David Jessop, THIS WEEK IN EUROPE
Last month, the European Commission (EC) offered to eliminate all remaining tariffs and quotas remaining on all ACP products other than sugar and rice whenever economic partnership agreements (EPAs) come into force.
Although the announcement made clear that this included 'bananas, beef and other meat, dairy products, wheat and all other cereals, as well as all fruits and vegetables', there has continued to be some uncertainty in parts of the region as to whether the proposal did cover bananas.
The reason, it seems, revolves around the absence of any explanatory document relating the proposal to the complex legal situation that surrounds the EC's managed market in bananas and which, since 1993, has been the subject of successive challenges at the World Trade Organisation (WTO).
But if confirmation were needed that full liberalisation for ACP bananas is indeed what the EC is proposing, one only has to look at the shocked commentary by France about theimplications for its own producers.
In a strongly worded statement to EU agriculture ministers, the French Government made clear that the implementation of the commission's proposal is "likely to upset the balance established in the context of the reform of the banana (market)" and could "weaken (Europe's) negotiating positions in the WTO and in the proceedings currently being brought by Ecuador and Colombia".
Eroded prices
An internal report of the same council meeting held in Luxembourg in mid-April, also makes plain that France is not alone in its concern. It notes, in part, that the French Minister of Agriculture, Dominique Bussereau, indicated at the meeting that the new support scheme just agreed for Community producers (in the French départements d'outre-mer: Martinique and Guadeloupe) will now see "their prices eroded by complete liberalisation".
The minute notes that similar concerns were expressed by ministers and officials representing Spain, Cyprus and Portugal.
For Caribbean banana-producing nations, the implications of unrestricted market access are also potentially just as profound.
Despite a significant contraction in the Caribbean industry over the last decade, bananas have remained an important export product for Belize, Jamaica, the Dominican Republic, St. Lucia, Dominica and St. Vincent, precisely because Europe has, up to now, managed its market in a manner that supports ACP producers.
By way of background, on January 1, 2006, the EU instituted a tariff-only regime for bananas in response to previous WTO rulings that its former licensing system discriminated in favour of ACP producers.
As a consequence, almost all banana imports into Europe (4.185 milllion tonnes in total in 2006) were made subject to a single tariff of €176 per tonne.
Within this arrangement, the EU provided a duty-free quota of 775,000 tonnes per annum for all ACP countries on a first-come-first served basis.
However, since then, Latin nations have continued to complain that the single tariff was too high, and have sought a figure somewhere between zero and €75 per tonne, levels at which Caribbean producers could not compete.
Then in March of this year, Ecuador brought a further WTO case on the basis that the EU had failed to introduce a regime that met the terms of the WTO's ruling on the earlier managed EU banana market. Commenting on its case, Ecuador told the WTO Disputes Settlement Body: "What we need are clear rules and the elimination of discriminatory and distorting measures of the regime."
Hard-to-predict outcomes
Against this background, Europe's offer of completely open access for ACP producers, if implemented as suggested, carries with it new and potentially hard to predict outcomes.
These range from a fall in price - already under pressure from the big EU supermarket chains as larger quantities of ACP fruit from low-cost African producers come on to the European market - to the possibility of further complaints at the WTO against the new regime by Latin producers unless there is full market liberalisation for all of their tropical products; or complete market disruption if Latin nations were to challenge any extension to Cotonou if an EPA was not agreed by the year's end.
The fundamental problem for the region is that Caribbean banana exporters are among the highest-cost ACP producers. They operate on a small scale under difficult conditions and are as a consequence significantly less competitive than other ACP suppliers in Africa.
In response, farmers in the Anglophone Caribbean have been moving towards fair trade and organic bananas which command a premium price, but the main regional effect so far of the restructuring of the EU market has been to see banana exports grow from lower-cost producers in the Dominican Republic.
The danger is that a free for all between ACP producers in a market in which banana prices are falling is that production in much of the Anglophone Caribbean may be unsustainable.
While some in the region believe this is inevitable anyway as broader market liberalisation occurs, trade negotiators had been seeking to have ACP bananas treated as a sensitive product in the Doha Round. However, the implication of the latest EC offer is that even this hoped-for-measure of protection is no longer possible.
To add to the complications for Caribbean banana producers, the EU has just agreed the negotiating mandates that will lead rapidly - not least because of concerns about bananas - to association agreements with the Andean group of nations and with Central America. These contain instructions to EC negotiators to establish free-trade areas on an asymmetrical basis introduced over a 10-year period.
David Jessop is director of the Caribbean Council. Email: david.jessop@caribbean-council.org
