HC Deb 15 December 1999 vol 341 cc69-88WH

11 am

Mr. Bowen Wells (Hertford and Stortford)

I remind the House that the Caribbean islands entered the banana trade after the second world war under a Labour Government. At that time there was little money to invest in Britain, let alone its colonies. So, in 1947, the Labour Government decided to allocate the banana trade to the eastern Caribbean nations, including Surinam and, later, Belize. Europe—and Britain especially—had begun to indulge in a highly subsidised beet sugar industry, which competed with sugar cane grown in the Caribbean islands, so the allocation of the banana trade was a compensation for the loss of the Caribbean sugar trade to the European beet sugar trade, helping the islands to diversify into bananas.

The Caribbean islands are not ideally suited to the production of bananas, as they are largely mountainous and consequently have shallow soils. There are also problems with the amount of rainfall: bananas need a great deal of rain to produce a heavy tonnage per acre. Britain and Europe knew in the 1940s that Caribbean bananas would cost a great deal more to produce. The current cost of production per tonne is about double that generally achieved on the African coast and in central and Latin America.

That problem is fundamental in relation to the World Trade Organisation-compatible regime desired by the Government. It would be delightful to solve that problem, which the European Union has recently tackled on three occasions. I made a bet with the previous Minister of Agriculture, Fisheries and Food, the hon. Member for Copeland (Dr. Cunningham), whose officials and Deputy Minister—the hon. Member for Birmingham, Perry Barr (Mr. Rooker)—proclaimed in European Standing Commitee B—that their proposals were WTO-compatible. When the WTO found that they were not, the Minister handed me £5.

It is impossible to make the regime—or, indeed, any regime—produce a WTO-compatible result in the eastern Caribbean. I contend that we must go for a WTO waiver, which can be achieved only if we conduct proper negotiations with all parties concerned and work out an agreeable solution. There is an agreeable solution on the table, with which the United States would go along. Evidence from central and Latin American countries shows that they are sympathetic to it, and the eastern Caribbean would very much like to achieve it. However, ministerial determination, enthusiasm and persistence will be required if such a solution is to be successful.

I remind the House that we are dealing with the traditional African, Caribbean and Pacific countries: the Cote d'Ivoire, Cameroon, Surinam, Somalia, Jamaica, St. Lucia, St. Vincent and the Grenadines, Dominica, Belize, Cape Verde, Grenada and Madagascar. Their total production or allocation is 857,000 tonnes. The European Union consumes 4 million tonnes of bananas per annum; in that context, 857,000 tonnes does not seem that much.

Twenty per cent. of the bananas supplied to Europe come from its own production in the French overseas departments of Martinique and Guadeloupe; the Spanish Canary islands; and Somalian supplies to Italy. Eighty per cent. is imported from other countries, 21 per cent. of those imports coming from the traditional ACP countries that I listed and 3 per cent. from other ACP countries. The remaining 76 per cent. comes from central and Latin America. That region gets the lion's share of the trade, so one might ask—as I think we should—what is it complaining about?

I am especially interested in, and know well, Jamaica, St. Lucia, St. Vincent, Dominica, Belize, Grenada and Surinam, whose total production is 477,000 tonnes, or just over half the 857,000 tonnes that ACP countries supply to the European Union. It is not too difficult to create a regime permitting free access to the European market. However, price is another matter. As I said, costs of production in eastern Caribbean countries are roughly double those in central America. We must therefore produce a tariff that protects those countries from Latin American production: that will involve a tariff and quota regime. The United States, however, is proposing a tariff-only regime. Were such a regime be entered into—especially on the basis of the European Community's current proposals—banana growing in the eastern Caribbean would soon come to an end.

The Commission proposes that the regime takes a two-stage approach: a transitional regime allowing time for adaptation in the Caribbean and other ACP countries followed by a tariff-only regime. Unfortunately, the regime proposed for the transitional period would not allow the Caribbean industry to survive. The Caribbean Banana Exporters Association has advised me that an effective transitional regime and a much longer transitional period are essential if devastating damage to the Caribbean is to be avoided.

Mrs. Cheryl Gillan (Chesham and Amersham)

I congratulate my hon. Friend on securing this Adjournment debate. I support everything that he has said; I am sure that I shall be in complete agreement with the rest of his argument. I was in St. Lucia this summer, and had the privilege of visiting Ellis Rupert Gajadhar's banana plantation. Mr. Gajadhar sent me a letter which confirms my hon. Friend's argument. He said:

"there will be serious social, economic and political dislocation in these islands if we were to lose the banana industry."

Does my hon. Friend agree with that? Will he comment specifically on the position in St. Lucia, as I know he is familiar with the island?

Mr. Wells

I am grateful to my hon. Friend, as I was about to discuss the devastation that will be caused if the banana industry goes out of production. I fear that it will do so within five years under the proposals.

St. Lucia has 126,000 inhabitants, of whom more than 50 per cent. rely on the banana industry for their income. If those people cannot grow bananas, what can they grow? There is certainly no other tropical agricultural product that can compete on the international market. The banana trade has had the advantage of preferential quota and tariff arrangements and all other tropical agricultural products are produced at much lower cost in many countries producing them. The St. Lucians would not be able to produce and distribute a sufficient quantity of such products to bear marketing and shipping costs, and cannot diversify into other crops.

Unfortunately, one crop is being grown: marijuana. It grows extremely well as it has no known pests or diseases. It is being destroyed by the US Drug Enforcement Administration in and around the volcano of St. Vincent and in remoter areas of Dominica and St. Lucia. It is a very profitable product. If people are denied any other crop to sell to the export markets, they will undoubtedly grow more marijuana and we will be pushing them into it.

