Explain why the EU and USA were in a dispute over the trade in bananas
In 1992 the European Union; including created a single market, by acting as one single trading bloc, (an intergovernmental organization in which groups of countries trade together) meaning that all members of the trading bloc must agree on getting the produce from the same producer.
The United Kingdom, who has had strong ties in the Caribbean due to their colonial past mostly bought Bananas from the Caribbean via the Geest company, the producers of Bananas in the Caribbean are just small independent farmers who relied on the UK for a flow of income for them.
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Whilst the UK had a special relationship with the Caribbean farmers, the EU, the world’s no.1 consumer of bananas, got some of their bananas from Latin American plantations – owned by big MNC’s (Multinational Companies) such as Chiquita and Del Monte. These MNC’s payed workers the bare minimum and made them work long hours. They also use many chemicals and pesticides to keep the Bananas healthy, but at the risk of deformation of the local population, and the destruction of the environment, and wildlife. The companies grow many banana crops and sell them for lots of money and massive profits, whilst leaving the workers poor.
Because of the EU now being a single market, there was a dispute between the EU and UK about not having any special relationships with countries outside of the EU for trade purposes, this meant that the EU would purchase bananas from the cheapest place possible; the MNC’s in Latin America. This deal meant that many of the independent farmers on the Caribbean islands have gone out of business and gone into illegal drug production.
In 1993 the EU and UK came to a solution, they would purchase the cheapest bananas from Latin America, but would also buy bananas from the Caribbean, Pacific islands and Africa as well, although these were to be controlled by quotas .MNC’s such as Chiquita believed that this deal was an unfair trade agreement, as their bananas were the cheapest, but were not being bought in large quantities.
MNC’s began talks with the capitalist U.S government, saying this was a unfair agreement, and because of this less money was coming into the U.S. The U.S government agreed that this was unfair, and fought back by increasing income taxes for products from Europe, such as Scotch whiskey and wine.
As well as taxes being raised, the U.S contacted the WTO, (World Trade Organisation) the organisation in charge of regulating world trade and solving disputes (which is very pro-free trade) was sent in to solve the problem.
The WTO declared that countries should not discriminate between products on grounds of social or environmental conditions of their products, and should only be made solely on economic grounds. The WTO also said that the EU should abandon the policy.
This meant that the EU could only purchase from one source – the American MNC’s in Latin America, whilst the Caribbean have to struggle, until the introduction of Fair-trade.
What have been the economic and social consequences of this dispute on Caribbean Farmers?
Because of the WTO’s decision stating that the EU should only purchase bananas from MNC’s in Latin America, Caribbean farmers have lost massive amounts of money from not selling bananas to the UK because of the special relationship they had.
Before the Banana wars, the Caribbean Windward islands used to export 76,000 tonnes of banana’s a year around the world, it was a major income for the island; but now the EU cannot purchase bananas from the Caribbean, the number of the crop being exported has halved.
Because of the banana industry falling in the Caribbean, many farmers are getting in debt, and losing their land and their businesses, causing mass unemployment on the already incredibly poor islands.
Some of the banana farmers have begun to use a different crop to make money; Marijuana, an illegal substance, which as some sources say, 30% of farmers on the Windward Islands are growing.
This drug is selling for much more than the banana plants would do, but at the massive risk of getting caught and arrested.
Because of the MNC’s huge amount of wealth, the Caribbean farmers can not try to outmatch these companies, because they are all independent farmers, and the MNC plantation owners such as Del Monte have hundreds of workers on the plantations with lots of chemicals to stimulate the growth of the bananas whilst the Caribbean farmers must use nature alone to grow their bananas.
What are the environmental and social consequences of the activities of MNCs in Central America?
The incredibly wealthy, and often American MNC’s in Central America bring hundreds of jobs into countries but at some very large consequences, for example many hundreds of acres of trees are deforested and in their place bananas are grown, these woodlands may be places of cultural importance to some people, but are now gone.
The Chemicals used in the plantations are probably the most important consequence of MNC’s being in Central America, these chemicals, such as DBCP (dibromochloropropane) cause major problems for the workers, and their families of the banana plantations; those in contact with this chemical can carry deformations into the family, children are commonly born with abnormally large heads or missing limbs; it has also been known to be so toxic it can kill people in contact with it.
The clothes for protection used by the workers, distributed by the MNC’s are very poor, mostly gloves and facemasks, this means that chemicals such as DBCP can easily get in contact with the workers skin and cause an array of problems.
These chemicals can also contaminate local water sources, the irrigation used in the banana plantations usually flow right into the local river, also the main source of water for the communities of Latin America; this creates huge issues for the ecosystem and biodiversity of the area, affecting every animal in the food chain, from fish, and eventually to man.
Because of the deforestation to make way for banana plants, there is an increased amount of erosion on the soil; the rain will wash away the soil with ease.
Explain the difference between free trade and fair trade.
There are two types of trade, Fair trade and Free trade, Free trade is a type of trade which does not involve governmental interference, most of the worlds trade is free trade, The WTO is very pro-free trade as it does not create as much disputes as other trade agreements do, which involve governments. In free trade many consumer states use the countries who produce products cheaply rather than the ones who are more expensive (such as Latin America plantations and the Caribbean farmers).
Fair trade is a trade movement which aims to help producers in developing countries, promoting sustainability; we pay more for fair trade products, but the producers receive much more than they would in free trade.