The Supply Side

III.1 A Brief Assessment of the Banana Trade

Bananas, in the export variety⁷⁶, belong to the top five most traded agricultural products. They are traded more than oranges and apples, making them the most traded fruit on international markets.

For Latin American countries, bananas are one of the main export products. Ecuador, Costa Rica, and Colombia represented more than the 50 percent of the international supply of bananas in 2003. For some Caribbean and African countries bananas are a subsistence product and a source of export revenues. Some countries’ economies depend on them exclusively (or to a high degree). On the demand side, the main consumers are developed countries, particularly the USA, the EU, and Japan. This particular trade relationship of supply from developing and demand from developed countries is described in more detail in the following subsections.

III.1.1 The Supply Side

The largest producers, as observed in Graph III.1, are India, China, Brazil, and Ecuador.

They were responsible for more than 60 percent of world production in 2004. Of this group, India and China consume all of their production, while Brazil and Ecuador export some of theirs. Brazil began exporting recently (in 2000) due to TNC interest in its cheaper labor costs (Van de Kasteele & Van der Sichele 2005, p. 8). Ecuador, as a traditional net-exporting country, is the primary exporting country worldwide. Ecuador belongs to a group of traditional, exporting producer countries called the “dollar”

countries because of the political and economic influence of US TNCs in the region. In addition to Ecuador, this thesis also concentrates on dollar countries Colombia and Costa Rica, which, alongside the Philippines, alternate for second place in banana exports.

76 There are more than 1000 varieties of bananas but the only used to be exported are the “Cavendish” and “Gross Michael” varieties.

III. DETERMINANTS OF COMPETITIVENESS

Graph III.1 Banana Production (Selected years and countries)

Roche (1998) argues that one important distinction between the international banana trade and other commodities is the intensity of its politics. Because of their political implications for the EU banana regime, EU producer nations⁷⁷ and the producer-exporting countries from the ex-European colonies of Africa, the Caribbean, and the Pacific (the ACP countries) must also be included. The heterogeneity of ACP countries almost necessitates a separate analysis for every country. Clearly, this is beyond the scope of this study, so the countries are classified to simplify the analysis. Table III.1 divides the countries first geographically, between Caribbean⁷⁸ and African⁷⁹, then according to their dependence on banana trade. The Caribbean countries break down into two groups, the highly dependent Windward Islands (where cluster study remains important), and the less dependent countries (such as Jamaica, Belize⁸⁰, and the Dominican Republic), which will be referred to as “the other Caribbean countries”.

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77 According to their production levels, the analysis concentrates on the French overseas territories (Martinique &

Guadeloupe) and the Spanish Canary Islands.

78 Because of social implications and the availability of information, only the Windward Islands are detailed in this study. It would be worthwhile to examine the implications for other Caribbean countries (including Belize, Jamaica, and the Dominican Republic), but information for them is not available.

79 Among the Western African countries, Cameroon and the Ivory Coast are emphasized.

80 Belize belongs geographically to Central America, but for historical reasons is defined as a Caribbean ACP beneficiary.

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Table III.1.Dependence on Banana Exports of Selected ACP-Countries

Banana

Sources: Rhys & Goate (2003) for the Caribbean; author’s calculations for the Dominican Republic and African countries

Among African ACP countries, only nations from Western Africa are important producers in the banana trade, although they are not as highly dependent on the banana as the Windward. Unfortunately, the lack of information precludes a cluster analysis of these countries.

As previously mentioned, Europe is important because its purchasing support has significant political implications for the main exporting countries. Banana producers within the EU include the Canary Islands, Madeira, Crete, the French overseas territories of Guadeloupe and Martinique, and Cyprus (the last only since the May 2004 enlargement). Only the overseas territories of Spain (the Canary Islands) and France (Martinique and Guadeloupe) produce quantities sufficient to compete in international markets. Therefore the analysis is focused on these two regions. Technically the EU producers do not export, since their production is demanded locally by continental Europe; however, transport and marketing costs are included in the import costs and must be taken into account. Thus, the most useful assumption is to regard EU production as “exports” for domestic EU consumption.

III. DETERMINANTS OF COMPETITIVENESS

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This chapter focuses on countries’ geographical positions and political relationships with the EU. Thus, the following countries are selected from European producers and dollar and ACP countries.

- Dollar countries: Colombia, Ecuador, and Costa Rica

- ACP countries: the Windward Islands, Jamaica, Cameroon, and the Ivory Coast - European producers: French Overseas Territories and the Spanish Canary Islands On the supply side, exporting countries’ production levels are based on historical foreign investment in plantations⁸¹ and small- and medium-sized local producers⁸². As a result, different countries can be classified according to their dominant production structures, whether based on foreign or domestic capital. This issue is analyzed more in Section III.4, when firms’ strategies are considered.