WTO AND INTERNATIONAL REGULATORY ENVIRONMENT

Assignment on Banana trade war

Submitted by : Niket sinha and Amit kadian

Submitted To: Mr. Gaurav Singh Arora

Main Causes of the Banana War

European countries limited the imports of bananas Companies complained to the World Trade Organization (WTO) The United States responded by imposing a stiff tariff on European goods shipped to the United States Overall cause is due to the European Unions (EU) failure to amend to Americas satisfaction on their banana-import rules

World Trade Organizations Role in the Banana War

WTO agrees with the United States position, but they are seen as incapable of enforcing their position Main problem is that the WTO doesnt appear to be capable of enforcing its rules WTO has twice told the EU that its banana regime is illegal, however, they are unable to bring the EU into line because its rules on compliance are so unclear WTOs dispute-settlement mechanism strength is that countries cannot veto WTO rulings against them. *They have the right to appeal once; if they lose again, they have 15 months in which to fall into line with world trade law. If they do not comply, the plaintiff can demand compensation or impose retaliatory sanctions.

Fine Details Up to the War

Before Lindner bought in, Chiquita Brands was the old United Fruit Co., a ruthless buccaneer that earned a justifiable reputation as a tyrant that bribed officials of foreign governments, used armed force to keep its workers in line and generally mistreated its thousands of dirt-poor laborers on impoverished Caribbean islands and Central American plantations. All of which helps explain why Chiquita was--and is--the world's dominant banana producer.

But how did it come to pass that the U.S. government launched a trade war over bananas at the expense of small American businesses, especially since the U.S. does not export bananas and Chiquita employs no American production workers? The E.U. announced that instead of an open market, which Chiquita had hoped for, it would expand the old system, with quotas and tariffs on bananas brought in from

Latin America and preferential treatment for bananas grown in the former colonies. The new rules went into effect on July 1, 1993.

Chiquita's business was tanking. From 1992 to 1994, the company racked up $407 million in losses. Its stock price plunged from $40 to $11 a share. In meetings with government officials, Chiquita laid the blame squarely on the EU's trade restrictions.

Banana farming: Banana farming Price

The cheapest bananas from Central and Southern America are so cheap because the costs are externalised. This means that someone else pays. In this case, the workers and the environment. If these costs were internalised, through decent wages and environmental protection, the price differences would disappear.

Production costs per box, 1995 Country Cost (in US$) Costa Rica 3.25 Ecuador 2.95 Colombia 3.64 St Vincent 8.39 Dominica 9.37 Martinique 11.12 Cote D'Ivoire 8.53

Environmental costs Waste: Two tonnes of often polluted waste per tonne of fruit. Deforestation: Takes place to make way for plantations. Soil: Chemical residues accumulate causing sterility as well as the soil problems associated with deforestation. Biodiversity: Loss of biodiversity through chemical input, monocultures and diseases. Exhaustion: Trees have a useful life of about 25 years

Feature Type of operation Owner

Guatemala

Nature of operation

Working conditions

Dominica Small scale independent A large scale plantation. growers with a central marketing organisation. Chiquita Brands, Privately owned by Cincinatti. individual growers. Bananas are interPlantation monoculture. cropped with a range of High levels of chemical other crops, affording input, some toxic. Very more resilience in the vulnerable to face of hurricanes, for devastation, dependent example. Farmers often on one crop. diversify into other areas e.g. cut flowers. Very poor conditions, The marketing company few safety standards and (DBMC) guarantees a unions not encouraged, market for growers. although recognition is There is some coming slowly. resentment of this Guatemalan law only scheme by more permits formation of successful growers who unions in individual believe they are companies. subsidising the others. GNP per capita $1,580, $0.63 per hour / $28 per week.

Dominican Republic Organic Fair Trade Growers Association. Small landowners. Organic by necessity the farmers could not afford chemical additives. Now certified by the German agency BCS.

Wages

Very poor conditions. Intensive farming chemicals have polluted Living wells, health is seriously conditions affected and the doctor, of provided by the employees company, is not anxious to identify the contaminants. Falling returns for bananas bringing Outlook increased pressure on workers and increased poverty.

Good conditions, although the nature of the work is intensive with long hours. Owners are self-policing since they all have an interest in the success of the farms which make up the association. GNP per capita $1,750, between $1,000 and GNP per capita $3,040. $2,000 a month per owner. Poor conditions, but Individual owners in the diversification by land association can make a owning farmers gives a considerably better little more security. living than the average Government for the country since commitment to the there is a double environment, reasonable premium on organic and wages and continued fair trade products. exports. The possible loss of For now a reasonable preferential export outlook, although the arrangements with market even in premium Europe will have a products can be fickle. negative impact.

