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Commodities & Futures: Belize's bananas face EC test

BELIZE, formerly known as British Honduras, started growing bananas in the early 1980s on advice from Europe and the World Bank to diversify its agricultural sector from citrus and sugar.

Today, it produces about 1.7 million 40lb boxes of bananas a year, and has made recent investments to produce and export 5 million boxes a year by 1996. Of its 200,000 population, about 2,500 work directly in the banana industry. Bananas provide a fifth of the country's export earnings.

Belize's banana industry is protected under the Lome treaty because it cannot compete effectively with bigger producers in Latin America. Like Jamaica, Surinam and the Windward Islands, Belize sells bananas to the UK.

Under a controversial European Commission proposal for a single market in bananas to start in January, the preferential supplier status of Belize and protected exporters would be maintained in a quota-based system.

The proposal upholds the Lome promises to African, Caribbean and Pacific producers, but goes against the General Agreement on Tariffs and Trade's aim of open markets and keeps EC prices artificially high. It has been criticised for potentially driving up margins for European marketing companies, for its expense, and for creating more distortions in the banana trade and a Brussels bureaucracy to run it.

Currently Germany imports bananas duty-free; Denmark and the Benelux countries impose a 20 per cent duty on non-preferred bananas; and quota schemes operate in other EC countries.

Under the EC proposal, Belize's banana exports would be protected from competition from multinationals like Chiquita, which sells cheaper fruit.

The government of Belize is not totally satisfied with the EC proposal, which would cap its imports based on 1990 output. But it thinks the proposal is the best it can do, and like other African, Caribbean and Pacific producers is lobbying European governments to vote for the scheme in Brussels.

George Price, the Prime Minister of Belize, said in London last week that he was asking non-committed European governments to support the Lome convention. The Belize government fears the alternative - tariffs - which are advocated by Gatt and supported by Germany, Denmark and the Benelux trio.

Ralph Fonseca, the finance minister, said tariffs are another subsidy, which may not be ploughed back into bananas and will not protect Belize from competition.

'If we small producers are competing against a giant, the giant will use its liquidity to hold down prices long enough to kill off our industry,' he said. Lome was set up to ensure that rich developed countries would not walk over small developing nations, he said.

He has a point. But so do banana workers in Honduras, one of Latin America's poorest nations. Banana prices are collapsing, adding to the 50 per cent jobless rate.

The Hondurans call bananas 'green gold.' President Rafael Callejas took office in 1990 declaring he would double output to meet rising demand in traditional markets, the US and Germany, and possibly Eastern Europe.

President Callejas says that the European proposal would be very hard on his economy. Honduras produces 55 million boxes a year. Bananas support hundreds of thousands of Honduran workers and bring export earnings to the debt-shackled government.

Honduran growing conditions are much better than in Belize - the soil is right, plantations are huge, labour is cheap. Its bananas are big and cheap, but are shut out of many European countries.

To Hondurans, the EC proposal sounds like unfair trade. Latin American sales to Europe would be limited to about 2.5 million tonnes a year and face a 20 per cent duty, while Caribbean bananas would get in free.

Latin American leaders have appealed to European governments, saying the scheme will cost them up to pounds 292m in export earnings and contravenes Gatt. They have asked Gatt to intervene on their behalf. Washington agrees, calling for tariffs instead.

The proposal is unlikely to pass without amendments, because Germany, Denmark and Benelux will vote against it, creating a blocking minority. Transitional arrangements will then be needed as border posts will be dismantled for the single market by the year-end.

The issue looks as up in the air as ever. A House of Commons select committee hears evidence on bananas early in November.