Mrs. Gillan

I thank my hon. Friend for being so generous in giving way. Will he also comment on the fact that the islands lend themselves to smuggling? Unfortunately, it is likely that drugs will pass from south America through the islands and on to the American mainland. Therefore, if you remove the livelihood from the islanders, the opportunities to move into illegal activity are so much greater by virtue of the islands' geography and their location between major drug-producing areas and a major drug-consuming area. That is highly dangerous.

Mr. Deputy Speaker (Mr. Frank Cook)

Order. The Chair has no intention of removing anyone's livelihood. Remarks must be addressed through the Chair.

Mrs. Gillan

I apologise, Mr. Deputy Speaker.

Mr. Wells

My hon. Friend is right. Not only can the islands grow marijuana, but they lie on the line between Colombia, Europe and America. Many islanders are being tempted into drug trafficking. They are aiding the import and export of drugs and assisting their passage to Europe and America. Such corruption can lead not just to illegal activity, but probably to the downfall of democracy in those islands and their capacity to enforce the rule of law. We are dealing with serious problems. It could be said that it is not important, that they are tiny islands and that we can live with it, but I do not think that we can. They will become nests of serious corruption and serious human rights problems throughout the Caribbean.

Dr. Jenny Tonge (Richmond Park)

I thank the hon. Gentleman for giving way. Before he leaves the subject, does he not also think that it would be ironic if the actions of the big banana producers, working through the USA Government and the World Trade Organisation, brought a dangerous drug culture much nearer the mainland of the United States, as that is exactly what it is trying to fight at the moment?

Mr. Wells

I very much agree. The United States is misleading itself in fighting the regime so strongly and will pay a high price. Given the determination and enthusiasm of Ministers, the Government and indeed our Parliament, there is a possibility of persuading the United States that there is a reason to make a sensible agreement under WTO rules. I believe in free trade and I know that it enhances the development of the third world and developing countries, but because of its history, we must be flexible enough to make exceptions. However, one exception that we propose to make via the European Union will lead not to the continued prosperity of the banana regime, but to its closure.

For the benefit of hon. Members, let me set out exactly what is proposed. It is a two-stage process. First, the Commission proposes to maintain a tariff-quota regime for the transitional period. However, the quota would not be allocated on past performance. That is a major problem. There will be three quotas. The first is for 2.2 million tonnes and the second is for 353,000 tonnes, both at a tariff of €75. The third tariff quota would be for 850,000 tonnes. The method of allocation for the first and second tariff quotas remains open, but it is likely to be on a first-come, first-served, or boat race method. The third tariff would be allocated by strike price auction, the auction being for the level of tariff payable. It is intended to meet the needs of these countries, the ACP traditional suppliers, because it provides a tariff preference of up to €275. It is designed to produce the price necessary to keep the Caribbean banana growers in business.

The Caribbean Banana Exporters Association concludes that it is difficult to think of an allocation system more likely to drive the Caribbean out of the market. The auction system places smaller operators at an immense disadvantage. It removes the certainty of access that is essential to economic shipping arrangements and to contracting for sales of bananas. The ability to contract for at least a year in advance, both for quality, reliable shipping and banana sales lies at the heart of a successful banana business. The strike price system would deny that essential need to the Caribbean and other ACP countries.

I remember why Jamaica and Trinidad went out of bananas. Trinidad was finally driven out by sikatoka disease, but the main reason was that their ships were only half filled with bananas. Sending a half-full refrigerated ship hugely increases the shipping costs and the cost per tonne landed in Britain. It would drive any banana producer out of the market. A viable industry is not possible, unless at even higher costs than now, with such a system. Ships must be full and that requires planning.

I agree with the CBEA. The present EU proposals are likely to produce the end of the Caribbean banana industry more quickly than any I have seen so far. The system will last only until 2006. If you put yourself in the position of a banana farmer who is faced with the possibility of replanting his farm, which he must do from time to time, reorganising his drainage because drainage is essential and has to be constantly cleared if bananas are to thrive, you will not put that kind of effort—

Mr. Deputy Speaker

Order. I remind the House once more that the Chair is not going to put himself in any position at the present time.

Mr. Wells

I was not putting—

Mr. Deputy Speaker

Order. We must be careful with the forms of expression we use for the purposes of the Official Report. I am sure that the hon. Gentleman understands that.

Mr. Wells

I will certainly try to adhere to your ruling, Mr. Deputy Speaker. I was trying to put us in the position of a banana farmer. When I used "you", I

meant the banana farmer. If you were a banana farmer, you would not invest in a field of bananas if you knew that in 2006 the tariff arrangements would end and you would have to compete with a banana farmer in, shall we say, Ecuador which also has a series of small farms as opposed to the plantations where bananas are grown in Costa Rica, Honduras and Guatemala and other central American countries.

The farmer must make the decision to invest in the banana industry. If it is to go out of existence in 2006, he must find something else to do before that hits him in the face. Because these proposals create severe instability, and because banana farmers do not know how the market will develop, but that it will end in 2006, they will begin to move out of bananas straight away. If the Caribbean banana is to survive, it must become more productive. Becoming more productive means investing more in the banana fields. More roads will be needed to carry the bananas gently from the farms so that they do not become bruised or damaged. More irrigation will be needed: there must be a certainty of water supply and bananas must be given more water to counter the drought periods which occur in the Caribbean each year. That will require more money. It also means better shipping and putting the bananas in containers and so on, all of which involves capital investment. If the market is uncertain because the European Union proposals lack certainty—perhaps because the EU has not thought the position through—there will be no assurance for the banana producer to make the investment necessary to make himself productive and competitive.

Mrs. Gillan

Does my hon. Friend also agree that the EU has shown a complete lack of common sense by recently giving large grants to install and build the sheds for stacking and packing the bananas in St. Lucia? Large sums have gone into creating the right environment so that the bananas can reach their destinations in good condition. Was it not just a waste of money to have provided grants that effectively mean the death of the industry?

