Examination of witnesses (Questions 374
- 399)
TUESDAY 3 FEBRUARY 1998
MR JOHN
ELLIS, MR
BERNARD CORNIBERT,
MR JUNIOR
LODGE and MR
GORDON MYERS
Chairman
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.
Chairman
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.
Chairman
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.
Chairman
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.
Chairman
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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