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 licencesthe 30 per
cent of the tariff quota licenceswere 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
companiesa kind of monetary incentiveto 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.
5 Not herewith printed. Back
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