§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Kirkhope.]
10.20 pm§ Mr. John Marshall (Hendon, South)The European Community's banana regime is treated by some people as an issue of little moment or of much amusement, but it is vital for banana producers in the West Indies, the Canaries, the former French colonies, Somalia and also in Latin America. It is also important that any regime adopted by the Community guarantees fair competition between existing banana distributors and new entrants to the industry, and that it should take full account of consumers' interests.
I have been heartened by the interest shown outside the House—if not within it—since the debate was announced. I am glad that the interests of a liberal economist are shared by independent distributors, who are anxious to shake up the industry, and by retailers. A major food retailer wrote to me saying:
Tesco would like to work with our traditional suppliers applying its knowledge of improving production, packaging and the distribution process to the banana industry.At the beginning of a debate, it is normal to declare an interest, and mine is that any regime adopted by the Community should benefit the consumer and encourage competition, which is the best guarantee of economic progress, but the European banana market is more akin to the Schleswig-Holstein question, of which it was said that one man who understood it had died, one had gone mad and the other had forgotten it.The industry has an anomalous position, in that there are three different markets within the European Community. There are those designed for former colonies, such as the French market, the Spanish market, 'which imports from the Canary Islands, the United Kingdom, which imports from the West Indies, and Italy, which imports from Somalia. The Benelux market imports dollar bananas, imposing a 20 per cent. tariff. Germany is a banana addict's dream because it has no import restrictions and no tariffs, and the price of bananas is about two thirds of what it is in the United Kingdom; not surprisingly, consumption of bananas is much greater in Germany.
We recognise that bananas come from poor countries. The African, Caribbean and Pacific producers confirm that bananas are produced by people whose wage rates are low. Wherever we buy our bananas from, we are helping a third world producer. But the present British banana regime suffers from certain defects. British consumers are paying a third more than the Germans for bananas and per capita consumption is accordingly much less.
The second major fault with the British system is that three main authorised importers account for 90 per cent. of the importation of bananas. In any other industry, Fyffes, Geest and the Jamaica Banana Board would be referred to the Monopolies and Mergers Commission. Instead, import licences are allocated in secret in the United Kingdom. Because the licences are known to have a financial value, one importer will sell them on to another.
An institutionalised cartel is just as evil as any other cartel. It results in much higher prices and, while the objective of the cartel is to help producers in the Windward Islands and Jamaica, working papers produced by the 844 World Bank suggest that, for every dollar of aid given to ACP suppliers of bananas, the British consumer pays $5.30, and for every dollar that goes to the producers of bananas, the importer gets an extra $3. So the fat cats of the banana industry do three times as well out of protection in the United Kingdom as do the peasant farmers of the West Indies whom the regime is designed to help.
§ Mr. Bernie Grant (Tottenham)Hear, hear.
§ Mr. MarshallI welcome the hon. Gentleman's support.
The monopoly profits earned by the distributors of bananas distort competition elsewhere in the fresh produce market. Those who enjoy the cushion of high banana profits are able to compete unfairly with those who do not. A tragedy of the situation that has existed since the mid-1940s is that inadequate attempts have been made by the importers of bananas to advise the farmers in the Windward Islands how to improve their productivity.
Productivity in the West Indies industry is half that of the Latin American industry. Protection breeds complacency and excessive profits, and many leading retailers would welcome the opportunity to import directly from the West Indies. The European Commission has produced a policy which is due to come into effect on 1 January 1993, but it has had to take account of conflicting trends and one wonders whether it has succeeded in that task.
The first question to ask about any policy is what impact it has on the consumer. A restriction on the import of dollar bananas would clearly harm the producer. Whereas, in 1992, about 2.6 million tonnes of dollar bananas were imported into the European Community, the Commission is proposing in 1993 a substantial reduction, to a base figure of about 2 million tonnes.
The second question must be whether the proposals will help the third world. Will the higher prices flow through to the producers in the West Indies or stick to the hands of the monopoly distributors? Currently, the higher prices in the United Kingdom have tended to benefit the distributors rather than the producers. The proposals, by severely restricting the right to import bananas, make it highly likely that a similar situation will prevail in the future.
