Summary
Fairtrade banana sales in France have grown rapidly following the ‘sourcing decisions by major supermarket chains’. St Lucian exporters are now seeking to target the French Fairtrade banana market in light of the Brexit related uncertainties. However the consumer trend towards dual certified Fairtrade/Organic bananas poses challenges for St Lucian exporters, given the absence of treatments for Black Sigatoka (black leaf streak) in wet tropical regions which are accepted by organic certifiers. This suggests the UK market will remain of considerable importance. This highlights the need for CARIFORUM leaders need to launch a political dialogue with UK on the need to retain both existing MFN banana sector tariff in the longer term and existing quota ceilings on reduced tariff access, determined on a pro-rata basis through the apportionment of existing bilaterally negotiated EU banana TRQs between the UK and EU27 market. In addressing the TRQ apportionment issue CARIFORUM leaders could usefully ally with political leaders in African banana exporting countries, who would be most severely impacted by the disruptions on EU27 markets which would follow on from any mismanagement of the apportionment of existing EU bilaterally negotiated banana TRQs.
In 2018 sales of ‘Fairtrade labelled bananas in France grew by 36%’, reaching 64,000 tonnes. This was the equivalent of 18.2% of extra-EU imports into France and 1.06% of extra-EU banana imports. Given domestic French production this is equivalent to almost 10% of the French market and 10% of total global Fairtrade banana sales (1).
Globally in 2017 ‘fair trade banana sales worldwide generated more than € 31 million in development bonus, benefiting 147 producer and worker organizations in the Dominican Republic, Colombia, Peru, Ecuador, Ghana’. Around half of Fairtrade bananas are also organically certified (1).
There has been a strong growth in Fairtrade banana sales in France since 2014, with this trend being driven by consumer choice and the ‘sourcing decisions by major supermarket chains’. In 2018 the decision of Monoprix alone to sell Fairtrade bananas, tripled the value of Fairtrade sales in a year. For Carrefour meanwhile Fairtrade bananas represent 1 in every 3 bananas sold (1).
This is potentially good news for St Lucian banana exporters, where the industry is facing tough times. Not only is production regularly disrupted by tropical storms but Brexit related uncertainties, which threaten fundamental banana sector trade policy changes in the St Lucia’s main EU market, the UK, could undermine established EU markets for St Lucian banana exports (2). Against this background in May 2019 it was announced government officials had travelled to London and Paris to explore new markets on the back of a first order for bananas from France (3).
However it has been suggested the prices being offered by French importers for St Lucian bananas would not be commercially viable without some form of subsidy.
In addition a new consumer trend is underway towards dual certified Fairtrade/organic bananas (4), with the supply of dual certified bananas being unable to keep up with demand growth (5). Unfortunately in wet tropical production zones such as those in St Lucia, there are disease constraints on making organic production the norm. The fungal infection Black Sigatoka (black leaf streak) places serious limits on organic production of Cavendish bananas. Given the currently available treatments accepted by organic certifiers organic bananas can only be regularly produced in dry production areas with less than 600 mm of rainfall per year. The absence of effective organic fungicide for the control of black leaf streak, seriously limits the possibilities for organic banana production in wet tropical regions (6). Against this background the consumer trend towards dual certified Fairtrade/organic bananas is potentially problematical in the marketing of St. Lucian Fairtrade bananas (2).
Currently amongst ACP countries the Dominican Republic is the leading producer of organic/Fairtrade bananas. Peru and Colombia are the other leading non-ACP organic producers (1).