Mr. Wells

I could not agree more. Much effort has gone into increasing the quality of bananas from the east Caribbean, which is affected climatically by periods of drought. Bananas need special handling if they are not to become bruised and damaged and regarded as sub-quality when they reach the markets in the United Kingdom. They must compete with products from Latin American and central American countries on quality as well as price. The EU promised a great deal of aid of the type described by my hon. Friend. Supermarkets in this country—certainly Tesco, Sainsbury's, Safeway and Waitrose—have set up a scheme to adopt certain farmers to specify how they want bananas produced, wrapped and boxed and so on, to increase quality.

Banana farmers have reacted extremely well. When I went to Southampton to see some of the banana production, I found that quality has increased hugely as a result of investment in St. Lucia and other places in boxing plants, port terminals and elsewhere. More money is required. The Prime Minister of St. Lucia told me when I visited the island after the Commonwealth Parliamentary Association conference, which both of us attended, that the EU, as usual, had promised a great deal of money, but had not delivered it. He said that some of the banana farms—some of the smallest on the worst land and on the steepest slopes—must go out of production because they cannot produce the necessary quality and their prices are too high. The EU had promised investment in those villages to provide the farmers with alternative means of earning their living. None of that money, which was promised two years ago, has been delivered. It is all very well for the EU to promise huge aid in replacement of banana production but, given its current appalling record of delivering aid properly and on time, many St. Lucians and St. Vincentians, if they are foolish enough to depend on it, will find themselves poverty stricken. All that must lead to an essential discussion on the politics of the banana industry.

I should like the Minister to take special note of what I am about to say because I have checked this argument with several sources. As you know, Mr. Deputy Speaker, in the House we have to live in a world of mirrors and smoke to discover exactly what is happening in Government. The Prime Minister of St. Lucia put it most directly. He said that the British Prime Minister had abandoned the Caribbean, that he had decided that there should be no further support for the Caribbean position if that support would result in further disruption of trade between the United States and the EU, and he had given instructions accordingly. That is what the St. Lucian Prime Minister believes. I have checked that with members of delegations who have been to see Baroness Scotland, who is Dominican by origin, having been born in that country. She has the most tremendous sympathy for the Caribbean and knows a little about the banana industry and other matters. However, she also gave the impression that the Government were not prepared to do much more to support the Caribbean, especially if it would disrupt other trading arrangements which the UK considered to be more important.

The only reason we got a banana agreement in 1995 was that my right hon. Friend the Member for Suffolk, Coastal (Mr. Gummer), then Minister of Agriculture, Fisheries and Food, took up the matter with persistence and enthusiasm and a feeling that we owed those small islands a great deal and that there was a moral position for us to take to protect them from central American competition in the banana industry. Only by that action from my right hon. Friend did we win through, and win over the European nations—not all of them, because the EU is divided on the issue, but we got a majority. I believe that that is possible again.

Having had indications that the US recognises the problems that my hon. Friend the Member for Chesham and Amersham (Mrs. Gillan) and the hon. Member for Richmond Park (Dr. Tonge) pointed out, I believe that the US has an interest in the stability and democratic credibility of the islands and is prepared to consider a solution that at least will enable east Caribbean banana producers to survive. A tiny proportion of the trade in bananas is involved and most central and Latin American countries will not be greatly affected. Banana production and consumption in the UK and the EU is increasing, so the preservation of a small preferred area, however we do it, would be acceptable.

I have also had indications from people who negotiate on behalf of the Ecuadorian Government. Ecuador's banana industry is interesting in that, like the east Caribbean industry, it is based on small farmers. It does not have the great plantations that I described earlier. The Ecuadorians are very sympathetic to the islands' position. They objected to the previous regime which gave preferential arrangements to distributors of bananas, but did not directly benefit the banana farmers. But, removing that from the equation, they believe that a sensible arrangement can be reached. Therefore, in my view, if this country goes after an agreement, there is every chance of getting it. I urge the Minister to do that. What a triumph it would be.

Finally, I wish to raise the matter of the WTO waiver. The Lomé convention is under WTO waiver, which lifts in February 2000. The Lomé succesor agreement was largely agreed in Brussels last week. I read that an application has been made to renew it. Strangely enough, the banana protocol never came under that waiver. I always thought that it should have done because we would therefore have avoided many problems.

We know that the WTO has to move by consensus. This reinforces what I said about trying to get an agreement. If we cannot, we shall fail to get a WTO waiver because it will be blocked by the dissenting party or parties. That in turn reinforces what I said about the need to reach an agreement between the parties, which I believe is possible. Despite all the legal advice given to the Minister or given in Europe, no regime could establish a banana protocol to preserve the east Caribbean banana industry unless there were a WTO waiver. Even if such a regime could be established, it would almost certainly drive the Caribbean out of production.

A WTO waiver is therefore the only way forward. A WTO waiver will be required for the Lomé convention anyway. If the banana industry were included, however, we would not obtain a waiver for the newly negotiated convention. Therefore, if we are determined to achieve a good result for the east Caribbean, we must reach a consensual agreement.

I beg the Minister to pursue the matter with determination and thoroughness, for which she is well known in Europe and in this country. She must persist, pursue, harry and hassle to get an agreement. That is the only way to prevent these countries from descending into poverty and drugs-related enterprises; otherwise, they will fall into a sorry, despicable and criminalised state.

This debate is not just about bananas; it is about human beings, their employment and their welfare. We have been associated with the countries concerned for 450 years—intermarriages and deep friendships have been established—and we owe them nothing less than our persistence and our insistence.

10.32 am
Dr. Jenny Tonge (Richmond Park)

I congratulate the hon. Member for Hertford and Stortford (Mr. Wells) on bringing this issue to this Chamber. He took an interest in this matter as Chairman of the International Development Committee, of which I was a member. I was inspired by his interest to focus on this issue, which is difficult and complicated—perhaps that is why no Labour Member, with the exception of the Minister, is speaking on it this morning. That is a tragedy, as many thousands of people in this country have relatives in the Caribbean who depend on the banana industry. I appeal to Labour Members to take more interest in this issue, which is important to many constituents.