The third question is whether the proposals will lead to the efficient production of bananas. A serious of policies designed to restrict imports from Latin America, where production costs are about half those in the West Indies, can scarcely result in increased efficiency. A regime that will not allow retailers in the United Kingdom, such as Sainsbury, Marks and Spencer and Tesco, to import directly from the West Indies and develop relationships with suppliers is not designed to increase efficiency. The United Kingdom food industry has been characterised by retailers developing links with suppliers and improving efficiency for the benefit of everyone.
It is not possible under the EC proposals, which give monopoly profits to favoured importers, who failed to encourage growers to improve quality in the past, to lock forward to an improvement in quality in the future. We must ask whether the proposals will do anything to help diversification among our suppliers, and clearly they will not.
It is not surprising that the proposals have led to widespread opposition within the Council of Ministers. I 845 think it fair to say that, within the Council, there is now a blocking minority led by Germany, and we have to recognise that the proposals would result in a substantial increase in prices in Germany. Outside the Council, the proposals have caused a great deal of unfavourable comment. The independent fruit importers recognise that the proposed regime would cause grossly unfair competition between them and the established importers. Those who are concerned about low-wage economies such as that of Dominica recognise that the problem of low wages in those countries will be aggravated by restrictions imposed on their exports to the European Community. Similarly, retailers are not happy with the proposals; nor are those who are concerned with the prosperity of the West Indies.
Many believe that West Indies producers would do better if they replaced the monopoly importers into the Community with a system of export boards. It is significant that growers of fruit in Israel, New Zealand and South Africa have all prospered by setting up their own system of export boards, and it might well be that the growers in the West Indies should do the same.
Many are concerned that most of the proposed assistance to the West Indies will be siphoned off in monopoly profits for a hand-picked group of favoured distributors. Latin American producers are concerned that the plan could cost them £500 million.
The proposals of the Commission are against the rules of the general agreement on tariffs and trade, and I am told that a number of exporters are unwilling to grant a GATT waiver. Perhaps the Minister would like to comment upon that.
We must ask the Minister, finally, whether it is right that the Commission should have proposed a 10-year transitional period to a free market. Obviously, a period of transition is right, but a period of transition that lasts for 10 years seems to me to be unconscionably long.
There is clearly pressure on the Council to reach a decision by the end of December, but it is much more important to reach a correct decision than to reach an early decision, because the policy will last a very long time. That is why I should like the Council to re-examine the possibility of tariffication—replacing the quota proposals with an external tariff. I believe that that would be acceptable to a number of countries that currently object to the Commission's proposals. I also believe that it would be acceptable to the independent importers, who are terribly anxious to increase their stake in the United Kingdom and other Community markets.
§ The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. David Curry)My hon. Friend the Member for Hendon, South (Mr. Marshall) began by saying that this was somewhat similar to the Schleswig-Holstein question: one man was dead, one was mad and the other had forgotten it. The one who had forgotten it was Palmerston, of course. I have to say that the options that were available to Palmerston are not available to Her Majesty's Government in present circumstances. Nor, I must say, is there any danger of anyone forgetting this issue. Indeed, there has been an intensity of lobbying on the banana issue which makes a trifling issue such as the 846 green rate for monetary compensatory amounts an absolute doddle compared with trying to sort out the future of the banana regime in the Community.
I must also point out to my hon. Friend that there is to be a detailed scrutiny debate on this matter shortly in Committee; therefore, there will obviously be the opportunity to discuss the matter in greater detail than, necessarily, is possible in an Adjournment debate.
As I am sure the House will recognise, we have here an extraordinarily difficult problem. We have a series of criteria, each of which is perfectly valid in its own right. We have the obligations under the Lomé convention, and nobody wishes to renege on those. We have the obligations that the existing GATT and the future GATT will impose as to the manner in which people are treated in the marketplace. That is another equally valid criterion. The introduction of the single market has implications for all the traditional arrangements and for the managed markets that have prevailed in many Community countries until now. Nobody pretends that those matters are not difficult to reconcile.
No one is bringing ill will to the debate, and my hon. Friend did not suggest that. Each country has different priorities and interests that best serve its national marketplace, and we must simply find a way through the problem.
It may help the House if I outline the elements of the Commission's proposal. The Commission has had as difficult a job as anyone else. Ultimately, it had to put its money on a particular horse, and it put it on the horse of trying to find a quantitive way of safeguarding the obligations under the Lomé convention.
