Summary
Brexit is likely to give rise to 3 distinct challenges for ACP banana exporters: retaining preferential access to the UK market; dealing with the market consequences of a possible abolition of duties on banana imports into the UK; dealing with the increased competition on EU27 markets as a result of the application of banana sector TRQs under bilaterally negotiated EU FTAs. While to date overall ACP banana exporters have expanded their exports to the EU28 despite expanded TRQ access for $ banana suppliers, the situation varies greatly between different ACP exporters. With Caribbean small island banana exporters largely being squeezed out of EU markets since 2007. However, the past strong trade performance of some ACP banana exporters since 2007 is no guarantee of future competitiveness. Market adjustment support may be required to ACP producers and exporters in adjusting to the market consequences of Brexit in the banana sector. The EC will also need to take account of the impact of expanded TRQ access on ACP banana suppliers in its application of the stabilisation mechanism set in place to protect EU banana producers.
- Main ACP banana exporters
While there are some 21 ACP countries with recorded banana exports to the EU, only 7 ACP countries can be considered as having a banana trade with the EU which is nationally significant. Of these, four are in the Caribbean (Dominican Republic, Belize, Suriname and St Lucia) and three in Africa (Ivory Coast and Cameroon, Ghana). In 2016 ACP countries accounted for 1,170,294 tonnes of total EU banana imports of 5,564,703 tonnes, some 21% of total EU banana imports. (1)
Three countries dominate this ACP trade (Dominican Republic, Ivory Coast, Cameroon), exporting in 2016 some 980,829 tonnes of banana to the EU at a value of €750 million. Since the lifting of quantitative restriction on imports of bananas from ACP countries in 2008, these three leading ACP banana exporters increased the volume of their exports by 59%, while the value of exports increased 86%.
Behind these three leading ACP suppliers there are three middle tier suppliers (Belize, Suriname and Ghana), which in 2016 collectively provided some 179,485 tonnes of bananas to the EU market, for a total value of €139 million. Exports from these three suppliers grew 15.5% in volume between 2007 and 2016, while the value of exports grew 86.4% (1).
Meanwhile banana exports from St Lucia have continued to fall from 30,498 tonnes in 2007 to a mere 7,397 tonnes in 2016 (- 76%), with revenues falling from €19.2 million in 2007 to €4.95 million in 2016 (-75%). While still a major export in trade with the EU accounting for 57% of the value of exports to the EU in 2016, this is below the 89% of total exports to the EU which bananas accounted for in trade with the EU in 2003. However the total value of exports to the EU fell from €23.6 m in 2003 to €8.8 m in 2016 (-63%). (1)
ACP Banana exports to the EU (tonnes)
| 2007 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | |
| Dominica Rep |
206,391 |
303,724 |
326,902 |
294,786 |
322,973 |
342,486 |
327,283 |
375,453 |
| Ivory Coast | 189,369 | 244,323 | 224,146 | 224,949 | 252,169 | 252,780 | 254,308 | 308,261 |
| Cameroon | 221,848 | 243,021 | 237,418 | 214,505 | 250,373 | 257,203 | 278,293 | 297,115 |
| Belize |
62,356 |
78,818 |
72,446 |
99,289 |
96,763 |
100,708 |
98,970 |
71,741 |
| Suriname |
58,799 |
70,436 |
62,913 |
83,133 |
80,956 |
72,594 |
58,583 |
49,738 |
| Ghana |
34,280 |
52,631 |
47,420 |
50,932 |
42,952 |
46,725 |
51,264 |
58,006 |
| St Lucia |
30,498 |
23,173 |
6,206 |
12,149 |
12,387 |
8,915 |
8,399 |
7,397 |
ACP Banana exports to the EU (€‘000)
| 2007 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | |
| Dominica Rep | 124,628 | 208,635 | 213,782 | 201,503 | 217,585 | 239,823 | 263,923 | 287,153 |
| Ivory Coast | 127,682 | 154,326 | 127,137 | 136,009 | 157,426 | 169,321 | 185,294 | 229,136 |
| Cameroon | 150,961 | 144,793 | 149,427 | 141,185 | 175,462 | 189,225 | 219,464 | 235,339 |
| Belize |
33,363 |
48,357 |
42,506 |
59,143 |
53,891 |
56,291 |
66,050 |
46,704 |
| Suriname |
19,835 |
31,256 |
28,865 |
41,495 |
41,469 |
38,689 |
32,969 |
42,886 |
| Ghana |
20,906 |
38,355 |
33,418 |
34,709 |
30,661 |
30,410 |
39,410 |
49,080 |
| St Lucia |
19,200 |
14,495 |
3,911 |
8,118 |
7,901 |
5,914 |
6,277 |
4,953 |
Source: EC, Market Access Data Base
- Dependency on the UK market
While the UK accounts for 20% of total EU banana imports it takes fully 1/3 of total ACP banana exports to the EU. ACP banana exporters to the EU are thus much more dependent on the UK market than other extra-EU banana suppliers (1).
