Unstarred Question: Bananas
Viscount Montgomery of Alamein rose to ask Her Majesty's Government whether the new European regime for the import of bananas is in the best interests of the United Kingdom.
Lord Faulkner of Worcester:
My Lords, I apologise to the noble Viscount for missing the first few seconds of his speech. The House got on to this debate very early and I was in Committee a little way away. I hope he will forgive me. However, I did hear the main part of his speech.
It is over 15 months since we last debated this subject on a similar Unstarred Question asked by the noble Lord, Lord Newby. I am delighted to see him in his place. I was going to say that I was the only person to have spoken in both debates, but I assume that the noble Lord is standing in for the noble Baroness, Lady Miller of Chilthorne Domer, so he and I will be veterans of both campaigns.
I declare the same interest that I did on that occasion. I was vice-chairman of the All-Party British-Caribbean Group, and an adviser over 25 years to the Fyffes Group in my business life before I joined your Lordships' House seven years ago. It is also relevant to report that I paid a visit to the banana growers of St Lucia in the Windward Islands under the auspices of the Commonwealth Parliamentary Association in May last year.
The noble Viscount said that he would probably be a lone voice putting forward his point of view. I cannot speak for anyone else who will take part in this debate, but his surmise about what I am going to say is absolutely right. I speak as a friend of the Caribbean, which has been treated shamefully by the World Trade Organisation, the multinational Latin American banana exporters, and particularly the United States Administration.
To some extent I exempt from this criticism the EU Commission, which has attempted to maintain a tariff structure which would give some protection to the African, Caribbean and Pacific countries which supply bananas to the European market. It was not its fault that the United States mounted trade sanctions against Europe at the behest of its multinational companies, which have substantial interests in Latin and south America even though not a single banana is grown commercially on the US mainland. As a result of attempting to accommodate the multinationals' bullying, the EU has tried to compromise with a new banana import regime, which—as often happens with so many compromises—satisfies virtually no banana-exporting country, whether Latin American or ACP.
What we are stuck with now is a flat-rate tariff with no limit on import volumes, and preferential access for 775,000 tonnes of ACP imports. The EU had to agree to a tariff-only system as the price of ending the dispute in the WTO. But it said at the time that the new single tariff was intended to have the same effect on the market as the system of tariff quotas that it would replace. The system could have worked if the level of tariffs on imports from Latin America—the so-called most favoured nation suppliers—was set high enough to prevent the European market being flooded by bananas priced at such low levels that the ACP exporters could not compete with them.
Originally the Commission said that the single tariff should be €230 on all MFN imports with no quota limit. This was thrown out in arbitration and a second proposal of €187 was put forward. The arbitrator refused to agree to that, saying that the Commission had not demonstrated that €187 would meet the required criteria. The Commission off its own bat then fixed the level at the still lower amount of €176.
When I was in St Lucia last year, I asked the banana farmers and their representatives whether they agreed that the original figure of €230 would have been of sufficient value to keep them in business. Not one of them did. The banana growers who I met believed that a significantly higher level of tariff, perhaps as much as €300 per tonne, was required to prevent retail prices for bananas in Britain falling to levels that would make it uneconomic for them to continue to supply the market. Therefore, we can imagine how far €176 falls short of what is required. The farmers told me that their return has been falling steadily over recent years, not least because the cost of their inputs, particularly fertiliser derived from oil, has risen but the retail price of bananas in Britain has been falling steadily. It has fallen by 25 per cent in the past three years as a natural consequence of a world over-supply of bananas. The Windwards are, of course, treated less favourably than their immediate neighbours, Martinique and Guadeloupe, which, as overseas departéments of France, qualify for deficiency payments from the EU. Often they amount to over half their total returns.
In the debate in your Lordships' House on 14 January last year, my noble friend Lord Evans of Temple Guiting, replying for the Government, suggested that diversification could be part of the solution for the Windward Islands. I discussed that with a number of the people I met, and it was clear that the scope is pretty limited. St Lucia operates a zero-tolerance policy towards drug production and trafficking, but there is worrying evidence elsewhere in the region that the ease of growing ganja creates just too great a temptation for some poor, previously banana-dependent island economies. I take issue with the noble Viscount, who said that that is just tough and they must try to do something else. I should say that the noble Lord, Lord Palmer, who cannot take part in this debate, was particularly keen that I should make this point about the risk of drug-growing as the alternative to bananas if the banana industry is damaged.
It is clear that the islands' economies face catastrophe if any new EU banana regime effectively excludes or severely reduces fruit from traditional ACP sources. This is not scaremongering or crystal-ball gazing. There are already worrying signs that since the new EU banana regime started on 1 January, imports from Latin America are up by over 6 per cent, despite some supply problems caused by bad weather. Only last week the online news service for the fruit and vegetable trade—freshinfo—reported that the new regime had brought Guatemala back into the EU trade after several years' absence with the arrival of 113,712 boxes of Lola-branded fruit into Rotterdam. That was the first instalment of 8 million cartons of bananas which will come to the EU this year. Not surprisingly, this is upsetting exporters from Ecuador as Guatemala and, indeed, Brazil are undercutting their prices by some €3.50.
Faced with this, it is hard to see the traditional Caribbean growers even getting to the starting line, and the situation would be even worse if the lobbying from Latin America to get the tariff even lower were to succeed. To go back to the terms of the noble Viscount's Question, how can the new European regime for the import of bananas be in the best interests of the United Kingdom if it produces the destruction of the banana-growing industry in Commonwealth countries—with which we have the closest ties—the exclusion of the exquisitely tasty, conveniently-sized fruit from the Caribbean in favour of what my wife and I regard as the large, cheap and nasty bananas from Latin America, and yet more price wars between British supermarkets to the further detriment of the smaller greengrocers and convenience stores? If ever there were a num question—one that expects the answer "no"—this is it.
I hope at the very least that we shall receive an assurance from my noble friend that the Government will follow the example of their predecessors and fight to keep alive the Caribbean banana industry, specifically in the first instance by doing all that they can to obtain a satisfactory level for the single tariff and ensuring that there is no change in the way in which the quota is administered, at least before 2008.