Why EU banana reform doesn't please everyone

Reform of the banana market started on 1 January with the liberalisation of the import regime. After a number of amendments forced by the WTO, the new regime was rushed through in order to be in place by January 2006, as agreed at the WTO Doha Ministerial held in 2001.

What made the new regulation controversial was the fact that bananas imported form Latin America must still pay a duty, while a duty-free annual import quota of 775,000 tons for bananas from certain African, Caribbean and Pacific (ACP) countries was put in place.

This has caused Latin American-based companies such as Chiquita to criticise the reforms.

In any case, the reform process is continuing with a re-examination of the internal aspects of the Common Market Organisation (CMO). A consultation, which is currently being carried out, closes on 8 May 2006.

The CMO regulates aid to European banana producers. Based on four reform options and a series of topics, the European Commission has launched a public consultation to build a richer information database on the challenges of the reform.

The four reform options are as follows:

The 'Status Quo'.​

This approach looks at the consequences of keeping the current system, taking recent and expected changes to the import regime into account.

Decoupling.​

This supposes that aid to banana producers will be integrated into the decoupled single payment scheme introduced by the last CAP reform.

The Memorandum approach​.

This option is close to that tabled by the Member State banana producers.

And finally, POSEI​.

This envisages that banana CMO funds will be transferred to the POSEI programmes established to support agriculture in the outermost regions of the Union.

The EC believes that the topics study various aspects of the banana production chain, the influence of commercial chains on supply and competition on the European market. In addition, the commission wants to examine how the impact of banana production on the environment can be improved.

The four options also take into account issues such as organic and fair-trade bananas, as well as the potential for synergies between European and ACP banana producers and how they can be built

The EC says that by analysing these options and topics, the consequences and impact of different possibilities for the future of the banana regime should be made clearer.

Some banana suppliers are of course already feeling the effects of the reform. Leading banana supplier Chiquita has increased its prices in Europe and the US in a move designed to offset the negative impact of higher tariffs.

According to the company, the higher prices have resulted from a strategic shift in sales to more premium Chiquita-label fruit, which sells at significantly higher prices than the company's second-label fruit, in addition to the impact of higher tariffs and other industry costs.​

With Latin America being Chiquita's primary source of bananas, the new reform has had a negative effect. The new banana tariff, which increased to 176 from 75 per ton, results in an increase in cost of around 1.84 ($2.20) for each box of bananas imported by Chiquita into the EU form Latin America, said the company.

Based on its 2005 volumes, the company this year expects to incur tariff costs of around $110m.

The new tariff system is designed to help importers from ACP countries compete, and give them greater European market access. But the numerous amendments forced through by the WTO, and the continued opposition from Latin American suppliers, illustrates how trade liberalisation remains an arbitrary process.