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Ecuador backs U.S. position on EU banana trade
The Packer

By Larry Luxner

QUITO -- Ecuador, the world's largest banana exporter, supports Washington's argument that the European Union stop giving preferential access to Caribbean banana-producing islands at the expense of Ecuador and other nations which refuse to sign a so-called "framework agreement" with the EU.

In 1995, Ecuador exported $772.2 million worth of bananas and plantains -- making the fruit second in economic importance only to petroleum exports, which generated $1.27 billion, but well ahead of cultivated shrimp ($630.1 million), coffee ($167.9 million), oil derivatives ($123.5 million) and cacao ($70.1 million).

Late last year, Ecuador's Congress ratified the country's membership in the World Trade Organization, a decision praised by José Vicente Maldonado, Ecuador's ministry of industry, commerce and integration, as "the most important decision on foreign trade in Ecuadoran history."

The WTO, successor to GATT (General Agreement on Tariffs and Trade), is currently hearing a challenge filed in November 1994 by Chiquita Brands International and the Hawaii Banana Growers Association urging the EU to end trade preferences for bananas produced in former European colonies in Africa and the Caribbean.

"The framework agreement is absolutely in opposition to the WTO," says Patricio Izurieta Mora-Bowen, assistant secretary for economic affairs at Ecuador's Foreign Ministry. "We feel that the current system is discriminatory, unfair and unjust, and creates a difficult situation for banana exporters. It has increased our costs. Our producers aren't getting the money they should."

Izurieta said during a recent interview in Quito that Ecuadoran producers are now getting $3.07 per box of fruit, when before they were receiving $3.50 -- which means they're now mostly losing instead of making money.

Caribbean banana producers, on the other hand, argue that their small island economies are entirely dependent on EU trade preferences. In December, Edison James, prime minister of the island of Dominica, told delegates at a Miami business conference that without the complicated trade regime, countries like his might be forced to grow illegal drugs to prevent total economic collapse (The Packer, Dec. 25, 1995).

"The only market for the Caribbean is Europe, and we will fight to hold onto this market," James had warned. "If this is what free trade means, then we in the Caribbean need to think again. The stakes are too high."

Yet both officials of Chiquita as well as Ecuadoran government officials say Europe's restrictive banana import policy creates higher costs for European consumers and hurts Latin American producers.

"We agree pretty much with the U.S. position. Our point of views coincide," said Izurieta. "Costa Rica, Colombia, Nicaragua and Venezuela signed a framework agreement with the EU, so they have a secure market. We did not agree with this. How can you divide a quota by 4,000 producers?"

Interestingly, Chiquita accounts for only 2% of Ecuador's banana exports, according to Izurieta, while Dole accounts for another 10% and Grupo Noboa nearly a quarter of total production. Recently, Noboa made an unsuccessful bid for the Windward Islands Banana Development and Exporting Co., which markets bananas from the Caribbean islands of Dominica, Grenada, St. Lucia and St. Vincent.

Banana exports increased 15% over 1994, according to Juan José Pons Arizaga, president of the Ecuadoran Federation of Exporters (known in Spanish as FEDEXPOR). Pons is a former top official of Grupo Noboa and now an independent banana exporter. Yet there was no profit, says Pons, "because exchange controls caused the cost structure to eat up any possibility of profitability."

Furthermore, Ecuador has had difficulty finding new markets for its bananas. Noboa's Bonita brand -- which accounts for 40% of the country's banana exports -- is now hawked on the streets of Eastern European capitals from Tirana to Warsaw, though that market isn't growing as fast as first anticipated following the fall of communism in 1991.

The federation's executive director, Hernán León Guarderas, complained in an interview that "Ecuador doesn't have a coordinated export strategy that promotes our exports. The private sector has long urged the government to adopt a new policy and a foreign trade law."

As far as the EU banana dispute, he said it's an aspect of principles. "If they're in favor of free trade, the WTO cannot accept the protectionist policies of the EU which benefit its ex-colonies."

Added Izurieta: "We hope that Europe will reformulate its banana regime, and that the framework agreement will be eliminated, or redone so it would be less unfair."

Meanwhile, Ecuador is working hard to diversify away from bananas into non-traditional fruits and vegetables. It is already South America's leading melon exporter, with 250,000-300,000 boxes shipped to the United States during its U.S. deal, which extended from November to mid-January. And that's nothing compared to the 430,000 boxes of honeydews shipped to the U.S. market during the 1993-94 season.

According to FEDEXPOR, Ecuador's leading non-traditional fruit/vegetable exports -- ranked by 1994 FOB prices -- include fresh broccoli ($3.2 million), melons ($1.3 million), pineapples ($1.1 million), mangoes ($524,000) and strawberries ($336,000). It also exports smaller quantities of asparagus, hearts of palm and papaya.

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