REPORT on the proposal for a Council regulation establishing a special framework of assistance for traditional ACP suppliers of bananas (COM(98)0005 - C4-0263/98 - 98/0014(SYN)) Draftsmen of the opinions (Hughes Procedure):Mrs Maria Celeste Cardona, Committee on BudgetsMrs Encarnación Redondo Jiménez, Committee on Agriculture and Rural Development

16 June 1998

Committee on Development and Cooperation
Rapporteur: Mr Peter Liese

By letter of 11 May 1998 the Council consulted Parliament, pursuant to Article 189c and Article 130w of the EC Treaty, on the proposal for a Council Regulation establishing a special framework of assistance for traditional ACP suppliers of bananas.

At the sitting of 11 May 1998 the President of Parliament announced that he had referred this proposal to the Committee on Development and Cooperation as the committee responsible and the Committee on Budgets and the Committee on Agriculture and Rural Development for their opinions.

At the sitting of 15 May 1998 the President announced that this report should be drawn up in accordance with the 'Hughes' Procedure by the Committee on Development and Cooperation, the Committee on Budgets and the Committee on Agriculture and Rural Development.

At its meeting of 25 February 1998 the Committee on Development and Cooperation appointed Mr Peter Liese rapporteur.

By letter of 12 June 1998 the Council requested urgent procedure pursuant to Rule 97 of the Rules of Procedure.

At its sitting of 16 June 1998 Parliament approved the request.

The Committee on Development and Cooperation considered the Commission proposal and the draft report at its meeting of 16 June 1998 and adopted the draft legislative resolutionwith no opposing votes and 2 abstentions.

The following took part in the vote/were present for the vote:Rocard, chairman; Liese, rapporteur; Aldo, Carlotti, Corrie, Cunningham, Delcroix (for Vecchi), Fernandez Martín, Gröner (for Lööw), Günther, Hawlicek (for Paasio), Howitt (for David), Junker, Kinnock, Maij-Weggen (for Pomes Ruiz), McGowan, Medina (for Torres Couto), Lord Plumb, Pons Grau, Robles Piquer, Sandbaek, Sauquillo Perez del Arco, Telkämper.

The opinions of the Committee on Budgets and the Committee on Agriculture and Rural Development are attached.

The report was tabled on 16 June 1998.

The deadline for tabling amendments is 5 p.m. on Wednesday 17 June 1998.

A. LEGISLATIVE PROPOSAL - DRAFT LEGISLATIVE RESOLUTION

Proposal for a Council Regulation establishing a special framework of assistance for traditional ACP suppliers of bananas

(COM(98)0005 - C4-0263/98 - 98/0014(SYN))

The proposal is approved with the following amendments:

Text proposed by the Commission[1]

Amendments by Parliament

(Amendment 1)

Recital 1a (new)

Whereas the European Union is bound by the undertakings it made to the ACP countries under the Lomé Convention, and more particularly its Protocol No 5, which seeks to guarantee maintenance for the ACP States of their advantages on the European market, access to that market in conditions that may not be less favourable than those that they previously enjoyed, and improvement of production and marketing conditions for ACP bananas;

(Amendment 2)

Recital 1b (new)

Whereas the Community banana regime and the trade preferences it involves are real instruments of development for a good many ACP countries;

(Amendment 3)

Recital 5

Whereas these modifications have substantially altered the market conditions for traditional ACP suppliers;

Whereas these modifications have substantially altered the market conditions for traditional ACP suppliers and might, in particular, harm the most disadvantaged suppliers;

(Amendment 4)

Recital 7

Whereas technical and financial assistance, additional to that provided for in the fourth ACP-EC Convention, should therefore be granted to traditional ACP suppliers to enable them to adapt to new market conditions and in particular to improve competitiveness; whereas at the same time environment-friendly production and marketing methods should be encouraged;

Whereas technical and financial assistance, additional to that provided for in the fourth ACP-EC Convention, should therefore be granted to traditional ACP suppliers to enable them to adapt to new market conditions and in particular to improve competitiveness; whereas at the same time environment-friendly production and marketing methods which also respect social standards should be encouraged;

