EU: Trade Agreement on Banana Imports

Lord Foulkes of Cumnock Excerpts

Tuesday 7th February 2012 Lords Chamber

[Lord Foulkes of Cumnock]

My Lords, I congratulate the noble Baroness, Lady Hooper, on obtaining this debate at last and on her eloquent introduction. I declare a non-pecuniary interest as president of the Caribbean Council. Bananas are still a very important source of income and employment in many parts of the Caribbean, particularly the eastern Caribbean. St Lucia, for example, has 1,500 farmers in the banana sector but it has seen a huge decline. In its heyday, 30,000 people worked in the banana sector.

We have seen rapid liberalisation of long-standing preferential trade agreements taking place. When that happens, they need to be replaced by financial support and capacity-building measures to make sure that people whose livelihoods are being swept away are able to become more competitive or to find employment in other sectors. The banana accompanying measures, which were agreed by the European Commission, will go some way to achieving that by extending the earlier banana support programme with an additional €190 million. While that money is of assistance it covers support only until 2013 whereas, depending on the progress with the Doha round, we expect tariff reductions to continue until 2020. Therefore, there is a gap.

It is particularly scandalous that, due to a stand-off between the EU institutions, there has been a delay between the agreement to dramatically lower the preferential tariffs and agreeing the funding mechanism. In fact, the Geneva agreement on bananas, to which the noble Baroness referred, was signed in December 2009. Now, more than two years later, the European Parliament has only just passed a resolution allowing the banana accompanying measures to proceed and the funding has not even started to flow yet. In her reply, will the Minister give us an assurance that our Government will do everything in their power to ensure that the European Commission gets this money flowing as quickly as possible?

Turning to other sectors, although there has been a lot of discussion on bananas because of the dispute, which remains an important element, we need in the Caribbean to see a movement away from sugar and bananas into higher value-added goods and services where it has a unique advantage. That has already been demonstrated, for example, in developing a massively successful, globally competitive tourist industry, which is based on those beautiful white sandy beaches and the turquoise seas that we all dream about, particularly in the middle of this London winter. Incidentally, the decision by the Government on air passenger duty was particularly unhelpful to the Caribbean in developing the tourist market.

It is vital that everything possible is done to help to protect these success stories. Industries such as Caribbean rum are already heading in this direction. It is of the highest quality and now is entering a wide range of markets around the world through improved branding and the use of a quality market. Other industries, such as creative and cultural industries, financial services and high-quality cocoa and coffee, all have the potential with the right support to be globally competitive and successful contributors to the economies and employment across the Caribbean region.

I urge the Minister to ensure that her Government and the European Commission continue to promote the ongoing diversification of the Caribbean economy, and to support this very encouraging trend of developing and growing new and existing industries where the value-added element stays in the Caribbean rather than elsewhere.

Finally, the economic partnership agreement was signed in October 2008 in good faith by the Caribbean Governments, who understood that they would be locked in for the long term. Many of the preferential benefits in terms of market access and development support were going. Those previous certainties now seem to be disappearing before their eyes. The EU has opened negotiations in quick succession, making bilateral agreements with countries in Central America, South America and now with India in products that are of key importance to the Caribbean. In these negotiations, many of the special concessions that were granted to the Caribbean in the EPA are being watered down or nullified as greater market access is granted to producers in other parts of the world. Some assistance is being provided, but much of it still exists only in theory. Several years down the line, Caribbean Governments are now beginning to have to reduce their duties against European products without the benefit of the aid-for-trade assistance which was promised.

I conclude by asking the Minister and the noble Lord, Lord Shutt of Greetland, to tell us the extent of the aid-for-trade support that has been provided by the United Kingdom and the European Commission to the Caribbean since the EPA was signed; and whether she agrees that more needs to be done to help the Caribbean, and that it needs to be done quickly.

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[Baroness Stowell of Beeston]

My Lords, I have found this debate fascinating, and I congratulate my noble friend Lady Hooper on her patience, as I know she has waited a long time to secure it. Her thoughtful and expert contribution—and indeed those from all noble Lords—clearly demonstrates why, as she says, this topic is still relevant today.