Of the 3 leading ACP banana exporters in 2016, while Ivory Coast and Cameroon have an average dependency on the UK market (13.9% and 14.1% respectively), the Dominican Republic depended on the UK market for 58.3% of the volume of its banana exports to the EU.
Belize and Ghana has a similarly excessively high dependence on the UK market for their banana exports to the EU (69% and 54% respectively), St Lucia meanwhile has an exclusive dependence on the UK market, while Surinam exports no bananas directly to the UK market.
Against this background if existing tariff preferences for ACP banana exporters to the UK are not extended from 30th March 2019, then the Dominican Republic, Belize, Ghana and St Lucia could see their banana trade with the EU significantly disrupted.
Banana exports to the EU and UK 2016 Volume and value (tonnes & Euro)
| Tonnes | € ‘000 | |||||
| EU | UK | UK % share | EU | UK | UK % share | |
| Dominica Rep |
375,453 |
218,905 |
58.3% |
287,153 |
157,575 |
54.9% |
| Suriname |
49,738 |
0 |
0% |
42,886 |
0 |
0% |
| Ivory Coast |
308,261 |
43,246 |
14.0% |
229,136 |
31,813 |
13.9% |
| Cameroon |
297,115 |
44,926 |
15.1% |
235,339 |
33,165 |
14.1% |
| Belize |
71,741 |
43,869 |
61.1% |
46,704 |
32,219 |
69.0% |
| Ghana |
58,006 |
31,496 |
54.3% |
49,080 |
26,438 |
53.9% |
| St Lucia |
7,397 |
7,397 |
100% |
4,953 |
4,953 |
100% |
Source: EC, Market Access Data Base
However this is but one dimension of the possible impact of Brexit on the UK banana market. It needs to be borne in mind that with no domestic production of bananas, once frees from EU policies the UK may simply abolish all import duties on bananas, greatly intensifying competition for ACP suppliers on the UK market.
In addition the impact on the UK market is not the only banana sector dimension of Brexit. The departure of the UK from the EU will also shrink overall EU banana import demand, while existing EU banana sector TRQ commitments under bilateral trade agreements will remain unchanged. However, following the departure of the UK these bilateral banana TRQs will only apply to the territory of the EU27 countries.
- Impact of Brexit on functioning EU27 markets
This needs to be seen in a context where the principal trade development underway in the EU banana market is the rolling out of expanded reduced tariff market access to the EU banana market under the EU’s association agreements with Andean Pact and Central American countries. The agreement with Peru and Colombia entered into force on 1st March and 1st August 2013 respectively, while the agreement with Honduras, Nicaragua and Panama entered into force on 1st August 2013 (2), with similar concessions being subsequently introduced for Ecuador, Costa Rica, Guatemala and El Salvador (3).
These agreements will see the tariff on imports of bananas into the territory of the EU from these countries progressively reduced from €145/tonne in 2010 to €75/tonne in 2020. Alongside these tariff reductions, the volume of bananas covered by such reduced tariff arrangements will have increased from 2,929,500 tonnes in 2010 to 5,246,361 tonnes in 2015 and 6,136,150 from 2019 (see table).
