The Banana Trade War

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  • by Anup Shah
  • This Page Last Updated Sunday, January 03, 2010

Although bananas may only look like a fruit, they represent a wide variety of environmental, economic, social, and political problems. The banana trade symbolizes economic imperialism, injustices in the global trade market, and the globalization of the agricultural economy. Bananas are also number four on the list of staple crops in the world and one of the biggest profit makers in supermarkets, making them critical for economic and global food security. As one of the first tropical fruits to be exported, bananas were a cheap way to bring the tropics to North America and Europe. Bananas have become such a common, inexpensive grocery item that we often forget where they come from and how they got here.

Rebecca Cohen, Global Issues for Breakfast: The Banana Industry and its Problems1, The Science Creative Quarterly, Issue 3, September 07 - April 08

On this page:

  1. Bananas are serious business
  2. The WTO rules against the Largest Aid and Trade Pact, the Lomé Convention
  3. A trade war between US and Europe: two banana-importing consumer nations
  4. We will act multilaterally when we can and unilaterally when we must
  5. Chiquita
  6. Caribbean region’s dependency on bananas is unhealthy
  7. More Information

Bananas are serious business

Bananas: common fruit, complex issues. (Source: Wikipedia2)

Bananas are globally one of the most commonly eaten fruit, not just in the tropics where they are usually grown, but in regions like North America and Europe. However, the way bananas are produced and exported gives an insight into a number of global issues.

As writer and journalist Peter Chapman reminds us in his book about on the history of the banana industry and United Fruit Company in particular, while bananas feature in many jokes, no one laughs at the banana in its areas of origin. It is too serious a business, on which jobs and lives depend. (Jungle Capitalists, Canongate Books, 2007)

Bananas grow on large plants not trees. (Source: Wikipedia3)

In a number of countries such as Brazil and India, large amounts of bananas are produced but consumed mostly locally. Other regions such as Central America and the Caribbean include a large number of banana exporters. Some of the nations in these regions are quite dependent on banana exports, often to their former colonial rulers.

Chapman details in his above-mentioned book, how for decades one multinational, United Fruit Company (now declined and surviving in small part as Chiquita), was often accused of bribing Latin American government officials in exchange for preferential treatment, exploiting workers, creating an abusive monopoly, and—similar to accusations some oil companies have have faced—encouraged or supported US coups against smaller nations putting in place dicatorships. The story of it’s rise and demise, which Chapman details, almost created the banana industry and what became termed the banana republics of Central America.

As Rebecca Cohen in her above-mentioned article summarized, the United Fruit Company thrived on the lack of unity, poverty, and corrupt governments in Central America. Businesses were able to get favorable terms, the best land, and vertical integration of the whole production and supply processes making them large, powerful and enormously influential entities.

Even during times tough times for United Fruit Company, (such as when they favored Hitler’s rapidly industrializing Germany over the US just as the Second World War was going to break out), they managed to get by and resorted to information/perception management (i.e. propaganda) and philanthropy to foster a more positive image of itself. (Chapman, pp. 111–119)

Dole and Chiquita are, in effect, inheritors of the empires that their predecessors created (Dole was formerly the Standard Fruit Company and United Fruit Company mostly survives as Chiquita though none have such overt geopolitical practices that their earlier companies were accused of).

Image: Women in Belize sorting bananas and slicing them from bunches. (Source: Wikipedia4)

Just 5 companies—Dole, Del Monte, Chiquita, Fyffes and Noboa—control some 80% of the international banana trade5, according to Banana Link, a UK-based organization campaigning for fairer and sustainable banana trade.

Cohen, mentioned above, summarizes how workers are exploited by a race to the bottom where supermarkets demand lowest prices for consumers, which results in low wages for workers in plantations.

Some workers work very long hours, sometimes exposed to hazardous chemicals, some which are often banned from nations with better ability to provide for worker safety, such as in the US and Europe.

Child labor, gender discrimination and other problems accompany this drive for low consumer prices.

Banana Link notes that in the past decade supermarkets have become a more significant part of the issue, helping drive wages down. Bananas in particular are becoming more important:

Supermarkets are now the only players in the banana chain to consistently make profits from bananas, having dramatically increased their economic power in the banana chain in the last decade. Bananas are the single most profitable item passing through the check-outs in British supermarkets, accounting for 1% of all sales. In the USA, it is estimated that bananas represent 2% of the total turnover of North American grocery retailers.

Supermarkets6, Banana Link, undated, last accessed June 14, 2009

Nations like the UK have a large concentration of supermarkets controlling most of the sector, leading to the usual economic and social problems that concentration brings.

Banana Link also notes that supermarkets are not neutral actors; they are in large part responsible for their aggressive price cutting (by often making suppliers reduce their prices rather than reducing their own margins, though sometimes their own margins are already low).

