Summary
EU banana producers have expressed fears over the impact any EU-Mercosur banana tariff concessions could have on the level of banana imports from Brazil. Based on recent trends in EU banana imports in response to tariff reductions these fears have solid foundations. However from an ACP perspective such fears should not be overstated with the likely market effects of increased Brazilian banana exports to the EU needing to be seen in the context of all the wider sources of pressure on the EU market position of ACP banana exporters. Individual ACP banana exporters will need to evaluate the specific implications of any new Mercosur agreement tariff concessions for the particular EU banana market components they serve. Where necessary enhanced marketing and product differentiation strategies will need to be set in place in order to maintain their current export trade to the EU. However, it needs to be recognized this will not be possible for all existing ACP banana exporters.
EU banana producers have expressed concerns the new EU-Mercosur Agreement could ‘increases the risk of a banana oversupply in Europe’. The Association of Banana Producers of the Canaries (Asprocan) has highlighted how ‘Brazil produces about seven million tons of bananas a year’, with ‘some of the most important multinationals in the banana production and export sectors’ having major production interests in Brazil (1).
Asprocan complained that on the basis of the information so far provided by the EU on the agreement concluded with Mercosur countries ‘it was not yet clear what tariffs the bananas would be subject to’. Asprocan fears that were a similar reduced tariff quota to that established for banana exporters from Ecuador, Colombia, Peru, Costa Rica, Panama, El Salvador, Honduras, and Guatemala to be granted to Brazilian banana exporters under the Mercosur agreement, this would result in a large scale increase in Brazilian banana exports to the EU. This would be a result of the import tariff on Brazilian banana falling form the current level of €114 per metric tonne to €75 per MT (1). This it is felt would then reverse the recent decline in EU imports of bananas from Brazil.
Thus while currently Brazilian banana exports to the EU are relatively small (see table) Asprocan believes ‘Brazilian banana production has great agronomic potential’ in the banana sector (having reached a high of 7.3 million tonnes in 2011). In addition it is held Brazil has in place ‘the infrastructure and the necessary experience to increase their exports of bananas’ to the EU (1).
| Comment and Analysis
The fears of EU banana producers in regard to the impact which tariff concession for imports of bananas under the EU-Mercosur Agreement could have on import levels from Brazil are firmly rooted in the pattern of the evolution of EU banana imports in response to granting of tariff concessions. From 2013 the EU began granting a series of reduced tariff TRQs for $ banana suppliers in South and Central America. These banana TRQ arrangements with Peru and Colombia entered into force on 1st March and 1st August 2013 respectively, with similar TRQs for Honduras, Nicaragua and Panama also entering into effect on 1st August 2013. Similar concessions were subsequently introduced for Costa Rica, Guatemala, and El Salvador. This saw EU banana imports increase: · 24.6% from Colombia between 2013 and 2017; · 14.3% from Peru between 2013 and 2018; · 44.0% from Costa Rica between 2013 and 2018; · 22.3% from Panama between 2013 and 2018; · 225.6% from Honduras between 2013 and 2018 It also saw Nicaragua re-emerge as a significant banana supplier, with exports to the EU increasing from zero in 2014 to 81,306 tonnes in 2018. In contrast with Ecuador standing aside from the Andean Pact agreement until 2017, standard EU MFN tariffs continued to be applied from 2013 to 2017. As a consequence between 2014 and 2016 Ecuador’s banana exports to the EU fell 12% (from 1,514,160 tonnes in 2014 to 1,332,575 tonnes in 2016). It was only from 2017 when Ecuador acceded to the Andean Pact-EU FTA that the same tariff reduction as other $ banana suppliers were enjoyed by Ecuadorian banana exporters on the EU market. This saw the decline in Ecuadorian banana export volumes reversed and renewed highs attained, with between 2016 and 2018 Ecuadorian banana exports to the EU increasing 24%. To date Brazil has not enjoyed any such reduced tariff access on its banana exports to the EU. As a consequence between 2011 and 2018 the volume of Brazil’s banana exports to the EU fell a massive 83.2% from 52,323 tonnes to 8,771 tonnes. This occurred despite a 27.4% increase in overall EU28 banana imports over this period. These trends strongly suggest that were a reduced tariff TRQ to be established for Brazilian bananas then exports to the EU could once again take off. This could easily see Brazilian banana export to the EU market reach and exceed the recent 2006 peak level of Brazilian banana exports to the EU market of 95,775 tonnes. However this needs to be seen in a context where between 2013 and 2018 total EU28 banana imports increased 1,165,168 tonnes, while a no-deal Brexit will remove some 1,017,458 tonnes of demand from the EU market served by existing banana sector TRQs. These contrary trends and developments provide the wider context for Asprocan’s concerns. Against this background the impact of any reduced tariff access for Brazilian banana exporters should therefore not be overstated. Rather any new reduced tariff access for Brazilian bananas will simply compound wider pressures on the EU market position of ACP banana exporters. Pressures which in the last few years have seen both a decline in the overall EU banana market share of ACP exporters and reduced earnings on banana sales. This being noted not all ACP banana suppliers are in the same position, with enhanced marketing and product differentiation strategies seeing some ACP exporters expanding their banana exports to the EU28 market. Each individual ACP banana exporter will therefore need to evaluate the specific implications of any new Mercosur agreement tariff concessions for Brazilian banana exporters for the particular EU banana market components which they serve. Trends in EU Imports of bananas 2011-2018 (tonnes)
Source: EC Market Access Data Base https://madb.europa.eu/madb/statistical_form.htm |
Sources:
(1) freshfruitportal.com, ‘EU Mercosur trade deal increases risk of banana oversupply, says Canary Islands group’, July 11, 2019
https://www.freshfruitportal.com/news/2019/07/11/eu-mercosur-trade-deal-increases-risk-of-banana-oversupply-says-canary-islands-group