Commodities & Futures: Proposal aims to mend split over banana imports

UNTIL this month, bananas have been the bane of Brussels bureaucrats, as officials struggled to produce a compromise plan for a single European market in bananas after 1992.

At stake is the future of many small overseas EC territories, such as Belize, Guadeloupe, and the Windward Islands, whose fragile economies depend on bananas even though they are inefficient, high-cost producers.

The fear is that if these countries stopped producing bananas the profitable drugs industry, already a threat, could take hold.

A proposal to solve the banana controversy was painstakingly forged by the European Commission in late July - after nearly five years of debate - and the English version has just been published.

It represents a real achievement, because the 12 European Community member states are as divided over the banana issue as if they were choosing a single European language.

Despite the efforts of the commissioners to include something for everyone, the proposal has satisfied hardly anyone. Perhaps that is why it just may work.

John Ellis, chairman of Fyffes, the UK banana importer, said: 'My personal assessment is that it's the nearest attempt I've seen that appears to be able to deliver all the obligations. But it's by no means acceptable to everyone.'

Most EC members except Germany restrict imports of inexpensive Latin American bananas and give preferential treatment to their overseas territories - anathema to the principles of the General Agreement on Tariffs and Trade and the objectives of the single European market.

These different policies cause significant variations in national prices, so that consumers in Britain pay about 50p for a pound of bananas while Germans pay only 40p. Americans, who eat 'dollar' bananas from South America, pay an average 28p.

The European Commission has proposed a two million ton annual quota on banana imports from 1 January, 1993, plus an additional 'autonomous quota' to be decided later at the commission's discretion. Europeans eat 3.5 million tons of bananas a year.

In addition, imports will face a 20 per cent duty when they enter each EC state. This 20 per cent levy now applies to all EC countries except Germany, which imports dollar bananas duty-free.

Under the proposal, EC number-crunchers say national prices should converge, with German bananas becoming more expensive and British banana prices falling.

Latin American banana producing countries - which via big multi-national companies such as Chiquita sold 2.3 million tons to Europe in 1991 - attacked the quota plan last week. They said it violates Gatt principles and will cost them nearly dollars 6bn over the next decade in lost revenue.

But the protected African, Caribbean and Pacific (ACP) exporters are also against limits and worry about the income implications. Some have suggested that a cap might be illegal under the Lome convention, the treaty obliging the EC to ensure that the ACP banana producers are not disadvantaged, and are holding this as a bargaining chip.

EC member governments have just begun poring over the complex, 35-page proposal. The Germans are believed to oppose it. The Benelux countries and Denmark are also free-traders, and in line with Gatt, prefer tariffs which would be phased out.

European banana producers - France, Spain, Portugal and Greece - would like an extra levy on bananas, to support the price and give aid to dollar producers as a sweetener to get them to accept quotas. But the EC Commission would balk at another levy, because it would hurt prices.

Negotiations on the proposal begin next month in Brussels. With the UK in the EC presidency, Britain is determined to resolve the banana issue by the end of this year.