Opinion of the Economic and Social Committee on the "Proposal for a Council Regulation amending Regulation (EEC) No 404/93 on the common organisation of the market in bananas"

(2000/C 140/03)

On 29 November 1999 the Council decided to consult the Economic and Social Committee, under Article 198 of the Treaty establishing the European Community, on the above-mentioned proposal.

The Section for Agriculture, Rural Development and the Environment, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 15 March 2000. The rapporteur was Mr Barato Triguero.

At its 371st plenary session (meeting of 29 March 2000), the Economic and Social Committee adopted the following opinion by 73 votes to two, with four abstentions.

1. Introduction

1.1. The Commission proposes to amend the features of the banana regime which were condemned by the latest report of the WTO panel. Indeed, the Commission goes further than the conclusions of the report by proposing to replace the quota system by a flat tariff system.

1.2. The proposed amendment may prove less beneficial for EU banana growers than the regime introduced in 1993. The 1993 regime helped growers to improve infrastructure and marketing channels, and to adjust more closely to environmental requirements. Producers had to make major investments to boost their competitiveness and withstand competition from third country producers.

1.3. The amendment proposed by the Commission flagrantly contradicts the principle of preference for Community and ACP producers, and could even prejudice growers from other third countries as it is likely to trigger a major fall in prices on the EU market.

1.4. The Commission proposes the following:

1.4.1. The current quota system will be replaced by a flat tariff system, by 1 January 2006 at the latest.

1.4.2.

>TABLE>

1.4.2.1. For quota C, the Commission proposes a bidding procedure, with a tariff preference of EUR 275/t. for ACP producers. For quotas A and B, the ACP preference entails the application of zero duty.

1.4.2.2. The system for managing quotas A and B is not described in detail. The proposal simply states that licences may be allocated on the basis of traditional trade flows (traditional/newcomer method) or using other methods. However, no reference period is given, and it will be left to a Commission regulation to decide on this and all other matters relating to the allocation of licences.

1.4.2.3. The level of the additional quota may be increased if Community demand increases as indicated by a balance sheet of production/consumption and imports/exports. The management committee procedure will be used to determine and adopt the constituents of the balance sheet, and to establish the increased quota.

1.4.2.4. The Commission, in agreement with the WTO parties which have a substantial interest (Costa Rica, Colombia, Ecuador and Panama), may assign a fixed percentage of the tariff quotas to each of these four countries.

1.4.2.5. If necessary, or if supplies to the Community market are subject to exceptional circumstances affecting production or import conditions, the Commission will use the management committee procedure to establish the requisite specific measures.

1.4.3. It is proposed that the new system should enter into force on 1 April 2000.

1.5. The proposal to amend the common market regulation is accompanied by a recommendation for a Council decision authorising the Commission to negotiate with third countries the amendment of the customs tariff for bananas as bound in WTO.

2. General comments

2.1. The Committee acknowledges the further effort made by the Commission to bring Regulation 404/93 into line with the international commitments arising from the WTO and the fourth Lomé Convention.

2.2. The Committee accepts that the WTO panel verdict of 12 April 1999 obliges the EU again to amend the common organisation of the banana market. At the same time, the Committee regrets that the WTO Dispute Settlement Body does not operate in a transparent manner and that, when dealing with competition, it does not take account of actual production conditions, in terms of their social, environmental and sustainability implications. The Committee asks the Commission to pursue its efforts within the WTO to ensure that these concerns are taken into account.

2.3. However, the Committee considers that the Commission proposal does not provide the necessary guarantees for the marketing of EU and ACP bananas, since its provisions are less favourable than those of the last amendment to the common market organisation which entered into force on 1 January 1999. The introduction of a flat tariff will, in practice, give large operators a commercial advantage over small producers and cooperatives and their marketing channels, as large operators have greater resources and can exploit economies of scale enabling them to place more products on the market at lower costs.

2.4. The Committee is therefore concerned that the proposed amendments and, in particular, the automatic switch to a flat tariff system, may force EU and ACP banana growers out of business, as well as most non-multinational operators in the sector.

2.5. The Committee considers that the marketing of bananas produced under proper social conditions should be stepped up, so as to uphold farmers' right to incomes which allow them a decent standard of living - as enshrined in Article 33 of the EC Treaty - and which enable them to offer their workers a fair wage and working conditions that respect their basic rights.

2.6. The Committee thinks that the marketing of bananas produced under proper environmental conditions should also be stepped up by promoting sustainable farming techniques and other agri-environmental measures that can help safeguard our environmental heritage. This also means considering organic production and the role which agriculture plays in land management, upkeep of the rural environment, conservation of ethnographic values, and so on.