One of my earliest memories—if not the earliest—is eating my first banana. My mother came back from the greengrocer and said, "Hey, look, I've got some bananas." We had read about bananas in geography books, and seen photographs of them, but it was our first experience of this extraordinary fruit. If I may go off on a medical tack, I shall explain why it is such an excellent food.

Bananas contain a great deal of fibre, which is very good for the bowels, and lots of carbohydrate, which provides energy. They contain potassium in great measure, which is good for the heart and counteracts all the salt in our diet. They even contain an anti-depressant substance, which affects the brain and makes the eater feel good. The banana is nature's own comfort food. Furthermore, it comes in its own hygienic, pre-packed container, which is biodegradable. It is a dream of a food for doctors and environmentalists.

However, the dollar banana—the big, pale, yellow sort sold in supermarkets—is a different matter. It is a cheap banana grown in huge plantations by, in particular, Chiquita, Dole and Del Monte, which use near slave labour in Latin America. The big producers also use poisonous pesticides and herbicides, which are becoming less effective as the banana plant acquires immunity. I checked my facts with Kew Gardens in my constituency, and I was told that dollar banana plants are examples of monoculture, which will lead to the eventual extinction of the plant. Alternatively, the producers might use genetic engineering to produce a different sort of plant. Genetic modification is not a popular option at the moment.

Consumers are becoming increasingly worried about their food. They will soon learn that the dollar banana from the big plantations in central and Latin America is not decent food, and they will stop buying it. The Caribbean banana, however, is often smaller—it comes in child-size portions, which I have found useful for my children because there is less waste—and it is sweeter and tastier. It is grown on small farms in the Caribbean and Africa. Some are grown organically, and must be a healthier option and product.

Sales of the dollar banana have fallen in recent years, which might be why big companies such as Chiquita have become scared and aggressively protective of their business. I would argue that that is why Chiquita funds both political parties in the USA, and last year put pressure on the US Government to go to the World Trade Organisation and cry foul. It claims that the EU's protection of Caribbean and ACP bananas through the Lomé convention—which enables small farmers in those countries to export their crops—is not fair.

This is a timely debate, as the Caribbean banana industry currently faces a lethal threat from the European Commission's latest proposals. I did not previously believe that those proposals were intended to destroy the Caribbean industry, although the speech by the hon. Member for Hertford and Stortford has made

me rethink my view on that—perhaps they are intended to destroy it. Whatever the intention, however, that will be the effect. The Caribbean growers would no longer have guaranteed access to the market, and would have to compete at auction for import licences for every tonne of bananas that they export.

The banana trade depends on the ability to contract a year ahead in shipping and sales. That requires certainty of access. Although the Commission proposes to give a substantial tariff preference to Caribbean countries, that will not suffice to ensure access for the Caribbean. The auction system would greatly favour the dominant traders in Latin America, which will have continued access, under a different allocation system, to the 2.5 million tonnes quota, at €75 tariff. They would also be free to compete in the auction for the 850,000 tonnes quota, which is intended primarily to meet Caribbean and ACP needs. They would be able to bid very competitively against the smaller banana countries for the quotas. That is partly because the main dollar quota is likely to be allocated on a first come, first served basis, which—as the hon. Member for Hertford and Stortford said—is otherwise known as the boat race. Traders bringing full ships over from Latin America will have every incentive to bid high for licences, which will enable them to dispose of bananas that they have failed to get in on the first come, first served basis.

The Government stated that they were willing to proceed on the basis of the Commission proposal, provided that Caribbean interests were safeguarded. However, it is not clear how that proviso can be met without radical changes to the proposal. Small-scale growers in the Caribbean need to know that there will be a market for their bananas. They cannot know that under the auction system, even with the proposed tariff preference. How can that system be reconciled with the repeated assurances to the Caribbean that its interests will be safeguarded? It does not add up. As has already been explained, an alternative system would be the allocation of quota on the basis of past performance. That is the preferred option of the Caribbean countries and the Commission, but it has not been proposed because the Commission has yet to secure agreement among interested parties on the details of such a system, particularly the reference period. The Commission really must try harder.

Another disturbing element in the Commission's proposals is the commitment to switch to a tariff-only system from 2006. The Caribbean must be granted sufficient time to restructure its industry and reduce the near total dependence of some states on a single product. The hon. Member for Hertford and Stortford has already told us about that, but I should say that it will prove an extremely difficult and time-consuming task. In three of the Windward Islands, bananas account for more than half of all export earnings and one third of all employment. They are equally vital to important regions of other Caribbean states. A massive economic adjustment will be necessary, and that cannot be made in only six years. The ACP states have asked for at least 10 years, and some European Union member states—but not the UK—have supported the granting of that longer period. I urge the Government to offer their support; otherwise, there will be disruption in the Caribbean and, as has been said, people will resort to growing drugs. Does the world really want that?

Mrs. Gillan

Has the hon. Lady read the Caribbean Banana Exporters Association report, which was written by Henry Gill and Anthony Gonzales? It forecasts that the loss of the banana industry would lead to significant unemployment and considerable social unrest, particularly in the Windward Islands, where 50 per cent. of the 30,000 people who farm bananas would quickly lose their jobs.

Dr. Tonge

I have read the report, and I thank the hon. Lady for bringing it to our attention. It makes it clear why we should show much greater interest in this issue, and I am saddened that so few hon. Members have attended this morning's debate. Although it may seem like a technical debate on trade, we are in fact discussing the future of the Caribbean: its direction, stability, democracy and economy. It is vital that the islands' economies remain stable, and that they have a product to export.

