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The banana war between the European Union and the
USA has already claimed its first victim — the mighty (and notorious) US
transnational, Chiquita, earlier called the United Fruit Company (UFC). This
company, that dominated world trade in bananas for over half a century, and is
infamous for the terror it has unleashed in the 1950s and 1960s in Central
America, for the installation of what came to be known as the ‘Banana Republics’
— is now virtually bankrupt. Fatally wounded by, not revolts in Central America,
but by its new competitor in the EU.
The company has a public debt of $862 million. It
has stopped repaying its debt as also the interest of $12 million due on
unsecured debt. The rating agencies, have for some time, treated its bonds as
junk and have downgraded the rating for debt further.
What then is it that has destroyed this giant TNC,
which has fattened over the decades on the blood of thousands and thousands of
Latin American peasants ? It is the ruthless war for the huge 4 million tonne
market for bananas consumed by the EU and the US. The annual EU import bill of
bananas is $2 billion while that of the US’s is $1.2 billion. The battle for
this has been vicious.
From UFC to Chiquita
The UFC had such a monopoly over banana trade in
the days gone by, that its brand name ‘Chiquita’ virtually replaced the
term ‘banana’ in the West. It owned huge plantations in Central America.
These are directly owned or contracted to the TNC, whose size range from 2,500
acres to 12,000 acres. For decades they have ruthlessly exploited the cheap
labour of these countries. According to a World Bank study, for every $1 that
goes to the producers, a little more than $12 is made by the TNC. Till today
this company employs 38,000 workers in Central America.
In the early 1950s, the company attained worldwide
notoriety, where, in Guatemala it was threatened by the policy of its Prime
Minister, Jacobo Arbenz, to redistribute land to the peasants. The CIA staged a
coup (in league with the UFC), Arbenz was overthrown, and land continued to be
controlled by the UFC. In the civil war that followed over 2 lakh people were
butchered in this tiny country (population was then 80 lakhs). Later, when the
CIA role became public, the company changed its name to
‘Chiquita’.
Since then it has dominated banana world trade.
Together with two other companies they controlled 70% of the world market.
Chiquita was particularly dependent on the EU market, and even as late as
1996, 85% of its income came from there.
Enter
"Fortress-Europe"
On July 1, 1993 the EU introduced a new banana
regime favouring bananas from domestic producers and former European colonies in
Africa, the Caribbean and the Pacific (ACP) known as the "404/93 regime".
The aim was to safeguard the interests of the traditional ACP and European
suppliers against import of cheap bananas from the dollar companies.
The EU had to formalise its commitments to ACP
banana producing countries under successive ‘Lome Conventions’ so that no
ACP state would lose its advantages in its traditional markets. The UK also had
similar commitments to lift bananas from the Winward Islands, Jamaica, Belize
and Surinam. But, the EU had also to take into account the fact that for reasons
of climate, terrain and labour costs, ACP fruit would not be competitive with
dollar bananas. The Caribbean bananas are produced in many small and independent
farms and so cost more than the giant land structures of Chiquita. While
the cost per box costs $4 in Central America, elsewhere the cost per box ranges
from $8 to $ 12.
The EU’s new regime, therefore, provided for a
tariff preference for ACP fruit. The system also provided for incentives to
traders handling ACP and EU fruit. The EU trade in bananas is dominated by the
company ‘Fiffees’ which has a tie-up with the Caribbean Banana
Cooperative. Fiffees has grown at such a pace, that it is now trying to push
into Chiquita’s domain in Central America.
The Tariff War
Chiquita got the US Trade Representative (Mickey
Kantor) to lodge a complaint at the WTO against the EU banana regime. A day
after this was done the powerful TNC gave a $5 lakh donation to the Clinton
election campaign. It was the first ever case to be taken by the US, and it is
significant that it dealt with the problems of one company (the other two
companies did not file a case).
In April 1996 the US, along with Ecuador,
Guatemala, Honduras and Mexico challenged the EU regime under the WTO Disputes
Settlement Mechanism. In May 1997 a WTO panel ruled that the EU banana regime
was violative of WTO obligations. The EU took the dispute to the WTO Appellate
Body that largely upheld the findings of the panel and gave its ruling in
September ’97. The EU was given time till January 1,’99 to implement the revised
arrangements.
The EU designed a new scheme that sought to remedy
the elements faulted by the WTO and brought it into force on January 1, ’99.
This was not acceptable to the US, which, a few days earlier resorted to
enforcing Section 301 against the EU. On December 21, ’98, it published a list
of products on which 10% retaliatory tariff would be imposed involving EU
imports of $520 million. The items included cashmere wool, clothing, bed linen,
biscuits, hand bags, pork, etc. This led to a hostile reaction from the EU, with
even the most servile Britain, witnessing rare expressions of anger against the
US in the House of Commons.
On April 6, the WTO ruled for the third time
against the EU. When this too was ignored, for the first time in its history,
the WTO slapped a retaliatory sanction of $191 million on EU imports by the US.
The US revised its list down.
And so the battle continues. Meanwhile,
Chiquita, which was already down, has been heavily hit. The data on net
income from 1991 to 1997 shows that the company was continuously incurring
losses, except in 1991 and 1995. The European nightmare cost it heavily. But,
arrogant of superpower supremacy, it was confident of brow-beating the EU to toe
its line. But, it miscalculated. This was no longer the cold war era where
Europe grew under the shadows of the US. Today the EU is a growing imperialist
power rivaling US supremacy in many spheres of the market. The end result : The
EU fought back; Chiquita crashed !
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