Communication from the Commission to the European Parliament - Special Framework of Assistance for Traditional ACP Suppliers of Bananas (Council Regulation 856/1999) - Biennial Report from the Commission 2000
Date: 2001-02-07
Institutions: European Commission
Subjects: ACP countries, aid system, financial aid, import, technical cooperation, tropical fruit

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 07.02.2001
COM(2001) 67 final

COMMUNICATION FROM THE COMMISSION
TO THE EUROPEAN PARLIAMENT

Special Framework of Assistance for Traditional ACP Suppliers of Bananas

(Council Regulation 856/1999)

Biennial Report from the Commission

2000

1.

INTRODUCTION

Traditional ACP producers of bananas had been favoured under the Lomé convention with an
assurance that their access to the European market would be no less favourable than the past.
This assurance was provided by EC Regulation 404/93 with ACP duty free country-specific
quantities. In order to assist traditional ACP countries to adjust to the changes in the market
following the introduction of Regulation 404/93, a special system of assistance to help
countries increase their efficiency of production was put in place under Council Regulation
2686/94 of 31 October 1994 and Budget Line B7-5023. This system came to an end in 1998,
but disbursements still continue. An evaluation of the system was made in 1999.

Following a ruling in 1997 by the Dispute Settlement Body of the World Trade Organisation,
the Commission’s import regime was found not to be completely in conformity with the
WTO.

In response, the EU introduced amendments to its import regime on 1 January 19991. The
revised regime continued duty free access for traditional ACP producers but under a global
ACP quantity of 857,500 tons.

Certain aspects of the new regime were again successfully challenged in the WTO in 1999
and the USA imposed trade sanctions of $ 191.4 mn per year on EU exports to the USA.

In order to assist the ACP countries concerned to adapt to the new realities of the market, a
new special framework of assistance (SFA) was introduced in 1999.

2.

LEGAL BACKGROUND TO THE SPECIAL FRAMEWORK OF ASSISTANCE (SFA)

Council Regulation (EC) No 856/19992 establishing a special framework of assistance (SFA)
for traditional ACP suppliers of bananas was adopted on 22 April 1999. The Regulation
provides for financial and technical assistance to twelve ACP countries, taking account of
changes in the marketing arrangements for bananas in Europe following the amendments to
the import regime introduced on 1 January 1999.

Commission Regulation (EC) No 1609/19993
implementation of the Council Regulation was adopted on 22 July 1999.

laying down the detailed rules for the

A Commission Decision4 fixing the amounts available in 1999 under the special framework
of assistance for a total of
45 mn was published on 30 September 1999. A second
€
Commission Decision was made on 18 July 2000 for the 2000 budget line (

44.5 mn).

€

1

2

3

4

Council Regulation (EC) No 1637/98 amending Regulation (EEC) No 404/93 on the common
organisation of the market in bananas.
OJ L 108, 27.4.1999, p. 2
OJ L 190, 23.7.1999, p. 14
OJ L 280, 30.10.1999, p. 122

2

Objectives

The overall objective of this programme of assistance is an improvement of competitiveness
of traditional ACP banana production. The Council Regulation aims to achieve this goal by
funding projects designed inter alia to increase banana productivity. Funding is also being
made available for diversification where no sustainable increase in competitivity in the
banana sector can be foreseen. The method for calculating eligibility for funding is based
upon a competitivity gap formula.

Reporting

Article 9 of the Council Regulation specifies that by 31 December 2000, and every two years
thereafter, the Commission shall present a report, accompanied if appropriate by proposals, on
the operation of this Regulation to the European Parliament and to the Council. The present
report is in fulfilment of this requirement.

3.

MARKET BACKGROUND

The world banana market is dominated on the consumption side by the US and EU markets
each of which consume between 3.5 mn and 4.0 mn tons of bananas a year. The USA imports
practically all its bananas, while the EU imports about 80 per cent (the remaining twenty per
cent coming from Community producers). On the production side, producers in Latin
America supply all the US market and about 80 per cent of EU imports, leaving some 20 per
cent of imports for ACP producers. Because of the supply restricting provisions of the EU
banana regime, prices in the European market are approximately twice those in the USA and
Eastern Europe.

€

558 per ton in 1999) to an ACP average of

Banana prices at point of import into Europe vary widely between Latin American supplies
745 for the
(averaging
Windward Islands alone. These figures give some idea of the gaps in competitivity between
the Latin American suppliers and the ACP suppliers, and of the improvements in productivity
that the SFA is aiming to attain.