The first element of the proposal is that there should be a quota on third-country imports, which are essentially dollar bananas. It also introduces the concept of non-traditional ACP imports. The GATT-bound element of that quota would be 2 million tonnes, and an additional unspecified amount would be settled annually or at shorter intervals, which would make up for the margin in the marketplace. Thus, the total size of the quota is not known. To take 1991 as an example, one would expect the dollar banana quota to be in the order of 2.3 million to 2.4 million tonnes.
Secondly, the proposal introduces a partnership concept in which 70 per cent. of the total quota would go to traders on the basis of their past trade in dollar fruit, but the remaining 30 per cent. would be allocated to companies on condition that they also imported ACP fruit. So a company could have dollar, ACP and additional dollar fruit within the 30 per cent. bracket. Three categories of bananas could thus be imported by the same company.
It is not yet clear how the licence system would work. Would it be for primary importers into the Community or for secondary importers—people who buy a surplus of bananas in the Community? The entrepot markets for bananas in Antwerp and Hamburg operate a bit like the stock market for oil and other commodities.
Because of the United Kingdom's links with its traditional suppliers, the volume of dollar fruit appearing on the market is relatively small, although it is certainly present in the marketplace, as we tend to import from supplies that have been delivered into the Community market.
The next element of the proposal concerns what happens to the ACP bananas. The proposal limits them to 847 traditional quantities at 1990 volumes and, beyond that, they must take pot luck in the dollar quota. There is pressure from the Commission to revise those ceilings, because Jamaica, for example, is recovering from a hurricane, so her ability to supply the marketplace has been affected. Moreover, significant investments in fruit made by countries such as Belize and Surinam have not yet borne fruit in production, so they do not want to find that that investment is rendered nugatory because it is not included in the Community proposal.
There is a proposal for income support and structural assistance for the Community and ACP producers, and for aid for Community producer organisations. A limited number of licences will be issued to newcomers—3.5 per cent. of the total quota—and quality standards are envisaged. That is the shape of the proposal on the table.
The present position is much as my hon. Friend the Member for Hendon, South described. Some countries have traditionally managed their markets in favour of particular suppliers. For instance, France has domestic producers in its overseas territories and some traditional producers in Cameroon and the Ivory Coast; Spain has a Canary Islands production; Portugal has a production in Madeira; and Greece has producers in Crete. Italy used to supply itself significantly from Somalia, but, because of what has happened in that unfortunate country. it now buys far more dollar fruit, so its position has slightly changed. The United Kingdom has her traditional suppliers.
The Community proposals are fiercely and passionately opposed by Germany, the Benelux countries and Denmark. Some countries that rarely mention the word "consumer" in the majority of their debates on agricultural matters have become sensitive to consumer needs when the issue of bananas is raised. While we may not necessarily agree with those countries about bananas, we hope that their approach sets an example that they will follow in their discussions of future problems relating to the common agricultural policy.
As my hon. Friend said, the Germans import bananas quota-free and tariff-free, and do not like the idea of quotas or partnership—both of which would mean much more restricted access than they presently enjoy.
The United Kingdom has long-standing commitments to provide preferential access for bananas from our traditional suppliers in the Commonwealth Caribbean-Jamaica and the Windward Islands. That goes back to 1932, when imperial preference was given on imports of bananas from Jamaica. My Department works closely with those producers in a programme to improve the quality of those bananas. A few months ago, I met the organisations from Jamaica, and one of the topics that we discussed was the extent to which Jamaica—which is making good progress—was meeting the quality norms. The Windward Islands are also making efforts, although they are a little behind Jamaica in their ability to upgrade the quality of some of their fruit.
That commitment is now embodied in protocol 5 of the fourth Community ACP convention—the Lomé convention—which states:
In respect of its banana exports to the Community markets, no ACP state shall be placed, as regards access to its traditional markets and its advantages on those markets, in a less favourable situation than in the past or at present.That represents an obligation in international law on all EC member states.848 The commitment recognises the importance of the banana industry to the Commonwealth Caribbean. Bananas account for more than 50 per cent. of export earnings in the Windwards, and the industry employs about 40 per cent. of the work force. Bananas are therefore vital to the economic, social and thus political stability of the islands.
