§ Motion made, and Question proposed, That this House do now adjourn.—[Sir John Cope.]
§ 10 pm
§ Mr. Bowen Wells (Hertford and Stortford)A prominent and senior member of the civil service, now working for the European Commission, told a meeting in London three years ago that the problem of establishing a single European market in bananas was one of the most intellectually demanding and difficult problems that he had confronted in his professional career. Therefore, the House will understand why we must pay tribute to my right hon. Friend the Minister of Agriculture, Fisheries and Food who, when he was President of the Agriculture Council in December, over many days and nights negotiated an agreement to establish a Europewide market for bananas. His perseverance and determination have resulted in an agreement which, while not perfect—indeed, it can be improved—is one with which I believe all the partners supplying bananas to the European Community can live.
That real marathon by my right hon. Friend did not take place only in December last year; it has been a four-year programme, in which many Ministers have taken part, including my noble Friend Lady Trumpington, my hon. Friends the Members for Calder Valley (Sir D. Thompson) and for Medway (Dame P. Fenner) and, of course, my hon. Friend the Member for Skipton and Ripon (Mr. Curry), who is the current Minister of State. I would add to that list many people in the industry and outside it, as well as the West India Committee, which assisted by educating and then cajoling in an attempt to produce the agreement.
My right hon. Friend the Minister said that the agreement is important for economic, social, political and moral reasons. That is true. He recognised that it was an economic necessity to find a solution to the problem. I have to declare an interest, because I have the honour to serve as a consultant to the banana company Geest. I pay tribute to that company because it has enabled me to take a close interest in the welfare and well-being of the banana farmers in the West Indies, with whom I have been associated since I first went to the West Indies in 1961. It was then that I first saw the banana ships of Geest coming every week to collect bananas from those four small islands of Grenada, St. Vincent, St. Lucia and Dominica.
The system that Mr. John Van Geest instituted and stuck by doggedly throughout hurricanes, strikes and all sort of problems over 40 years was what he said to the banana farmers—"If you will grow bananas, I will put my ships in regularly every week to collect whatever exportable bananas you have. I will market and ship those bananas in partnership with the many hundreds and thousands of banana farmers in the islands."
One thing not often understood is that the banana industry of the West Indies is a small farmer industry. The farms are on precipitous hillsides, with inhospitable soil conditions and difficult climatic conditions such as droughts and floods. There are 47,000 farmers, and the industry involves 189,000 people. Many of the farms are under 10 acres. They are family farms which have built up a first-class industry for their country. It is a wonderful 380 success. They have turned it from a minor industry into the major industry to replace sugar, which previously dominated the Windward Islands.
The reason why sugar had to be replaced as the major product of the islands was the European Community and this country decided to subsidise beet sugar farmers by giving them supported prices. That meant that the West Indies could no longer produce sugar profitably and viably. Consciously, we said that we would reserve the British market for bananas produced in the Windward Islands. At that time, they were small producers, but the industry developed because of the intervention and doggedness of Geest and the skill of the farmers.
It is often said that Windward Island bananas are not of the same quality as those produced in central America, but the quality is of the best. We all know that Marks and Spencer, for example, would not market anything that was not top quality. Their main suppliers of bananas are the Windward Islands. Despite the inhospitable conditions, the farmers produce some of the sweetest and best bananas marketed throughout the world. It should not be said that we are being asked to consume low-quality bananas.
Let us get it into perspective also that the world market is 9 million tonnes in total. The market is divided 85 per cent. to Latin America, 2 per cent. to the Windward Islands, 5 per cent. to African, Caribbean and Pacific countries, and 8 per cent. to world production from Martinique and Guadeloupe, the Canary Islands and Madeira. All that the Windward Islands ask is that they may retain the 2 per cent. share of the world market that they currently enjoy.
Why, therefore, should the Germans complain, and the Latin Americans state that they will be deprived of 50 per cent. of their production, if 2 per cent. of the market is reserved for the Windward Islands? Can the request of the Windward Islands be described as unreasonable? It is unreasonable that the central Americans should seek to supply the whole European market, as they thought they would be able to do. That is why the area in central America planted with bananas increased by over 30 per cent. between 1988 and 1992. They increased their market share in Europe from 57 per cent. to 63 per cent.