(Amendment 5)

Recital 7a (new)

Whereas the purpose of fair trade with developing countries is to contribute to the fight against poverty and to the promotion of acceptable social and environmental conditions; whereas such initiatives should be encouraged;

(Amendment 6)

Recital 7b (new)

European consumers are increasingly prepared to buy 'fair trade' products and to pay slightly higher prices for them. The European Union supports the goal of increasing the supply of bananas on the European market from producers that adhere to particularly high environmental and social standards. Consequently, ACP banana producers should be granted support for converting their plantations to comply with such criteria and in obtaining certification.

(Amendment 7)

Recital 7c (new)

Whereas it is necessary to foster alternative economic activities for those growers least able to adapt to new market conditions; whereas the programme of technical and financial assistance should therefore be extended to include aid for diversification; whereas this will only be possible if the sum allocated for this programme is adequate to meet the real needs of ACP suppliers and is provided for a sufficient duration to cover the period of crisis;

(Amendment 8)

Recital 7d (new)

Whereas special measures will be necessary to enable growers to maintain quality and productivity in the period immediately following introduction of the amended regime, before the programmes of assistance have been implemented;

(Amendment 9)

Recital 10a (new)

Having regard to the specific situation of a lack of government and of a recognized legitimate authority which has prevailed in Somalia for many years, and until such an authority is reconstituted and recognized, in order to enable Somali banana producers, under the supervision of a body or organization designated by the EC, to benefit immediately from all the provisions of this Regulation, the Commission and the representatives of the Member States must take account of the situation regarding the organization of public authority in Somalia and do whatever is possible to facilitate forthwith the resumption and improvement of banana marketing;

(Amendment 10)

Recital 10b (new)

Whereas it is essential to establish special rules to deal, with immediate and practical effect, with the special characteristics and difficulties of the present situation of the banana sector in Somalia, so as to ensure its swift recovery; whereas these are also necessary to deal with the consequences of the serious floods which devastated Somalia at the end of 1997 and the beginning of 1998;

(Amendment 11)

Article 1(1)

1. A special framework for technical and financial assistance is hereby established to assist traditional ACP suppliers of bananas to adapt to the new market conditions following the amendments introduced to the common organisation of the market in bananas by Regulation (EC) No /98.

1. A special system for technical and financial assistance is hereby established to assist traditional ACP suppliers of bananas to adapt to the new market conditions following the amendments introduced to the common organisation of the market in bananas by Regulation (EC) No /98.

(Amendment 12)

Article 1(2)

2. This special framework shall be implemented for a period not exceeding ten years starting on 1 January 1999.

2. This special system shall be implemented for a period of ten years starting from its date of implementation, at the end of which the special framework of assistance may, in the light of adjustments achieved and changes on the market, be renewed as it stands of revised. It shall take the form of technical and financial assistance including an income system based on criteria which take particular account of the interests of the most disadvantaged suppliers, and shall exclude any diversification programmes.

(Amendment 13)

Article 1(2a) (new)

2a. The Commission shall undertake to encourage diversification in the ACP countries through the creation of a special fund.

(Amendment 14)

Article 2, second indent

? “bananas” means fresh or dried bananas covered by CN code 0803 00 19.

? “bananas” means fresh or dried bananas covered by CN code 0803 00 19, excluding plantains.

(Amendment 15)
Article 2a (new)

In view of the specific situation in Somalia, until a government has been legitimately recognized 'traditional ACP suppliers' shall, in the case of Somalia, be understood to mean the producers themselves and their representative organizations.

(Amendment 16)
Article 3(1)

1. Traditional ACP suppliers shall be eligible for technical and financial assistance.

1. All traditional ACP suppliers, together with the Dominican Republic and Ghana, shall be eligible for technical and financial assistance, which must, to the fullest possible extent, directly benefit producers through the expeditious provision of support..

(Amendment 17 )

Article 3(1a) (new)

1a. Income support shall be paid solely to the most disadvantaged traditional ACP suppliers.

