Banana deal: Latin exports to grow, aid softens blow for others

Geneva, 15 December 2009
The new deal on EU banana import tariffs will be a boon to Latin American exporters but would trigger a drop in exports of the fruit from African, Caribbean and Pacific (ACP) countries, according to a study from the International Centre for Trade and Sustainable Development. But the blow to ACP banana exporters may be cushioned by the aid money that the EU has promised in conjunction with the deal, the study concludes.

The Geneva Agreement on Trade in Bananas, due to be initialled today, will close the door on a long-standing dispute over the preferential access for bananas granted to Europe's former colonies, which Latin American producers charge are in violation of WTO rules.

The agreement will cut the EU tariff faced by Latin American exporters to €114 per tonne from the current €176 per tonne over a period of several years - giving ACP countries time to adjust to fiercer competition. The tariff cuts kick off with an initial reduction of €28 per tonne as a down payment.

The ICTSD study, by Professor Giovanni Anania of the University of Calabria, projects that, after the cuts, EU imports of bananas will increase by 6 percent. ACP exports to the EU will decrease by 14 percent, and there will be a 17 percent increase in exports from other countries, largely Latin American.

The study shows that ACP countries will face smaller export revenue losses if the Geneva Agreement on Trade in Bananasand a Doha Round deal are concluded together. Both the Latin American and ACP exporters would in fact benefit most if the banana deal is part of a broader Doha Round deal - meaning that the two groups "share at least one common interest," says Anania.

Lower tariffs across the world will open up markets for both Latin American and ACP bananas, Anania explains, and this increased access will partially compensate for the drop in ACP exports to the EU.

Anania finds that, with the banana deal in place, thanks to the preferences granted to them by the EU with the Economic Partnership Agreements in 2008, ACP exports are likely to grow by around 100 percent in the period examined in the study. Without the Geneva Agreement on Trade in Bananas, exports would have grown by around 130 percent over the same period.

Latin American and ACP countries, together, could stand to lose US$381 million in export revenues after the cuts if a banana deal occurs without a Doha agreement in place. ACP countries alone would lose US$40 million.

The study cautions policy makers on the need to provide aid to increase the competitiveness of ACP banana exports. Under the Banana Adjustment Measures, a precondition for an agreement, the EU will provide €190 million to help improve competitiveness, economic diversification and to mitigate the social consequences of adjustment for the ACP.

An agreement on bananas is widely viewed as a critical condition for a conclusion to the stalled WTO Doha Round of trade negotiations.

The study is online at: http://ictsd.net/i/publications/50782/

Development / Accra / Ghana / Africa / Modernghana.com