Mr. Wells

With regard to the disruption of social mores, some of the islands—particularly St. Lucia, but also Grenada and, to a lesser extent, St. Vincent and Dominica—could divesify into tourism. However, if the disorder, burglary and criminal activity to which the loss of the banana industry is likely to lead actually occur, tourism will simply switch off, and the islands will lose that industry as well.

Dr. Tonge

I absolutely agree with the hon. Gentleman—it is a serious problem. I speak to various groups in my constituency and throughout the country about how to prevent international unrest, instability and civil war, which always lead to the abuse of human rights. This is an extremely important issue for Caribbean countries. We must nip in the bud the destruction of a trade that supports those islands; its loss would lead to untold damage.

Mrs. Gillan

Does the hon. Lady also agree that the Government are sending out the wrong signals about offshore financial services industries, which are a potential source of employment? It appears that the Government will not support those industries in any form, even though they could eventually offer alternative employment for some of the smaller islands.

Dr. Tonge

I was about to deal with that matter in relation to diversification. Clearly, the Caribbean islands should not depend entirely on bananas for ever and ever, amen. We must urge the Government to consider all options, and the one that the hon. Lady mentions is very important.

The Commission has threatened to apply the tariff-only option immediately if the Council fails to agree on alternatives. To paraphrase a famous tennis player, I would like to think that it cannot be serious, given the devastating impact that such a step would have. If a tariff-only system were adopted now, the Caribbean banana industry would rapidly be destroyed. That could be averted only if the European Union extended to it a deficiency payment system comparable to that currently extended to EU banana growers, but the Commission insists that that would be politically and financially unacceptable. However, the destruction of the Caribbean economies is no less unacceptable.

Another option which is often discussed is aid for diversification. That is a welcome measure, but it is not a solution in itself. Payments to Governments for diversification will not keep Caribbean banana growers in business. Such payments will not ensure access to the market while diversification takes place, nor will they feed, clothe and educate the growers' children. The Caribbean needs aid, but with trade.

I realise that the Department for International Development stood up valiantly for the ACP during last week's discussion in Brussels on the successor to the present Lomé convention. The Lomé commitments are being ruthlessly whittled away, but there remains the EU commitment to take all necessary steps to ensure the continuing viability of the banana industries. That commitment is vital, and must not be further weakened.

Finally, I invite the Minister to confirm that the Government will oppose an auction system that cannot provide the assured duty-free access that is essential to the survival of the Caribbean. The Government must argue the historical basis for quota allocation, at least in respect of the 850,000 tonne quota that is proposed to meet the needs of the ACP. They must insist on a much longer transitional period before the introduction of a tariff-only system. As the hon. Member for Hertford and Stortford said, they must consider including the Caribbean banana trade in the WTO waiver. Unless those measures are adopted, there will be dire unrest in the Caribbean and we shall lose a superior product, the Caribbean banana, and the knowledge and expertise required to grow it. The dollar banana will eventually become extinct, and we shall then be able sincerely to say, "Yes, we have no bananas!"

11.49 am
Mr. James Paice (South-East Cambridgeshire)

That should not be too difficult to follow. I congratulate my hon. Friend the Member for Hertford and Stortford (Mr. Wells) on securing this debate, and on the manner in which he conducted it. It is well known that he is the House's expert on such matters, and has many years' experience in Caribbean issues, particularly bananas. It is a pity that the Government have not initiated a debate on this issue. As the hon. Member for Richmond Park (Dr. Tonge) said, it is a shame that more people have not shown an interest. As recently as a year ago, a number of people attended a Commitee debate on Commission proposals, which suggests that there was some interest then. During that debate, my hon. Friend the Member for Hertford and Stortford challenged the former Minister about the WTO compatibility of those proposals. The then Government appeared to be convinced—albeit wrongly—that they were compatible.

My hon. Friend gave an introduction to the background of the problem, and to the sugar industry. We are approaching a reform of the sugar regime in the Community, but I do not believe that anyone connected with agricultural politics expects any opportunity for regeneration of the sugar cane industry in the Caribbean. Sugar cane is now grown in many parts of the world, using highly efficient industrialised processes. We should not be lulled into the belief that the sugar industry would provide an alternative to bananas.

I shall not waste the House's time by going through the employment issues involved, as both my hon. Friend the Member for Hertford and Stortford and the hon. Member for Richmond Park have made those points admirably. The banana industry is the major part of the economy for most of the eastern Caribbean.

I endorse the comments made about the drug risk. We cannot underestimate the potential damage to those islands in terms of their culture and the effects of criminality on their tourism industry, and also to the United States and other countries in which the drug criminals seek to market their goods. In this country, we must stop at nothing to prevent such developments. It is all very well running anti-drug campaigns here, but if we are complicit in encouraging the development of a drug industry in the Caribbean, we shall do much to undermine all that good work. As my hon. Friend the Member for Hertford and Stortford said, no real alternative agricultural products are available to the islands. The banana industry is, and must remain, at least for the foreseeable future, a major part of their economy.

I turn to the World Trade Organisation, and, in particular, the role of the United States within it. Conservative Members recognise the importance and value of the WTO, and, as my hon. Friend said, we support the principles of a move towards free trade. I am less convinced that the European Union and the United Kingdom Government understand the implications for the Caribbean of accepting, almost without debate, some of the arguments put forward by the United States through the WTO.

We need to challenge the United States over several aspects of its approach to this debate, such as its hypocrisy over its overall levels of support for agriculture, which we know are far greater than it would have us believe. There is no banana industry in the United States. The hon. Member for Richmond Park reminded us of the financial support that the major American companies involved in the banana industry give to political parties, even though there is no indigenous industry for them to worry about. As my hon. Friend the Member for Hertford and Stortford said, those companies already have 76 per cent. of the import trade into the European Union. They are not exactly hard done by.