| Comment and Analysis While for St Lucian banana producers the future of their duty free quota free access to the UK market is secured through the initialing on the 22nd March 2019 of a Continuity Agreement between the UK and CARIFORUM member government, the threat remains of a possible change in UK MFN tariffs. While currently under its temporary no-deal Brexit MFN tariff schedule the UK is committed to maintaining the current high MFN tariffs on bananas in recognition of the importance of the margins of tariff preference issue for certain developing countries, it is unclear how long this temporary policy will be maintained (for a summary of details of the UK’s proposed no-deal MFN tariff schedule see companion epamonitoring.net article ‘The UK’s Proposed New MFN Tariff Regime: Protects ACP Interests in the Short Term But’, 14 March 2019).The announced temporary UK MFN tariff regime is scheduled to run for up to a year from the date of a UK ‘no deal’ withdrawal from the EU. During this period, a comprehensive review of the UK’s MFN tariffs is to be undertaken. This review needs to be seen in the context of statement by the Secretary of State for International Trade Liam Fox, that he sees no reason why MFN tariffs should not be lowered to zero in products where the UK has no production interest (e.g. for bananas).A second related threat to St Lucia’s position on the UK market is how existing TRQ arrangements for bananas under EU trade agreements are to be dealt with under ‘UK-only’ Continuity Agreements.Since the text of how the banana TRQ issue has been dealt with under the Continuity Agreement the UK signed with Colombia, Ecuador and Peru on 15th May 2019 has not yet been made public (7), it remains unclear whether the existing EU TRQ has beena) apportioned in line with current exports to the UK market; b) arbitrarily determined by the UK government; or c) simply abandoned. While the UK government appears to be committed to re-sizing its bilateral TRQ commitments in line with its departure from the EU it is unclear just how this is to be brought about and whether this would result in an increased level of reduced duty competition on the UK market from Colombia, Peru, and Ecuador, under the newly concluded ‘Continuity Agreement with these Andean Pact countries. This would be a particular source of concern in regard to imports from Peru and Colombia given the dual Fairtrade/Organic certification some producers in these countries enjoy. This is also an issue of concern to Fairtrade banana exporters from Ghana and the Dominican Republic for whom the UK market is particularly important in their trade with the EU. Share of the UK in Total Banana Exports to the EU from leading African and Caribbean Banana exporters
Source: EC Market Access Data Base http://madb.europa.eu/madb/statistical_form.htm Indeed, the issue of whether or not there is an apportionment of existing EU banana TRQs has implications for the functioning of EU27 markets. If existing EU28 TRQ access for bananas was to be concentrated on EU27 markets, in the absence of UK banana import demand from the EU banana market equation, then this would constitute a serious increase in competition from the reduced duty access allowed non-ACP bananas (see companion epamonitoring.net article ‘Why Eliminating UK MFN Tariffs on Bananas Would be Bad News for ACP Banana Exporters’, 11 March 2018). Recent statement by EC officials at civil society dialogue meetings indicate the EU27 will fully take over all bilaterally negotiated TRQ obligations established to date for the EU28 market. This is potentially problematical in the banana sectors and could result in over an additional 700,000 tonnes of bananas being sent to the EU27 market under EU bilaterally negotiated TRQ arrangements for bananas. Against this background the issue of the UK’s future MFN tariff regime for bananas is an area where CARIFORUM leaders need to engage in an essentially political dialogue with UK politicians to ensure that the current development friendly approach to UK MFN tariff policy enshrined in the UK’s temporary tariff schedule is extended and bananas do not get caught up in the emerging ‘zero production-zero-tariff’ approach, which appears to be favoured by Secretary of State for International Trade Liam Fox. CARIFORUM leaders will also need to urgently lobby the UK and EU leaders on the need for a managed division of existing bilaterally negotiated banana TRQs. This needs to build on the agreed EU/UK apportionment approach which both parties wish to see applied to EU WTO agreed TRQs. In such lobbying efforts CARIFORUM leaders could usefully ally with leaders from African banana exporting countries (Cameroon and Cote d’Ivoire) whose exports are highly vulnerable to the disruption of EU27 banana markets which would arise if existing EU bilaterally negotiated TRQs for bananas were to be exclusively focussed on EU27 markets. However given the most recent EC statements in the context of civil society dialogue, this boat may already have sailed. |
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Sources:
(1) Freshplaza.com, ‘Fairtrade bananas more and more popular in France’, 3 May 2019
https://www.freshplaza.com/article/9099760/fairtrade-bananas-more-and-more-popular-in-france/
(2) freshplaza.com, ‘Saint Lucia banana farmers brace for tough times as UK demand diminishes’, 15 Feb 2019
https://www.freshplaza.com/article/9072742/saint-lucia-banana-farmers-brace-for-tough-times-as-uk-demand-diminishes/
(3) St. Lucia Times, ‘NWU Applauds Move To Seek New Banana Markets’, May 28, 2019
https://stluciatimes.com/nwu-applauds-move-to-seek-new-banana-markets/
(4) ‘Fairtrade and organic are the future of the banana market’, 27 March 2019
https://www.freshplaza.com/article/9085208/fairtrade-and-organic-are-the-future-of-the-banana-market/
(5) freshplaza.com, ‘Meeting demand is biggest challenge for organic banana growers’, 31 Jan 2019
https://www.freshplaza.com/article/9067310/meeting-demand-is-biggest-challenge-for-organic-banana-growers/
(6) promusa.org, ‘Whats in store for organic bananas’, 27 May 2019
http://www.promusa.org/blogpost615-What-s-in-store-for-organic-bananas
(7) gov.uk, ‘UK signs trade continuity agreement with Colombia, Ecuador and Peru’, 15 May 2019
https://www.gov.uk/government/news/uk-signs-trade-continuity-agreement-with-colombia-ecuador-and-peru