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Prime Minister on the Impact of the WTO Ruling on the EU Banana Import Regime on W.I. Bananas

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Mr. Chairman,

It is, indeed, for me a special privilege to address this meeting today and to meet so many friends, both old and new, who from home or who share a deep interest and concern for the welfare and future of that idyllic but fragile and vulnerable part of the world where we live. We do have problems which, on our own, we cannot resolve and therefore, we need the solidarity and support of our friends. I am sure you are aware by now that these concern the banana industries in the African, Caribbean and Pacific (ACP) countries.

Economic Significance of the Banana Industry

In case you were not aware of the importance of the banana industry to St. Lucia and the other Windward Islands, let me illustrate with these 1995 economic indicators.

Dominica St. Lucia St. Vincent

Banana Exports as % of GDP 14.3 12.3 11.1
Banana Exports % of Total
Exports 51.4 46.5 42.3
Banana Exports as % of
Agricultural Exports 83.0 89.0 70.0
Banana Employment as % of
Total Employment 36.0 30.0 35.0

As these figures clearly show, the banana industry dominates the agriculture sector of these three islands. It is the single most important sector of the economies of these islands and has been the main engine of growth and development, particularly rural development. It has contributed immensely to the socio-economic development of the islands and to the stable democratic climate which they have enjoyed. It is all of these that are now at stake, and so I am sure you will understand and share with us our grave concern over what we see as a threat to our very survival as small nation states. Without any exaggeration, that is how serious the challenge we face.

If, indeed, there are any doubt as to whether that was the case, there has been enough coverage in the press recently to convince any skeptic of the imminent threat to our banana industry, and the consequential damage to these islands, by the recent ruling of the Appellate Body of World Trade Organisation (WTO), on the EC banana import regime. No other issues is as important to us today, or has struck so directly and cruelly at the heart of the predicament of small countries in a world where unbridled liberalism has become such a dominant creed.

From Sugar Cane to Banana - the Lome Convention

We have been producing bananas in the Caribbean on small family farms ever since we moved away from the plantation production of sugar cane in the early fifties. With the active encouragement and support of the British Government, sugar cane was replaced with bananas as the principal export. As year round crop, which provides a regular cash income to the farmers, the banana was identified as the most suitable crop for the farming structure of the islands. It is useful to note that the British Government, too, benefited from the change to bananas. As Crown Colonies, the Windward Islands were in the Sterling currency area and so imports from the Windwards, rather than from the Dollar area, would have saved Britain scarce and valuable foreign exchange in the post-war period.

However, given our respect for the rights of workers to be unionised and the fact that we pay decent wages; our small size and lack economies of scale in production, our production cost is higher than those of our Dollar area competitors. Therefore, the British market had to be protected for the Windwards and Jamaica, through preferential import arrangements under which the imports of Dollar bananas were restricted. When Britain joined the European Community, the British Government was instrumental in obtaining for us, through the Lome Convention, a special Protocol to safeguard our access to and maintain our position on our traditional market. Although the spirit of the Protocol has remained unchanged ever since the first Lome Convention, the import arrangements that give effect to the undertakings of the Protocol were modified when the Single Market regime was established in 1993, through Regulation 404/93.

What really is at Stake

Since the establishment of the EU Single Market for bananas, the small share of the market enjoyed by Saint Lucia and the other ACP countries has been coveted by the multinationals and other big suppliers to the market. The Windward's islands' banana export account for less then 2.5% of the world banana trade and only 5% of the EU banana market. The comparative figures for all of the ACP are 7% and 17% respectively. On the other hand, the three North American Multinationals, between them, control about 70% of the world banana trade and almost over 45% of the EU banana market. Yet, in its greedy pursuit of increased market share and to deny our producers their measly share of the market, one US multinational, Chiquita International, was able to persuade the United States Administration to take up its case and fight the preferential access arrangements that are in place for our producers. Initially, the US used its own legislation, through a Section 301 investigation, to help Chiquita achieve its objective. When that failed, it sought the support of four Central American supplying countries, one of which is not an exporter of bananas to the EU. It must be noted that the US, despite its very active and leading role in the dispute, is not itself an exporter or producer of bananas.

My understanding is that US companies have done well as a result of the EU banana regime. They have gained substantially from higher average prices of the bananas but also, in some cases, from increased market share. The Latin American complainants, collectively, have also gained in market share and should also have benefited from the higher average prices. What, therefore, is at stake is not what they already have but what, in addition, they think they ought to have. That addition is the market share of the ACP suppliers. that is what is at stake. We will lose everything, but the companies and other suppliers that are already doing quite well stand to gain more and make bigger profits, at the expense of our farmers. That seems to be what the WTO ruling is all about, applying the ideology of "free trade" in its purest form. regardless of the consequences and if it means making paupers of thousands of small farmers and entire nations, then so be it. The WTO is unconcerned that the benefits which have kept our many farmers in business, earning a decent living through their hard work, will now go to swell the profits of a few big companies.

