite right, sir. We would like to see that element of it changed in the proposal coming forward, hence the recommendations we have made under the autonomous tariff quota. We have not necessarily had an encouragement on that score, but we have made that point.


  384.  Can I dispose of one solution to this problem, which is continuously mentioned by all the pundits of the economic development world, who continuously cry "Your solution is in diversification". It is a lovely word, and everybody says "Hurrah", but to my knowledge, first of all, bananas were a diversification for the Caribbean and the Windward Islands out of sugar, and, secondly, to anything that the Windward Islands and Jamaica (and, indeed, Belize) would like to diversify there are many competitors with many more advantages, in terms of scale, of course, that you would have to compete with. So this great pundits'—experts'—view is, in my view, absurd and ignorant. But am I right?
  (Mr Ellis)  We wholeheartedly agree with you, sir.

  385.  I do not wish to lead the witnesses!
  (Mr Cornibert)  Chairman, diversification has been on the cards for the Windward Islands and, indeed, for Jamaica and the rest of the Caribbean, for a long time. One is talking here specifically about agricultural diversification. I know there are several projects that have been attempted in the past, aimed primarily at agricultural diversification. Indeed, the OECS has an agricultural diversification unit that was designed to promote agricultural diversification—particularly for the marketing of non-traditional, non-banana produce. They have achieved some success, but very limited I should add. The reasons, as you have already mentioned, are that there is not a ready or sufficiently large market for non-banana produce. We are disadvantaged countries, in terms of topography and small countries like the Windward Islands cannot compete. Just recently we had an officer here from the OECS agricultural diversification unit, and we visited one of the leading supermarkets here to see how it could assist us with our non-banana produce. We left the meeting feeling very gloomy and pessimistic, because essentially what they were saying was that they were ruling out a whole range of produce that we could grow in the Windwards. They said "We do not think you could compete". So it is still about competition and about operating in a free market. One must remember that we are dealing here with the same banana growers who have been in banana production for 40 years who still find it difficult to compete in a free and open market. To expect them to produce other produce that required the same level of sophistication and the same technologies and techniques in packaging, etc., and to compete in a free and open market, is unrealistic. We have to talk, also, about general economic diversification, which is again being looked at in the Windward Islands. I can tell you, without being too parochial, that in the Windward Islands there is now a lot of Stabex money that has been earned through the banana industry because of declining prices and production over the years—that is being directed not just towards agricultural diversification but towards general economic diversification. So we are taking the issue very seriously, but as has been pointed out, it is extremely difficult.

Dr Tonge

  386.  I come from a position where I can actually remember eating my very first banana when I was a very small child. It is one of those earliest memories, of my mother coming home and saying "This is a banana. Eat it. It is delicious." So I have a great affection for bananas and, as a medic, they are the best food and a great comfort food—everything. Is there any way you can make Caribbean bananas special? There have been hints that they could be grown more organically, or more healthily, so that you could actually attract the people of my consistency—in Richmond—who go for "organic" food? Is there any other use for bananas? I am totally ignorant; when I see a banana I just shovel it down, but is there any other use? It is a wonderful product and there must be other uses for it. Has that been explored?
  (Mr Cornibert)  I was going to say we thought Caribbean bananas were special, so there is not a great deal we could do to make it more special. As far as organic bananas are concerned, the technology for growing bananas and shipping bananas organically has not yet that developed. You still have to treat the bananas with chemicals to prevent them from premature ripening and rotting. Unfortunately, that is the state of the art at the moment. We are not talking now about growing and shipping bananas, in this kind of large volume, organically, because the technology is not there now. However, we probably are talking, in Caribbean terms, about a banana that is more socially and more environmentally friendly. If you understand the structure of our banana industries you will know that they are made up of small farms, owned by the farmers themselves and there are very few that employ labour; most of them are family-run farms. So, from a social point of view, it is probably the closest and best you can get to the concept of a fair trade product.

Chairman:  They are special, yes.

Dr Tonge

  387.  Other uses?
  (Mr Cornibert)  There are things like banana chips, banana ketchup, etc. There are those uses, but, at the end of the day, as we said a while ago, we are talking about a very bulky product; we are talking about hundreds and thousands of tonnes of bananas. The question is whether you can produce that amount of ketchup and chips and where are the markets for them. We must remember that when a country like Ecuador produces almost 3 million tonnes of bananas, the amount of bananas that they can leave behind to produce banana chips and the like is probably more than the entire Windward Islands production. When you put this into perspective it can be seen that we are almost not in the banana business. Yes, there are other uses, but in terms of volume, it is really a speck in the dust compared to the amount of bananas consumed as fresh produce or fruit.