(Amendment 18)

Article 3(2), first indent

? increasing productivity, without causing damage to the environment,

? increasing productivity, without causing damage to the environment and while complying with minimum social standards relating to working conditions,

(Amendment 19)

Article 3(2), fourth indent

- establishing producers" organisations which have as their objective the improvement of the marketing and competitiveness of their products and the development of systems for certifying environment-friendly production methods,

- assisting producer and farmer organizations to improve competitiveness and increase market opportunities by supporting initiatives to enable producers to fulfil the social and environment-friendly criteria established by European and internationally recognized fair trade and organic produce importers and marketing organizations,

(Amendment 20)

Article 3(2), fifth indent

- developing a production and/or marketing strategy to meet the requirements of the market in the Community in the light of the common organisation of the market in bananas,

- developing and operating a production and/or marketing strategy, which is consulted with producer and farmers" organizations, to meet the requirements of the market in the Community in the light of the common organization of the market in bananas,

(Amendment 21)

Article 3(2), sixth indent

- assisting with training, market intelligence, the development of environment-friendly production methods, improving the distribution infrastructure and improving commercial and financial services to banana producers.

- assisting with training, market intelligence, the development of environment-friendly production methods, implementing social projects relating to improvements in the working conditions and lives of workers, improving the distribution infrastructure and improving commercial and financial services to banana producers, in consultation with producer and farmers' organizations.

(Amendment 22)

Article 3(3) (new)

3. Producers of fair trade bananas, together with the agencies which provide 'fair trade' certification, must be eligible for special support measures associated with technical and financial assistance.

(Amendment 23)

Article 3 (4) (new)

4. Technical and financial assistance shall also be granted to contribute to programmes to assist diversification into other economic sectors and will include the provision of investment and support for human resource development.

(Amendment 24)

Article 4(2) (new)

2. The Commission shall, however, make funds available outside these programmes in the first years of the amended regime for urgent measures necessary to enable growers to improve and maintain quality and productivity.

(Amendment 25)

Article 4(3) (new)

3. The Commission and Member States, in partnership with traditional ACP suppliers, and in coordination with the private sector, civil society, and international bodies, should support and develop strategy to diversify traditional ACP States with a heavy dependency on banana exports.

(Amendment 26)

Article 4a (new)

Where Somalia is concerned, the Commission shall determine, after consulting the committee referred to in Article 10, the organization representing Somali producers which is deemed an appropriate body for holding discussions and negotiations with the Commission.

(Amendment 27)

Article 5(1)

1. Within the global amount available for a given year, the Commission shall fix the maximum amount available to each traditional ACP supplier for the financing of the programmes referred to in Article 3(2), taking into account the level of competitiveness and the importance of banana production for the economy of the country concerned.

1. Within the global amount available for a given year, the Commission shall fix the maximum amount available to each traditional ACP supplier for the financing of the programmes referred to in Article 3(2), taking into account the competitiveness gap vis-à-vis bananas from competing third countries and the socioeconomic impact of banana production on the country concerned, as well as the conditions relating to the policy of regional integration and diversification of agricultural exports.

(Amendment 28)

Article 5(1a) (new)

1a. The funds available should primarily benefit small independent producers. Multinational firms, i.e. firms that own banana plantations in more than one State, shall not be eligible for assistance under this Regulation.

(Amendment 29)

Article 6, second paragraph (new)

In view of the specific situation in Somalia, the volume of exports to be used to calculate the reference price shall correspond to the best export result achieved by Somalia prior to 1991.

(Amendment 30)

Article 6a (new)

The Commission shall undertake to implement a transparent technical and financial assistance mechanism, enabling producers or producer organizations either to pass aid on or to benefit from it as directly as possible.

(Amendment 31)

Article 6b (new)

The financial table should be amended to provide for a sum of 500 mecu rather than 366.8 mecu.

(Amendment 32)

Article 6c (new)

The reduction coefficient should be applied from the year 2004 to suppliers which have not made sufficient effort to increase their competitiveness (rather than achieved sufficient increase in competitiveness).