Increasing Trade Liberalisation-the WTO Process

From the outset, this banana dispute has always been seen more significantly in political terms than as a genuine trade dispute. Now that the WTO has issued its final and most devastating ruling, from our perspective, the operation of the global trading system itself must be scrutinised and questioned. Above all, we want to ask, how is it possible that one government can so unashamedly use its might to manipulate such a system, that is supposed to be international in its objectives, for the selfish interest of one big company.

What of the WTO ruling itself? It this not a proper and legally sound outcome characterised by due process? Let us examine this more closely. Many observers have been concerned with the role of the US Administration, in this matter. They are confused as to why the United States, which does not export a single banana, should have chosen this particular issue, in which it has not trading or economic interests at sake, to lodge such a complaint. I understand there is to be Senate Committee investigation into the allegations which I hope will shed some light on what, to us, is still a mystery.

I have some serious concerns regarding the WTO process and its handling of this matter. These have led many to question the fairness and even-handedness of the organisation in this dispute. We had, from the outset, expressed our uneasiness with the composition of the Dispute Board. Of the three members, not one came from the developing countries, despite the fact that this was a matter concerning developing countries. Furthermore, our countries were denied full rights of participation during the actual proceedings, although we were the ones with vital economic interests at stake. The most galling injustice was the treatment of our legal representatives who were accredited members of our delegation, engaged to provide us with on-the-spot legal advice. They were improperly expelled from the meeting. In the end, as if to "rub salt in the wound" a US national was appointed Chairman of the Appellate Body, appointed to review the Panel findings, in complete disregard of the fact the principal complainant was the United States. It is not my intention to cast any aspersions on the integrity or even-handedness of the members of the Appellate Division, but I merely wish to point out that such a selection demonstrates the insensitivity on the part of the WTO and its lack of concern for any perception of fair play by those affected by the outcome.

The outcome of the Appeal was not surprising under such circumstances. If the process was designed to investigate, in a very narrow and legalistic sense, whether the regime complied with the letter of the WTO rules, this outcome could have been expected. However, the actual impact of the actions sought through the WTO is most bizarre since it would deny a large number of countries of the sole basis of their participation in international trade and which offers them the most realistic prospect for development. These benefits which have been received by a large number of participants in our countries, if the WTO Ruling is carried out to the letter, will now be concentrated in the hands of just a few companies. Ironically, the ruling serves to endorse the hegemony of the Multinational Corporations and confirmed the view that "free trade" really means free for the multinationals.

The Role played by Chiquita and the US Administration

As for that company, it is common knowledge that Chiquita International has used and abused its corporate might in Latin America to influence and manipulate political decisions and power, much as it appears to have done in the United States, but only more brutally. It is also known that this is a company that has shown little or no respect for workers' rights and has brutalised those seeking independent union representation. This is a company that pays pittance wages to the workers who toil in the banana fields, under appalling conditions to swell its coffers. This is a company with one of the worst track record in labour relations in the banana producing regions of Latin America. This is a company that terrorised small independent farmers and other companies who dared to offer them a better price for their product, than what they are paid by Chiquita under contract. Yes, this is the company who caused the US administration has chosen to champion at the expense of our poor defenseless farmers and our fragile economies.

The proponents of free trade should take note because, in the absence of free competition through the chain, from production to market, trade is neither free nor fair. In this case, if the labour market at the production stage is not free, if workers are intimidated and paid wages that are below market rates, then that is not free competition and trade in the product of such labour cannot, even in the classical economic sense, be called "free."

The Windwards need time for Adjustment and Diversification

Why, it must be asked, has there been this widespread concern regarding the ruling earlier this month by the Appellate Body of the WTO ? The ACP countries are particularly devastated by the ruling because, in effect, it conflicts with the obligations of the EU, under the Lome Convention to provide continued access to the market on the basis of a remunerative return to our farmers. Admittedly, we did not expect the existing preferential regime to remain in perpetuity, but we had expected and hoped that Regulation 404/93 would have been allowed to work, as a transitional arrangement, while we embark on our programme of restructuring and diversification. We have no idea how long it will take to complete that process, but the Regulation is scheduled for a major review in just about four years time. The farmers of Regulation 404/93 were perceptive enough to recommend a time-frame extending to 2002 and so it is not unreasonable to us to ask of those who are pressing for immediate change, particularly the US, to take that reality into consideration, notwithstanding the WTO ruling. We need the support of all our friends in convincing the US and others of our need to maintain the existing import arrangements until the year 2002.