That brings me to the Commission's proposals. I preface my comments about them by saying that I am astonished that they have been put forward in their present form. That is because of what I have read in the document entitled "The Commission reports to the Council on consultations with a view to settlement of the banana disputes", dated 10 September 1999, issued by the Directorate-General for Trade. It is a recent document, which follows the WTO panel's dismissal of the previous system, but predates the proposals that we are discussing now. It makes a couple of statements that are remarkable given the present proposals. In reference to auctioning, it states:

Auctioning continues to be questioned as to its WTO-compatibility. No operators were in favour of this system. Other conventional systems appear unlikely to provide a resolution of this issue. Given that no one was in favour of auctioning, and that there are questions about its WTO compatibility, it is remarkable that the Commission should introduce the measure as an integral part of its proposals to settle the dispute.

My hon. Friend mentioned waivers, and this same document refers to the fact that the Community regarded access under the tariff quota system as

"a volume limited tariff preference and hence covered the existing article 1 waiver. However, the WTO concluded that a tariff preference, which is limited in size, is by definition a tariff quota."

One does not need to be an Einstein to work that out. It is patently obvious, and I do not understand how the European Union could have been foolish enough to believe that that was covered. The document goes on to say:

Unless such a quota respects article XIII GATT rules in terms in particular of erga omnes access and distribution, it requires a derogation (waiver) from that article. In GATT history, a waiver based on article XIII has only been granted once. Our numerous contacts have made it clear that complainants and parties involved are either not ready to grant such a waiver or only at a very high price. I say that not directly to caution against my hon. Friend's proposition for a waiver, because he put forward a sound argument for it. However, there are obviously some doubts. Having said that, I quoted earlier the Commission's remarks about auctions, and it seems to have taken little heed of its own views on that subject. One might, therefore, have to counter the comments about waivers.

My hon. Friend has outlined the present proposals to the House, and I shall not repeat them. However, I want to mention the matter of the auction with a tariff preference of €275 for the third element of the quota, not only because of the remarks that I read out earlier on the unacceptability of auctioning to all the operators who were asked, but because of the huge disadvantage to the Carribbean operators of an auction-based system. The hon. Member for Richmond Park also referred to that.

Access to the European market is an essential part of the core business of the Caribbean banana producers. We are talking not about marginal tonnages, but about the producers' core business, yet the auctions would place the small operators at a significant disadvantage. However, the dollar banana producers, operating on a much greater international scale, could use their marginal costings basis to make higher bids and secure that extra tonnage to ensure that the boats were full. The marginal costings that they could use to supply existing markets would be better for them than seeking to open up new markets in, for example, central or eastern Europe. The Caribbean producers would, therefore, have no certainty of access and, given what I have said about the auction-based system, I am amazed that the Commission is proposing it. I look forward to the Minister's response on that subject.

A further aspect is the transitional period to the tariff-only regime. The banana industry in the Caribbean would have to carry out a huge amount of restructuring. Considerable structural change would be necessary, and it is highly unlikely that that could be achieved in the five years allowed under the proposals. The Caribbean banana producers have said clearly that they want at least a 10-year proposal.

My hon. Friend the Member for Chesham and Amersham (Mrs. Gillan), our Front-Bench spokesman, is unable to make a speech on the subject, but her interventions showed the considerable knowledge and personal experience that she gained by visiting some of the producers. The questions that she raised bear repetition and I shall add to what she said.

I hope that the Minister of State, Ministry of Agriculture, Fisheries and Food will accept the Government's major responsibility to the Caribbean producers, for moral and historical reasons—the hon. Member for Richmond Park referred to the countless citizens of this country who can trace their roots back to that part of the world—for Commonwealth reasons and also for the selfish reason that we discussed: the potential of drugs to damage our country and our culture.

I hope that the Government will tell us what they are doing to get involved in discussions. Although negotiations with the WTO have ultimately to be conducted by the Commission, we cannot get away from the fact that Britain still enjoys a special relationship with the United States, which is the major spokesman for the three big companies involved. I hope that the Government are being proactive in arguing the case with the United States for the position that we have described and are not adopting the complacent attitude that the Commission will sort it out and that it will all be WTO-compatible. As we have already seen, that is not the case.

The Government have a duty of responsibility to be proactive in trying to pursuade the United States Government that it is in their interests, as well as in ours, that the Caribbean banana industry continues to have realistic access to the European market.

Will the Government tell us their stance on the third tranche of quota TRQ3 and the length of the transition period that would follow it? Do the Government support a strike auction-based system or, if the process is to be adopted, another way of allocating that element of the quota?

What are the Government doing about the action taken early this year by the United States to impose retaliatory duties on several products, and their withholding liquidation for many others in retribution for the European Union's stance on the arrangements?

This is a serious issue; it is a great shame that more Members from both sides of the House are not present to participate in the debate. It gets to the root of our international and historical responsibilities to parts of the world with which this country has been associated for many centuries. As my hon. Friend the Member for Hertford and Stortford reminded us, its fulfilment is the Lomé arrangement, which we hope will shortly be concluded. It would be absurd if, on one hand, we paid lip service to Lomé and the need to support the ACP countries through the European Union, and at the same time allowed an arrangement under which the key industry in the eastern Caribbean would eventually disappear. The European Union could set a tariff-only system at a high level which would protect the industry, but, as has been said, it would be subject to compensation under article XXVIII of the general agreement on tariffs and trade; therefore, it would cost a lot of money. We must accept that possibility.

We do not necessarily have clear solutions to the proposition, not least because we are not in a position to do anything about it. However, I hope that, when the Minister responds to the debate, she will give us a clear assurance about the Government's position and their involvement in the matter. We want to know that the Government are not simply allowing the Commission to make all the running, because this country has a key role. It has more experience than virtually any other country in Europe in dealing with Caribbean issues and trade. I hope that that experience is being put to good use for the advantage of those islands, to which we owe a great duty. I hope that the Minister will give us the assurance that we seek.