Mrs Kingham

  388.  I was interested in what you said about bananas from the Caribbean being more socially and environmentally attractive. It has been put to the Committee that one area of diversification could be into tourism, for the Caribbean. I would be interested to hear your comments about whether you feel that is viable in the long term and, secondly, what impact you feel that might have in terms of the small farmers and the environmentally and socially friendly balance that you have at the moment. Tourism, in my mind, is not usually as environmentally or socially friendly. Would that alter the balance in the islands?
  (Mr Cornibert)  A case in point might be Dominica, which is not really, in the traditional sense, a tourist island because it does not have the white sandy beaches and it does not have an international airport, but it is a beautiful island—nature island, as they prefer to call it. It is developing its tourism industry along those lines, in a kind of environmentally friendly way, or eco-tourism but such developments do not happen overnight. That is the problem. St Lucia, on the other hand, has a more developed tourism industry, although it is not like Antigua or Barbados. We are doing these things alongside the banana industry, but the tourism industry is a very fickle industry and we cannot see the development of the tourism as an alternative to bananas. We have got to develop all economic sectors and industries—manufacturing, tourism, whatever we can—but we need the banana industry, if only as a springboard for the development of the other sectors of the economy. It is not a question of whether we are going to do away with it—we need the banana industry.
  (Mr Ellis)  I would like to make one point, again about diversification and generalise it from the Windward Islands. Anybody who knows Belize knows that bananas opened up the southern part of Belize—Stann Creek. Take bananas away and it will close it as quickly because there is no other alternative to bananas in the Stann Creek. They are developing other products, such as mangoes and other tropical fruit items, but they are only going to be small-ish compared to bananas and only going to be possible if that banana ship is coming in each week to take them out again. It does apply to everywhere. If you take Jamaica, the area in Jamaica where bananas are grown is not an area where there is any bauxite or any other alternative. This issue is right across the Caribbean.


  389.  So the diversification that you are talking about has to take place on the back of, or in conjunction with, bananas—such as your shipment of orange juice, for example, together with bananas from Big Creek.
  (Mr Ellis)  It is going out on our fresh banana vessels and it would not do otherwise.

  390.  Cutting out shipping costs, presumably?
  (Mr Ellis)  Yes.

Mr Grant

  391.  The banana boats do not come back empty, they bring different goods in.
  (Mr Ellis)  Yes, sir.

  392.  I noticed, in your paper, you talk about diversification, but if you diversify into, say, assembling microwave ovens, you would then be caught by the rules of origin of the European Union, that says that more than 20 per cent of the components of anything that comes from outside the ACP region and you get a heavy tariff slapped on. Have you made representations? I suppose it is a matter for government, but are you aware of any representations being made by the governments to try and press the European Union to ease the whole situation with regard to the rules of origin, so that you could diversify? You have not got raw materials to make anything, so you have to import stuff. Do you know whether there is any work like that being done?
  (Mr Cornibert)  I know there have been a lot of discussions about the rules of origin and those issues in the broader negotiations with the European Union on Lome. I do not know the specifics but I know there has been some discussion. It is certainly an area that they have been looking at, but what the actual outcomes are, I do not know.


  393.  Can I ask you, in conclusion of this section, can you make the banana industry more competitive than it is at present, and can you improve the quality of your product to a greater standard than it is at present?
  (Mr Cornibert)  The answer to both questions is yes, we can. Let me take the quality one first. We can and have produced bananas of excellent quality in the Caribbean. In the last year or so—if I can speak specifically for the Windward Islands—we have seen a tremendous improvement in quality, as measured by international standards, in Windward Islands' bananas. We think that now we are almost on the road where we can compete with any supplier in the market on quality and on a consistent basis. So the question of quality is an issue but it is not one that we feel we cannot address, or is insurmountable. We can bridge completely the quality gap between our bananas and bananas from Latin American countries. We are working very hard on that, and if we are not quite there as yet we are not far from bridging that gap completely. The question of whether we can compete is a question of cost; whether we can produce a banana that is as cheap as bananas produced in Central America. Our cost of production is now in the region of about 8 or 9 US dollars a box. That compares with between 4 and 5 dollars a box in Central America.