We have not remained complacent, begging for protection, while our competitors lead ahead of us and eat our dinner. We are determined to increase the competitiveness of our industry and to diversify our agricultural sectors and our economies generally. The governments of the Windwards, with financial and technical assistance from the EU, have embarked on a major programme to restructure the banana industry, to increase productivity and improve product quality, to ensure its survival in a freer market environment. The required investments in irrigation and other farm infrastructure, are being financed, in part, through STABEX resources. We intend to intensify and accelerate the process in the months ahead. While these are going on, the rest of the economy are not being ignored. We are actively pursuing a number of diversification projects, again with the assistance our EU partners and the rest of the Donor Community, particularly for the Agricultural sector but also for the economy as a whole.

I can tell you that I am in the most unenviable position of forcing on our farmers very unpopular and painful measures aimed at getting them to adapt to the changing market environment. Our banana farmers are hurting and, quite understandably, they fear that the bitter medicine being administered to them, rather than helping, will end up destroying their very livelihood. Be that as it may, we are determined to push ahead with those measures because we know that the preferential system will not remain in place forever. However, I must repeat and I shall do so again, at every opportunity given to me, that our farmers need, and must be given, enough time to make the necessary adjustments. Otherwise, the process will be so painful that the fears of our farmers may well become a reality. If change were to be too precipitate, the resulting social and economic disruption would be unimaginable and unbearable for our small and vulnerable countries.

We are proud of our democratic traditions, our respect for the rule of law, for workers' rights and human rights generally. We will never abandon those basic rights and principles and if violating them is the only means by which we can grow cheap bananas to compete with the likes of Chiquita, and survive, then we would rather suffer and fight for what we believe is right, but we will never give up.

The EU's Response

You need not be a lawyer to understand and appreciate that correctness of a position or judgement in the strict legal sense, does not necessarily imply similar rightness from a moral standpoint. I know tat morality and commerce are two different things but when business is devoid of considerations of right and wrong, it becomes no more than unprincipled expediency. One would hope that the United Kingdom, and indeed the European Union, would be prepared in this case to take a stance on the basis of what is morally right. It is important, therefore, that the EU does not betray the trust that so many of our developing countries have placed in it, as one of the major powers still prepared to operate on the basis of integrity and principle and which places great emphasis on the need for sustainable development in poor countries. However, it needs to be imaginative in seeking an acceptable solution. First and foremost, implementation of the ruling to the last letter is not an option. This would go against the provisions of the Banana Protocol of Lomé Convention and would be a terrible betrayal of the co-operative relations which we are pursuing with Europe.

Yes, those who have been mesmerised by the philosophy of trade liberalisation at all costs; those who want to enhance their profits regardless of who suffers; those who are indifferent to our ambitions for viable and sustainable development of our countries; all of those we can expect to join in the call for the full and early implementation of the ruling, regardless.

Europe must have the courage to say to them, "no, we will not abandon the ACP, we will not walk away from our treaty obligations." The EU must resist US pressure on this matter, to do what the US wants or what the US thinks is best for the Caribbean or the ACP. It must do what, in its own judgement and by its own standards, it deems fair and just. Yes, the US might have the WTO ruling that it always wanted and certainly has economic might on its side, but it has no moral authority or standing in this case.

The purpose of the WTO is, in part, to promote higher standards and sustainable development. This ruling goes against those fundamental principles and it is, therefore, wrong and deplorable. Unfortunately, it cannot be altered now, but how and when it is implemented must be questioned and fought if necessary. If the EU were to proceed with the indecent haste demand by the US and required by the WTO rules, it would set a dangerous precedent of total disregard of the legitimate rights of the developing countries. Once again, we call on all our friends to help us safeguard those rights. We know can we rely only on the European Union to put a halt to this blatant attempt to deprive developing countries of their legitimate rights.

The Role of the United Kingdom

In this fight, Saint Lucia and the Caribbean will stand firm, but Britain's voice must be heard. She must have the courage and assertiveness to insist that Europe does not stubbornly adhere to some theoretical economic doctrine, but that instead it does what is morally right. Indeed, Britain is in an unique position, because of its special historical relationship with the US and with its influence within the EU, to determine the shape of any post-WTO arrangements. We have always looked to Britain, as our principal supporters and because of our strong historical links, to continue to play a supportive role. We will expect no less of the British Government on this occasion. Above all, to the extent that any arrangement will affect us, we want to play an active role in the formulation of any such arrangement. The WTO have unfortunately treated us a third parties, but we are not. We are partners with the EU and the injustice of the WTO must now be put right. We will not be contented to be treated as passive third parties to be consulted when all arrangements have been finalised and agreed between the EU and the US. We want to be right up on the stage, with the actors, Britain and the EU, through every scene and act, and playing our part as fully as possible. It is only in that way will we be assured that our interests are fully represented and taken into account.

I thank you.

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