It was clear from the contributions by the noble Baroness, Lady Howells of St Davids, and my noble friend Lady Benjamin that this topic arouses a lot of passion and emotion because of our ties with the part of the world that we are discussing. In my response I will try to do justice to the points that have been raised. I thank the noble Viscount, Lord Montgomery of Alamein, for his welcome to me on this topic, which is one that I know noble Lords in the Chamber today have debated on previous occasions.

As set out in our White Paper, Trade and Investment for Growth, published last year, this Government uphold fully the principles of free and open markets. Free trade reduces the cost of goods and inputs to consumers and manufacturers. It stimulates competitiveness and spurs innovation. Most importantly, free trade, especially at this time, supports sustainable and balanced growth which is, to state the obvious, essential to the global economy. As well as free trade, we believe in non-discrimination between countries at a similar level of development. The European Union’s Geneva Agreement on Trade in Bananas, introduced in 2009, supports both these principles.

Prior to that agreement, the high tariffs placed on bananas imported into the European Union from countries other than the so-called ACP group—Africa, Caribbean and the Pacific—were plainly discriminatory. Not only did that restrict market access and opportunities to banana producers in Latin America and elsewhere, it also raised the price of bananas for consumers in Europe. As I think most noble Lords would agree, those outcomes were not fair, reasonable or economically sensible. By contrast, the Geneva agreement will reduce discriminatory tariffs by 2018, and that reduction will bring considerable benefits.

I shall start with the benefits for the consumer. As my noble friend Lady Hooper has summarised in her remarks, bananas are the most widely bought fruit in the UK. Indeed, in 2010 they accounted for 27 per cent of all fresh fruit purchases. Incidentally, we buy more fair trade bananas than the rest of the world combined. My noble friend asked about the labelling of fair trade bananas and why they did not identify their country of origin. I imagine that the boxes in which the bananas are carried into stores will state their country of origin. I am not sure of the answer to the question about their individual packaging, but I will write to my noble friend. It is true that we are the main source for fair trade bananas. I was interested to hear that earlier today the noble Earl, Lord Sandwich, spotted fair trade bananas in the Bishops’ Bar.

The price of bananas has fallen by around 10 per cent over the past 10 years, due to more efficient production and distribution. Further reductions on tariffs should help maintain this trend. The noble Earl asked what the Government were doing to combat a banana price war. The market will always determine the price of commodities; it is not the role of Governments to seek to control that.

The Geneva agreement will also support the industry, as the more efficient producers will be able to compete more fairly. I will come shortly to support for the Caribbean area, but in the long term, the agreement will support Caribbean and other ACP economies as it will encourage efficient production or diversification into other economic sectors better suited to local conditions.

While removing discriminatory tariffs is the right approach, of course I recognise that adapting to a new set of circumstances brings a number of challenges to producers in Africa and the Caribbean, as has been identified by noble Lords this evening. It is therefore right that countries are given time to adjust, and it is why the Geneva agreement will take up to nine years to be fully implemented.

My noble friend Lady Hooper asked whether the agreement is working. It is too early to assess the full impact of the agreement on both the Latin American and ACP producers. It is worth pointing out that since 2009 when the agreement first came into force, the share of the EU market has in broad terms remained unchanged in that the Latin American countries have retained about 70 per cent of the market. My noble friend Lady Benjamin gave specific statistics regarding individual ACP countries; I am afraid that I do not have them in front of me, but the total figure in terms of region has remained steady. That said, when the agreement was finalised, the Commission clearly assessed its potential impact. It calculated that the tariff changes were unlikely to have any major macroeconomic impact on the ACP group of countries as a whole. However, the Commission’s analysis also concluded that there could be significant loss of export revenue for some, in particular for Dominica and St Vincent. There could be consequences for some individual producers if cost-saving measures were not introduced, leading to job losses and localised social difficulties—in other words, if those producers did not or could not increase their efficiency in order to compete.

The Commission’s overall assessment was the rationale for providing further assistance—the banana accompanying measures, or BAMs as they are sometimes known and have been referred to by several noble Lords this evening—on top of the restructuring activities that had been undertaken with EC funding from 1994 until 2008. This assistance package of up to €190 million should be the final tranche of support for banana producers either to increase their international competitiveness for the adoption of new technology or diversify into other economic sectors. Several noble Lords asked what might follow the four-year period. It is worth pointing out that one of the reasons why it has been possible for the European Union to introduce these BAMs and the support is precisely because they are temporary. Had they been a permanent measure, they would not have been compliant with the WTO agreement.

