Commodities & Futures: Banana drama draws to a close

THE bananadrama has reached its final act. Last week, European Community farm ministers finally agreed an EC-wide banana regime for the single market in 1993.

The compromise entails a fixed quota of Latin American bananas of 2 million metric tons, subject to a lower tariff than the EC now demands, and a heavy 170 per cent tariff on Latin American bananas imported in excess of the quota.

The decision, though opposed in principal by Germany, Denmark, the Netherlands and Belgium, was accepted because it was deftly embedded in a large and complex package of other agricultural measures. Only Germany, Portugal and Luxembourg voted against it. The scheme was supposed to satisfy conflicting criteria: the Uruguay round's free trade principles and the Lome convention, which protects EC territory banana producers' current export arrangements. In a feat of technical wizardry, it has done both. But it has not satisfied all parties involved.

The deal will please the big UK banana importers, particularly Geest, because it allows them to maintain their market penetration in Europe. Through complex licensing arrangements, it could give some of them an even greater market share of Latin American, African, Caribbean and Pacific bananas than before.

But Latin American producers and big US multinationals are unhappy with the result. A punitive 170 per cent tariff on imports above 2 million tons means that they could lose a lot of market share and money.

Latin American banana producing countries and the companies that export them estimate current shipments at 2.6 million tons, so they believe the quota itself is restrictive.

Another aspect of the deal, which gives licences for one-third of the Latin American imports to traditional importers of Lome and European bananas, looks suspiciously like a trade restriction.

But the proposal has been cannily constructed to fit the specific requirements of the General Agreement on Tariffs and Trade: by linking tariffs and quotas, the EC has not restricted market access to bananas.

Nick Saphir, president of the Fruit Exporters Association and the third largest fruit and vegetable distributor in the UK, said his firm was not affected because it did not handle bananas, having been excluded from the trade by UK banana policy over the past 25 years.

'When it is ratified, the decision will be excellent for the existing big UK banana importers,' he said. 'But it's rather peculiar that we trade pounds 150m worth of fruit and vegetables a year in the UK market and we will still be effectively banned from trading bananas.'

Under the new regime, 'newcomers' to the European banana market will get an allowance amounting to 3 1/2 per cent of Latin American banana imports, which he works out to about 1,000 tons for his company - hardly worth doing.

Prices for bananas to consumers in Germany, Denmark and the Netherlands - where bananas now are the cheapest in Europe - are expected to rise under the new regime. But in the UK, where we already pay as much as 50 per cent more than in Germany, prices will probably be stable.

The 'superlevy' will deter imports of bananas above the quota level, so there will probably be fewer Latin American bananas imported into Europe overall. If you have grown to love the large, tasty Latin American bananas, you may miss them.

Latin American countries may kick up a huge fuss in Gatt, complaining that the deal is merely a legal mechanism to deliver a Gatt- friendly deal. The European importers of Latin American bananas, such as Germany, may also raise a stink but will be unlikely to change the proposal, because it is tied to a package of other farm measures.

Ironically, it is exactly what Arthur Dunkel called for but exactly what he did not mean. The solution is about 1,000 miles away from a free market.