620 per ton, to

€

€

Banana prices weakened in 1999 mainly as a result of abundant supplies entering
international trade coupled with constrained demand growth in the emerging markets of the
former USSR and China. During the course of 2000, banana prices slumped to unusually low
levels, declining to $ 307 per ton in the US in July and $ 622 per ton in Europe in June. While
prices do fluctuate through the year, these prices were only 62 per cent of the yearly average
prices in 1998.

A small part of the slump in the European market may reflect the issue of fraudulent licences
for Ecuador banana imports into southern Italy. On 9 June 2000 a joint team of Italian
officials and OLAF investigators discovered that 101 false import certificates had been
presented in order to import fraudulently into the Community over 160,000 tons of bananas
since March 1998.

3

4.

AMENDING THE EU REGIME FOLLOWING THE WTO RULINGS

Following detailed discussions with interested parties the Commission put forward a proposal
to the Council to amend Regulation 404/93 in November 1999. This proposal included a
transitional tariff quota system, with three quotas being established, prior to the introduction
of a tariff only system by 2006 at the latest. During discussions with third parties it became
evident that a system of quota management with licence distribution based on traditional trade
flows with a historical reference period was the preferred option.

After months of intensive discussions it seemed that a tariff quota system either based upon
licences allocated on historical performance or auctioning would be difficult to achieve, and
that the discussions on historical reference periods were at an impasse. Thus the Commission
proposed in its Communication to the Council in July that the Commission should conclude
its examination of the First Come, First Served (FCFS) method of quota management. This
was accepted by the Council and in October 2000 following its assessment of the FCFS
method, the Commission presented a further Communication to the Council indicating that it
considered the FCFS method a viable option. The Commission put
forward several
amendments to its November proposal:
€

• The fixing of a maximum tariff of

300 per ton in the third quota (instead of fixing the

tariff by tender system as originally proposed in November 1999),

• The increase to a maximum of the ACP preference, from

€

275 per ton to

€

300 per ton,

• The possibility for the Commission to reduce the maximum tariff in the thrid quota.

The Communication was reviewed in the General Affairs Council of 9 October 2000 in
Luxembourg. A formal Council position is expected once the European Parliament has
expressed its opinion. An ACP-EU Joint Parliamentary Assembly resolution on the reform of
the EU banana regime was made during its session in Brussels from 9 to 12 October.

5.

BUDGET LINE 1999

In the first half of 1999, country strategies were prepared by nine of the twelve traditional
banana producing ACP countries, and presented to the EDF Committee for information.
Somalia was unable to submit a strategy or an investment proposal because of continuing civil
strife and absence of a national authority. Madagascar was unable to submit a strategy or an
investment proposal because of over-stretched capacities in the national authorising office.
The strategy document for Cape Verde arrived too late in the year for the necessary
administrative procedures to be completed in time. After due consideration of need and
1,100,000 between
efficiency considerations, the Commission reallocated the amount of
Ivory Coast (
500,000) in November 1999. Thus nine country
proposals were received and approved in 1999, following EDF Committee submissions, for a
total of

600,000) and Grenada (

44.5 mn (see Table 1).

€

€

€

€

Eight of the nine financing agreements for 1999 were signed by the Commission on
27 August 2000. The Ivory Coast financing agreement is to be signed in November following
the conclusion of a dialogue between the Commission and the national authorities on
procedural matters relating to the respective roles of the NAO and the Banana Association
(OCAB).

4

6.

BUDGET LINE 2000

Following the announcement of the indicative country allocations for 2000 on 4 April, eleven
financing proposals were received by the end of May. Only Somalia did not present a
proposal. SCR was unable to give its approval on procedural grounds to a proposal from
Madagascar to use the funds for diversification on the basis of an existing MoU relating to
Stabex.

€

As a result of Somalia and Madagascar not qualifying for budget line finance in 2000, a sum
of
1.6 mn was available for re-allocation. The Commission decided on 11 October that
€
400,000 be set aside for a monitoring consultancy, and that additional resources be made
200,000), Cape Verde
available to Belize (
€
(
250,000), on grounds of efficiency, and capacity to use the
funds effectively within the time frame.

100,000), and Ivory Coast (

400,000), St Vincent (

250,000), Cameroon (

€

€

€

€

The ten financing proposals will be considered by the EDF committee in October, November
ten country
and December, following which financing decisions will be made for all
proposals by the end of 2000 for a total amount of
400,000 being
committed for monitoring consultancies (see Table 1).

44,075,000, with

€

€

7.

INCREASING BANANA COMPETITIVITY OR DIVERSIFICATION?