EU $ Banana TRQs 2015 and 2019+
| Reduced Duty TRQs | |||
| Country | 2015 (€110/t) | 2019+ (€75/t) | |
| Colombia (Andean Pact FTA) |
1,687,500 |
1,957,500 |
|
| Ecuador (Andean Pact FTA) (6) |
1,645,111 |
1,957,500 |
|
| Costa Rica (Central American FTAs) |
1,281,250 |
1,486,250 |
|
| Panama (Central American FTAs) |
468,750 |
543,750 |
|
| Peru (Andean Pact FTA) |
86,250 |
101,250 |
|
| Guatemala (Central American FTAs) |
62,500 |
72,500 |
|
| Nicaragua (Central American FTAs) |
12,500 |
14,500 |
|
| El Salvador (Central American FTAs) |
2,500 |
2,900 |
|
| Mexico (Bilateral FTA) |
*2,000 |
2,000 |
|
| Sub total |
5,248,361 |
6,136,3150 |
|
* Duty €70/tonne
This constitutes a 109.5% increase in the volume of reduced tariff access between 2010 and 2020. This TRQ tonnage will exceed total extra EU28 banana imports in 2016 (which amounted to 5,564,703 tonnes).
This is causing serious concerns amongst EU banana producers, with the EC committing to ‘stabilization mechanism in the case of banana imports so as to protect the interests of European producers’. This ‘will allow the suspension of preferences… after a given export volume’ has been attained. (9). According to the European Parliament rapporteur on the EU-Ecuador trade agreement Marielle de Sarnez ‘Ecuador’s accession to the trade agreement had a “significant impact” on EU banana producers’ and ‘might possibly destabilize a sector which plays an essential role in the outermost regions and is responsible for 37,000 jobs’.) She claimed that while Ecuador will have preferential access to the EU market, the interests of EU growers will be ‘protected by a temporary stabilisation mechanism’. Significantly in a joint declaration the EC has committed to ‘review the situation in two years’ time’, at which point it ‘may extend the protection mechanism, should the position of European growers worsen’ (10).
This provides the context in which the UK’s departure from the EU is scheduled to occur on 30th March 2019.
In 2016 the UK accounted for 20% of total EU banana consumption. Thus while by 2020 reduced duty TRQ access to the EU27 market will have increased significantly the size of the EU banana market will have been reduced by 20%. Against this background the question arises: what will be the impact of the proportional increase in competition on EU27 markets on the competitive position of ACP banana exports to EU27 countries?
In 2016 these EU27 markets took 66.6% of ACP banana exports to the EU28 amounting to some 779,365 tonnes. To put this in perspective, in 2016 $ banana exporters who enjoy reduced duty TRQ access to the EU28 market, exported around 693,861 tonnes of bananas to the UK. If, given the lapsing of the EU trade agreements with Central American and Andean Pact countries, current TRQ based tariff preferences on the UK market is lost, this could see the 693,861 tonnes of bananas currently exported to the UK market redirected to EU27 markets. This would be likely to greatly intensify the competitive challenge arising for ACP banana exporters from the expansion of reduced duty TRQ access which is underway under bilateral EU trade agreements.
