HL Deb 02 November 1999 vol 606 cc716-9

2.58 p.m.

Viscount Waverley

asked Her Majesty's Government:

Whether the United States' legal challenge to the European Union's preferential tariff regime for African, Caribbean and Pacific (ACP) banana producers (Lomé Convention) is compatible with United States subsidies to their agricultural exporters.

Lord Carter

My Lords, the United States' claim that the European Union banana import regime is incompatible with world trade rules has been upheld by the World Trade Organisation. We closely follow US protection and support to its agricultural industry. If we consider any of this to be incompatible with WTO rules we press for action to be taken accordingly.

Viscount Waverley

My Lords, I am assured in greater part. Will not the effects of these self-serving policies be continuing aid as a result of stifling trade so that farmers who rely on exports will turn to drug distribution, not least in the United States and United Kingdom markets?

Lord Carter

My Lords, as to the conflict between aid and trade it should be remembered that the US is not the only complainant. Ecuador also challenged the EU regime and won. Other Latin American countries which are involved are also developing countries. The WTO rules are designed to promote international trade and encourage efficient production, which is to everyone's long-term benefit. However, we need to find ways to allow vulnerable countries to adjust and develop their economies. This is recognised by WTO members who have agreed a waiver to allow a preference for ACP countries.

On diversification and the risk of drugs, it is worth pointing out that the main source of the present EU funding is called Stabex. From 2000 onwards the main source of funding of the islands and the remainder of the Caribbean will be the recently agreed special framework of assistance (SFA). It is expected that under the SFA each of the main banana growing Windward Islands will receive between £4 million to £6 million a year; and Jamaica will receive nearly £3 million a year.

Baroness Young

My Lords, I welcome the noble Lord, Lord Carter, speaking on this serious and important subject. Will the Minister indicate the Government's policy towards these Caribbean islands which are completely dependent upon exports of bananas? As the noble Viscount, Lord Waverley, said, if they lose those exports, they will be likely to turn to drugs, to everyone's disadvantage. What positive plans have the Government to help those countries out of their dilemma, assuming that the agreements reached in the WTO hold?

Lord Carter

My Lords, the European Commission is producing proposals this month—we understand within the next few days. Those proposals will have to take account of the WTO rules and the vulnerability of the Caribbean producers.

The UK Government wish to see a solution which does not risk further challenges to the WTO and which addresses the needs of the most vulnerable banana producers. Such a solution would need the agreement of all parties. We support the Commission in searching for a quota-based solution and a speedy end to the dispute. But even if the Commission produces proposals, it is then a matter for the interested parties in the European Union and other interested parties around the world to agree. The issue is extremely complex.

Lord Razzall

My Lords, in examining the proposals which will come forward from the European Union, does the Minister accept that two clear principles should be followed by Her Majesty's Government? The first is that the European Union is still committed to the principles of its Lomé commitment to those countries. The second is that the only long-term solution for those countries would be for the European Union to adopt a reference price deficiency payment system comparable with that currently obtained by European Union growers.

Lord Carter

My Lords, I have already said that it is for the Commission to produce proposals. We have made our position clear. It is clear that if there were a tariff system the tariff would have to be set at a level to support the Caribbean producers which would be too high to be accepted by other parties. The only other hope is a quota-based solution, which will have to be negotiated with the other European Union countries and America and the Latin American countries.

Lord Jopling

My Lords, while there will be broad agreement that banana growing in the Caribbean countries should not be allowed to be massively reduced, is the Minister aware that in the past the quality of bananas grown in the Caribbean has been poor (to put it politely); and that everything must be done to encourage and coerce the banana growers in the Caribbean for their own good to improve dramatically the quality of their product?

Lord Carter

My Lords, the noble Lord is correct. The UK Government are fully committed to the restructuring of the Caribbean banana industry so that it is more competitive and to reducing dependence on banana production. As I pointed out, under the new scheme the total that the main banana growing Windward Islands and Jamaica will receive in 2000 will be in the order of £9 million a year.

Lord Faulkner of Worcester

My Lords, does the Minister agree that whatever compromise may come out of the European Union's discussions with the WTO, it is vital that the traditional access for Commonwealth ACP producers is maintained? Does the noble Lord accept that that will not be possible by a system of auctioning licences? Does he also accept that transitional arrangements have to cover a sufficient period to enable the countries concerned, in particular in the Commonwealth Caribbean, to adapt their economies and their industry? Otherwise they will face a social collapse of the kind to which noble Lords have referred.

Lord Carter

My Lords, the problem to which the noble Lord refers is recognised. Other members of the WTO have already agreed a waiver allowing a preference for ACP countries. I repeat: it is extremely complex to balance the arguments between the interests of the banana producers and the WTO rules which are designed for international trade.

Baroness Trumpington

My Lords, is the Minister aware that I wish to disagree in the nicest possible way with my noble friend Lord Jopling? The quality of produce from the ACP countries is as good as any bananas produced in the world.

Furthermore, in the Minister's original Answer he cited countries which are far bigger than the Caribbean islands and therefore have the chance to produce alternative crops. Countries such as Dominica simply cannot grow anything else except drugs.

Lord Carter

My Lords, I can only repeat what I have already said. We recognise the problem. There will have to be some attempt to help these countries to diversify. The aid for the main banana-growing Windward Islands and Jamaica for the year 2000 is £9 million a year.