I conclude by repeating my congratulations to my hon. Friend the Member for Hertford and Stortford on introducing the debate and on being a stalwart champion in the House of the banana industry in the eastern Caribbean. I hope that the rest of us will stand beside him in championing that cause.

12.6 pm

The Minister of State, Ministry of Agriculture, Fisheries and Food (Ms Joyce Quin)

This has been an interesting and worthwhile debate. It is the first time that I have spoken in this Chamber, although, like you, Madam Deputy Speaker, I have spoken in the European Parliament. We should be more familiar than most with semi-circular Chambers.

I congratulate the hon. Member for Hertford and Stortford (Mr. Wells) on choosing the topic for debate and on being fortunate enough to raise it in this Chamber. The hon. Gentleman showed his interest in and knowledge of the Caribbean banana industry by giving us background information on the present situation, and he brought that knowledge to bear in his ideas on how we could proceed.

Other hon. Members spoke in the debate and voiced their concerns about safeguarding the interests of Caribbean suppliers. I shall try to respond to as many of the points raised as I can. Every hon. Member who spoke expressed regret at the poor attendance by both sides of the Committee—all three of the main parties were represented by Front-Bench spokespeople or by the hon. Member who introduced the debate—yet we all know that there is a wider interest in the issue in the House, as past debates and cross-party consensus on the matter have shown. If I have any complaint about this morning's contributions it is that they under-estimated the degree of consensus among all parties in the House on the importance of the Caribbean producers' position. We have their interests very much at heart and Members from all parties have been active in pursuing those interests. I hope to say more about how the Government have been active and, to pick up the point made by the hon. Member for South-East Cambridgeshire (Mr. Paice), proactive in trying to find satisfactory ways to safeguard the interests of Caribbean banana producers.

The United Kingdom has a long-standing commitment to maintaining such a major place in our market for the Caribbean producers. We are fully apprised of the importance of the banana industry, which is a significant world industry. The hon. Member for Richmond Park (Dr. Tonge) spoke amusingly about her first taste of a banana; over the years, the banana has become the most popular fruit in the United Kingdom. Its consumption has doubled in this country in the past 10 years and there is significant consumption all over the world. Given that it is such a popular fruit, most of us feel that it is reasonable for traditional suppliers in the Caribbean to continue to supply an important share of that market.

The Caribbean producers, particularly Jamaica, Belize and the four Windward Islands—Dominica, Grenada, St. Lucia and St. Vincent—are heavily dependent on sales to the United Kingdom. They depend on preferential access arrangements, which are defined in the EU banana regime. The need for that trading preference, which has been illustrated in the comments of hon. Members this morning, is at the heart of the problem now facing us.

I come to this debate as a Minister in the Ministry of Agriculture, Fisheries and Food, but I have come across the issue in other ministerial roles, particularly in the Foreign Office where the matter was mentioned many times in the General Affairs Council. I emphasise that the Departments concerned—MAFF, the Foreign Office and the Department for International Development—have worked closely together because the issue tends to be raised in the councils of which they are members. We need to liaise closely and have done so to ensure that our concerns about the matter are properly raised at every opportunity.

The hon. Member for Hertford and Stortford referred to the recent ACP-EU discussions. I am pleased that the draft declaration that was issued at the conclusion of those discussions includes a strong commitment to the ACP banana suppliers. The opening lines of the declaration state:

The ACP and the EU recognise the overwhelming economic importance to the ACP banana suppliers of their exports to the EU market. In view of the vulnerability of the economies of these countries, the EU agrees to take all necessary measures to ensure the continued viability of their banana export industries. I pay tribute to my hon. Friend the Under-Secretary of State for International Development who was very active in proposing ideas at that meeting.

The EU banana regime is complicated. It tries to reconcile international trade rules with differing interests and concerns within the EU and among our overseas suppliers. Not only does the regime give preference to Caribbean and African suppliers, but it provides support for EU producers in the island countries that are designated part of the EU and are particularly closely associated with France and Spain. To support and protect EU and ACP suppliers, the regime limits imports from other sources in Latin America by means of a system of quotas and licences, which has created a series of problems.

The WTO ruling in April requires the EU's regime to be changed. It does not require the removal of tariff preferences for ACP bananas—that is important—nor does it preclude a quota system. Nevertheless, the EU's response could have severe political and economic implications for our historic trading partners in the Caribbean. The Government have made it clear that, in seeking a solution to the dispute, the vulnerable position of the Caribbean states must be fully taken into account.

The WTO ruling has caused difficulties for United Kingdom and other EU exporters that are affected by

WTO-authorised American sanctions. That is another reason why we need a satisfactory outcome to end the dispute once and for all. There have been some high-profile cases in which sanctions have had a dramatic effect, but some companies in the United Kingdom and other countries, which have been badly affected financially by sanctions, are also victims.

The European Commission's task is not easy. It is seeking a solution that will not be challenged by the WTO but respects the concerns of EU producers, budgetary constraints, the commitment to ACP suppliers, and ensures availability of supplies for consumers.

The Commission has made a proposal that it believes offers the best chance of resolving the dispute and meeting those concerns. As hon. Members have said, it consists of a transitional tariff-rate quota system, followed by a tariff-only regime by January 2006 at the latest. The level of the tariff and the tariff preference for the ACP would be subject to negotiation under procedures laid down by the WTO.

That is important, because the Caribbean countries will need a continuing trade preference to enable them to continue to send their bananas to our market. In turn, they need the agreement of other countries to a waiver from the normal WTO rules, as the hon. Member for Hertford and Stortford emphasised. Those other countries include rival banana producers in Latin America, which are also developing countries. The task facing the Commission is to persuade them to agree to the new waiver. That is a matter for negotiation and cannot be imposed unilaterally.

