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House of Commons
Session 1997-98
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Standing Committee Debates


European Standing Committee A

Wednesday 25 March 1998

[Mr. John Maxton in the Chair]


[Relevant document: Council Regulation (EC) No. 2686/94 of 31 October 1994 establishing a special system of assistance to traditional ACP suppliers of bananas.]

10.30 am

The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. Jeff Rooker): I am pleased to have this opportunity to speak today about a policy on which there has been a rare unity of view among successive Administrations over many years. That policy is partly due to our colonial history. The Government accept, as did the previous Administration, that our historic links with the countries of the Commonwealth Caribbean, which depend on bananas for much of their export revenue, mean that we have to temper our usual enthusiasm for liberal trading arrangements with our concern for those small and potentially fragile economies.

In the early 1950s the then Government encouraged the people of the Windward Islands to begin banana production by assuring them, and other Caribbean suppliers, of priority in our market for all the fruit that they could grow that was of saleable quality. Over the next 40 years, our national arrangements for banana imports guaranteed Caribbean growers returns that kept a significant share of the work force in banana production in the Windwards, in some parts of Jamaica and, more recently, in Belize.

The EU banana regime, agreed in principle under the previous United Kingdom presidency in 1992, replaced our national arrangements, and those of other European Union member states, with a harmonised system. As well as bringing those differing arrangements into line with the requirement for the free movement of bananas within the single market, the regime also attempted to meet three other, apparently irreconcilable, concerns_the EU's commitments to traditional banana suppliers in African, Caribbean and Pacific countries under the fourth LomeĀ convention, protection for EU producers under a common agricultural policy regime and our obligations under the World Trade Organisation rules. I suspect that our discussions this morning will highlight those apparently irreconcilable concerns.

The regime, which has now been in place for nearly five years, has remained controversial both inside and outside the EU. I will concentrate on the external challenges, because they have provided the driving force for change. A GATT challenge by five Latin American banana-producing countries_all of whom are, I believe, technically republics_soon after the regime came into effect in 1993 was partially resolved when four of them, Costa Rica, Nicaragua, Venezuela and Colombia, signed a banana framework agreement with the EU during the final settlement of the Uruguay round. However, the fragile peace that followed the implementation of this agreement in 1995 was disturbed by a further challenge under the new stricter WTO rules and procedures that were adopted in the Uruguay round. That complaint, if I could term it thus, came from Guatemala and Mexico_ joined by Honduras and Ecuador, which had recently joined the World Trade Organisation_and the United States of America, which is not famed for its banana production. We now have to grapple with the legal issues thrown up by the WTO ruling on this latter challenge as we try to reach agreement on a revised WTO-consistent arrangement during the UK's current presidency of the EU.

It has been clear to us since the WTO appellate body gave its final ruling on the EU regime last September that the findings pose severe political and economic difficulties for some of our historical trading partners in the Caribbean. When my right hon. Friend the Minister for Agriculture, Fisheries and Food went to St. Lucia in January to talk to Caribbean leaders and hear their concerns, he gave them assurances of his determination to ensure that their interests were taken fully into account in the negotiations that are now underway in Brussels. He made it clear that Caribbean growers must be given the opportunity to prove that they can sustain a viable industry committed to providing a good quality product to the European consumer at a competitive price.

As firm adherents of the multilateral system, we have also accepted_ever since the latest WTO challenge began two years ago_that, in the event of an adverse ruling, the EU would have to bring its banana import arrangements into line with that ruling. The EU committed itself to do that last October and has been given until 1 Janaury next year to get a revised WTO-compatible system into place. That gives the UK Government a pivotal role in getting that agreement into place during their EU Presidency.

Once we had looked at the complex legal ruling handed down by the WTO appellate body, we had to make a decision on the broad approach to be taken by the EU in response to the rulings. One possibility was to take the current arrangements, which are based on tariffs, quotas and licences, and change the elements that had been criticised by the WTO. Those elements included the main bone of contention in the dispute, the import licensing system, and in particular the B licences that have provided an incentive to traders to market Caribbean bananas. They also included the way in which the EU had shared out its market between supplying countries with quotas for specific countries.