  394.  What is the weight of your boxes?
  (Mr Cornibert)  Forty pound boxes, or 18 kilo boxes. The last time we did an exercise in the Windward Islands our cost was in the region of 8 or 9 US dollars. That compares, as I said, with 4 to 5 dollars in Central America. We are talking about, essentially, halving our costs in order to be able to compete. To do that we have to increase land productivity—maybe to increase labour productivity as well, but we have to increase land productivity. We have to almost double the yield that we get per hectare of land. That essentially is the problem. The question is can we do it? I cannot tell you, now, whether or not we can completely bridge that gap or when. If we can do it—we will do it, but I can tell you we have made some progress and we feel that we can, given time, narrow that gap considerably. I am not saying we will never bridge that gap, and I would not say, at this point either that we will be able to do it. I do not know when, but I can tell you quite emphatically that we can narrow that gap if we are given time and we can use the technical and financial assistance that is being provided through the European Union, with the current Stabex resources and, indeed, with the financial assistance package that is being proposed in the new arrangements put forward by the Commission. We need to restructure our banana industries. In the Windward Islands in particular, we need to look at it from a point of view of having an industry in the longer term that can survive—maybe an industry that is slightly leaner in terms of the number of operating units within the industry, and so on, but these are things that will take time. What we do not want to do is throw the small and more vulnerable growers on the scrapheap because it is expedient for us to do so and to show that we are now competitive. It has to be done in a planned way. We have to find ways to assist those growers that, in our view, might not be able to survive in the longer term. We have no doubt about the fact that we have to have an industry that can compete in a more competitive market environment in the future.

  395.  Does this involve considerable investment in irrigation equipment, for example?
  (Mr Cornibert)  Yes, that is being addressed. In fact, in St Vincent we have a lot of irrigation equipment being put in in place at the moment, again through financial assistance being provided by the European Union under Stabex. All of those issues are being addressed. One way—you are quite right—to increase productivity is through irrigation;ie. to remove, as it were, the dependency on rainfall and be able to manage water resources more effectively. Water is very critical for banana production: too much of it is bad, too little of it is just as bad or worse. Therefore, irrigation would help considerably in maintaining the flow of water and in controlling it so as to be able to produce the kind of competitive yield that is required.

Mrs Kingham

  396.  That sounds highly commendable, to increase yield, etc. What would the implications be on things like labour standards, environmental standards, and making sure that the income of the family units in the islands were sustained?
  (Mr Cornibert)  As I said earlier, we want to respect the environment and the social conditions under which bananas are produced in the Windward Islands. We have put together a comprehensive programme, the Certified Farmer Programme, in the Windward Islands. We are working with the European Union in putting together that programme where we certify farmers, and under which they have to meet certain conditions and criteria. As part of that we have also put together a code of practice for all banana growers to follow. It is still in draft form, but that code includes labour aspects as well as aspects to do with the environment—how farmers should manage the use of pesticides and herbicides and so on. It is an all-embracing programme. We are looking at every aspect of banana production.

  397.  That would not be sacrificed in order to obtain higher productivity?
  (Mr Cornibert)  Absolutely not.

Mr Grant

  398.  I was going to ask you about the certified farmers' programme, but not all of the 28,000 farmers are going to be able to reach the standards which you set. What is going to happen to those that cannot meet the standards?
  (Mr Cornibert)  This is what I was saying a while ago. We have—not just the banana industry but the governments—to address this issue. If you recall, I said earlier that we cannot just throw those who cannot meet the requirements for certification on the scrapheap. Therefore, we are working with the European Union on an aid programme that again is being put together to find alternative means for any displaced growers. That is going to take time. It is not something that we expect to happen overnight, but we are working on such a programme where help and assistance will be provided to those people.

  399.  In your paper you talked about the average production costs of Windward Island bananas—for a 40 pound box—as between $9.35 and $9.70. Then you said "This is nearly double the fob price of around $5 per box paid for dollar bananas". You are not comparing like with like, because you are saying that the production costs in the Windward Islands are up to $9.70 a box but you are saying that the price that is paid—not the cost of production—to the dollar bananas is $5 per box. Have you any estimate of the production costs per box for dollar bananas? On the other hand, could you tell us what you are paid per box, so that we can get a proper comparison?
  (Mr Cornibert)  The fob——

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