No wonder prices dropped 30 per cent. in the past year. No wonder the United Fruit Company, a major world producer of bananas, has gone into loss to the extent of $170 million. That is not because of the European marketing arrangements but due to market over-supply.
The central American producers thought that they could take the whole European market and eastern Europe. It is their own doing, and although it will be painful to contract the area under bananas, the difficulty is due to serious over-production in Latin America, and has nothing to do with the Windward Islands or the new European regime.
The new agreement will allocate 66.5 per cent. to traditional dollar supplies, 30 per cent. to ACP and European Community supplies, and 3.5 per cent. to newcomers. On the basis of the market share previously enjoyed, that seems entirely right. The tariff will be increased to 100 ecu on imports throughout the Community other than from ACP suppliers, which will mean that German supplies must bear that tariff.
That need not necessarily result in higher prices, despite the hysteria in Germany. Although Belgium and Holland paid 100 ecu per tonne on imports over the past three or four years, prices in Belgian and Dutch supermarkets are 381 no more than those in Germany. I have refrained from saying where the extra margin went, but that is the situation.
Above the quota limit of 66.5 per cent. of the market of 2 million tonnes, 850 ecu per tonne must be paid for further imports to protect the Windward Islands and the Community's own production from predatory pricing, and the fact that production in central America, under ideal conditions, is at much less cost per tonne than can be achieved under present arrangements in the Caribbean, Madeira and the Canaries.
The Windward Islands do not entirely applaud that agreement, because they will have to accept many conditions that will lead to significant changes and restructuring within their banana industry. They will undoubtedly face increased competition, which, in spite of the protective tariff, will lead to lower prices. The whole of their present production is capped, and as the market grows, the Windward Islands will have a diminishing share of the total European market. Also, the whole arrangement will come to an end in 10 years' time.
That means that the Caribbean banana industry must change. It will have to alter its production methods, introduce extra infrastructure in the form of ports, apply much more quality control, and increase best-quality production so that it can secure higher prices and maintain income. It is most important that the industry can continue to enjoy increased assistance to meet restructuring.
I shall be grateful if my hon. Friend the Minister will answer a series of questions. I am particularly grateful to him for returning from Brussels, at great inconvenience to himself, to reply to this debate.
Can my hon. Friend reassure the House that the 17 December agreement that was confirmed at the Agriculture Council in February is compatible with our GATT commitment, that it cannot be successfully challenged at the European Court of Justice, and that the regime will start on 1 July?
Secondly, may I have an assurance that a reference price, thought by the Select Committee on Agriculture to be about 680 ecu, or £464, per tonne, will be established, and that below this figure compensatory payments will be made to ACP producers? Thirdly, I should like an assurance that a substantial aid package, in addition to Lomé aid, will be available to assist the restructuring of the banana industry and improve infrastructure, for the purpose of increasing productivity and improving quality.
Fourthly, can my hon. Friend assure me that he will continue to press for increased quota for countries that increase their productivity and quality to enable ACP countries to benefit proportionately from any increase in the size of the market? Undoubtedly the Minister will say that that is not part of the current agreement. Nonetheless, I think that it is unfair and does not encourage Caribbean producers to increase their productivity and raise their quality, as I am sure the European Communities would like. I should like my hon. Friend to continue to bring this matter to the attention of his colleagues in Europe.
Fifthly, will my hon. Friend ensure that adequate enforcement machinery is established to prevent smuggling or to keep unlicensed or unquoted bananas from entering the system? Sixthly, will he see that the 382 Administrative machinery set up to implement the single banana market in Europe has adequate means taking account of ACP interests as the programme develops?
The agreement that my right hon. and hon. Friends have been able to negotiate in Europe is an excellent one. Ministers deserve the gratitude and admiration of the House for their perseverance and their commitment to finding a solution to this intractable and difficult problem.
§ The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. David Curry)I am most grateful to my hon. Friend for his very kind words about my right hon. Friend the Minister of Agriculture, Fisheries and Food. My right hon. Friend is a man of such innate modesty and self-effacement that he would have been deeply embarrassed if such praise had been uttered to his face. However, I shall convey my hon. Friend's praise to him, and I am sure that he will overcome any embarrassment.
