European Scrutiny Committee Contents

43 The EU and ACP banana producers








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COM(10) 103




COM(10) 101

Draft Council Regulation amending Regulation (EC) No. 1905/2006 establishing a Financing Instrument for Development Cooperation

Commission Communication: Biennial Report on the Special Framework of Assistance for Traditional ACP Suppliers of Bananas

Commission Communication: Banana Accompanying Measures: Supporting the Sustainable Adjustment of the Main ACP Banana-Exporting Countries to New Trade Realities

Legal base(a) Article 209(1) TFEU; QMV

(b) and (c) —

Document originated17 March 2010
Deposited in Parliament(a) 19 March 2010

(b) and (c) 23 March 2010

DepartmentInternational Development
Basis of considerationEM of 31 March 2010
Previous Committee ReportNone
To be discussed in CouncilTo be determined
Committee's assessmentPolitically important
Committee's decisionCleared


43.1 Regulation (EC) No 1905/2006 of the European Parliament and of the Council of 18 December 2006 establishing a financing instrument for development cooperation (DCI) replaced the range of geographic and thematic instruments that had been created over time and as needs arose. Its aim is "to improve development cooperation." Under this instrument, the EU finances measures aimed at supporting geographic cooperation with the developing countries included in the list of aid recipients of the Development Assistance Committee of the Organisation for Economic Cooperation and Development (OECD/DAC), which are listed in Annex 1 to the Regulation.[171]

43.2 In chapter 44 of this Report we outline two Council Decisions that are designed to usher in new arrangements between the EU and banana producers generally, which will have particular implications for those banana producers with whom the EU has long had a special relationship, namely those from the ACP countries. As explained there, it has been necessary to come to these new arrangements because: since 1995 the EU has been challenged at the World Trade Organisation (WTO) by the US and countries from Latin America over the preferential market access given to ACP countries by the EU; the WTO has repeatedly ruled against the EU; and, as a result, the EU has negotiated the "Geneva Agreement on Trade in Bananas" with Latin American countries and the "Agreement on Trade in Bananas" with the US — which agreements settle all disputes with the US and Latin American countries over bananas.

43.3 In that chapter, we also outline the steps that the EU has taken to facilitate the adjustment that ACP banana producers will have to make, viz., a package of transitional financial assistance — the Banana Accompanying Measures (BAMs) — worth €190 million (£170 million) over four years.[172]

The documents

43.4 Against this background, the documents considered here are:

—  an amendment to the DCI to enable the financing of the BAMs;

—  a Commission Communication outlining the BAMs in greater detail; and

—  a Commission Communication on the Special Framework of Assistance (SFA) for traditional ACP suppliers of bananas, which was created in 1999, expired in 2008 and, under which, some €376 million was provided.

43.5 The SFA is being implemented across twelve ACP countries[173] and was designed either to improve the competitiveness of ACP banana producers or to support diversification into other economic activities.

43.6 In his Explanatory Memorandum of 31 March 2010, the then Minister of State at the Department for International Development (Mr Gareth Thomas) notes that an external evaluation of the SFA "highlighted some positive results". He says that 48% of SFA funds supported increased competitiveness objectives between 1999 and 2008; that the four countries still supporting this objective (Belize, Cameroon, Cote d'Ivoire and Suriname) have maintained or increased export quantities during 2006-2008; and the SFA programme "has offered them stronger prospects for a viable banana sector in a more open environment."

43.7 He also notes that the results of measures to support diversification "were less visible, and require more time to assess." He continues thus:

"As of 2008, nine countries supported diversification objectives and have seen investments in tourism, horticulture, agricultural extension, rural development and small scale irrigation. While SFA diversification efforts will have contributed to economic diversification and growth, the programmes lacked focus or proper monitoring and evaluation systems. There were many small investments with limited potential for real, measurable impact. However given only half of SFA funds have been disbursed it is hard to evaluate its full impact at this stage. Efforts to increase disbursements are beginning to show progress."

43.8 The then Minister (Mr Gareth Thomas) then notes that:

"An evaluation of similar EC measures to support loss of preferences for ACP sugar producers highlighted the need to integrate programmes better, consider using budget support as a delivery mechanism and ensure appropriate stakeholder consultation before and during implementation."

43.9 Turning to the future, the then Minister says:

"BAMs plan to apply the lessons of these earlier programmes with clearer objectives to facilitate clear demonstration of results. BAMs will be implemented through country specific strategies, and where possible will be incorporated into wider National Adaptation Strategies. They will also try to address the broader social impacts of restructuring and reducing the banana sector in recipient ACP countries. Budget support will be considered where appropriate. Future trading prospects of ACP exporters within a changing trade environment will be assessed more carefully to ensure any competitiveness measures implemented have a good chance of success. The assistance scheme will be monitored throughout and assessed in 2012."

