Jan 19, 1998

Brussels, Jan 15 (IPS/Niccolo Sarno) -- The European Union has modified its banana trade and aid regime in line with the World Trade Organisation rules, in what analysts say that the new regime would threaten the incomes of small banana producers in the Caribbean.  

The EU's executive Commission proposals, unveiled Wednesday and approved Thursday, have been tabled in response to the WTO's September 1997 ruling against the bloc's trade preferences on banana exports to Europe.

They must be passed by a qualified majority among the bloc's 15 members before they come into force. They must also withstand any further challenges from the WTO. 

The US $ 2 billion a year banana trade preferences system, is an integral part of the EU's massive Lome Convention trade and aid pact with the 71 African, Caribbean and Pacific (ACP) group of developing states.

Small banana farmers in the Caribbean say that without the trade preferences they cannot hope to compete on an open market against the industrialised banana farmers of Central America. But European commissioner for Agriculture Franz Fischler says the EU has no choice. 

The Commission says the proposals seek to ensure that the farmers stay in business, and that their exports to Europe meet WTO rules, but it admits that there will be no means of giving precedence to ACP producers once the import licence system that underpins the present system is dismantled, as the WTO insist. 

Many people in the Caribbean believe that if the banana industry collapses, social unrest and economic collapse could follow, with many banana farmers turning to growing narcotics for supply to Europe.  

In 1993 the EU allowed ACP banana growers an annual duty-free quota of 857,000 tonnes of bananas a year for the EU market. Latin American countries can supply up to 2.1 million tonnes. 

Despite their 80% market share, the United States, Ecuador, Guatemala, Honduras and Mexico took the system to the WTO complaints body claiming discrimination.

The WTO eventually ruled against the banana trade pact's import licensing arrangements, the allocation of percentages of the tariff quota to countries that sign EU framework agreements on bananas (Colombia, Costa Rica, Venezuela and Nicaragua), the dividing up of quotas among ACP states and other aspects of the system. If the EU does not dismantle the system, it must compensate the complainants. 

The Commission says the proposed modifications greed Wednesday are designed to address these requirements. The plans includes cash support for a 10-year modernisation programme to make banana production more efficient in ACP states.  

In the new proposal, the tariff quota is maintained at its present level, 2.2 million tonnes, at a duty of ECU 75 (US $ 81) per tonne, as is the duty of ECU 765 (US $ 826) per tonne on imports beyond the quota.

In addition, a supplementary autonomous tariff quota of 353,000 tonnes at a duty of ECU 300 (US $ 324) per tonne is now proposed, "to take account of the EU's (membership) enlargement and to ensure adequate supplies to the (European) market".  

The plan proposes methods to target the quotas on 'traditional' ACP exporters -- which includes the producers most dependent on the trade preferences -- instead of broadly sharing out the quota between both 'traditional' and 'non-traditional' ACP producers.  

A specified share of the quota would continue to be allocated, but would only be granted to suppliers with a so-called "substantial interest". The other suppliers would have to compete for the remaining share.

Similarly the existing maximum quota 857,700 tonnes a year at zero duty would stay, but would not be distributed between individual ACP members. This would, say the Commission, "allow more flexibility for traditional ACP suppliers". Tariffs on 'non-traditional' suppliers would be increased to ECU 200 (216 dollars) per tonne.  

Importers of Latin American bananas will gain through the abolition of some licences and 'special export certificates,' says the Commission. 

These benefits are estimated at twice the amount that will have to be paid extra in duty payable on the extra 353,000 tonnes that the draft would add to the original 1993 quota to take account of the increase in EU membership.

The United States, home to the trio of multinationals that dominate the Central American banana industries, Dole, Del Monte and Chiquita Brands, is, however, saying that the draft fails to meet the WTO rules. 

Ecuador, the leading Latin American supplier of bananas to the EU, says the traditional Caribbean banana trade with Britain and France will survive the end of the licensing system. It argues that many licences granted to operators exporting from the Caribbean were already resold to traders exporting from Latin America. 

The Commission maintains that many ACP producers will lose out. "The amendments proposed will substantially alter the market conditions for traditional ACP suppliers," acknowledges the draft.

In order to enable traditional ACP suppliers to maintain their already small share of the EU market, the Commission proposes new technical and financial aid programmes, allocated according to the level of difficulty in each ACP state under the proposed system. "This will help them to adapt to the new market conditions and in particular toincrease the competitiveness of their production," said the Commission. 

Fischler says the fund budget will be decided after discussions on the EU budget in a few weeks, but the Commission is likely to propose funding of no more than 450 million ECUs, much less than amounts tabled previously. The aid will also be reduced over years. In contrast banana growers inside the EU itself, mainly in Spanish and French overseas territories, get a special deal that will increase aid if the price of EU bananas falls in the shops.