(Amendment 33)
Article 7a (new)

By 31 December 2000, and every two years thereafter, the Commission shall present a report on the operation of this Regulation to the European Parliament and the Council. The report shall especially focus on the improvement of the competitiveness of the banana sector in the traditional ACP bananasupplying countries and on the development of the income of the banana producers.

Legislative resolution embodying Parliament's opinion on the proposal for a Council Regulation establishing a special framework of assistance for traditional ACP suppliers of bananas (COM(98)0005 - C4-0263/98 - 98/0014(SYN))

(Cooperation procedure: first reading)

The European Parliament,

- having regard to the Commission proposal to the Council, (COM(98)0005 - 98/0014(SYN))[2]

- having been consulted by the Council pursuant to Article 189c and Article 130w of the EC Treaty (C4-0263/98),

- having regard to Rule 58 of its Rules of Procedure,

- having regard to the report of the Committee on development and cooperation and the opinions of the Committee on Budgets and the Committee on Agriculture and Rural Development (A4-0237/98),

1. Approves the Commission proposal, subject to Parliament's amendments;

2. Calls on the Commission to alter its proposal accordingly, pursuant to Article 189a(2) of the EC Treaty;

3. Calls on the Council to incorporate Parliament's amendments in the common position that it adopts in accordance with Article 189c(a) of the EC Treaty;

4. Calls for the conciliation procedure to be opened should the Council intend to depart from the text approved by Parliament;

5. Asks to be consulted again should the Council intend to make substantial modifications to the Commission proposal;

6. Instructs its President to forward this opinion to the Council and Commission.

  • [1] () OJ C 108, 7.4.1998, p. 91-93
  • [2] () OJ C 108, 7.4.1998, p. 91-93.

B EXPLANATORY STATEMENT

1. Background to the common organization of the market in bananas

The common organization of the market in bananas came into force on 1 July 1993. Its purpose was to protect European banana production (particularly in the Canary Islands, Madeira, Guadeloupe, Martinique and Crete) and banana production in the traditional ACP-supplying states (the leading producers are Cameroon, Côte d'Ivoire, St Lucia, Dominica and Jamaica). Banana production in the countries concerned is less competitive than that in Latin America to a varying degree, depending on natural factors and production methods. Protocol No 5 to the Fourth Lomé Convention requires the European Union to ensure that after introduction of the single market banana producers are not placed in a less favourable situation than in the past. The banana protocol is valid until March 2000.

It is often argued that the aim of the common organization of the market in bananas is to protect small independent producers who comply with environmentally-friendly and socially-acceptable conditions, against bananas produced on large plantations belonging to American multinationals. However, this has never been the official position of the Commission, which has tended to rely on formal grounds relating to the Lomé Convention and Community preference. There is no provision for assistance to small independent Latin American producers who satisfy ecological and social criteria, nor is there any intention to regulate or curb large-scale producers, a small number of which can also be found in ACP States.

The common organization of the market was enacted in 1992 in the face of opposition from the Netherlands, Belgium and Germany, who subsequently continued to oppose the market organization in its current form. Further criticism came from the three new Member States, Finland, Sweden and Austria, where the price of bananas has increased sharply since accession to the EU and which complained that Latin American producers had been put at a disadvantage. In 1995 the banana-producing states Ecuador, Guatemala, Mexico and Honduras, together with the United States, which, although not a banana-producer itself, felt that the market organization damaged the commercial interests of US firms, lodged a complaint against the market organization with the WTO. In 1997 the WTO dispute settlement body ruled that the common organization of the market in its current form was in breach of WTO rules and required the European Union to amend the market organization by 1 January 1999. The main criticism was directed at the licensing system. The fact that 'B licences' were issued free of charge to importers sourcing from traditional EU producers or from the ACP States put such importers at a financial advantage vis-à-vis other importers. The system was criticized for subsidizing importers at the expense of Latin American producers and European consumers although it was also of indirect benefit to ACP banana producers.

