Summary
At the beginning of 2020 Ecuador secured the benefits of the tariff reductions included in the EU-Andean Pact FTA. Ecuadorian exporters believe this will further stimulate banana exports to the EU, in a context where Ecuador already accounts for 1 in 4 bananas imported to the EU. It is unclear what the impact of the Covid-19 pandemic will be on Ecuador’s banana export trade to the EU. The Ecuadorian experience highlights the importance of the tariffs applied to banana imports on trade flows. In this context two issues arise for African banana exporters, namely: the future MFN tariffs the UK plans to apply to banana imports after it has left the EU customs union and whether the UK will unilaterally roll over existing duty free access for Ghanaian, Cameroonian and Ivorian banana exports, given the Covid-19 interruptions of ongoing negotiations on ‘UK-only’ Continuity Agreements which were intended to replace the EU trade agreement which will lapse once the UK leaves the EU customs union. African banana exporters have actively made their economic development concerns known to the UK government. It remains to be seen just how the UK government will respond to these concerns.
At the beginning of 2020, the process of reducing import tariffs on Ecuadorian banana imports into the EU following Ecuador’s accession to the Andean Pact EU free trade area (FTA) agreement was completed. Between 2016 and 2020 import tariffs have fallen each annually from €114/tonne to €97/tonne to €90/tonne to €83/tonne and final from 1st January 2020 to €75/tonne. This is the same tariff applied to other preferred $ banana suppliers who have FTAs in place with the EU (1).
This needs to be seen in a context where Ecuadorian banana exporters have been losing market share to competing $ banana suppliers, due to Ecuador’s relatively high cost structure and the tariff disadvantage. This being noted, the Ecuadorian Federation of Exporters argues the impact of the gradual phase down of tariffs on bananas to date has been “absolutely” positive since it has stimulated an increase in $ earnings of 7% on average over the first two years of the tariff phase down (2017 and 2018). This it was held saw an increase in the number of Ecuadorian banana exporters from 1,300 companies to 1,450 companies (1).
EU28 Main Sources of Fresh Banana imports (08039010) -2019 (€ & tonnes)
| Country | Value | % share total | Tonnes | % share total |
| TOTAL | 3,827,811,229 | 5,881,636 | ||
| Ecuador * | 886,870,937 | 23.2% | 1,479,746 | 25.2% |
| Colombia * | 840,966,761 | 22.0% | 1,406,074 | 23.9% |
| Costa Rica* | 730,522,787 | 19.1% | 1,159,095 | 19.7% |
| Panama* | 253,526,034 | 6.6% | 285,876 | 4.9% |
| Dom Republic° | 252,107,744 | 6.6% | 365,148 | 6.2% |
| Ivory Coast° | 250,650,225 | 6.5% | 339,297 | 5.8% |
| Cameroon° | 173,667,234 | 4.5% | 188,566 | 3.2% |
| Peru* | 81,627,906 | 2.1% | 110,677 | 1.9% |
| Ghana° | 73,091,268 | 1.9% | 85,118 | 1.4% |
| Belize° | 54,185,321 | 1.4% | 85,928 | 1.5% |
| Nicaragua* | 39,518,435 | 1.0% | 74,654 | 1.3% |
| Mexico* | 17,214,988 | 0.4% | 29,400 | 0.5% |
| Honduras* | 16,295,944 | 0.4% | 20,453 | 0.3% |
| Suriname° | 12,076,344 | 0.3% | 19,147 | 0.3% |
| Brazil** | 12,075,545 | 0.3% | 18,258 | 0.3% |
| St Lucia° | 3,935,405 | 0.1% | 6,448 | 0.1% |
| Angola° | 2,646,455 | 0.07% | 4,889 | 0.1% |
| Sub-Total | 96.47% | 5,678,774 | 96.55% |
° duty free access
* reduced duty access of €75/tonne
** Full MFN duty paid €114/tonne
EC figures suggest the landed value of Ecuadorian banana exports to the EU in Euro terms increased 17.4% in 2017 compared to 2016 and a further 9.6% in 2018 compared to 2017. This would appear to confirm the benefits Ecuadorian banana exports gained from accession to the EU-Andean Pact FTA in 2017 (2).
However, the landed value of Ecuadorian banana exports fell 7.9% in 2019 compare to 2018 (2), suggesting that price competitiveness challenges remained (1).The decline in the volume of earnings on Ecuadorian banana exports to the EU in 2019 was attributed to the expansion of Guatemalan exports (from 157,177 tonnes to 204,373 tonnes (2)) at ‘lower prices’. This has led to a displacement of Ecuadorian banana from markets in Germany, Belgium, and Italy (3).
It was argued that in the absence of Ecuador’s accession to the Andean Pact FTA in 2017 and the associated tariff reductions, not would Ecuador’s relative position on the EU market have declined but so would the absolute volume and value of exports. The hope in Ecuador is that the introduction of a €75/tonne import tariff will assist Ecuadorian exports in regaining their relative competitiveness on the EU market.
It is unclear what the impact of the Covid-19 pandemic will be on Ecuador’s banana export trade to the EU, given the logistical problems faced in serving the Chinese market (and now also the EU market) and the reduction in Russian import demand linked to the halving of the oil price (4).
