Select Committee on European Scrutiny Twenty-Second Report


10 Import arrangements for bananas

(a)

(26390)

6605/05

COM(05) 50


Commission Report on the operation of the common organisation of the market in bananas
(b)

(26836)

12249/05

COM(05) 433


Draft Council Regulation on the tariff rates for bananas

Legal base(a) —

(b) Article 133EC; QMV

DepartmentEnvironment, Food and Rural Affairs
Basis of considerationMinister's letter of 7 March 2006
Previous Committee Report(a) HC 38-xi (2004-05), para 1 (15 March 2005)

(b) HC 34-vi (2005-06), para 5 (19 October 2006)

To be discussed in CouncilNot applicable
Committee's assessmentPolitically important
Committee's decision(Both) Cleared

Background

10.1 Prior to 1993, there was no Community regime for bananas, individual Member States continuing to operate their own, often very different, national arrangements. However, since this impeded the free circulation of bananas within the Community, the introduction of the Single Market made it necessary to establish a common market organisation. The Council therefore adopted Regulation (EEC) No. 404/93,[29] which provided for compensatory aid for Community producers, for structural support within the framework of rural development measures, and for rules governing trade with third countries.

10.2 The last of these is of particular importance to the UK, given its aim of safeguarding its traditional Caribbean suppliers (the Windward Islands and Jamaica), and it is an aspect of the regime on which our predecessors reported to the House at frequent intervals as the Community struggled to maintain arrangements which meet its own needs consistently with its obligations under the rules of the World Trade Organisation (WTO). The upshot was that, following changes agreed in 1998 and 2001, imports from third countries were subject to a complex system of tariff quotas and preferences, ACP suppliers having an annual tariff-free quota of 750,000 tonnes, whilst other Most-Favoured Nations (MFNs) had a quota of 2.2 million tonnes, within which a duty of €75 per tonne applied, rising to €680 per tonne once that quota had been exhausted. However, these were to be replaced as from the start of 2006 by a tariff-only arrangement, to be negotiated within the WTO.

10.3 Council Regulation (EEC) No. 404/93 required the Commission to report to the European Parliament and Council by the end of 2004 on the operation of the common market organisation, and it duly did so in February 2005 (document (a)). This was an essentially factual report, and, for the most part, it did not raise any major issues for the UK. However, our predecessors noted that Caribbean supplies to the Community had dropped by 9.6% in the period between 1999 and 2003, and that the Commission had highlighted an "especially marked" decrease of 51.1% in exports from the Windward Islands. Since it has been a key objective of the UK in this area to safeguard its suppliers in those Islands (and Jamaica), they expressed surprise that the Government's Explanatory Memorandum was silent on this point, and therefore asked for its reactions to this development. In the meantime, they continued to hold the document under scrutiny.

10.4 . The Commission's report also noted that, having obtained a mandate from the Member States in summer 2004 for negotiations in the WTO on replacing the current bound-specific duties and concessionary tariff quotas, it had opened those negotiations on the basis that the current tariff of €75 per tonne for non-ACP imports would be replaced by a bound duty of €230 per tonne. However, a WTO arbitration panel had subsequently ruled that this offer would not have maintained the current level of access for the MFNs, and the Community had therefore tabled a revised offer of €187 per tonne, coupled with a duty free quota of 775,000 tonnes for the ACP countries (document (b)). It had also addressed the way in which the ACP quota was divided. Hitherto, traditional suppliers had received 89%, but the Commission had now proposed a 82%-18% split, which it said reflected increased trade flows over the last ten years from newer ACP suppliers, such as Belize.

10.5 As we noted in our Report of 19 October 2005, the Parliamentary Under-Secretary of State (Sustainable Farming and Food) at the Department of Environment, Food and Rural Affairs (Lord Bach) had pointed out that this revised offer had not been acceptable to the MFN countries, and that the Community had requested a second round of arbitration. He also pointed out that the proposal that non-traditional producers should receive a larger percentage share had already sparked protests from a number of ACP countries and traditional operators, and that the UK was pressing the Commission to provide a detailed explanation for this change. In view of this, we said that we could probably do little more than await events, but that we would continue to hold the document under scrutiny, pending further information on this point, and on the response of the WTO panel to the Community's latest tariff offer.

10.6 We subsequently received from the Minister letters of 16 November and 17 November 2005, telling us that the WTO had ruled against the Community's offer of €187 per tonne, and that the Commission would be seeking the Council's agreement on 21 November to a further reduction in the tariff to €179 per tonne, which the UK would be supporting. In view of the fast-moving nature of the negotiations, and the need for an agreement by the end of 2005, we decided not to report these developments to the House at that stage, but to ask the Minister to keep us informed, particularly in the event of an agreement being reached within the WTO.

Minister's letter of 7 March 2006

10.7 We have now received his letter of 7 March 2006, in which he says:

    "Caribbean banana production generally, and that of the Windward Islands in particular, is at far higher cost than that of Latin America or the major African producer countries. As foreshadowed in my earlier letter at the end of November the Council of Ministers approved new import arrangements for bananas such that quotas no longer apply to imports from MFN countries (which are now subject to an increased duty of €176 per tonne), whilst ACP imports remain subject to a quota of 775,000 tonnes on which no duty is payable.

    "As part of the Council agreement it was decided that 'at least half' of ACP imports should be subject to a 'first come first served' (FCFS) arrangement under which no import licences would be needed. During subsequent negotiations on the practical arrangements, my officials sought to ensure that Windward Islands exporters have access to sufficient licences to avoid the need for payment of duty. Looking ahead, the WTO waiver that allows a zero duty for ACP bananas expires at the end of 2007 when a new mechanism Economic Partnership Agreements (EPAs) is expected to come into effect. EPAs are being negotiated by DTI and, where possible, the interests of the Caribbean banana producing countries will be accounted for."

Conclusion

10.8 In the light of this further information provided by the Minister, we are now clearing both these documents.




29   OJ No. L.47, 25.2.1993, p.1. Back


 
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