In January 1998 the Commission submitted a proposal to amend the common organization of the market in bananas to bring it into line with WTO rules. There is considerable controversy as to whether the Commission's proposal complies fully with the WTO requirements or whether it might not create new problems with the countries that lodged complaints. Ecuador's ambassador told Parliament's Committee on Development and Cooperation that changes in favour of Ecuador were urgently required otherwise a further complaint would be lodged. What is not in dispute, however, is that the system of licences giving preferential treatment to B licence-holders cannot be maintained. Its dismantling will entail financial losses for traders who import traditional ACP bananas. It will probably also result in losses of income for producers of traditional ACP bananas.

2. Commission proposal for payments to traditional ACP banana producers.

In February 1998 the Commission submitted a proposal for a Council regulation establishing a special framework of assistance for traditional ACP suppliers of bananas. Technical and financial assistance will be granted to contribute to the implementation of programmes in the banana sector aimed at improving competitiveness, in particular through:

- increasing productivity, without causing damage to the environment,- improving quality,

- adapting production, distribution or marketing methods to meet the quality standards provided for in Article 2 of Regulation (EEC) No 404/93,

- establishing producers' organizations which have as their objective the improvement of the marketing and competitiveness of their products and the development of systems for certifying environment-friendly production methods,

- developing a production and/or marketing strategy to meet the requirements of the market in the Community in the light of the common organisation of the market in bananas,

- assisting with training, market intelligence, the development of environment-friendly production methods, improving the distribution infrastructure and improving commercial and financial services to banana producers.

With regard to funding of the programme, a maximum amount is to be fixed for each traditional ACP supplier, taking into account the level of competitiveness and the importance of banana production for the economy of the country concerned. As from the year 2004 a reduction coefficient of up to 15% will be applied to countries where assistance has not resulted in improved competitiveness. The funds provided will be in addition to those available under the Fourth ACP-EU Convention. In total, an additional ECU 366.8 m will be made available over ten years, 100% in the form of non-repayable grants.

The Commission has stated in writing and orally on several occasions that these payments are not intended as compensation for losses arising from the dismantling of the B licence system. Payments of such a kind would undoubtedly be open to a legal challenge on the grounds that B licences were illegal and that no funds should be spent on providing compensation for what was an illegal situation. The proposed funds constitute technical and financial assistance.

3. Appraisal

Your rapporteur is not convinced that this proposal will achieve the objectives of banana policy consistently supported by the European Parliament. At no point does the proposal mention that support should primarily go to small independent banana producers. There is no provision for a ceiling on assistance per plantation or firm, nor does the proposal stipulate that multinational firms are not eligible for assistance. Parliament's repeated call for support for fair trade bananas is not reflected in the proposal.

One positive point is that in the proposal for a regulation the Commission has, for the first time in an official document, stipulated that environmental aspects are to be taken into account in the banana sector.

Your rapporteur fails to understand why the proposal completely rules out assistance for nontraditional ACP banana producers.

His personal view is that the approach taken in this proposal for a directive is fundamentally flawed. Instead of a comprehensive development plan for all developing countries it provides special support for only a very small sector in ten fairly small developing countries. It is a cause for grave concern that the proposal for a regulation does not rule out the possibility that a large proportion of the resources may not benefit those concerned in the developing countries but will go to multinational firms, some of which have their headquarters in the European Union.

This would in itself justify rejection of the proposal for a regulation. However, if an agreed solution can at last be found to the overall banana problem, the proposed payments could be part of a compromise solution. At any event, amendments are essential to prevent improper use of resources.

4. Amendments

A. Support for fair trade bananas

It is Parliament's stated objective to support producers that meet particularly high environmental and social standards and this position should be spelled out clearly in the regulation.

B. Extending the regulation to non-traditional ACP States

Over recent years a significant banana industry has also developed in non-traditional ACP States. A large number of people are employed in the banana sector and many regions are dependent upon it. Consequently, the regulation should not be restricted to traditional ACP banana producers.

C. Option of granting loans

The funds available can be used to greater effect if a proportion of the monies are granted in the form of loans. This provides greater incentives to submit economically sustainable projects and allows more people to benefit from the programmes if loan repayments are used to fund new projects.

