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'
Date: 2000-03-29
Institutions: European Economic and Social Committee
Subjects: EU production, Lomé Convention, United States, World Trade Organisation, import, tropical fruit

C 140/6

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Official Journal of the European Communities

18.5.2000

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.

1.4.2.2.
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. How-
ever, 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.

1.2.
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.

1.4.2.3.
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.

The

1.3.
amendment proposed by the Commission
flagrantly contradicts the principle of preference for Com-
munity 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.

The Commission,

1.4.2.4.
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.

The Commission proposes the following:

1.4.1.
tariff system, by 1 January 2006 at the latest.

The current quota system will be replaced by a flat

1.4.2.
three tariff quotas:

During the six-year transitional period, there will be

Quota A

2,2 million tonnes at EUR 75/t.

Quota B

353 000 tonnes at EUR 75/t.

Quota C

850 000 tonnes (variable tariff).

If necessary, or if supplies to the Community
1.4.2.5.
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.
force on 1 April 2000.

It is proposed that the new system should enter into

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.

1.5.
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.

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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.

The Committee accepts that the WTO panel verdict of
2.2.
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 Com-
mission to pursue its efforts within the WTO to ensure that
these concerns are taken into account.

2.3.
However, the Committee considers that the Com-
mission 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 chan-
nels, 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 pro-
posed 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.

The Committee considers that

2.5.
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.

2.7.
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 con-
sumers 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).

The Committee considers that EU producers should
2.8.
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 estab-
lishment 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 (353 000 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.

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.

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.

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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 certifi-
cates 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.

Consequently, the Committee thinks that the ‘tra-
3.3.2.
ditional/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.

The Committee considers that accompanying measures

3.4.
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.

Brussels, 29 March 2000.

The Committee considers that account must be taken
3.5.
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.

The President

of the Economic and Social Committee

Beatrice RANGONI MACHIAVELLI