43.10 The then Minister also explains that the BAMs will be financed by the "use of margins and redeployment within EC expenditure allocated under 'The EU as a Global Player'". The choice of financing in this way is, he says, "due to under-utilisation and absorption constraints." Disbursements will take place through the Development Cooperation Instrument and under a specific budget line, entitled BAMs. "Use of the margin will result in an increase in the overall level of the EU budget, which will in turn carry additional cost for the UK."

43.11 He also notes that there will be a small revenue loss to the Commission because of reduced tariff levels on banana imports, which will be shared according to each Member State's GNI-share contribution to the budget.

The Government's view

43.12 The then Minister goes on to say that the EU commitment to provide the BAMs to the ACP "has been essential to the conclusion of the banana dispute by reassuring ACP countries they will have support to adjust or diversify." He again expresses his belief that it is "right to open up the EU market to other developing countries at an appropriate pace, to ensure non-discrimination between countries of similar levels of development", and that it is also important to comply with WTO rulings.

43.13 He notes that, although many ACP banana producers have been undergoing structural adaptation activities, the reduced tariff reduction on Latin American banana exporters will require further and more rapid adjustment: "ACP countries, with appropriate support from the EU, will have to assess long-term competitiveness in a more open market either to increase productivity further or to diversify as their preferences gradually erode."

43.14 Turning to the UK contribution towards supporting opportunities for increased trade, improved competitiveness and regional integration in the Caribbean region, the Minister again highlights COMPETE Caribbean — a US $ 42 million Challenge Fund Programme, implemented in partnership with the Inter-American Development Bank (IDB) and the Canadian International Development Agency (CIDA), in which DFID will contribute $16m (c. £10m), CIDA $16m (c. £ 10m) and the IDB $ 9m (c.£6m) — which he says will "help tackle the lack of export diversification and innovation, and weak entrepreneurship, across the region." He continues as follows:

"The UK has also funded a number of initiatives to support ACP countries adjust to eroding preferences and make best use of the funds available through the EC, for example funding studies, workshops and support for ACP countries to draw up national adaptation plans so they can access EC funds faster. The EC document, 'Biennial Report on the SFA for Traditional ACP suppliers of Bananas' makes reference to UK support, for example in St. Lucia 'SFA disbursement rate improved substantially since 2007, especially with recent help of DFID funded technical assistance to the NAO between January and December 2008.'

"The UK is actively working with the EC to align better UK and EC private sector focused initiatives in the Caribbean supporting improved diversification outcomes. The focus is on promoting emerging growth sectors[174] both through improving the investment climate and direct assistance to firms to innovate and diversify."

43.15 The then Minister then professes himself "encouraged that the SFA programme is showing improvements in disbursement rates and that some of the previous recommendations from reviews have been incorporated" He believes the BAM to be an improvement on previous EC support to banana producers:

"but the Commission will need to follow up proactively to ensure that lessons learnt previously are acted upon. We will continue to lobby the EC to do this.

"The UK will, where possible, monitor the implementation of EC aid at the local level and feedback wider systemic lessons that need to be addressed at headquarters. The UK will engage with the Commission in Brussels to ensure that BAMS applies the lessons learned from earlier programmes of support for both bananas and sugar."


43.16 As our predecessors noted, the SFA was not the Commission's shining hour. This continues to be borne out in what the Minister has to say: programmes lacking focus or proper monitoring and evaluation systems; many small investments with limited potential for real, measurable impact; difficulty in evaluating full impact, given only half of SFA funds are disbursed; evaluation of similar EC measures to support loss of preferences for ACP sugar producers also highlighting the need to integrate programmes better, consider using budget support as a delivery mechanism and ensure appropriate stakeholder consultation before and during implementation.

43.17 The BAM can hardly not be an improvement. But that will be down to the Commission in the first instance. As the Minister notes, the Commission will need to follow up proactively to ensure that lessons learnt previously are acted upon. Its record under the SFA has not been impressive. And, with a much reduced presence in the Caribbean, it is not clear how the then Minister's Department is going to be able to keep the Commission under pressure.

43.18 The BAM scheme is to be assessed in 2012. We would like the Minister of State at the Department for International Development to write to us by the end of 2011 with information about, and views on, its impact, and on the effectiveness of the Commission in fulfilling its brief (c.f. paragraph 43.16 above); and with similar information and views on what has happened under the SFA by then.

43.19 In the meantime, we clear the documents.

171   For full information on the DCI, see  Back

172   (31431) 7776/10, (31432) 7780/10; see chapter 44 of this Report. Back

173   Belize, Jamaica, Dominica, St Lucia, St Vincent, Grenada, Suriname, Cameroon, Ivory Coast, Somalia, Cape Verde and Madagascar. Back

174   For example Information and Communication Technologies, niche tourism, arts and entertainment. Back

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