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Wednesday, April 16, 2003

Pleas and Defences

Loosely related to the post immediately below, there is this argument from the Caribbean Banana Exporters Association:

Caribbean bananas are grown mainly on small family farms, with intensive and justly paid labour and low usage of agro-chemical inputs. That inevitably results in lower yields and higher average cost. But many consumers are willing to pay a fair, if slightly higher, price for such an ethical and quality product- as they do for free-range and Fair Trade products.

Most Caribbean bananas conform broadly to the criteria for Fair Trade products and would qualify to carry the "Fairtrade" label. However, it would not be viable to apply the Fairtrade label on all of the 250,000 tonnes produced by the Caribbean for the UK market, because that quantity is much larger than the quantity for which the UK consumer is currently willing to pay the Fairtrade price. But regardless of label, the principle remains the same; the higher cost is justified by a quality product produced in a socially desirable manner. (their italics)

The people who wrote this don't realise that they undermined their own argument by saying that their export "quantity is much larger than the quantity for which the UK consumer is currently willing to pay the Fairtrade price". Consumers have made the tradeoff: they are only willing to pay so much for a "quality product produced in a socially desirable manner". Economics 101.

I don't write this to be smug. The Caribbean's banana growers are suffering severe dislocation from the end of preferential trade, and the end of preference has come about relatively suddenly. Or so it would seem.

Preferences existed before these islands gained independence in the 1970s, and thye were codified after it with the first Lomé protocol between the African, Caribbean and Pacific state and the then European Economic Community in 1975. This was a barely year after the proclamation of a New International Economic Order by developing nations, and the "guilt trip" (which is what the NIEO can be stripped down to, in essence) probably made Third World leaders, Caribbean ones among them, think that preferences were there to stay, at least for a long while.

Times change. While previous rounds of GATT negotiations more or less ignored developing countries, the Uruguay round, which started in 1986, was different in that it demanded full reciprocity from all parties. What's sad is that the leaders made no attempt to adjust to this. It was clear before 1975 that bananas could not survive without preferences, and political leaders in the eastern Caribbean have served their people poorly by not telling their constituents that their lives would, in the long run, have to change. A recent IMF summary on Dominica is just one case which shows where delayed adjustment can lead.

I don't have a miracle growth solution for these soon-to-be former banana islands. Offshore banking and the selling of passports, to which some have resorted, are mere band-aids, and not very good ones at that. Recession-hit Dominca, hit by recession, thinks part of the answer lies a new international airport, to boost tourism. My point, though, is that Caribbean leaders should not have discounted the future so heavily, and that they should have prepared an easier adjustment process for their people.