New Paths to Just Trade in the Caribbean
If you visited the small island nation of Saint Vincent and the Grenadines (SVG) two decades ago, you would have seen a thriving banana industry led by small farmers growing under sustainable conditions. Today, the industry has all but collapsed.
While bananas are still grown on SVG for local and regional markets, when I visited in the summer of 2018, hardly a single banana was being exported to the European Union (EU). And yet, for decades, preferential access to the EU market was key to the success of banana industries in SVG and its Windward Island neighbours: Dominica, Grenada, and Saint Lucia.
The story of how they got from there to here is a long one, involving free trade reforms beginning in the 1990s. Most importantly, a series of disputes at the World Trade Organization from 1997 to 2008 ruled that preferential access to the EU market, which had been extended to all members of the African, Caribbean, and Pacific Group of States, amounted to discrimination against non-participating countries and had to be phased out.
Caribbean nations fought to keep these preferences, which they rightly defended as owed to vulnerable nations highly dependent on a limited range of exports due to the legacies of colonialism and slavery.
The decline of preferential trade spelled doom for banana farmers and had disastrous impacts on the national economies of the Windward Islands. Take SVG, for example. Adjusting for inflation, the value of its total merchandise exports in 2017—after 25 years of “free trade” reforms—was still only 16 percent of what it had been in 1993.
In 1992, SVG had 7,855 active banana farmers. Today, according to Cecil Ryan, Chairman of the Board of Directors of Winfresh, a public corporation jointly owned by the Windward Islands governments, only 100 remain—a decline of 99 percent. As a result, Winfresh, originally incorporated in the 1990s to manage banana exports, has gradually changed its role. Today it runs commercial operations with a specific developmental mission: to find and promote a range of opportunities for small farmers.
Fairtrade Bananas and Living Income
With the banana industry in disarray, farmers initially turned to Fairtrade certification in the early 2000s, becoming pioneering Fairtrade banana partners. Unfortunately, Fairtrade proved unable to prevent the continuing decline of the industry.
There were several reasons for this, including the rise of black sigatoka disease and the challenges of meeting growing demands from supermarket giants for visually perfect bananas. A major factor, however, was income.
While certainly not getting rich under the old, preferential trade agreement, Caribbean farmers did receive something close to what today might be considered a living income. Banana farmers were often able to put aside a bit of money to save for their children’s education or invest in a house.
Although Fairtrade has made an important turn toward ensuring living incomes since 2014 by developing the Global Living Wage Coalition with other certification bodies, many Fairtrade farmers have historically not received living incomes.
Speaking to me from his office in Saint Lucia, Bernard Cornibert, CEO of Winfresh, reflected on the difficulties faced by Caribbean farmers, who have confronted relentless downward pressure from large-scale competitors across the globe and within the Fairtrade system.
One major concern of Cornibert’s is that the Fairtrade system does not sufficiently distinguish between smallholders and large-scale farmers. For instance, Caribbean farmers have faced increasing competition from large plantations in Latin America and West Africa that use economies of scale and, in some cases, low wages to offer lower cost Fairtrade bananas.
Supermarket chains in the EU, under pressure to earn profits, opt for lower cost Fairtrade bananas from large plantations, while grocers who want to buy from smallholders in the Caribbean are not able to distinguish their products in the market and recoup the extra costs. With a situation like this, said Cornibert, “Fairtrade is not particularly helpful to the smallholder in Saint Lucia.”
Possibilities for Fair Trade
Cornibert is worried that Fairtrade has become too big and volume-focused. “If you have Fairtrade on everything,” he said, “the consumer ignores the merits of Fairtrade, because everything is Fairtrade.” In the end “the Fairtrade product becomes a regular commodity.”
One solution would be for Fairtrade to more clearly distinguish small farms from large with separate or identifiable labels. This would “let the consumer make the choice,” Cornibert said.
Another solution lies in innovative approaches to trading fairly.
Winfresh still manages banana exports under Fairtrade terms. In Saint Lucia, the industry has declined significantly since the 1990s, but farmers continue to export bananas to the EU. Winfresh also exports and ripens bananas purchased from Fairtrade farms in the Dominican Republic, where farmers report the benefits of a more stable income and community projects funded by the social premium.
Increasingly, however, Winfresh has turned attention toward diversification, moving into value-added food manufacturing of juice, cordials, pepper sauce, pepper mash, marinades, non-dairy frozen desserts, and bottled water. While these products are not yet Fairtrade certified, they provide opportunities for farmers along with employment for young workers in manufacturing in a region facing high unemployment and emigration.
Winfresh works with small farmers, providing credit, technical assistance, business training, subsidized inputs like seedlings, and a guaranteed contract to buy the final product for a sustainable price. In its product development, Winfresh aims to promote “the Caribbean way of life,” emphasizing visions of sustainable lives and products that reflect Caribbean culture and tastes. To develop its business, Winfresh aims to start with local, regional, and diaspora markets before ramping up to larger markets in Europe and North America.
Finding a Niche in the Global Economy
At the VincyFresh facility in SVG, a subsidiary of the regional Winfresh, farmers have been encouraged to grow peppers to meet increasing global demand for sauce and mash. During a tour last summer, I saw significant progress. VincyFresh has developed a state-of-the-art processing facility, drawing funds from a variety of partners, including a loan for millions of dollars from the Latin America and Caribbean–led intergovernmental organization ALBA.
Before being able to export its product to major markets, however, VincyFresh needs to overcome the challenge of scale. This is not easy in island states with small populations—the population of SVG is just over 109,000 people. To be cost effective, VincyFresh needs to have lots of product and more than a few customers to compensate for expensive shipping charges.
To address this, VincyFresh is storing barrels of pepper sauce and mash in a large warehouse, waiting to ship at a cost-effective scale when the time is right, anticipated to be the end of 2019.
There is certainly no simple road ahead. The global trading system, as Cornibert observed, is not an easy place for small and vulnerable countries. The concept of comparative advantage, so central to the theory of free trade, simply does not work in the real world. The application of the model of free trade to international trade assumes that countries “come together and manage” trade based on who has the comparative advantage in what products. Without this happening, said Cornibert, “the whole thing breaks down.”
Larger countries, far from settling in on what they do best, produce and export anything and everything to the weaker or less competitive countries. As a result, the benefits of free trade remain an illusion for many small developing countries, which do not have an “absolute advantage” in anything.
This is a challenge for the Windward Islands, which do not have oil resources and cannot compete globally in heavy industries. As a result, said Ryan, their potential advantages lie in “agriculture, fruit production, and service industries.”
For Winfresh, this means that “food processing has to be the thrust.” Its ability to accomplish its goals is about more than the success of any single product, whether peppers, juice, or bananas. It is about the long-term success of small Caribbean economies.
Author: Gavin Fridell is Canada Research Chair in International Development Studies at Saint Mary’s University in Halifax and the author of Coffee and Alternative Trade.