44 The EU and banana producers
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Draft Council Decision on the signature and provisional application of a Geneva Agreement on Trade in Bananas between the European Union and Brazil, Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Peru and Venezuela and of an Agreement on Trade in Bananas between the European Union and the United States
Draft Council Decision on the conclusion of a Geneva Agreement on Trade in Bananas between the European Union and Brazil, Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Peru and Venezuela and of an Agreement on Trade in Bananas between the European Union and the United States
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| Legal base | Article 209(1) TFEU; QMV
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| Document originated | 17 March 2010
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| Deposited in Parliament | 24 March 2010
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| Department | International Development
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| Basis of consideration | EM of 31 March 2010
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| Previous Committee Report | None
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| To be discussed in Council | To be determined
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
44.1 Since 1993, the Common Market Organisation (CMO) for bananas
in the European Union (EU) has provided a preferential trade regime
in favour of African, Caribbean and Pacific (ACP) banana-exporting
countries. For several ACP states, banana production for export
to the EU forms an important economic activity.
44.2 Since 1995 the EU's CMO 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. As a result
the EU has negotiated the "Geneva Agreement on Trade in Bananas"
with Latin American countries[175]
and the "Agreement on Trade in Bananas" with the US.
These agreements settle all disputes with the US and Latin American
countries over bananas.
44.3 In his Explanatory Memorandum of 31 March 2010, the then
Minister of State at the Department for International Development
(Mr Gareth Thomas) explains that this means that tariffs on bananas
imported from 11 Latin American countries will be reduced from
€176 (£157) per tonne to €114 (£102) per tonne
over seven to nine years[176]
and there will be no quota restrictions. This, the then Minister
says, "solves one of the longest-running trade disputes and
is a key blockage removed within the Doha Development Agreement
negotiations." He continues as follows:
"ACP banana producers will continue to have duty-free quota-free
access to the EU market if they have signed an Economic Partnership
Agreement with the EU or are a Least Developed Country and are
subsequently eligible for Everything But Arms (EBA) trade preferences.[177]
However the reduction in the EU's Most Favoured Nation (MFN) tariff
to Latin American producers will decrease the preference margin
received by ACP banana producers. ACP producers accounted for
17% of the EU market in 2008.
"This reduction matters for ACP banana suppliers
as it is has come sooner than expected and because their production
costs are generally higher than Latin America. The EC has analysed
the likely impact of the changes in the banana tariff schedules
on ACP banana-supplying countries. They assess that it is unlikely
the changes will have major macroeconomic impacts, but there could
be significant loss of export revenues for some countries. In
addition there could be important impacts on local producers with
social implications if cost-saving measures are not introduced.
Additional assistance will help ACP producers adjust to the increased
competition or diversify into other areas where they can be competitive.
"To facilitate this adjustment, the EU has proposed
a package of transitional financial assistance — the Banana
Accompanying Measures (BAMs) worth €190 million (£170
million) over four years. The Commission will also try and source
an additional €10 million (£8.9 million), if there are
unused funds available from other budgets. These BAMs are in conformity
with the EU's WTO obligations and have a clear restructuring and
hence temporary nature, with a maximum duration of four years.
(2010-2013).
"The BAMs will be provided to the ten main ACP
banana exporters, who have on average exported in excess of 10,000
tonnes to the EU over 1999-2008. The allocations will be based
on the level of banana exports, the economic importance of the
banana sector and the level of development, as measured by the
UN's Human Development Index. The BAMs will seek to build on the
restructuring activities already undertaken by ACP banana producers
under the Special System of Assistance (SSA, 1994-1999) and the
Special Framework of Assistance (SFA, 1999-2008. Total funds granted
under the SFA are Euro 376 million and as of end 2008, 73% of
allocated funds had been committed to contracts). It will also
seek to incorporate lessons learnt from these programmes."
The Government's view
44.4 The then Minister (Mr Gareth Thomas) goes on
to describe the banana agreements as "significant",
in that they "bring an end to a protracted dispute and the
uncertainty and tension which have accompanied it since 1993"
which in turn "will unblock one potential barrier to concluding
the Doha Development Agreement (DDA) negotiations." Noting
that the DDA discussions are "currently stalled", he
says that "the UK continues to push globally for action to
conclude the deal which we consider as the best way of achieving
a fair and comprehensive deal on trade for developing countries."