D. Ceilings and multinational firms

It is essential to prevent the funds concerned being used by multinational firms to establish huge plantations in the ACP countries. A ceiling should therefore be imposed to prevent multinational firms from benefiting from the resources.

E. Avoiding unnecessary budgetary constraints

As regards policy, the most problematic aspect in the long term is how the necessary resources to support ACP banana suppliers will be raised. The Commission initially intends the funds to be paid entirely out of the EU budget. However, this raises problems in that category IV (external policies) is likely to come under severe pressure in the next few years. The priorities already established at the Cannes Summit are constantly restricting the leeway for the priorities of the Committee on Development and Cooperation. Constant cuts are being made in resources for NGOs for the environment and development and for other areas. So as not to restrict further the leeway available to the European Parliament and its Committee on Development and Cooperation, the necessary funds should be made available wherever possible from EDF resources. Past experience has shown that a large proportion of EDF resources cannot be absorbed for the intended purposes and that residual amounts are available. Funds should only be disbursed from the budget if a careful examination shows that the use of EDF resources is not feasible.

19 May 1998

OPINION

(Rule 147)

for the Committee on Development and Cooperation

on the proposal for a Council Regulation (EC) establishing a special framework of assistance for traditional ACP suppliers of bananas (COM(98)0005 – C4-0263/98 - 98/0014(SYN)) (report by Mr Liese)

Committee on Budgets

Draftsman: Mrs Maria Celeste Cardona

Procedure

At its meeting of 17 March 1998 the Committee on Budgets appointed Mrs Maria Celeste Cardona draftswoman.

It considered the draft opinion at its meeting of 18 May 1998.

At the latter/last meeting it adopted the following conclusions unanimously with 5 abstentions.

The following took part in the vote: Samland, chairman; Tillich, Giansily, vice-chairmen; Cardona (for Di Prima), draftsman; Bösch, Christodoulou (for Bardong), Colom I Naval, Des Places (for Fabre-Auprespy), Dührkop Dührkop, Fabra Valles, Garriga Polledo, Haug, Jöns (for Dankert), Kellett- Bowman (for Böge), Krehl, Marinho (for Ghilardotti), Mulder (for Brinkhorst), Müller, Pimenta, Virrankoski, Wemheuer (for Laignel) and Wynn.

1. Background

From the about four million tonnes of bananas consumed in the Community annually, some 80% are imported. About 21% of these imports come from a group of 12 countries[1] called traditional ACP countries since they have been exporting bananas to the Community over a long period. The Lomé Convention guarantees all ACP countries preferential access to the Community market for the bananas they produce. But the group of traditional banana exporters has always had special advantages.

This has been effected up to now by allocating a reserved share of the banana market for each individual country. Moreover a special licence scheme is operated, which bridges the gap in competitiveness between the traditional ACP suppliers and producers from third countries.[2] The latter are mostly large scale producers (often US owned companies) in Panama, Honduras, Guatemala and other Latin American countries, which provide the lion"s share of 76% of the Community banana imports. Three percent of the imported bananas come from other ACP countries.

This priority treatment for traditional ACP banana suppliers was attacked by the US and a number of Latin American banana producers[3] as inter alia a violation of GATT article XIII. A WTO dispute settlement body ruled in September 1997 that indeed the Union"s regime for the importation of bananas violates that GATT article and summoned the Union to bring its regime into line with the GATT /WTO rules before January 1999. The Commission has therefore put forward a proposal to amend Regulation 404/93 on the common organization of the market in bananas on 14 January 1998.

In the Latin American countries mentioned, US companies have large plantations and production takes place with little consideration for social and environmental conditions. In the traditional ACP countries the banana production takes place on a smaller scale and producers can cope with the competition of the US bananas only due to the priority treatment that they currently enjoy. In order to help the traditional ACP countries to cope with the increased competition, which will result from the abandonment of (part) of the priority treatment, the Commission proposes a special framework of assistance for traditional ACP suppliers of bananas. (The interests of the banana producers in the Community are covered by Regulation 404/93.)