| Comment and Analysis The expansion of reduced duty TRQ access to the EU market for $ banana exporters is indicative of the kind of challenges which will be compounded by the trade consequences of Brexit. However the foregoing can be seen as representing a ‘worst case’ scenario in terms of increased competition for ACP banana exports on EU27 markets.This ‘worst case’ scenario however needs to be balanced against the 15% expansion of per capita banana consumption since 2004. This expansion in per capita banana consumption has been driven by market liberalization and the consequent relative cheapness of bananas as well as their year round availability (5). A continuation of this growth in per capita banana consumption could ease the competitive pressures on EU27 markets arising from the UK’s departure from the EU.This increase in banana consumption has also been supported by the increased variety of bananas available. This ranges from fair-trade and organic bananas, through baby bananas to red bananas and other specialty bananas. Overall since 2006 (the year in which the EU import regime was modified) EU banana imports have grown 23.6% in volume terms. Despite earlier expectations, imports of both $ bananas (both under TRQs and MFN arrangements) and ACP bananas have grown in recent years. Since 2006 the volume of ACP banana exports to EU28 countries has increased 31%, while the volume of $ banana exports to the EU28 have increased 21.7%. This has increased the ACP EU28 market share from 19.8% to 21.0%. While this suggests to date ACP banana exporters as a group have not been as severely affected by preference erosion since 2006 as was initially feared, this masks divergent trends. The strong ACP banana export performance was accounted for largely by the Dominican Republic, whose exports not only increased 112% in volume terms but by 161% in value terms (reflecting a concentration of banana exports in dual certified fairtrade/organic bananas). There was also been an increase in exports from Ivory Coast and Cameroon (39.1% and 18.4% respectively) and the rise of Ghana as an ACP banana exporter (+ 157%). In contrast traditional Caribbean island exporters have largely fallen out of EU supply chains, with exports falling from 99,437 tonnes in 2006 to a mere 7,468 tonnes in 2016. Recent trends suggest the situation of ACP exporters is likely to deteriorate in the coming years, as competition increases from $ banana exporters in niche markets as well as the generic market. In this context there are already indications Peru is moving strongly into organic banana exports (7). These trends are likely to be compounded by the banana market effects of Brexit, which will impact not only on sales of ACP bananas on the UK market but also on EU27 markets. Against the background of the adjustment needs arising from the market effects of Brexit, consideration my need to be given to ACP countries approaching the EU for the establishment of a dedicated marketing adjustment support programme aimed at assisting ACP producers and exporters in adjusting to the market consequences of Brexit in the banana, and other affected sectors of export interest to ACP countries. At a minimum the EC should commit to taking into account the expansion of exports from preferred $ banana suppliers on ACP banana exporters in their deployment of the stabilization mechanism’ set in place to minimise the commercial damage to domestic EU banana producers, arising from expanded TRQ access. |
Source:
(1) EC, Market Access Data Base
http://trade.ec.europa.eu/doclib/docs/2014/september/tradoc_152796.pdf
(2) Eurofresh Distribution Magazine, ‘Bananas: 10 years of import regime in the EU’, 29 April 2016
http://www.eurofresh-distribution.com/news/bananas-10-years-import-regime-eu
(3) EC, ‘Bananas other than plantains’, September 2013
https://ec.europa.eu/agriculture/sites/agriculture/files/bananas/fact-sheet_en.pdf
(4) EU Official Journal of the European Union, L 141/3, ‘Geneva Agreement on Trade in Bananas’, 9.6.2010
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2010:141:0003:0005:EN:PDF
(5) Fruitnet.com, ‘Bananas buck EU consumption trend’, 21 April 2016
http://www.fruitnet.com/eurofruit/article/168521/bananas-buck-eu-consumption-trend
(6) EU-Ecuador FTA, Explanatory Notes to the EU Offer
http://trade.ec.europa.eu/doclib/docs/2014/september/tradoc_152796.pdf
(7) Freshplaza.com, ‘Peru Organic banana exports grow by19%’, 22 August 2016
http://www.freshplaza.com/article/162276/Peru-Organic-banana-exports-grow-by-19-procent
(8) EC, ‘EU banana sector’ 14 March 2017
https://ec.europa.eu/agriculture/sites/agriculture/files/fruit-and-vegetables/product-reports/bananas/reports/market_2017_en.pdf
(9) Europa Press, ‘Ecuador EU agreement will protect European bananas’, 15 December 2016
http://www.freshplaza.com/article/168268/Ecuador-EU-agreement-will-protect-European-bananas
(10) Freshplaza.com, ‘MEPs approve safeguards against Ecuadorian banana surge’, February 06, 2017
http://www.freshfruitportal.com/news/2017/02/06/europe-meps-approve-safeguards-ecuadorian-banana-surge
| Key words: Bananas, Dominican Republic, Belize, Suriname, St Lucia, Ivory Coast, Cameroon, Ghana, BREXIT Area for Posting: Caribbean EPA, West African EPA, Central African EPA, BREXIT |