44.5 He then says that:
- "it is right to open up
the EU market to other developing countries at an appropriate
pace; to ensure non-discrimination between other countries of
similar levels of development;
- it is "important to comply with WTO Appellate
Body rulings;
- "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;
- "the reduced tariff reduction on Latin American
banana exporters will require further and more rapid adjustment;
and
- "ACP countries, with appropriate support
from the EU, will have to assess long-term competitiveness in
a more open market. They will need to increase productivity further,
develop further niche markets or diversify as their preferences
gradually erode."
44.6 The then Minister outlines UK support to the
Caribbean region as follows:
"The UK is providing additional support to the
Caribbean region by supporting opportunities for increased trade,
improved competitiveness and regional integration. Its flagship
programme COMPETE Caribbean — a US $ 42m[178]
Challenge Fund Programme — will help tackle the lack of
export diversification and innovation, and weak entrepreneurship
across the region. The UK has also funded a number of initiatives
to help ACP countries adjust to preference erosion and to 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 UK also
works with the EC in supporting diversification activities for
the private sector."
44.7 Turning to the Financial Implications,
the then Minister says that:
"There will be a small revenue loss to the Commission
because of reduced tariff levels on banana imports. This cost
will be shared according to each member state's GNI-share contribution
to the budget.
"The EU also has a small number of EU banana
producers that are located in the outer regions of the European
community[179] and
banana production is a major source of employment, finance and
social cohesion. They already receive very generous payments because
of their locations. They may well apply to the European Commission
for additional compensation if the tariff changes have a negative
effect. However they already receive annual support of €279
million (£249 million) which translates to approximately
€463 (£413) per tonne of bananas produced and further
concessions are unlikely."
44.8 Finally, the then Minister says that these Council
Decisions will go to a Council between May and July 2010.
Conclusion
44.9 These Council Decisions are related to three
other documents — a Council Regulation amending the relevant
financial regulation in order to finance the BAMs and two Commission
Communications: one on the BAMs and the other on the previous
European Commission assistance to the Caribbean banana producers
— which we consider elsewhere in this Report, and which
raise questions about the Commission's effectiveness in implementing
the BAMs, given its lack of success so far with the previous support
scheme.
44.10 Thus, although the Council Decisions raise
no questions, we consider that they warranted a substantive Report
to the House.
175 The Latin American countries are Colombia, Panama,
Ecuador, Costa Rica, Honduras, Guatemala, Peru, Brazil, Mexico,
Nicaragua and Venezuela. Back
176
The then Minister adds that "the pace will depend if the
Doha Development Agreement is reached at the WTO." Back
177
The least developed countries (LDCs) receive more favourable treatment
than other developing countries. In February 2001, the Council
adopted Regulation (EC) 416/2001, the so-called "EBA Regulation"
("Everything But Arms"), granting duty-free access to
imports of all products from LDCs, except arms and ammunitions,
without any quantitative restrictions (with the exception of bananas,
sugar and rice for a limited period). EBA was later incorporated
into the GSP Council Regulation (EC) No 2501/2001, The Regulation
foresees that the special arrangements for LDCs should be maintained
for an unlimited period of time and not be subject to the periodic
renewal of the Community's scheme of generalised preferences.
Beneficiaries of the special arrangements for least developed
countries require formal recognition by the United Nations. At
present, 49 developing countries belong to the category of LDCs.
For further information see http://ec.europa.eu/trade/wider-agenda/development/generalised-system-of-preferences/everything-but-arms/. Back
178
COMPETE will be implemented in partnership with the Inter-American
Development Bank (IDB), and the Canadian International Development
Agency (CIDA) DFID will contribute $16m (approx £10m), CIDA
$16m (approx. £10m) and the IDB, $9m (£6m). Back
179
EU banana producers are Canary Islands, Martinique, Guadeloupe,
Madeira and Azores. Back
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