Fair trade is often presented as a fair way to help banana growers, but when international trade is dominated by the wealthier nations and companies, poorer farmers and nations are often left with an uncertain future.

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The WTO rules against the Largest Aid and Trade Pact, the Lomé Convention

Caribbean bananas are grown on small, family-run farms. However, a September 1997 World Trade Organization (WTO) decision pressured by the US, backed by companies like Chiquita, has meant that these local producers will have to compete 7 on a level playing field with giant multinationals and Latin-American dollar bananas.

According to the WTO ruling8, there shouldn’t be discrimination based on where the food is produced or even how it is created (which also means, for example, that a country cannot easily say no to genetically modified food9 and the general public doesn’t have to be informed).

This has affected the way the European Union (EU) has it’s trade agreements10 with the African, Caribbean and Pacific countries (ACP countries) and the Lomé; convention which is based on cooperation and partnership between the EU and 71 ACP member states. This, even though some members of the ACP are not WTO members or observers as the report from the previous link mentions. The convention was the world’s largest trade and aid pact and following the expiry in 2000, has to be replaced11 by a system designed to open up the markets of the poor nations to the industrialized nations of Europe.

In 1998, UK already voted to abolish12 the Caribbean’s guaranteed access to European markets. European government and development agencies have predicted terrible consequences such as mass poverty, and high levels of unemployment (from this link13). In its place is a proposal for the EU to issue import licenses to ships arriving with bananas on a first come, first served14 basis.

The ACP nations feel that they will be not be ready15 to enter a global market place with free trade in the way that the WTO prescribes. As mentioned in the Free Trade16 part of this web site, forcing free trade restructuring on governments who are not financially stable or ready to do so would not work.

A report from a coalition of NGOs said that the new agreement fails to safeguard17 the notion that poverty eradication plays a central role in ACP-EU relations or guarantee the inclusion of civil society. There is hope that the framework is flexible enough to address these concerns, but it remains to be seen. You can read the actual report at this link18.

Oxfam also highlights that the new agreement allows the EU to follow more free trade policies in a way that can give them a stronger bargaining position19.

Oxfam also noted that the Caribbean small farmers themselves were denied representation at the WTO (though some of which were not WTO members—though they are affected, nonetheless), that the multinationals were generally making profits anyway, and that the entire argument was over a small share of the overall European market20.

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A trade war between US and Europe: two banana-importing consumer nations

The beginning of March 1999 saw a new trade war emerge. To give an idea of the importance of this issue, Washington applied a set of sanctions on a variety of EU goods, many of which had nothing to do with bananas21, due to the preferential banana trade agreement.

Washington claimed that they were protecting their interests and want to show that free trade can work, while the EU battled over questions regarding the right to decide, claiming that the US was manipulating WTO rules22 to implement sanctions against countries trading with regimes it does not like.

The WTO eventually authorized its largest ever trade sanctions23 by USA on the EU.

(The beef trading disputes24 also bore resemblance to the banana trade war; the EU banned beef from the US which have been treated with growth hormones, on the grounds of safety. The WTO ruled against the EU concerns and preferred the free trade approach.)

The beginning of May 2001, saw an agreement signaling an end to the sanctions25 resulting from the banana dispute. Chiquita is thought to benefit26, as it was facing bankruptcy. The Caribbean Bananas Exporters’ Association, representing the interests and fears of the Caribbean banana industry, also welcomed the end of the dispute27 but remained worried about some provisions.

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We will act multilaterally when we can and unilaterally when we must

Another fundamental issue from the banana war had emerged: initially, Washington imposed sanctions unilaterally28, just weeks before the WTO was to meet about this issue. The resulting emergency meetings by the WTO raised concerns about whether the WTO can be an effective moderator in such disputes if nations decide to do things unilaterally.

In other words, if larger, powerful nations can impose their will whenever they wish, what would be the fate of the poorer or less powerful nations? Even at the WTO Ministerial Meeting in Seattle, Caribbean nations would have likely lost out29 and gained little from the world trade liberalization agenda of the WTO had the huge public protests30 not been able to derail that meeting.

(Whether the WTO has actually been beneficial and fair to developing nations31 at all is another topic in itself, but the point here is more about how this is yet another example of undermining or manipulating international rules to suit ones own interests with disregard to who and how it can affect so many other people—for example, on the one hand, the US was able to disrupt a biosafety protocol32—which it hasn’t even signed to—arguing that the WTO should be involved, allowing freer trade (even though the biosafety protocol is not about trade). Yet here, while they have used the WTO to get the original ruling, they did not wait for the WTO resolution process to work and acted unilaterally. As an aside, the above quote in the heading is from then-US Secretary of State in the Clinton Administration, Madeline Albright, regarding the Iraq crisis in 1998, but very applicable here too.)

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Chiquita

A lot of pressure to get this ruling came from the large corporations like Chiquita33. They complained that this was unfair trade. Yet, with the subsequent ruling turning in their favor34, trade