Select Committee on International Development Minutes of Evidence


Examination of witnesses (Questions 420 - 439)

TUESDAY 3 FEBRUARY 1998

MR JOHN ELLIS, MR BERNARD CORNIBERT, MR JUNIOR LODGE and MR GORDON MYERS

Mrs Kingham

  420.  Could we get a copy of that report?
  (Mr Myers)  Yes, certainly.

Chairman:  If you could let us have a copy of that report, that would be very useful to the Committee.[5]

Dr Tonge:  Can I just ask one other question on drugs and this is really coming from my medical point of view. I personally, and this is not party political, but I personally think that cannabis should be decriminalised and I think there are a lot of useful medical uses for cannabis and I think that if we grow tobacco, people should be able to grow cannabis. If that happened, would it be a good crop for the Caribbean farmer? I have never grown cannabis and I have never smoked it, inhaling or otherwise, either. In fact I have never had anything to do with it and I have never had a need for it.

Chairman:  I assume the answer is that it depends upon the price.

Dr Tonge

  421.  Well, that is argued, is it not, that if drugs were decriminalised, then we would not have all this crime connected with drug trafficking, but that is a personal point of view? I just wondered, is it a good place to grow cannabis, just out of interest?
  (Mr Cornibert)  It is probably best grown in Colombia.

Chairman:  It grows very well in the mountains of St Vincent, to my certain knowledge.

Mr Grant

  422.  I was just wanting to raise this point that if we are going to get some written material, I notice that there was a reference to the political economy of Europe's banana trade, a document of 1997, which talks about diversification, so could we have a copy of that as well?
  (Mr Myers)  Yes.

  423.  My question is in relation to the 30 per cent of the tariff quota for the so-called B licences. There are two questions. What would be the effect of losing the current licensing arrangements to those importers who import ACP bananas as well as dollar bananas? Secondly, there has been an allegation from the Latin American producers that the Caribbean producers are being subsidised by the Ecuadorians and others and that the fruits of one third world country literally are subsidising another third world country. Could you answer those two questions?
  (Mr Ellis)  I would be happy to respond to that, sir. This is part of the lobby on behalf of Latin America, that the money does not go back, but it stays with the companies. I think we have demonstrated in this chart that twice the price is going back to the Caribbean that is going back to Latin America. The specific answer is that if the income is taken away, then we do not pay the same price, or we would not be able to pay the same price, to Belize or Jamaica or the Windward Islands, because that B licence is part of the price going back to generate the better price than they get for Latin American bananas, so the companies and the importers would not have the income to send that back, and at US$10, twice the price is going back. Twice the price is going back to the Caribbean that is going back to Latin American producers and I remember Marshall Hall of Jamaica saying at a conference in answer to the same question, Chairman, in Honduras, "If you people were getting the price I was getting, you would all be very happy", so this price does get back there, and reducing that specific cross-subsidisation is going to throw into a very difficult perspective how you get the price that they are going to need unless, what we have not seen yet coming from the Commission, the licensing system does generate some benefit or some replacement to that benefit.

  424.  So the Latin American people are right in that the workers of the third world country are subsidising the workers of the Caribbean?
  (Mr Cornibert)  No, that is not correct.

  425.  You just said "cross-subsidisation".
  (Mr Cornibert)  I think that what you have to do in analysing this is to ask yourself what would have happened if this 30 per cent or the category B licences—the 30 per cent of the tariff quota licences—were not given to the ACP operators. They would have been given to other operators, the big multinationals. They are the ones who would have got them. The question you have to ask yourself is whether they would have paid the Latin American workers more.

  426.  No.
  (Mr Cornibert)  Exactly. That is the answer to the question. The answer is that you would not have given them to the ACP operators, but you would have given them to the big multinationals. They are the ones who would have got them. All they would have done is to pocket the benefits. It would not have gone to the Latin American independent producers or to the workers on the plantations. They would have continued to do exactly what they are doing now.

Dr Tonge

  427.  But it, nonetheless, represents a transfer from a developing country to another country.
  (Mr Cornibert)  No, it is not. It is a transfer from the big multinationals who would have got the licences because if you do not give them to the ACP operators, for them to pass on some of the benefits to the ACP producers, you would have given them to Chiquita and the like. Let us face it, that is what is going to happen.

Mr Grant

  428.  But Ecuador, as I understand it, does not have these multinationals, so it would go back to the people of Ecuador.
  (Mr Cornibert)  No, because these independent producers, the small independent producers from Ecuador would still be selling to Chiquita and Naboa and those big companies. They are the ones who would have been making the money, not these independent producers.