The noble Lord, Lord Foulkes, and my noble friend Lady Benjamin, along with others, expressed disappointment about these funds having yet to reach the producers they are meant to help. We share that disappointment. Initially, as the noble Lord, Lord Foulkes, indicated, the problem was related to internal wrangling over competence between the Commission and the European Parliament. However, noble Lords will be pleased to know that, as the noble Lord, Lord Foulkes, has indicated, this has now been resolved. That resolution means that there are no further excuses for delay. To that end, the head of DfID’s office in the Caribbean has raised the issue of slow disbursement rates with the Commission, most recently on a visit to Brussels last December. We have been lobbying our European partners in Brussels as well. This evening I can at least share with noble Lords that the EC delegation expects approval for disbursement for Jamaica and Belize in summer 2012. We need to keep up the pressure—I will certainly use this evening’s debate as a way of providing ammunition for our representatives in the region—but at the moment that is as much as I can offer.

[Lord Foulkes of Cumnock]

If I had been as courteous as the noble Viscount, Lord Montgomery, I would have welcomed the Minister to the debate and to the Dispatch Box. She has been very helpful. As I have said on several occasions, I have great respect for our Ministers in DfID, Andrew Mitchell, Alan Duncan and Stephen O’Brien. We have a very good team there. Surely one of them could go over to Brussels, as Clare Short and I used to, to give them a shaking and make sure that this money gets flowing as quickly as possible. That is something that can be done. We have a powerful team there. If the Minister draws attention to the widespread support across every Bench in this Chamber, whichever one of them goes can go with our wholehearted blessing.

[Baroness Stowell of Beeston]

I think they will hear that message loud and clear from the noble Lord, for which I am grateful.

Despite the setback on BAMs, previous assistance given to banana producers is having some effect. Some countries, namely Cameroon, Belize, Suriname and Ivory Coast, are increasing production and continue to use EC trade assistance funds to increase their competitiveness. I am conscious of the time so I will keep rattling on. However, some countries no longer find it economic to continue in banana production. Other producers have opted to diversify into other sectors such as poultry farming, or on-farm agriprocessing. In Jamaica, 35,000 people have benefited from 15 projects supported by the EC’s special framework programme for banana producers.

Very briefly, there may well be scope in my noble friend’s suggestion of using bananas as a new source of energy. I will certainly inquire and, if there is anything to report, come back to my noble friend.

The noble Baroness, Lady Howells, and the noble Lord, Lord Palmer, raised the serious issue of drugs and whether some banana producers might turn to producing drugs if they go out of business. Obviously the drugs trade is a pernicious problem and requires the international community to work together to tackle it effectively. We are working closely with the Governments of the Caribbean to eradicate this problem. I am not aware of any evidence that ex-banana growers are more likely than others to take up drug production or trade but it is clearly something that we need to watch out for. Indeed, it was raised at the UK-Caribbean Forum last month, as my noble friend Lady Benjamin mentioned.

There is much that I could cover in my closing remarks but I am conscious of the time. However, I should like to say that, separate from our responsibilities via the EU, the UK Government are doing a great deal to support the Caribbean. We have the interests of the people of the Caribbean very close to our hearts. Four British Ministers, including the Foreign Secretary himself, participated in last month’s UK-Caribbean Forum in Grenada, at which agreement was reached on an action plan to co-operate on a series of programmes to promote economic resilience, tackling climate change, the environment and sustainable development. The Minister of State for International Development announced the first grants under our new £10 million contribution to the Compete Caribbean initiative for private sector development and job creation.

Several noble Lords have raised the issue of air passenger duty. There was an Oral Question on this topic only two weeks ago, so I will not repeat the points made at that time. However, at that same event to which I have just referred, the issue was raised and the difficulties were acknowledged by my right honourable friend William Hague.

I conclude by saying that we will continue to monitor closely the impact of the Geneva agreement on the banana industry. Most importantly, we believe the combined effect of increased free trade via the agreement, together with the support we are providing to the ACP countries more generally, should provide economic benefits for the peoples in all the countries directly affected.

It has been a great privilege to respond to the debate today. I thank all noble Lords who have contributed to it.