Ecuadorian Banana Exports to the UK as a % of the EU28 market 2015-2018
| 2015 | 2016 | 2017 | 2018 | 2019 | % change 2016-19 | |
| Value (€) EU | 826,178,380 | 776,594,530 | 911,750,465 | 998,836,049 | 920,035,416 | +11.4% |
| Value (€) UK | 75,429,635 | 54,610,200 | 69,576,144 | 59,927,235 | 57,503,240 | -23.8% |
| UK % | 9.1% | 7.0% | 7.6% | 6.0% | 6.2% | |
| Volume (T) EU | 1,398,979 | 1,332,748 | 1,520,282 | 1,657,300 | 1,521,991 | +8.8% |
| Volume (T) UK | 138,394 | 113,709 | 145,054 | 126,895 | 120,298 | -13.1% |
| % UK | 9.9% | 8.5% | 9.5% | 7.7% | 7.9% |
Source: EC Market Access Data Base
The significance of the UK market in Ecuador’s exports to the EU has been declining in the past 5 years, with the UK market accounting for a far lower % of Ecuadorian banana exports than the EU than the UK’s overall role as a market for bananas within the EU.
Ecuador is however a major exporter of organic and Fairtrade bananas with the UK being the leading EU market for Fairtrade and dual certified bananas (5, 6).
| Comment and Analysis The Ecuadorian experience holds some important lessons for ACP banana exporters. First at the pan-ACP level it highlights the importance of the outcome of the UK’s MFN tariff review. Given the earlier articulation by the then Secretary of State for Trade Liam Fox of a potential ‘zero production, zero MFN tariff’ approach to the review and the absence of any domestic UK production of bananas there have been long standing concerns the UK government would simply abolish MFN tariffs on bananas. This saw the pan-African banana exporters association, Afruibana organize an information visit by African banana exporters to London in February 2020 to explain the serious implications of the adoption of a zero UK MFN tariff for bananas to UK official, Ministers and Parliamentarians. This also saw Afruibana, the ACP Ambassadorial sub-Committee on Bananas, the Government of Belize, and the Banana Producers Association of Ghana amongst others, submitted memos to the UK government as part of the UK governments on-line requesting the maintenance by the UK of existing MFN tariffs on bananas. The subsequent announcement of the introduction of full duty-free access for bananas under the EFTA-Ecuador agreement has only served to heighten the concerns of ACP banana exporters (7). This is a matter of concern since in the event of a no-deal UK departure from the EU customs union and single market the UK could well seek membership or associate membership of EFTA. While the results of the UK’s MFN review were expected in April, the presentations of the outcome of the review has been put on hold, as a result of the effects of the Covid-19 pandemic. It remains to be seen whether the efforts of African banana exporters and concerned African and Caribbean banana exporters will have been effective in ensuring a continuation of the application by the UK government of current MFN tariffs for banana after 1st January 2021. The second issue of concern relates to the situation of African banana exporters in Ghana, Cote d’Ivoire and Cameroon, where the transportation and movement constraints arising as a result of the Covid-19 pandemic have led to the suspension of face to face negotiations with the UK over the conclusion of UK only ‘Continuity Agreements’. The trajectory of the global pandemic is such that transportation and movement constraints are likely to remain in place throughout 2020 and into 2021. With the EU/UK negotiations on future relations similarly disrupted by the Covid-19 pandemic and the prospects of an agreement before the end of the year looking unlikely, the UK governments’ ongoing insistence on leaving the EU customs union and single market by 1st January 2021 regardless of the state of play in EU/UK trade negotiations, is a matter of growing concern. This would mean the EU trade agreements which currently govern the terms and conditions of access to the UK market throughout the transition period, would come to an end on 31st December 2020. In the absence of a UK only Continuity Agreement, banana exporters in Ghana, Cote d’Ivoire and Cameroon would face the re-imposition of the €114/tonne MFN tariff. This needs to be seen in a context where bananas exports account for 51% of Cameroonian direct exports to the UK market, 12% of Ivorian direct exports to the UK market, 5% of Ghanaian direct exports to the UK market. In light of the Covid-19 disruptions to ongoing trade negotiations with the UK, a strong case exists for a reinstating of the Transitional Protection Mechanism proposed by the UK in October 2019, which was intended to avoid a sudden disruption of trade relations by extending current duty free access until the bilateral ‘Continuity Agreement’ negotiations with the UK could be completed. Any loss of duty-free access for these African banana exporters would drive them out of the UK market regardless of the MFN tariff the UK government may choose to apply to bananas.
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Sources
(1) ecuadortimes.net, ‘Ecuador now on equal terms regarding banana exports to EU’, Jan 2020
https://www.freshplaza.com/article/9177659/ecuador-now-on-equal-terms-regarding-banana-exports-to-eu/
(2) EC, Market Access Data Base
https://madb.europa.eu/madb/statistical_form.htm
(3) freshfruitportal.com, ‘Ecuadorian bananas Total exports rise but EU, U.S. take smaller share’, 12 September 2019
https://www.freshfruitportal.com/news/2019/09/12/ecuadorian-bananas-total-exports-rise-but-eu-u-s-take-smaller-share
(4) freshfruitportal.com, ‘Banana exports from Ecuador Expect Challenges’, 9 March 2020
https://www.freshfruitportal.com/news/2020/03/09/banana-exports-from-ecuador-expect-challenges/
(5) producebuisnessuk, ‘Rising Ecuador shouts about heightened sustainability efforts, banana quality’, 5 October 2018
https://www.producebusinessuk.com/insight/insight-stories/2018/10/05/ecuador-to-shout-about-heightened-sustainability-efforts-banana-quality
(6) freshplaza.com, ‘Demand for organic banana increases steadily’, 19 February 2019
https://www.freshplaza.com/article/9073447/ecuador-demand-for-organic-bananas-increases-steadily/
(7) ANNEX V, REFERRED TO IN ARTICLE 2.2, SCHEDULE OF TARIFF COMMITMENTS ON GOODS, COMMITMENTS OF SWITZERLAND ON GOODS ORIGINATING IN ECUADOR
https://www.efta.int/sites/default/files/documents/legal-texts/free-trade-relations/ecuador/efta-ecuador-annex-V-schedule-of-tariff-commitments-on-goods-switzerland.pdf