Caribbean Rivals Ripe For Banana War

For generations, bananas have been an easy cash crop in the Eastern Caribbean. Even if a hurricane blew through, local farmers could count on another banana crop in nine months or so.

Now, though, the crucial banana industry is under attack from a force that could prove far more devastating than a hurricane.

Four rival banana-producing countries plus the United States - largely at the behest of Cincinnati-based Chiquita Brands International - are challenging the legality of a trade preference given to Caribbean bananas in European markets.

Under the Lom Convention, former European colonies in African, Caribbean and Pacific (ACP) countries enjoy duty-free access to European markets for their exports, including bananas.

The European Union continued that trade preference, imposing a two-million-ton quota in 1993 on non-ACP bananas, which are subject to duties of $110 per ton, or $930 per ton if the quota is exceeded.

Ecuador, Guatemala, Honduras and Mexico have joined the United States in a complaint filed with the World Trade Organization that contends the EU rules systematically exclude Latin American bananas from the European market.

“The larger U.S. interest is ensuring that markets operate on an open, fair and competitive basis,” said Jay Ziegler, a spokesman for the U.S. Trade Representative’s Office.

A formal WTO hearing was held in September and a decision is expected in early 1997.

If the ruling goes against Caribbean producers, farmers in the Windward Islands would be particularly vulnerable. In Dominica, Grenada, St. Lucia and St. Vincent, bananas account for about 50 percent of export earnings.

And the economic alternatives in these tiny islands swept by the trade winds are limited. The largest of the group, Dominica, is just 29 miles long and 16 miles wide.

With higher production costs and smaller plantations, Caribbean producers fear they would be unable to compete against large South and Central America banana producers if they lose the trade preference. Caribbean producers now supply about 8 percent of the European Union market.

“Lots of banana farmers will be driven out of business,” said Swinburne Lestrade, director general of the Organisation of Eastern Caribbean States. “The question is into what.

“Bananas is a very easy cash crop,” he said. “That’s why the countries don’t want to let it go. We’ve had banana production for so long that it’s now part of the culture.”

Bananas are also important to smaller Central American producers, but they don’t carry the relative weight they do in the Eastern Caribbean, where fragile economies have been built almost solely on bananas, spices and tourism.

“Bananas and tourism are the two pillars that sustain the Eastern Caribbean economy and the currency,” said Edwin Carrington, secretary general of the Caribbean Community.

Any sudden upheaval in the banana trade could have dire consequences for the rock-solid common currency, the East Caribbean dollar. It has been fixed at 2.70 to $1 U.S. for the past 20 years.

“The currency represents the chord and knot that tie the entire community together,” said Carrington, who was in Miami recently for a business development conference organized by the Caribbean American Business Network.

If the United States, Ecuador, Guatemala, Honduras and Mexico succeed in dismantling the European banana import restrictions, he said, the EC dollar could be undermined.

The Caribbean Community has asked President Clinton to withdraw the World Trade Organization complaint. Caribbean nations have also solicited and received support from the Congressional Black Caucus. They warn that, stripped of their livelihood, some farmers might be tempted to get into another easy cash crop: drugs.

“The Caribbean countries feel very cheated by the U.S. government, but we have done about all we can on the banana issue,” Lestrade said.

The United States has held several informal consultations with the Caribbean nations in an effort to resolve their concerns outside the WTO process. Among the proposals is changing the tariff system so money would be contributed to a fund for economic diversification in the Caribbean.

In the meantime Caribbean nations need to prepare for the possibility that the banana preference could go away, said Lestrade.

So while interested parties were submitting position papers last week in Brussels, where the World Trade Organization is hearing the dispute, a high-level delegation from the East Caribbean arrived in Miami to discuss investments and economic partnerships in the region.

They called on South Florida businesses and trade groups to encourage distribution of Caribbean products.