Banana Accompanying Measures (BAM) - briefing
17 March 2010by eub2 -- last modified 17 March 2010
The European Commission has adopted a €190 million support package for banana exporters from African, Caribbean and Pacific (ACP) states. This proposal was part of the historic Geneva Agreement on Trade in Bananas. The EU concluded this deal with Latin American countries and the US in December 2009 which settles 15 years banana disputes. It also cuts the tariff which the EU applies to bananas imported from Latin American countries. Today's measures aim to support ACP banana exporters to adjust to this new trading environment, taking into account each country's specific situation. The measures will focus on three goals: boosting the banana sector's competitiveness, promoting economic diversification and addressing broader social, economic and environmental impacts.
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Why is the Commission proposing these measures?
Banana exports from the African, Caribbean and Pacific (ACP) group of countries have enjoyed preferential access to the EU for decades. But this trade regime has been subject to more than 15 years of legal disputes in the World Trade Organisation (WTO).
In December 2009, the EU finally reached an agreement with all parties concerned. The agreement reconciles the legitimate interests of two sets of developing countries exporting bananas - Latin American countries on the one hand, and ACP countries on the other. It will cut the EU's banana tariff for Latin American countries - its so-called Most Favoured Nation or MFN tariff - so the preferential margin which ACP countries enjoy will fall.
But ACP preferences will remain. The EU applies no import tariffs or quotas on bananas from ACP countries, and that will continue, under the terms of new Economic Partnership Agreements (EPAs) between the EU and groups of neighbouring ACP countries.
In addition, the EU will continue its longstanding financial support to the banana sector in ACP countries. The Banana Accompanying Measures (BAM) are designed to help those countries adjust to new trade realities over the next few years.
Has the Commission evaluated its past support programmes?
The Special Framework of Assistance (SFA) to traditional ACP banana supplying countries was assessed every two years (1999-2008). Within the 'banana package' approved today, the final report on this programme is transmitted to the Parliament. It highlights the importance of continued support to ACP banana-exporting countries during an adjustment period.
We know from the evaluation of the previous SFA programme the consequences of doing nothing. Although not always a major sector of the broad economy, banana production for export is an important factor in the rural fabric of the ACP countries concerned. The BAM show Europe's continued commitment to supporting these populations.
Which countries will benefit from the BAM?
The Commission has pre-identified main ACP banana-exporting countries on the basis of their volume of exports to the EU. Ten countries exported more than 10,000 tonnes on average over the past decade:
In Africa: Cameroon, Côte d'Ivoire and Ghana;
In the Caribbean: Belize, Dominica, Dominican Republic, Jamaica, St. Lucia, St. Vincent & The Grenadines and Suriname.
Other ACP countries had much lower export volumes amounting to a maximum of a few hundred tonnes per year.
How much money? What was the basis for the amount?
In total €190 million for ten countries over four years, 2010-2013.
Under the previous programme (SFA), financial support to the sector averaged €37.5 million per year. The Banana Accompanying Measures take this average as a basis and factor in the increase in export volumes.
How will the money be distributed?
The Commission proposes three criteria:
* Volume of banana trade with the EU;
* Importance of banana exports to the EU to the country's economy;
* Level of development (as measured by an internationally recognised measure, such as the UN's HDI)
When will the programme be kicking off?
The BAM measures will be programmed and country-specific activities defined during 2010 and start to be implemented from early 2011 onwards. It is important to underline that the SFA programme is continuing to deliver support and the final actions agreed in 2008 run through to the end of 2012.
Where will the funds come from?
The Commission's proposal is to source the funds from the EU's General Budget. In order to be coherent in our development cooperation we propose to integrate the programme within the EU's main development cooperation instrument (the DCI 1905/2006). These funds will therefore be in addition to the European Development Fund (EDF), which finances cooperation with ACP countries.
Will ACP countries still be able to export to the EU market?
Yes. We have been supporting ACP producers for many years. Since 1994, the EU has provided more than €450m to ACP banana-exporting countries to help them adapt to changes. This money has helped them to produce bananas more competitively, or to diversify their economies into other areas. In addition to regular EU aid, main ACP banana-exporting countries will receive BAM support to help them adjust to the new tariff. Those that will no longer be competitive will be supported in their diversification efforts – as we have done in the past. Furthermore:
1. Bananas from ACP countries have entered the EU duty- and quota-free since 2008, thanks to Economic Partnership Agreements (EPAs). This will continue.
2. The EU will still apply a duty on bananas coming from other countries. This so-called MFN duty will fall, from the current €176 per tonne to €114. But only gradually – over at least seven years.
3. The deal provides predictability, which is important for investment. It ends legal disputes at the WTO pitting the US and Latin American countries against the EU. It also allows the EU to set a tariff on bananas to which all other WTO members have agreed. So it will make the global market in bananas more predictable and stable, and thereby encourage investment and growth, and hopefully increased attention to wider production condition issues in the banana supply chains.
What will the economic and social consequences of the tariff cuts be?
The situation across ACP countries varies heavily: a reduction in tariffs could lead some of the less competitive countries to stop their banana exports to the EU, whilst in other countries the banana export sector could adjust with additional restructuring efforts.
The Commission has analysed the possible impact of the changes in EU banana tariffs. Whilst the tariff reductions are unlikely to have major impacts in countries at the macroeconomic level, at the local level, the implications will depend on the specific cost structure of the banana sector and the room for possible cost saving measures. With adequate and targeted support, challenges can be addressed.
What will the money be used for? How will the measures help countries' banana industries in concrete terms?
The Banana Accompanying Measures would be country-specific, build on past support, and help tackle broader consequences. The support will help to boost the banana sector's competitiveness and/or diversification according to the partner countries' own strategies; taking into consideration broader social, economic and environmental impacts.
Past programmes funded by the EU to improve the competitiveness of the banana industries have been successful across the board. Over the past years, EU imports of bananas from the ACP group have increased in both absolute and relative terms. Suriname is an excellent case in point of a country that went from less than 20,000 tonnes of exports to the EU in 2004 to +65,000 tonnes in 2008.
Will banana producers in the EU's outermost regions still be able to compete?
Yes. Banana producers within the EU have expressed concerns that they will become less competitive compared to Latin American exporters.
But the EU's important domestic support programme for these regions addresses their concerns (the Programme d'options spécifiques à l'éloignement et l'insularité, or POSEI).
In fact, in 2006, the EU increased annual funding for bananas within this programme to €279 million. And a Commission impact assessment found that by keeping tariff cuts within certain thresholds, and providing financial aid of this kind, the EU would limit the impact of tariff cuts on its domestic producers.
How big is the EU's banana market? Where do the bananas come from?
In 2008, EU consumers bought more than 5.4 million tonnes of bananas. The EU imported almost 90% of the bananas it consumed - around 4.8 million tonnes, worth €2.9 billion. Annex 1 gives more details.
Five EU countries supplied the remaining 11%: Cyprus; the French overseas departments of Guadeloupe and Martinique; Greece; Portugal (Madeira and the mainland); and the Spanish Canary Islands.
What happens next?
The Commission's proposal will be forwarded to the Council and the European Parliament.
Source: European Commission