Caribbean producers suffer several disadvantages compared to Latin American or dollar competitors. One must be careful not to lump all those producers together, as Honduras has a production that is very much in the hands of smallholders and is not the same scale of enterprise as is found in some of the other dollar producers. Caribbean producers suffer disadvantages in terms of terrain, soil type, climate, farm size, wage levels and economies of scale. They are unlikely to be able to compete on equal terms with the dollar producers, given their natural handicaps. Diversification options for Caribbean producers are limited. No product has yet been identified that would offer the same benefits as the banana industry.
The national market arrangements must he replaced by harmonised Communitywide arrangements in order to complete the single market. The mechanisms that have permitted the markets to be divided up simply will not exist once the single market comes into existence. We are condemned to find some agreement.
We have recognised the difficulty of the task, and must reconcile the objectives that I have listed. Those objectives include the obligation to the Community and ACP producers, under the treaty of Rome and the Lomé convention respectively—they are both international treaties; commitments in the GATT—nobody could not, at present, be conscious of their importance. Clearly, if the Community were to adopt the sort of formula I outlined in the proposal, that would require a waiver. We must observe the need for competition, efficiency and the aims of the single market. We have in mind the interests of consumers, as we do throughout debates on agricultural issues. We are also aware of the need to ensure that the Community uses its money sensibly. The United Kingdom has always been somewhat suspicious about the notion of substituting financial aid for trade opportunity. We do not feel that that is necessarily the right way to help developing countries. It is better to give them more access than to buy them off in a sort of banana decommissioning scheme Striking a balance between them will be difficult.
The Commission and the presidency, as we would expect, have to reflect on how to take the matter forward. We are gridlocked, as it were, on the negotiations. There is a powerful body of states that believe passionately in one formula and another powerful body of states that believe just as passionately in the opposite formula. It is an occasion when it is difficult, by doing a little tweaking or finessing, to bring one group into line with the other. We have to find a way forward. It will be for the Commission to propose that way, although the presidency will lend all the assistance it can, as we are duty bound to do.
The United Kingdom has to honour its commitment. We are not hooked on one mechanism or another. The mechanism is a subsidiary aspect. The primary aspect is to fulfil commitments that we have entered into voluntarily because of historical ties and the nature of the supplies we receive. The United Kingdom cannot and would not wish 849 to walk away from that. We have to find a way through difficult circumstances. We will examine any mechanism which delivers that.
We have said to the member states that object to the proposal, "What is your alternative? We assume that you are not saying that the commitment does not apply. Therefore, how do you square the circle? How do you meet that commitment and at the same time deal with the problems in the present proposal?" There was a working party under the Council yesterday which was examining the problem again and placing the challenge before member states.
Many people have come to my office and to the office of my right hon. Friend to discuss the matter. We welcome all representations.
§ Mr. Bernie GrantIs not the problem the fact that, if the matter is not resolved in a way that works in the interests of the dollar producers, from 1 January Sainsbury and Tesco could send a truck to Frankfurt to pick up dollar bananas and bring them back?
§ Mr. CurryThe hon. Gentleman will be reassured to know that our reflections on the way forward cover any 850 lacuna that might emerge at the end of the year as we move into 1993. Therefore, we and the Commission wish to make appropriate proposals that would address that eventuality. I am sure that the hon. Gentleman will excuse me if I am not too precise, because the whole negotiation is difficult, but we are anxious to find a solution.
We welcome all representations on the matter. We are acutely conscious of the representations and the lobby from the dollar fruit producers as well as from those with a place in the British market already. We have not had a selective doorway. We will seek a way through.
My hon. Friend has an interest and I gladly undertake to keep him informed of progress and, of course, to report to the House. The next opportunity for that will be in the scrutiny debate which, I think, will be in a couple of weeks. I hope that, by that time, things will have moved forward a little. The problem commands great urgency because of the deadline referred to by the hon. Member for Tottenham (Mr. Grant). We cannot stop clocks indefinitely, and we have to get a solution. As I said, we are condemned to agree and, for once, we hope to be able to come out of the condemnation rejoicing.
§ Question put and agreed to.
§ Adjourned accordingly at twelve minutes to Eleven o'clock.