The negotiations were indeed extraordinarily difficult. First, the political agreement had to be put in place, and that was possible only in December, in the context of a rather complex package, as part of a whole series of measures relating to agriculture. Then the legal text had to be brought forward, and that caused an entirely separate spat and a marathon session to ensure that the political agreements that had been reached in December were followed through in January.
This was despite the fact that the Belgians and the Dutch changed their votes in the meantime, and we have to be grateful to the Danes, who had the courage to assume their chairmanship responsibilities by changing their vote in order to see the agreement home and dry, even though they had been consistently hostile to it. Thus, while I accept praise on behalf of my right hon. Friend, I have to say that it is only fair that we should acknowledge the fact that the Danes' presidency played a very noble part in achieving the agreement.
I shall try, at the beginning, to answer my hon. Friend's questions. Some of his points are dealt with in the body of my text, and I shall deal with them as I come to them.
On the ACP traditional quantities, the agreement total is 857,700 tonnes. This is based on the highest recorded exports from each individual ACP country before 1991, in line with Lomé commitments. ACP imports in 1991 were about 600,000 tonnes, so quite a margin has been built in to take account of investments in the pipeline, which will produce further fruit in coming years.
On the safeguard provision, with a reference price of 680 ecu per tonne, the Council's text does not include a specific Dunkel-type clause. This matter will have to be looked at again in the light of the settlement in the Uruguay round. The Council and its legal services are certainly of the opinion that the deal is compatible with GATT, and that therefore no waiver is required. I cannot guarantee that it will not be possible to challenge it successfully in the courts, but the opinion that we have received is certainly that it will not, the Council believing that it is proof against court challenge. I can confirm that it will start to operate on 1 July.
§ Mr. Roy Beggs (Antrim, East)Are not the areas that produce only 2 per cent. of the banana market very vulnerable to the threat posed by larger producing areas? Is the Minister satisfied that the agreement affords sufficient protection to those areas?
§ Mr. CurryI fully recognise that the Caribbean producers face much greater difficulties than the Latin American so-called dollar producers, because of the climate. The risk of hurricanes may sound comic, but it is a serious problem for small farmers in that part of the world.
We sought two aims in the negotiations. First, we wanted to ensure that the entitlements of such countries were comfortably ahead of their records of sendings, so that a margin could be built in. Secondly, we wanted to ensure that the quota enjoyed by the dollar fruit reflected the realities of the European market, rather than the frankly speculative sendings of last year, when the aim was to build up positions in the market place in anticipation of the introduction of a quota system.
I think that we have secured seafeguards, although I echo what my hon. Friend the Member for Hertford and Stortford (Mr. Wells) said about the Windward Islands. There is a programme of quality control, and Jamaica and the Windward Islands are the two principal suppliers to which it has related; considerable progress has been made, but it must be accelerated.
In our discussions, we have made it clear that the deal does not mean that from now on everything will be frightfully comfortable, thank you very much; the process of quality control must continue, in simple matters such as storage—especially cluster storage—and shipping Such action will, of course, make the bananas much more readily available and acceptable in the market place.
As for aid for ACP banana producers, the Commission has issued a separate proposal. That was not addressed by the Council in February, but the negotiations will continue. Up to 130 million ecu remain to be committed from existing funds for national indicative programmes in the Caribbean, as provided for in the Lomé convention. Financial resources are available.
The Council text makes no provision for an increase in ACP quantitities in line with production, but I think that that is because traditional quantities are ahead of sendings. For instance, St. Lucia's sendings in 1991 amounted to just under 103,000 tonnes, while the traditional quantity allocated is 127,000. St. Vincent's sendings are 63,000 tonnes, while the traditional quantity is almost 20,000 tonnes more than that. In 1991, Dominica had 55,000 tonnes of sendings, as against 71,000 tonnes of traditional quanitity. That represents the amount that can be sent under the agreement within the special provisions for ACP countries. Like other senders, they can send in quantities above their allocation, paying the higher rate of duty.
In 1991, Grenada had 8,000 tonnes of sendings, compared with a 25,000-tonne traditional sending quota. Jamaica—which, along with St. Lucia, is in the big league—had 70,000 tonnes of sendings as against 105,000 tonnes of traditional quantity. Those figures were set so that the investments in the pipeline would be thrust out, and could be realised in what was sent to the European Community.