A tariff-only regime would be the simplest WTO-compatible regime, but the Caribbean industry would need time to adapt and to restructure. The Commission's proposal could provide that if it were adjusted to reflect their needs. That is the message that the Government and the Caribbean states are making clear.

Dr. Tonge

Does the Minister believe that six years is sufficient time for diversification to take place?

Ms Quin

We would have preferred a longer period. Six years is a compromise and we continue to work for a transitional period and accompanying measures to allow the necessary changes to take place.

The hon. Lady made some important points, but she also suggested differences between her perspective and that of the Government, which do not exist. There is much common ground in the approach of everyone in the House who has taken an interest in the matter.

Mr. Paice

The Minister said that the Government would have preferred a longer transitional period. Is she saying that, because the transitional period is a compromise, there is no possibility of the EU increasing that period and that it will be six years, take it or leave it?

Ms Quin

No, I am not saying that. Discussions are continuing in the EU among the Commission and member states, and the European Parliament must also give its opinion. The length of time and the support for Caribbean countries will be the subject of discussion among the European institutions. In response to the concerns that were expressed at the recent ACP-EU meeting, the Commission must take such matters into account.

Mrs. Gillan

I urge the Minister to reinforce that message with her colleagues. The men who work on the banana farms in, for example, St. Lucia—I have met many of them—face an end to their working life and to the means by which they support their family. This period is of great significance to them—they have to find the funds to re-skill themselves and an educator who can offer them the appropriate opportunities. If the industry comes to an end, they may no longer be able to support their family financially, and their family's honour and integrity may be threatened.

Ms Quin

I appreciate and sympathise with the hon. Lady's points. When we pursue arguments in the European Union, we need to stress the effects of the loss of the banana market on different countries. The ACPEU debates in the Council mean that many more issues have been aired, but it is still important to consider examples.

Several hon. Members said this morning that few alternatives are available to Caribbean producers and that it may be difficult for them to find an obvious area of diversification. There is also the threat that countries may diversify into the dangerous drug trade. The last thing that we want to do is to add to the problems that have already been caused by the drug trade in that part of the world and elsewhere—with the drugs trade, problems anywhere in the world become our problems.

I was interested in the comments on offshore financial development. We must consider all the possibilities, but we do not want to encourage countries to go down a route that will not be productive in the long term. There may be some room for manoeuvre in the financial services sector, but that would involve the well-trailed discussions in the European Union about finance havens. That issue also needs to be considered on a wider scale, in the Organisation for Economic Co-operation and Development and other organisations. We need to consider all the possibilities that are open to Caribbean countries, but we also need to be alert to the dangers of encouraging developments that might bring problems in the long term.

Almost all the interested parties have expressed a preference for a tariff-rate quota system at least for a transitional period, which offers the possibility of reaching an agreement. However, it is in the detail of the management of the quotas that views differ. Most could accept a system of licensing that is based on historical reference periods, although there are differences about which periods should be used. The WTO ruling requires agreement on the reference periods. Without that, an aggrieved party could again challenge the WTO's regime. All sides wish to avoid returning to the WTO. The Commission needs to embark on further discussions with third parties to establish whether common ground can be found, and it needs to do so with persistence and determination.

The UK Government are fully committed to helping the Caribbean countries to restructure their banana industries in a manner that ensures that those countries become less dependent on banana production and that their banana production becomes more competitive. Virtually all the aid that is available for restructuring and diversification of the banana industry comes from the EU. The UK takes an active role in shaping and monitoring EU assistance through its participation in the donor group. From next year, the main source of funding will be the new special framework of assistance. Under that framework, it is expected that each of the main banana-growing Windward Islands will receive between €6 million and €9 million per year and that Jamaica will receive about €5.3 million. We recognise the importance of providing effective aid.

Several hon. Members discussed the difficulties with EU aid schemes and the effectiveness—or lack of effectiveness—with which aid has been given. The UK Government seek to ensure that aid goes where it is most needed and that it is delivered effectively. There is much frustration with the way in which aid programmes are administered. However, if such programmes can be made effective, the amount of money that is available means that they can make a real difference.

Mr. Wells

The problem with such aid is that it goes not to banana farmers, but to the Governments of those countries, who can use it as they think fit. One does not necessarily target the banana farmer with such aid. We also need to be aware of difficulties with the European Community's aid programme, which is too slow, bureaucratic and unfocused. The Secretary of State for International Development is doing her best to correct that, but it is a serious problem in this context.

Ms Quin

I accept the hon. Gentleman's comments, and I am glad that he recognises that the Government are focusing on the matter. Such aid can be used for restructuring and diversification and for establishing social support programmes for displaced banana growers. We must ensure that the money that is in theory available is used for such purposes. We are seeking to ensure that aid programmes are as effective as possible by using our influence in the European Union and our contacts with Commission officials and the banana-growing countries.

Several hon. Members referred to the meeting of EU and ACP Ministers in Brussels on 7 and 8 December. At that meeting, my hon. Friend the Under-Secretary of State for International Development actively advanced the UK's concerns. We achieved several of our objectives for defining across-the-board trading arrangements with the ACP. Following a preparatory period to 2008, new WTO compatible trade arrangements will be introduced. They will comprise regional economic partnership agreements and a safety net for those who are unable to join them. I appreciate that this matter goes slightly wider than the terms of this morning's debate, but I am sure that the Select Committee on International Development will want to examine the agreement between EU Ministers and ACP Ministers to establish how to make progress.

We are encouraged by the fact that the European Commission is speaking to all parties in an effort to find a common way forward. We all want to end this dispute, but much depends on the detail. The Government therefore have to remain on their guard.

The hon. Member for Hertford and Stortford urged me to persist, harry and hassle, and to use every method—

Madam Deputy Speaker (Mrs. Gwyneth Dunwoody)

Order. We must now move on to the next debate.