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Yesterday Bananas, Today Sugar: What's Next? - August 1, 2005

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Yesterday Bananas, Today Sugar: What's Next? - August 1, 2005



According to my records, the last occasion when a Conversation was aired was June 27, 2005. Many have complained about the absence of the programme.

Perhaps you will understand the interruptions after I have explained that the last few weeks have been incredibly hectic. I had to travel to Kuwait to finalize financing for the Castries to Gros-Islet Highway, then it was back to chair the Conference of Caribbean Heads of Government, then it was off to Martinique for five (5) days leave, then, on my return, it was off again to Canada to address CARICOM citizens on the impending Single Market and Economy. I have missed “The Conversations,” just as you have missed them. So, let us get back on track.


Do you remember just a few months ago, the popular word on the streets and in particular the banana belt was that the SLP Government has killed the banana industry. Do you remember how some took pleasure in spreading the word that Government implemented policies deliberately aimed at destroying the banana industry? “Kenny kill bananas” they say, loudly and frequently.

Surely, you must remember the many voices who said that this Government likes to hide behind slogans such as globalization and blame all but itself for failing to address the problems of the banana industry. Yet, while this was being said the Government was pouring vast resources into the industry to ensure it survives. I know too, that you remember the charge that this Government is favouring tourism over agriculture despite how often I have repeated that tourism and agriculture are both vital for the continued development of our nation and the well being of our people. How often have you heard me say that what is important is the creation of linkages between these two vital industries? Simply logic and common sense would dictate that we should never put all of our eggs in one basket.

Just think for a moment and ask yourself how would this Government or any other government benefit from destroying an industry which has contributed so much to the overall development of our country. Why would any Government want increased unemployment and a loss of export revenue? None of these are desirable nor do they serve the interest of our long-term development.


But there is a popular saying that the truth shall set you free and today the truth is beginning to reveal itself. Sadly, it had to take the unfortunate situation facing the sugar industry in the region to drive home the point that it is not Government policy which has caused contraction in the banana industry. We have insisted time and time again that the decline in our banana industry is due largely to global forces over which we have very little or no control whatsoever. On numerous occasions, through many different fora, we have explained to the people of Saint Lucia and in particular the banana farmers that the WTO regime has ended the preferential trading arrangements for our bananas and is responsible for the continued decline of the industry. We have even invited representatives of the opposition UWP to travel to Europe at Government expense to experience first hand the challenges faced by the industry. They know why they have not accepted.


Yesterday, it was bananas. Today it is Sugar. The European Union Commission is proposing changes in the arrangements under which the African, Caribbean and Pacific countries sell their sugar to the European countries. The proposal outlined by the European Commission, if implemented, will, as of 2006, cut guaranteed prices for white sugar by 39% in a four-year period ending 2009/2010. Overall, such a cut in sugar prices would result in a reduction of revenue of over US$ 400 million annually for ACP countries. For the sugar producing countries of the region such a cut would mean a loss of over US$ 100 million annually.


We are all aware that from the days of slavery to the present, the sugar industry formed the backbone of the economies of many Caribbean countries. Just as bananas in the days of “green gold”, was the major foreign exchange earner of the Saint Lucian economy, so too was sugar to many of the regional economies.

In 2004, sugar exports from Guyana alone totaled $121 million, Jamaica $70 million and Belize $34 million. In Guyana, the Sugar Industry accounted for 17% of GDP, as well as being the chief export and the largest employer. Sugar is also the top agricultural export for Jamaica, Barbados, Belize and until recently, Saint Kitts and Nevis. As occurred in Saint Lucia and the remaining Windward Islands, it is likely that the new EU regime for sugar will cause economic dislocation and a rise in unemployment in the affected countries. Whereas the sugar producing countries of the region are not opposed to reforms in the industry, it is clear that the proposed cut in sugar prices is “too deep, too soon and too short.”


The new arrangements proposed by the European Union has produced its first casualty, Saint Kitts and Nevis. The Government of Saint Kitts and Nevis has announced that it is closing down its Sugar Industry, leaving behind a debt of EC $350 million dollars, and hundreds of individuals on the breadline. Indeed, the debt of $350 million is one of the reasons why Saint Kitts and Nevis has one of the highest GDP/Public Debt ratios in the world. Just think for a moment. Could you imagine what would have happened in Saint Lucia if this Government had allowed the debt of the old Saint Lucia Banana Growers Association to go above the EC $45 million dollars which it inherited in 1997?

Even before the events in Saint Kitts and Nevis, another Caribbean country, Trinidad and Tobago had seen the writing on the wall. Three or four years ago, the Government closed down sugar production at the state owned company, Caroni Ltd., leaving several thousand persons unemployed.

Barbados too is considering the future of its sugar industry, which also, is heavily in debt.

Truly, these are challenging times!


As was the case with Windward Island bananas, the region’s economy is once again being held ransom by international agreements which care very little for the constraints of small size, the lack of economic diversity and the region’s vulnerability to external economic shocks. Hence, the decision to impose changes in the region’s sugar trading arrangement is taking place in order to "make Europe's sugar industry fit to handle future competition," regardless of the fact that preferential prices are "an economic lifeline" for ACP countries.

Despite the dire consequences the changes in the EU sugar trading arrangements are likely to have on the vulnerable economies of the region, the EU has proposed an aid package valued at only 40 million euros or roughly EC$ 120 million to the affected countries. Many of the sugar producing countries of the region have deemed this sum totally inadequate to compensate for the drastic cuts in GDP that will be experienced by these countries. Indeed, it has been estimated that it may take a minimum aid package of approximately 500 million euros to keep the economies of ACP countries afloat.

The fact is, as happened previously in the case of bananas, the EU financial support programmes have been of little or no effect in buffering the severe economic and social dislocation caused by changes in the commodity regimes. In the case of sugar, it is likely that the same will be true. To begin with, the proposed aid programme is too small. Imagine the sum of $US 48.3 million to be divided among 18 ACP countries. It is obvious that when this amount is shared between the respective countries it will be wholly inadequate to compensate for the loss of earning resulting from the price cuts. Further, The EU procedures for the disbursement of aid are notoriously slow and cumbersome. In light of this it is likely that it can take years for the required funds to reach the affected countries and their producers.


The sugar issue is a perfect example of how globalization is seriously damaging Caribbean economies. The truth is whether we believe it or not the processes of liberalization and globalization are likely to threaten the preferential market access for almost all our traditional commodity exports. For the many who claimed that it is the Government that destroyed the banana industry, I want to ask them whether it is the governments of Trinidad and Tobago, St. Kitts and Nevis, Jamaica, Guyana and Belize that are also responsible for destroying their respective sugar industries.


The governments of the region are not foolhardy. None will cut its nose to spite its face. None relishes the prospects of increased unemployment and joblessness among its nationals. None would invite increased poverty on its people. None would like to see an increase in crime and social instability.

Even a blind man can see that the countries of the region are victims of circumstances. They are caught in a web spanned by new economic realities that are neither of their making nor liking.

The truth is the chickens have come home to roost. When will we learn? Will we, ever? Ponder on these issues as we usher in another week.

Be of Good Cheer, God Bless and Take Care.


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