Another approach, suggested primarily by the United States of America, was to sweep away quotas and licences, and protect ACP countries through an increased tariff preference. Given the complexities of the WTO findings, that is undoubtedly appealing.

However, there are drawbacks. Such radical change in response to the first adverse WTO ruling would set an unwelcome precedent for the EU. Latin Americans, whose agreement would be needed, would face rises in the tariff barrier on their banana exports. Most importantly, from the UK standpoint, at last autumn's Commonwealth Heads of Government meeting in Edinburgh, Caribbean leaders made it clear that their preferred solution was to continue with as much of the present tariff quota regime as it was possible to salvage.

The commission has therefore, sensibly in our view, set itself the task of making the current arrangements conform with WTO findings by proposing changes to the import licensing rules and to the way that the EU market is shared out.

The Government have assessed the proposal which Commissioner Fischler presented to the Agriculture Council in January against two key criteria. We have assessed whether the proposal goes as far as it can to protect the interests of Caribbean producers: as I have said, that is a priority for us. We have also assessed whether the proposal constitutes a defensible response to the WTO findings on the banana regime.

Our first key test was the protection of Caribbean ACP interests. We and the Caribbean leaders must accept that the revised arrangements will not be as favourable as those that we have at present. B licences will go, as will individual export allocations to ACP countries. That is a major anxiety for some Caribbean producers, especially those in the Windward Islands.

The Commission's analysis of the WTO ruling is that there is no way in which the EU can continue to offer ACP countries individual guarantees of access to its market, so we have reluctantly conceded that the unallocated global volume of 857,700 tonnes for duty-free imports from traditional ACP suppliers is the best that can be achieved.

WTO compatibility was even more difficult to assess than the protection of Caribbean ACP interests. The WTO complainants, led by the United States of America_ which, as I have said, is not famed for banana production_have lost no time in claiming that the arrangements proposed by the Commission would not be consistent with WTO rules.

Some EU member states have taken up this claim: as I said, there has been continuing dispute inside and outside the EU. The Commission, which has responsibility for defending its proposals, has provided member states with a comprehensive analysis of its response to the WTO findings in devising revised arrangements.

Although there are still some uncertainties on the WTO aspects, the Government have concluded that the proposal represents a carefully judged reconciliation of the EU's obligations under the WTO and its commitments to the ACP countries under the LomeĀ convention. Although the proposal does not_and probably cannot_meet Caribbean anxieties in every respect, it is, in our view, the best one they are likely to get in the wake of the WTO ruling. The proposal for a new framework of assistance for traditional African, Caribbean and Pacific producers, for which my right hon. Friend the Secretary of State for International Development has responsibility, should help the highest-cost producers adjust to the changed circumstances and to the tougher competition that they will face in the European Union market.

I apologise for the length of the statement. The matter is complicated, and the Committee needs as much background information as possible.

The European Scrutiny Committee has asked that the aid proposal be debated alongside the proposed revisions to the trade regime, and I shall be glad to take questions from hon. Members about the Commission package. I am delighted that my hon. Friend the Under-Secretary of State for International Development is attending his first European Standing Committee_a new experience that I am sure that he will enjoy. I am sure that he will be able to answer any questions that I cannot deal with.

The Government have decided to concentrate our efforts on getting revised arrangements, on the lines of the Commission proposal, agreed by the end of our European Union presidency in June. That will not be easy, given the persistent disagreements within the European Union about bananas. However, we are encouraged that no member state_not even one of those that favour freer trading arrangements_has refused to negotiate on the basis of the Commission's proposal.

We have been pushing ahead as quickly as we can. After initial discussion at the January Agriculture Council, a technical working group completed a thorough examination of the proposal, before reporting back to the Special Committee on Agriculture and to the February Council. There was a further discussion in the Special Committee earlier this week. We expect to keep up the pace so that we can reach a conclusion before the end of June.

I hope that hon. Members understand why I have spoken for longer than usual, and I am grateful for your forebearance, Mr. Maxton. It is a complicated issue, in which the decisions of the Government and of the European Union will affect the livelihoods and the futures of many of our historical trading partners in the Commonwealth of Caribbean countries.


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