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An overview of the past two months
China-Philippines trade goes bananas

It finally looks as though things are calming down between China and the Philippines with regards to their recent banana stand off. It’s been almost two months since China first refused entry to Philippine banana exports after the tightening of quarantine regulations.  The Chinese authorities cited the finding of scale insects in fruit shipments as the reason for holding up shipments at the point of entry.
By the 14th May there were 150 containers of bananas being denied markets access in Beijing, worth in the region of $760,000. They were joined on the 15th by 43 containers of papaya and pineapple, allegedly having been found to harbour mealybugs.

However, the fact that insects found on the fruits are common throughout much of the world – including China – instantly lead to suspicions that there was more to this affair than met the eye.

Stephen Antig, president of the Filipino Banana Growers and Exporters Association at the beginning of May, said, “We have been very careful in shipping bananas to China for over 10 years and see to it that there is no problem.”

Antig stated that the industry in general employed through processes and high technology to ensure that they complied with international export standards for fruit.  Even back then  Antig was hinting that there was possibly a more political reason for the banana  problem, that it might in fact have been a sign that China was attempting to take an economic route to settling a dispute over the Scarborough Shoal Islands in the South China Sea.



The islands are a hotly disputed territory claimed by China, Taiwan and  the Philippines.  Tensions over the archipelago were raised after Filipino authorities attempted to arrest Chinese fishermen in the area, but were prevented from doing so by the Chinese. After  that both countries stepped up their naval presence in the area.

There followed a range of other activities between the two nations,  including the Chinese broadcasting weather forecasts of the region for the first time, viewed by many as a provocation.  It was also commonly felt that the increased quarantine on banana imports was just another part of this diplomatic tit for tat game. The increasing of banana inspections to 100% of all imports certainly came at the right time to suggest this. Before the stand off fruit imports were only randomly inspected and no problems had been reported.



Economic pressure certainly suggested robust potential as a weapon. Trade between the two nations is worth an estimated $30 billion USD at the time of writing. Within that bananas were an obvious target. The Philippines exports $75 million worth of bananas per annum currently, with China being the 4th largest market.
Initially the blocking of the bananas lead to great concerns. No one knew how far things would go and there were worries over unemployment for banana growers, workers and those in the supply chain. Stephen Antig initially reported that up to 200,000 jobs could be put at risk if the situation escalated and became long standing.

Despite this many kept a calm face on things, pointing out that there were other markets available for the produce and that China was likely to harm itself if it dealt out too many economic sanctions. Arsenio Balisacan, Socioeconomic Planning Secretary for the Philippines said the blocking of bananas would have only a “modest effect” on the industry as a whole. Though he did stress the importance of solving the issue.

The economist and journalist Cielito Habito said, “if China completely stops importing our [goods, including] bananas, pineapples, mangoes and other products, then it would have the problem of sourcing these from somewhere else and many of these items cannot be readily sourced from our neighbours  or elsewhere.”



The Philippines Government maintained a pragmatic façade throughout and was not fast to jump to conclusions. During the stand off  the authorities have officially accepted the Chinese official line that the increased quarantine was nothing to do with sovereignty over the shoal .

They have consistently sought to play down such claims and looked instead to negotiate their way out of the situation. Agricultural trade Secretary, Gregory Domingo took part in a diplomatic mission to China during the height of the issue in mid-May. At the time he said the government was of the view that the problem was technical not diplomatic. However, he did allow for the possibility saying, “I’m not saying it isn’t to do with the shoal, I just hope it isn’t.”  

The government’s initial response was to instruct the Agriculture Secretary, Proceso Alcala, to seek alternative markets. It was suggested that there was potential in Russia, Mongolia and Italy. Antig, however, disputed this from the very outset, saying that the distances involved were too great to make any kind of trade viable.
“These countries are too far. It won’t be competitive and we will not earn from it because of freight costs.”

Things started moving again earlier this week and, since Saturday 190 containers of Filipino bananas have gained entry into China. There are signs, however, that some Chinese consumers are turning their backs on the produce, at least for the time being.

Malacanan Palace Spokeswoman, Abigail Valte, says the worst of the crisis is now passed. "We’re making progress concerning this. China is now accepting the fruit exports."

She also said that she did not consider the banana affair to be related to the shoal dispute. She was backed up by Agriculture Secretary, Proceso Alcala, who stated, "Actually our products were never banned. Our Chinese counterparts are merely conducting a more thorough and extended inspection of our fruit exports.

"From here on we will impose a zero-tolerance  with respect to insect and other contaminants. We have to keep a closer watch on our procedures and assure that they are strictly followed."

To make sure of this Valte has stated that the government will do all it can to help
the smaller growers to comply with the new demands, saying that the larger growers did not have any problems with this, having exported to Japan for many years, where quarantine regulations have always been of a strict standard.

For what happens next we will just have to wait and see, but the episode clearly shows the dangers of relying too heavily on one market for reliable trade.

Publication date: 5/31/2012
Author: Ben Littler
Copyright: www.freshplaza.com


 


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