The Council Regulation permits beneficiary countries to use the finance available for
technical and financial assistance to improve competitiveness in the banana sector or to
support diversification where improvement in the competitiveness of the banana sector is not
sustainable. In practice, most beneficiary countries have opted for banana competitiveness in
their strategies, even against the increasing uncertainty of the future EU banana regime. The
evaluation study for the earlier budget line suggests that Ivory Coast and Cameroon have the
best chances of competing on costs with Costa Rica or Ecuador5.

Only the Windwards have made specific allocations for diversification (both agricultural and
economic) and, in the case of St Lucia, for social recovery for those falling out of the
industry. It should be noted that the Windwards have received considerable amounts of
Stabex funds which have been used in the past for banana productivity improvements, and
more recently for diversification and social recovery purposes. Cameroon, Belize and Ivory
Coast have made allocations in favour of improving social conditions for banana plantation
workers.

With the decline in banana prices and worsening expectations as to the future course of prices,
the ACP countries have been asked by the Commission to reconsider their strategies with a
view to putting more of the SFA finance into diversification.

5

Evaluation of EU Assistance to ACP Banana Producers under Regulation 2686/94, Nordic Consulting
Group/University of Birmingham/Synergie, January 2000.

5

8.

STRENGTHENING ECONOMIC AND FINANCIAL ANALYSES

A common feature of financing proposals has been a weakness in their economic and
financial analyses. Inter alia, this makes it difficult to arrive at informed judgements about the
inter-country and inter-sectoral allocation of investment funds.

To remedy the situation, terms of reference have been prepared for a consultancy which will
help to strengthen the economic and financial analyses, initially in Jamaica and Cameroon,
and eventually to all the principal beneficiary countries. A particular feature of the study will
be an assessment of the future market prospects for ACP banana producers in the light of
forthcoming changes to the EU banana regime in the Commission’s bid to make it WTO
compatible.

9.

ARRANGEMENTS FOR MONITORING

In order to obtain comparative and current information on progress achieved, and for the task
team to be able to make recommendations on any modification of sectoral or country
allocations in a meaningful manner, consultants will be engaged in 2000 for an initial period
of two years to make annual visits to each of the major recipient countries. In consultation
with the Commission Delegations concerned, they will report on improvements in efficiency
in the production and marketing of bananas. Where relevant, they will also review progress in
diversification. Financial provision for this consultancy has been made in the Commission
Decision for 2000.

10.

CONCLUSIONS

The Commission concludes that the Special Framework of Assistance foreseen in Council
Regulation 856/1999 is being put into effect in accordance with the rules of implementation
laid down in Commission Regulation 1609/1999.

It
is too early to assess the impact of the SFA funds on banana productivity and/or
diversification in the countries concerned, but arrangements are in hand for these to be fully
assessed by monitors recruited for this purpose.

6

TABLE 1

BANANA BUDGET LINE B7-8710

COUNTRY ALLOCATIONS 1999 AND 2000
as at 2 october 2000

Budget Line B7-8710
Special Framework of Assistance for Traditional ACP Suppliers of Bananas

Initial Allocation
1999
€

Revised Allocation
1999
€

Initial Allocation *
2000
€

Revised Allocation
2000
€

6.200.000
500.000
4.100.000
500.000
600.000
11.900.000

5.300.000
3.100.000
8.500.000
6.100.000
500.000
6.500.000
3.100.000
33.100.000

6.200.000

4.700.000

10.900.000

5.300.000
3.100.000
8.500.000
6.100.000
1.000.000
6.500.000
3.100.000
33.600.000

5.500.000
500.000
4.100.000
500.000
1.100.000
11.700.000

5.300.000
2.700.000
8.875.000
6.200.000
500.000
6.500.000
2.700.000
32.775.000

45.000.000

44.500.000

44.475.000

5.700.000
600.000
4.350.000
0
0
10.650.000

5.300.000
3.100.000
8.875.000
6.450.000
500.000
6.500.000
2.700.000
33.425.000
400.000
44.475.000

Africa
Cameroon
Cape Verde
Ivory Coast
Madagascar
Somalia
sub-total
Caribbean
Jamaica
Belize
St Lucia
St Vincent
Grenada
Dominica
Suriname
sub-total
monitoring
Total
*

as approved by the Commission on 18 July 2000 E/2000/1055 - C(2000)1993
Décision de la Commission fixant les montants disponsibles en 2000 au titre de cadre
spécial d'assistance en faveur des fournisseurs ACP traditionels de bananes

7