2.7. The Committee thinks that consumers must continue to be offered the full range of banana varieties currently available, so that they can opt for organic or "fair trade" bananas. The new system must therefore guarantee the co-existence on the market of EU, ACP and Latin American bananas that meet the various quality criteria, taking account of production and marketing conditions. With due account for the fact that the WTO does not allow discrimination between similar products which have been produced under different environmental and social conditions, European consumers can still enjoy the benefits of ecological production systems, and of properly monitored voluntary labelling of "fair trade" bananas (e.g. as is now done in the Windward Islands).

2.8. The Committee considers that EU producers should focus increasingly on quality, in terms not only of taste but also of nutritional properties and presentation, while respecting the environment and avoiding excess use of plant protection products.

3. Specific comments

3.1. The Committee thinks that the automatic switch to the flat tariff system proposed by the Commission is unjustified. Such a system is not required by the WTO panel, nor is it desired by the majority of plaintiff countries and by market operators. The Committee therefore cannot accept the establishment of a flat tariff, and thinks that a non-discriminatory quota system should be retained for at least ten years while exploring the possibility of introducing another system at the end of that period. The intervening period can be used to evaluate the impact of the new regime on employment, production structures, producer incomes and market prices in the EU's various producer regions.

3.2. The Committee thinks that the current level of the additional quota (353000 t.) is too high and that in the last few years it has led to over-supply, particularly in 1999 when prices were especially low. For this reason, the Committee considers that the quota should be revised in the light of market requirements, to a more realistic level.

3.3. The Committee considers that the chosen method for allocating import licences must allow small producers and distributors to enjoy the same market opportunities as the large multinationals. This is necessary in order to offer the consumer a free choice and value for money, while also satisfying health and environmental requirements.

3.3.1. The Committee therefore considers that the best way of allocating the licences is the "traditional/newcomers" method, based on verifiable import figures on customs certificates and a long-term historical reference period from which the operator would be able to select the best three years. The Committee considers that the "simultaneous examination" method would also be an appropriate way of allocating the import licences; however, as the plaintiff countries are firmly opposed to such a system, the Committee thinks that its adoption could lead to a further WTO dispute.

3.3.2. Consequently, the Committee thinks that the "traditional/newcomers" method offers the best way of meeting the requirements of the WTO panel and the expectations of ACP and Community producers. More broadly, this system could also improve the operation and transparency of the market.

3.3.3. The Committee therefore urges the Commission to continue its efforts to reach a consensus based on a historical reference system that secures the requisite WTO approval.

3.4. The Committee considers that accompanying measures will be needed to offset:

- the shortcomings of Regulation 404/93 as regards the calculation of compensatory aid;

- the non-application of some provisions of the Luxembourg compromise of June 1998 and the discrimination which this has caused;

- the impact which the amendment of the import system will have on Community producers.

3.4.1. These measures should include an increase in the flat-rate reference income for calculating compensatory aid, alongside other measures deemed necessary to guarantee Community banana growers an adequate income, so that none of them suffer as a result of adverse market conditions or natural disasters. An increase in the reference income is further justified by the new Article 299 of the EC Treaty, which provides a legal basis for establishing special conditions for the application of Community policies in the outermost regions.

3.5. The Committee considers that account must be taken of the political instability in Somalia, which is currently preventing it from exporting its bananas to the EU market on a regular basis. Somali producers should receive direct special aid.

3.6. Greater use should be made of the OECD guidelines on multinational companies' environmental, social and consumer behaviour in developing countries.

4. Conclusions

4.1. The Committee is mindful of the need to bring the banana import arrangements established by Regulation (EEC) 404/93 into line with the ruling of the WTO panel, and thus to end the retaliatory measures taken unilaterally by the United States against imports of certain EU products. The Committee deeply deplores the fact that the WTO's terms of reference do not include such criteria as the right to development, the sustainability of production, and social considerations. The WTO does not take account of real production conditions or the need to retain a balance between societies and regions. The Committee opposes unilateral, arbitrary measures that run counter to a multilateral, concerted drive to resolve trade disputes fairly. The Committee thinks that compliance with the conclusions of the WTO panel must not compromise the efficiency of the common market organisation in achieving its fundamental objectives, particularly in maintaining the market access guarantee for Community and ACP bananas, ensuring a decent income for their producers, and giving consumers access to a varied range of bananas of different origins at reasonable prices throughout the Community.

4.1.1. The Committee therefore hopes that account will be taken of its arguments regarding the present amendment of the common market organisation for bananas. Under no circumstances can the Committee accept that Community preference, a fundamental pillar of the CAP, be dismantled because of the loss of guaranteed market access for Community producers. The Committee also considers it essential to preserve the preferential access to the Community market granted to ACP producers under the Lomé agreements, which are a cornerstone of the Community's external and development policies. A consensual solution must be found which is compatible with WTO rules.

Brussels, 29 March 2000.

The President

of the Economic and Social Committee

Beatrice Rangoni Machiavelli