Future problems and choices for the EU It is beyond the immediate power of the EU to end the root causes of all migration. However, over time, if the EU wanted to reduce migratory pressure it could try to provide more development aid, debt relief and fair trade that would reduce the 'push factors' causing the migration in some parts of the world. Some Europeans argue, however, that trying to stop the migration for economic reasons is short sighted. Europe's population is ageing fast and is set to decline over the next 50 years. Italy, for example, will lose 28 percent of its population by 2050. In order to maintain its working age population, Italy would need to start importing more than 350,000 immigrants per year or, alternatively, keep its citizens working until they are 75. Already the UK and Germany has seen the need to attract highly skilled foreign workers to Europe. The UK is desperately short of health workers and German industry has persuaded its government to issue work permits to thousands of computer specialists from Asia. The problem for EU politicians in the future will be to find a way of securing the labour that industry and commerce needs, while at the same time reassuring electorates that the illegal immigration covered so extensively in the media can be reduced.

Soils Higher temperatures would reduce water holding capacity, increasing soil moisture deficit. Stability of building foundations in areas of clay soils would be affected. Would affect level of water table, and salinity. Poorly drained soils would become less of a problem,

Flora. Fauna & Landscape Any sustained rise in temperature would tend to lead to species movement. Rates of climate change may be too fast for tree species to adapt genetically and native species may be lost increased invasion of alien weeds, pests, diseases and viruses. Increased competition from foreign species of invertebrates, birds and mammals.

Agriculture Climate is the most significant factor in determining plant growth and productivity. Higher temperatures would decrease the yield of cereal crops (such as wheat), although the yield of crops such as potatoes, sugar beet and forest trees would increase. Pests

such as Colarado Beetle and rhizomania, limited by temperature could be more prevalent Length of growing season for grasses and trees would be increased by about 15 days per degree Celsius increase. Opportunities later on to introduce new crops. Change in vegetation will change the albedo. Temperature increase Moisture Availability Change in extreme weather events Effect of sea level rise Effect of increased carbon dioxide concentration on plant growth Effects on production Adaptations in Agriculture Ecosystems would be affected differently

Coastal Regions Increase in mean sea level, and frequency and magnitude of storms, storm surges would lead to more frequent flooding. Number of low-lying areas are vulnerable: coasts of E. Anglia, Lancashire, Fens, Essex mudflats, Thames estuary, Clyde/Forth estuaries. Flooding would result in short term disruption to transport, manufacturing and domestic sector. Climate change and sea level

Water Resources Water resources would benefit from wetter winters, but warmer summers with longer growing seasons and increased evaporation would lead to greater pressure on water resources, especially in the SE of the UK. Higher temperatures would lead to greater demand for water, for irrigation, and for abstraction of water from rivers. Effect on hydrological cycle

increase in air temperature would increase potential evaporation individual catchments may respond differently increase in duration of dry spells will not necessarily lead to an increased likelihood of low river flows and groundwater levels since increases in precipitation will be experienced in other seasons increased rainfall will increase flood risk increased snowmelt freshwater ecosystems may be affected by rise in temperature and inundation by seawater

Energy

Higher temperatures would lead to less space heating demands, but increased demands for air conditioning may entail higher electricity use. Energy use is responsible for 75% of man made C02 emissions. There are 3 main areas where energy use can be reduced: Energy saving in the home (20% of energy is used by domestic appliances) Reduction in waste production (methane produced from landfill sites) Transport Could increase the amount of renewable energy - would improve viability of solar power and wind power. Unreliable nature of sunlight would act against further investment.

Manufacturing and Construction Droughts could affect certain manufacturing industries requiring large amounts of water, such as paper making, brewing, food industries and power generation, and chemical industries. Increased winter rainfall could affect some construction activities, as would more windy conditions. Return period of extreme events would be reduced, compromising the safety of some structures.

Transport Sensitivity to weather and climate is high for all forms of transport, Snow and ice in winter are a problem, so the reduction in severity and duration of winter freeze would be beneficial. Transport produces 24% of greenhouse gas emissions. Could try to aim for sustainable transport to reduce numbers of cars. Suggestions include: Reducing the need to travel Car pooling Reducing / charging for road space Improving public transport

Financial Sector Insurance industry would be immediately affected by a shift in the risk of damaging weather events. Increase in flood risk due to sea level rise would also be a factor. Return period of extreme events would be reduced. Less risk of winter damage such as burst pipes. Property insurance is worth over 6bn in UK alone. Increase in average temperatures may lead to more intermittent rainfall and drying out of soils. There are several options they may take: Do nothing Withdraw insurance from high risk areas Change the type of insurance policy Greenhouse mitigation

Recreation and Tourism UK tourism has an international dimension sensitive to any change which would reduce its ability to compete with other destinations. Change to warmer, drier, sunnier conditions could increase tourism.

Human Health Direct health effects will occur as a result of more extreme climate. Air pollution is also a concern. May affect heat-related deaths, vector borne diseases e.g asthma could result from increased formation and persistence of pollen, spores and urban pollutants.