Chiquita blames EU banana regime for its bankruptcy woes

by Brian Kenety

Brussels, 19 Jan 2001 (IPS) -- The European Union (EU) has rejected charges by Chiquita Brands International that the EU’s banana import regime was responsible for the financial woes of the US-based fruit exporter - the latest salvo in the transatlantic trade war.

Announcing a financial restructuring Tuesday, Chiquita president Steven G. Warshaw said the company would have to halt its debt payments due to weak European currencies and “the corrosive impact” of eight years of an “illegal” EU regime “that today still remains unreformed”.

Jean-Christophe Filori, a spokesperson for the EU’s executive Commission, strongly denied any link between EU market conditions and Chiquita’s performance.

“If there is an area or market where Chiquita could make money it was really the European Union, so they have absolutely no reason to complain,” he told reporters in Brussels on Thursday. “The best proof of that is that some of the main competitors of Chiquita who are also present on the European market are doing well”.

Indeed, US banana marketing giant, the Dole Food Company - Chiquita’s arch-rival - has come out in support of the EU’s proposal for a new banana regime, which calls for a five-year continuation of import quotas and a change to a tariff-only regime on 1 January 2006.

Dole president David DeLorenzo said in a statement last month the new regime, adopted in Brussels on 19 December, “is a non-discriminatory method for allocating import rights for Latin American bananas to the EU, which Dole supports”.

Chiquita, which has suggested it may undergo bankruptcy proceedings, said, in a statement Tuesday, it would continue its “vigorous efforts to resolve this trade dispute legally, fairly and in a way that restores Chiquita’s market access in conformity with international trade law”.

The trade dispute is certain to pick up steam under the new Republican George W. Bush administration.

The “New York Times” reported this week that it was under steady pressure from Chiquita, whose chairman and chief executive, Carl H.  Lindner, is a big contributor to both political parties, that the outgoing Clinton administration brought several complaints against the EU in the late 1990s before the World Trade Organisation and won them.

“When the Europeans first imposed the barriers on bananas, Chiquita sought help in Washington, and people there listened,” said the newspaper, noting that according to public financing records, Lindner contributed $550,000 to the Republican Party and at least $270,000 to the Democrats.

Bush’s pick for US Trade Representative, Robert Zoellick, a veteran of previous Republican administrations, is already known to EU Trade Commissioner Pascal Lamy when he was in former Commission President Jacques Delors’ cabinet. Lamy’s spokesman, Anthony Gooch, who also has rejected Chiquita’s accusations, said: “We believe Mr Zoellick to be an extremely tough, competent and respected negotiator ... we have no doubt that he will defend US interests stoutly.”

Together with Dole and Del Monte, Chiquita accounts for nearly two-thirds of the world banana trade. The EU, which purchases 40% of bananas sold on the world market - to the tune of $5 billion a year - has been found repeatedly to be violating the GATT/WTO trade rules by panels that have examined the legality of its import, sales and distribution system.

The WTO has calculated that for every year that the illegal EU policies have been in effect, Chiquita has sustained annual damages of almost $200 million, resulting in total damages since 1993 of over $1.5 billion, said the company.

The WTO ruled in April 1999 that the current EU banana regime favours the EU’s former colonies in the African, Caribbean and Pacific (ACP) group of nations over Latin American growers and US companies like Chiquita and Dole.

Chiquita is not the only unhappy group: Caribbean banana producers are also up in arms over the new regime. The Caribbean Community (CARICOM) trade and economic group of 15 nations said, in a statement Thursday, that the proposed new EU regime does not provide the continued access for ACP bananas it says is promised under the Cotonou Agreement, the EU-ACP trade and aid accord signed in June 2000.

“This system will turn the banana trade into a lottery for Caribbean growers, with the odds stacked against them in favour of the dominant dollar traders”, a reference to US-owned interests.

When the EU failed to meet a WTO-imposed January 2000 deadline to reform its banana regime, Ecuador, the world’s leading producer, and the United States, home to major transnational corporations that place Latin American bananas on the European market, announced hundreds of millions of dollars’ worth of sanctions against the EU. These sanctions are supported by the Latin American banana-producing states of Colombia, Costa Rica, Guatemala, Honduras, Mexico, Nicaragua, Panama and Venezuela.

EU officials in Brussels say their current proposal for a “first come, first served” import quota system, due to come into force on 1 April, is WTO-compatible. However, besides Chiquita, Latin American banana exporters have rejected it, insisting that the EU instead grant licences in consideration of each country’s prior levels of banana trade with Europe.

“Virtually all of the Western Hemisphere, including (banana-producing countries of the) Caribbean, as well as the African nations and many EU member states, consider the EU Commission’s latest scheme, known as ‘first-come, first-served’, to be explicitly WTO-illegal,” said Chiquita.

The company said Europe accounted for nearly half its sales and the largest part of its profits. Chiquita said it had “suffered the most damage under Europe’s policies and would continue to suffer harm if yet another illegal regime” were allowed to go into effect. – SUNS4819