COMMENTARY

Latin America shows no concern for the Caribbean

by Sir Ronald Sanders, a former Caribbean diplomat, now corporate executive, who publishes widely on small states in the global community

Tuesday, July 19, 2005

On July 7th seven Latin American countries held a meeting in Costa Rica in which they showed no concern for the calamitous effect on CARICOM economies of a further loss of their preferential market in the European Union (EU) for bananas.

The Presidents of Colombia, Costa Rica, Ecuador, Guatemala and Panama, and representatives of the Presidents of Nicaragua and Honduras declared that a new tariff on their banana exports which is being proposed by the EU for January 1, 2006 discriminates against them.

What is troubling is that the seven countries actually named the present access for bananas by African, Caribbean and Pacific (ACP) countries to the EU market as harmful to them, and indicated their firm intention to fight it. 

The Latin countries are emboldened in this by the fact that US multi-national corporations own many of their banana plantations, and both the present government of President George W Bush and the previous administration of Bill Clinton sided strongly with them in challenging ACP preferential access to the EU market. 

Arbitration panels of the World Trade Organisation (WTO) have ruled that the Treaties under which the EU gives ACP countries preferential treatment contravene free-trade rules by discriminating against Latin American “dollar” bananas.

The next test of the Latin American fight will come in a few weeks time, around August 1st, when an initial ruling is expected by a WTO Panel on the EU proposal to place a single tariff of 230 Euros per metric tonne on all banana imports with no limit on volumes from January 1st, 2006. 

At the moment, under existing agreements with the EU, ACP countries enjoy a duty-free quota of 750,000 tonnes; beyond the quota a tariff of 380 Euros is paid.

The EU proposal for a single tariff of 230 Euros per metric tonne does not please ACP countries either.

They firmly believe that once their existing duty-free quotas are removed “imports will increase dramatically and prices will fall as traders fight to increase market share”. They would have preferred a higher tariff to be applied to bananas from non-ACP countries to allow them to maintain their share of the EU market, particularly as the Latin American counties produce less expensive bananas largely because of cheap labour costs.

At their meeting in Costa Rica, the Latin countries declared that “the tariff of 230 euros per metric tonne does not guarantee the maintenance of total access for bananas coming from Latin America”, and they “consider it unjustifiable that at the Doha round (trade negotiations of the WTO) the European Commission denies the commercial opening to banana exports coming from Latin American developing countries”.

But, Caribbean banana exports are small in relation to the exports of the fruit from Latin America.

Further, for several Caribbean countries especially Belize, Jamaica and the Windward Islands of Dominica, St Lucia and St Vincent & the Grenadines, the EU market for bananas is essential for their survival. In Belize for instance, banana production and related industries account for about 10% of total employment, and there is no alternative employment for the 10,000 people dependent on these jobs. Similarly, in Jamaica approximately 10% of the total labour force is reliant on the banana industry and its related sectors.

And, while tourism has recently been making a greater contribution to St Lucia’s economy than before, that island still relies heavily on banana exports as does Dominica and St Vincent & the Grenadines. In fact, in the latter two countries, the export of bananas to the EU is crucial to their survival in absolute terms.

In this context, the attitude of the Latin countries poses a real threat to these five countries of the Caribbean Community and Common Market (CARICOM) and to its other member states as well. It has to be recalled that declines in the economic performance of one CARICOM country affects all of them.

The seven Latin countries have asserted that “social, economic and political stability depend to a great extent” on their efforts to incorporate their economies into world trade and this includes exporting their bananas to the EU without restriction. They also claim that exports of bananas would allow for “abandoning crops from which illicit drugs are made”.

These arguments are perhaps more valid for the five affected CARICOM countries than they are for the Latin countries precisely because the level of reliance by the CARICOM countries on exports of bananas to the EU is far greater than it is for Latin America. The potential for social, economic and political stability is much more real and immediate for small CARICOM states than it is for larger Latin ones.

What is more, great efforts have been made by the banana-producing CARICOM states to improve the efficiency of the banana industry and, indeed, to diversify their economies. But, even as this commentary is being written, it is already known that income from the export of sugar by Belize, Jamaica and other CARICOM countries to the EU will be reduced by 39%. Unemployment will rise and social unrest will surely follow.

Latin America and the Caribbean may be classified as one group in the international system, particularly within the United Nations framework, but the level of understanding and sympathy for the Caribbean from Latin America is practically non-existent. 

All this having been said, Caribbean countries should not expect the Latin Americans to ease their pressure on the EU. They want a new tariff on bananas that is lower than 75 Euros, and they want open access to the market in terms of volumes. .

The EU itself has chosen to deal with the problem in the context of existing WTO rules which do not allow for special treatment for countries, except for the least developed states such as those in sub-Saharan Africa.

And, a rules-based WTO has little choice but to come down on the side of non-discrimination and equal trade access.

It is those rules that have to be changed if the EU is to institute arrangements which benefit Caribbean countries.

At the bottom line, the majority of CARICOM countries – in particular Belize, Barbados and the countries that comprise the Organisation of Eastern Caribbean States (OECS) are small and vulnerable economies. Guyana is in a class by itself as a Highly Indebted Poor Country. But, the WTO rules are deficient in relation to the special circumstances of small CARICOM states, and the Organisation should be persuaded to accept the special nature of their circumstances – as well as that of other ACP states – and place them in a special category.

This should be done not only for commodities but for services as well, or one day very soon the Caribbean will find its tourism and other services industries gravely affected by WTO rules.

If this does not happen, Caribbean states will continue to be judged by the rule of “one size shoe fits all”, and arbitration panels of the WTO will continue to come down against their interests. 

In this connection, Caribbean states should be in the forefront of persuading the EU not to simply accept existing WTO rules, which is what they have been doing so far in respect of both sugar and bananas; instead the EU should be urged to lead the way in convincing the US, Japan and Mexico that a formula should be determined and advanced to create a new category of special and differential treatment for small and vulnerable ACP states. 

The Latin Americans are pushing their interests; Caribbean countries should protect theirs. 

(responses to: ronaldsanders29@hotmail.com) 

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