Mr Rowe

  429.  But why, if Fyffes behave so well, should the other big companies behave so badly?
  (Mr Ellis)  I think it has been a way of the system that the going price in Latin America, if I want to buy bananas, and if I had a licence to enter Europe, the going price between whether I go to Columbia or Costa Rica or Ecuador, the going price is somewhere between $4 and $5 and you pay the going price and you get a better margin therefrom. You do not have to keep the flow of bananas (in those countries, it is going to happen anyway) as you do in the Caribbean because if you do not pay the price in the Caribbean, then the flow of bananas is going to stop very quickly.

Mr Grant

  430.  Are you saying, Mr Ellis, that if you were stopped from getting the 30 per cent or your share of the 30 per cent licences, that Fyffes would stop importing Caribbean bananas?
  (Mr Ellis)  No, sir.

  431.  You are not saying that?
  (Mr Ellis)  No, I am not saying that. I am saying we would have a difficulty in paying the price necessary to keep the flow of bananas going. Thirty per cent licences provide only part of the income we get to pay the US$10. We are buying FOB Belize or wherever and we would lose a piece of that income and we would have a difficulty in meeting the price as it is today.

  432.  Could somebody explain how this 30 per cent came about because it does seem a strange arrangement?
  (Mr Cornibert)  When Regulation 404/93, which is the current regulation governing the importation of bananas into the Community now, was being discussed and put together, it was felt that some form of incentive was needed for the ACP operators. Because there was going to be free circulation and there was going to be a Single Market, those operators needed some kind of incentive to continue to import bananas from the ACP. On top of that, it was also felt that in order to ensure that those operators continued to pay what you might consider a remunerative price for the ACP producers, there was a need, as it were, to transfer a little bit of the quota rent to the ACP producers through these operators. Once you have a regulated market like that, there is going to be some extra money or quota rent that operators in the market are going to make in such a market and, therefore, the Commission, thought it would be necessary to allow those companies to earn a little a bit of that quota rent because they needed to pay a higher price for ACP bananas compared to what operators pay for Latin American bananas. Therefore, the two objectives were: 1) cross-subsidisation, but also 2) to provide an incentive for those companies—a kind of monetary incentive—to continue to market ACP bananas. As John Ellis has just said, without that incentive, Fyffes they would still be interested in the Belize fruit, but the economic viability of that industry would be in question because the company would not be able in a free market where it does not have access to that kind of quota rent, to pay a price of $10 a box. Like I said, the argument is if the ACP operators did not get the licence, who was going to get it? Let me ask you another question. We are talking about 30 per cent of the total licences available from the total tariff quota, but what about the other 70 per cent? Why are the other operators not paying a better price to the independent Latin American producers for the other 70 per cent that they hold? What is happening to the other 70 per cent? That is the question you need to ask.

Chairman:  Now we come to our last question which is: what happens to the profits from category B? Mr Grant?

Mr Grant

  433.  Yes, well, as the Chairman said.
  (Mr Ellis)  This is exactly the point we have just been discussing. There is no profit from it. It is part of the remuneration that goes back to generate this better price. As Bernard said, nothing of the 70 per cent is going back to Latin America and they are still paying $5. This 30 per cent is going back as part of the ability to pay the $10, Chairman.

  434.  To whom does it go?
  (Mr Ellis)  The producers' associations, the figure I am quoting, whether it is BECO in Jamaica or the growers' association in Belize, that is who it goes to.

  435.  It does not reach the farmer?
  (Mr Ellis)  I think it does, sir.

  436.  To pay for fertilisers and so on.
  (Mr Ellis)  Well, it depends on the way the association manages its affairs. Some associations do buy fertilisers and boxes and, therefore, give the farmer the box and some of the fertiliser or do the spraying, but at the end of the day if they did not do it, the farmer would have to pay for it.

Chairman

  437.  Yes, but let me ask you what is happening to the financing costs of Wibdeco of which both Fyffes and the Windward banana industry are shareholders, are they not?
  (Mr Ellis)  That is correct.

  438.  Out of the surpluses made, obviously the financing costs have got to be paid, but how much of the surplus is going into financing it?
  (Mr Ellis)  All the money for the transaction of the purchase of Geest which is owned, as you rightly say, between Fyffes and Wibdeco, was financed with the banks and not by the growers themselves. In the past year, after the financing, we have made a payment of a dividend of 4 million sterling, so that has been paid and £2 million of that has gone back to the growers' associations. That is after paying the interest on the money which was borrowed here in London.

  439.  Is it right to interpret that as saying that half then went to the costs of what you now still call Geest West Indies Limited, do you not, the joint company?
  (Mr Cornibert)  Let me shed a bit of light on that. There is no longer Geest West Indies Limited. Wibdeco has taken over that role.


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