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Banana Trade Facing Unfruitful Change

Christiane Wolters (tkw)May 12, 2005

Europeans eat a lot of bananas and are willing to pay generous prices for the pleasure, but if a new ruling on import duty becomes reality, they may find the market swamped with bunches of cheap, poorly produced fruit.

Europeans just love their bananasImage: BilderBox

The continental banana market is specially protected by a system of quotas dictating which regions are allowed to supply what quantities of bananas to Europe. But now, following several rulings by the World Trade Organization, the European Union is obliged to change this system by Jan. 1 next year -- much to the dismay of producers the world over.

The "banana war," as it has become commonly known, has been generating heat for the past decade. There are two main factions: The Europeans, who give preferential treatment to their former colonies (ACP states) by guaranteeing them generous European quotas, and the South American producers who dominate the US market.

So-called "dollar bananas" are substantially cheaper than the ACP ones, but there is a limit to how many can currently be exported to European soil. Those that are exported are stung with a duty charge.

Encouraging cheap production

But the World Trade Organization has ruled that that should all change. Karl-Friedrich Falkenberg, who heads the trade directorate of the European Commission, said the new ruling would increase the drive towards cheap mass production.

Bananen Produktion in Kolumbien
Banana production in ColombiaImage: dpa

"Those who produce more cheaply will have the chance to sell more," he said. "These historic rights will dissolve and the more competitive will get a bigger share of the world market."

From 2006, the present quota and duty system will be replaced by a duty only system with no limit on volume. The EU plan, which foresees an import duty of 230 euros ($293) per ton of bananas, has sparked outrage among producers in both the former colonies and in Latin America.

Social tsunami

Gilberth Bermudez of COLSIBA, the umbrella organization of South American banana workers trade unions said he fears that a removal of the limit on volume will trigger a fall in prices.

"There will be a social tsunami with thousands of lost jobs and companies forced to move elsewhere," he said. "Wages would fall and social conditions would worsen. The poverty in central America, where more than three million people depend on the banana trade, would get even worse. But Africans would also get poorer because the companies are only interested in absolutely inefficient social standards."

International non-governmental organizations share this worry. For years they've been complaining about a race for the lowest standards in the banana trade, and because too many bananas are being produced, prices and social conditions are falling. Bettina Burkert of the BanaFair organization said the new EU rules would speed up the race.

"We are calling on the EU to put a moratorium on the move, so instead of it coming into effect next January, research could be conducted into how it would affect South American and Caribbean producers," she said.

Various interest groups are demanding a differentiated system in which the level of import duty would depend upon whether the bananas were produced in a socially fair and ecologically sound way. But Karl-Friedrich Falkenberg said he doesn't believe that such regulations would augment the fairness of the banana trade.

"Much is down to the consumers," he said "If they go for the cheapest bananas, they'll be buying the ones produced under the worst social conditions."

Falkenberg added he is convinced that the new system of duty only will be implemented, but just how costly that will be is to be decided in the coming weeks by the World Trade Organization.