Bananas, Justice and Free Trade
by David Morris
Institute for Local Self-Reliance
May 6, 1999 – published in St. Paul Pioneer Press
Three planetary corporations–Del Monte, Chiquita and Dole–control 60 percent of the world market for bananas. Seven tiny island nations in the East Caribbean control less than 3 percent. The big boys insist the islanders don’t deserve even that much. Washington agrees.
Here’s the situation. In the early 1990s, the European Union(EU) reserved a small portion of its internal market for bananas grown in former colonies in Africa and the Caribbean. The U.S., on behalf of the large banana marketing companies, complained to the World Trade Organization(WTO) that the EU’s action violated the newly revised General Agreement on Tariffs and Trade(GATT).
In March the WTO agreed. In April the U.S. threatened to impose a 100 percent duty on a range of luxury items from Europe if the EU did not abandon its preference policy. At the end of April Europe backed down. U.S. trade negotiators are exulting in our glorious “victory”.
But who won, and who lost? You be the judge.
There’s no question that European consumers will pay a a few cents less for bananas when the Caribbean quota ends. The smaller and more succulent Caribbean bananas cost more than those raised in Central America. Part of that higher cost is a result of natural factors—hill terrain, the limited size of the islands, relatively poor soil quality, and climatic hazards like hurricanes and floods.
But most of the cost difference is a result of social factors—the different cultures of banana growing in the Caribbean and Central America. As my colleague at the Institute for Local Self-Reliance, Daniel Kraker, observes, the Caribbean banana industry is characterized by many small, independent farms and high wage workers. The Central American banana industry is characterized by low wage workers and a few huge plantations owned by or contracted to foreign corporations.
The average banana farm in the Windward Islands, for example, is less than four acres while Central American plantations range from 2,500 to more than 12,000 acres.
The Windward Islands host 24,000 independent farmers. Central American plantations, on the other hand, are either owned directly by their parent multinational or contracted to them. Chiquita employs about 38,000 workers in its Central American plantations. Small farms and widespread ownership has resulted in a remarkable equalizing effect on income levels of households in the Windward Islands. The inequality of income in Central American countries is stark.
Caribbean banana workers earn a living wage. Their counterparts on Central American plantations earn one half to one sixth as much.
To my way of thinking, the EU’s banana policy is a perfect example of “trade not aid”. Rather than offering handouts, Europe encourages hard-working, well-paying, independent enterprises.
The elimination of the EU policy could devastate the eastern Caribbean. In the Windward Islands some 70,000 persons are employed by the banana industry–roughly one-third of the entire labor force. In Dominica, the smallest banana producer in the Windwards, bananas account for 60-80 percent of foreign exchange.
“We are told that the world has changed, that because of the WTO there must be a free market in bananas,” says Windward Islands banana farmer Winston Graham. “But the market should not be so free that it can destroy people’s lives.”
Some U.S. trade negotiators argue that the end of the European quota will have a positive influence by forcing Caribbean nations to diversify their economies. Maybe. But bananas constitute an excellent crop for these islands. Their hilly terrain makes it difficult to grow other crops. Bananas are resilient in the face of the numerous hurricanes that afflict this part of the world. And unlike other fruits, bananas are produced year round.
As for diversification, some island governments point out that the principal alternative to growing bananas may well be exporting marijuana.
Earlier this year, when it became clear the banana quota would be rejected by the WTO, many Europeans argued for a new policy that would allow the import of all bananas so long as they are grown in an environmentally benign manner and nurture the dignity of the farmer and the worker. But that policy too would violate GATT. In the brave new world of free trade, social and environmental impacts cannot influence public policy.
As a result of the U.S. triumph, Europe is designing an aid package to replace its trade program. In the future it will offer the Caribbean nations a handout, not a hand up. Their independent farmers could disappear. Meanwhile, in the wake of Hurricane Mitch, the giant banana corporations are forcing their Central American workers to accept even worse benefits and working conditions. All in all, it seems like a very hollow “victory”.