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The World Trade Organization (WTO) and Caribbean Bananas
by Jean Dominique

Until 1992, the former British Caribbean colonies of the Windward Islands (Dominica, St. Lucia, St. Vincent, Grenada) and other colonies such a Jamaica, Belize and Suriname, had supplied the British banana market from as far back as 1950s.

Under a contract between the British government and fruit merchant, Geest, bananas from the Caribbean were guaranteed a market in Britain. These Caribbean islands exported exclusively to Britain and by the 1990s Caribbean bananas had climbed to two-thirds of the British banana market. Hence over the years, banana came to be the dominant feature of the economic and agricultural landscape of the Windward Islands, providing the main source of earnings and employment.

All of the Caribbean banana islands are generally very small, with small populations. The four islands that comprise the Windward Islands, for example, have a combine population of just over 434,000 people. On the island of St. Lucia, 60,000 people depend on the banana industry to earn their daily living. This is over one-third of the population. In Dominica 33 percent of the labor force and 70 percent of the population of St. Vincent is directly or indirectly involved in the production of bananas. 30 percent of the land in the Windward Islands is under banana cultivation.

The Windward Islands depend heavily on the banana industry for their economic survival. On all the islands, bananas provide over half of all export earnings. The industry injects 1.1 million dollars every week into the St. Lucia economy. The industry has also contributed significantly to the political and social stability of the whole Caribbean region. Because of this stability the various governments have made significant achievements in pursuing democracy and good governance.

The WTO and Caribbean Banana

The age of global market liberalization has been threatening the economy of the Windward Islands. With the advent of the European Common Market, Britain find herself having to share her market with her other European partners.

Through a series of treaties call 'The Lomé Conventions', she and the other European countries has been able to guarantee preferential access to Europe’s banana market for bananas from her former colonies and other developing countries in Africa, the Caribbean and the Pacific islands (the so-called ACP states). The conventions treaties are crucial for the economic survival of the small islands because they lack the infrastructure to compete against huge multi-million dollar companies on the international market.

However, the EU was challenged by the WTO that its banana import and licensing system contravenes WTO rules. The organization agreed in principle that the ACP banana exporting countries would have preferential access to EU markets in accordance with the Lomé waiver. It also agreed that the quotas and tariffs of the banana regime were compatible with WTO rules. However, it ruled that the import-licensing system was clearly contravening WTO rules, because it unfairly discriminate against some of the companies importing and marketing Latin American “dollar” bananas. It also claimed that companies that import ACP bananas were at an unfair advantage in the competitive market and were unfairly benefiting from a transfer in profit share made on “dollar” bananas.

Huge U.S-based companies such as Dole and Chiquita, which has dominated the banana industry in Latin America, complain loudly to the U.S. government that they had seen a reduction in profits because of the licensing system.

Chief among the complainers is Carl Linder Jr. who heads the giant company Chiquita. Linder, whose company has dominated the global trade on banana for a century, and who has a personal fortune estimated at $800 million, was frustrated because the European countries limit imports on his bananas. He complained to the U.S. government and it in turn complained to the WTO, which ruled against the licensing system.

At the beginning of March 1999, a trade war loomed as Washington applied a set of sanctions on EU goods because of the preferential banana trade agreement. Washington claimed that it was protecting its interest while showing free trade can actually work. However, many in the EU see this differently. “The whole process,” Sir Leon Brittan, then EU Trade Commissioner, told BBC2’s the Money Programme. “Is being driven by politics in the United States. It is driven by the fact that Chiquita is a company that gives money to the political parties, that the president of Chiquita is very close to Senator Trent Lott.”

This new round of trade dispute between Washington and EU commonly called in some economic quarters as the Great Banana War, came at a time when many small businesses in the U.S. were struggling to survive after the then Clinton Administration imposed a 100% tariff on products imported from the EU. On the list this time was Scottish cashmere sweaters, Italian cheese, French handbags and German coffee makers. Even even those on U.S. soil are feeling the effect of the banana controversy.

Potential Impact of the Decline of the Banana Industry in the Caribbean

It is difficult to assess the full effect of a WTO-compatible regime on Caribbean bananas on the EU market. Undoubtedly, it will lead to a big and unfair squeeze on the Caribbean’s market share. The resulting impact will be devastating in social, economical and political terms, especially on vulnerable single-commodity-dependent economies of the Windward Islands.

The loss of the banana trade will surely lead to mass poverty, high levels of unemployment and political instability, as is presently being experienced in Dominica.

The livelihood of hundreds of thousands of people across the Caribbean will be affected. The significant drop in prices has already caused many farmers to leave the land and unemployment is on the rise. There is a real danger of many farmers turning to another economic alternative: illegal drugs. And drugs barons from Central America can easily exploit the situation and use the Caribbean as a major point in the trans-shipment of cocaine to the U.S.

Jean Dominique

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