I believe that the deal that we achieved was not merely the best on offer; it was well beyond reasonable expectations. Of course, it incurred considerable flak. The reason why it was so difficult to achieve was the existence of genuinely conflicting criteria. We have a categorical obligation to the ACP countries. The fourth Lomé convention of 1991 specifically states: 384
in respect of its banana exports to the community markets, no ACP state shall be placed, as regards access to traditional markets and its advantages on those markets, in a less favourable situation than in the past or at present".Nothing could be more categorical than that. It was spelt out in the Lomé convention. It is an obligation on the whole Community, not only the United Kingdom. In addition, there were obligations to GATT, which is why, although the Commission had originally proposed a quota formula, the United Kingdom effectively brokered a compromise based on tariffication, and tariffication is the mechanism compatible with GATT. As this was happening, there was not a squeak from the Americans, if I can put it that way. We believe that the agreement is "Gattable" because it pursues the favoured mechanism of GATT.In addition, there were obligations imposed by the single market itself. It is true that, if one does not have the ability to intervene at the frontier—as one would traditionally have had—it is more difficult to monitor and control. None of us intended to try to prevent the completion of the free market. There were various obligations which, if not in conflict, were difficult to reconcile, and they were all perfectly legitimate.
We believe that the ACP countries have had a reasonable and fair arrangement, but it must be said that built into the provisions is the ability to review the 2 million tonnes allocation. We are not telling the dollar producers, "That's it for all time". They have the opportunity to review their sendings in the light of the markets. In any case, they have the ability to send over the quota, but there is also an ability to review the basic quota itself. We have built in a sensible flexibility.
No one is in the business of trying to tell people what sort of bananas they should eat or to create a banana cartel. We want to ensure that obligations are observed in the context of a regime which looks to the consumer. At the end of the day, the key person is the consumer willing to buy bananas. Bananas are a growth market. Those of us who watched Wimbledon will have noticed how much free publicity bananas get—they are apparently the great dynamic fruit. Instead of the traditional occasional tincture being offered to the Council meeting during the agricultural and fisheries price marathons, perhaps a basket of bananas should be passed around to give Agriculture Ministers high levels of energy in the wee small hours of the night.
The agreement was achieved with some difficulty, and it would not have been reached without the United Kingdom's actions. It was fortuitous that we had the presidency and that, when we had to settle the whole complex package in December, we were able to ensure that bananas formed part of the package. Had we not had it in the package, the ability to deliver that in isolation would have been virtually impossible, given that the countries on the so-called liberal wing of the argument would have comfortably formed a blocking minority. The ability to keep a lot of balls in the air at the same time achieved a political breakthrough. In January, it was a hard slog to ensure that it was translated into the legal text and followed through.
The reason we were so insistent was that we are aware of precisely the facts mentioned by my hon. Friend. The islands are extraordinarily dependent on the banana crop. It is a vulnerable crop in any case, but it is very difficult to suggest an alternative—there is no obvious alternative. If 385 there were, we should have thought of it, because the competition is severe from the dollar producers. They have better climatic conditions and, perhaps, more competitive structures. Therefore, we had an obligation to discharge, and we were determined to do so.
The detailed rules provide for the allocation of 2 million tonnes of quota and have still to be negotiated, but a proportion of that—30 per cent.—will be allocated on the basis of the past trade in traditional ACP and European Community fruit. That is intended to give an important incentive for the continuing marketing of European Community and ACP fruit, so that it continues to find a place in the whole European market.
People have criticised the so-called partnership arrangements, but we believed that the mechanism would 386 give a little extra security to the ACP countries to see their bananas finding a market across the European Community. As my hon. Friend said, their bananas are sweeter and better suited to many people's tastes. I do not wish to engage in a consumer test, but I have always thought that bananas are greatly improved by being fried in butter and flambéed in a large quantity of rum. Rum is also a Caribbean product, and therefore naturally compatible with that extraordinary fruit.
We are proud of the negotiation. Presidencies are pretty grim affairs, but when we come to look back, the agreement will not be the least of our achievements. Although there was an EC obligation, we felt that the United Kingdom had a particular role, and we have discharged it.
§ Question put and agreed to.
§ Adjourned accordingly at half-past Ten o'clock.