2. The Commission proposal

The Commission proposes to set up a special framework of technical and financial assistance to help the traditional ACP exporters of bananas to improve their productivity while at the same time encouraging more environment friendly methods of production and marketing. The size of the funds made available to those countries will depend on the observed gap of competitiveness as well as on the importance of banana production for the economies of the countries concerned. The assistance will be given over a period of 10 years but decrease over this period, and in order to stimulate the producers to invest in new production and marketing improvements a reduction coefficient of up to 15% shall be applied after 2004 if no sufficient increase in competitiveness has been observed.

The aid has to be used for programmes to increase productivity (without damaging the environment), to improve the quality of the bananas, to improve distribution and marketing methods (with a reference to Article 2 of Regulation 404/93 on the CAMO on bananas), to help establishing producers" organizations and to assist with training, the development of environment friendly production methods and to improve the distribution infrastructure and commercial and financial services to banana producers.

The total amount proposed by the Commission is ECU 366.8 m, starting with annual amounts of ECU 45 m for the first five years and decreasing to ECU 20 m in 2008.

3. Appraisal

It seems indeed appropriate to help the traditional ACP suppliers. Due to expected lower prices in the Community for bananas and the abolition of the preference import licences the traditional ACP suppliers will suffer most of the changes in the import regime. The traditional ACP banana producers got a reasonable income due to the protection. Competition with the third countries mentioned is difficult as the conditions under which the bananas are produced differ too much.

It has to be seen whether the programmes will help sufficiently to bridge the gap in competitiveness. But the results of the projects financed under an earlier assistance programme (Council Regulation 2686/94) are, although not yet fully available, promising. The Commission calculates the difference in competitiveness to be ECU 45 m annually and therefore proposes to grant aid, at least over the first five years, for the same amount. It remains to be seen whether the countries concerned will be able to absorb the amount of aid they will receive.

4. Conclusions

1. The traditional ACP supply countries of bananas will probably suffer most from the changes to the CAMO on bananas.

2. The proposed special framework of assistance will help those countries to bridge the gap in competitiveness which exists with the Latin American banana exporting countries. However, the Commission should report every two years how the assistance improves the competitiveness of the traditional ACP banana suppliers and how their income situation develops.

5. Recommendation

The Committee on Budgets requests the Committee on Development and Cooperation to take the following amendments into account:

Text proposed by the Commission

Amendments by Parliament

(Amendment 1)

Recital 1a (new)

Whereas the European Union is bound by the undertakings it made to the ACP countries under the Lomé Convention, and more particularly its Protocol No 5, which seeks to guarantee maintenance for the ACP States of their advantages on the European market, access to that market in conditions that may not be less favourable than those that they previously enjoyed, and improvement of production and marketing conditions for ACP bananas;

(Amendment 2)

Recital 1b (new)

Whereas the Community banana regime and the trade preferences it involves are real instruments of development for a good many ACP countries;

(Amendment 3)

Article 7a (new)

Article 7a

By 31 December 2000, and every two years thereafter, the Commission shall present a report on the operation of this Regulation to the European Parliament and the Council. The report shall especially focus on the improvement of the competitiveness of the banana sector in the traditional ACP bananasupplying countries and on the development of the income of the banana producers.

3 June 1998

  • [1] () These countries are: Côte d"Ivoire, Cameroon, Suriname, Somalia, Jamaica, St. Lucia, St. Vincent and the Grenadines, Dominica, Belize, Cape Verde, Grenada and Madagascar.
  • [2] () At present 30% of the import licences for the (about) 3.2 million tonnes of bananas imported annually are reserved for importers of bananas produced in the EU and ACP countries.
  • [3] () US, Mexico, Ecuador, Guatemala and Honduras.

OPINION

(Rule 147)

for the Committee on Development and Cooperation

on the proposal for a Council Regulation establishing a special framework of assistance for traditional ACP suppliers of bananas (COM(98)0005 – C4-0263/98 - 98/0014(SYN)) (report by Mr Liese)

Committee on Agriculture and Rural Development

Draftsman: Mrs Encarnación Redondo Jiménez

PROCEDURE

At its meeting of 17 and 18 March 1998 the Committee on Agriculture and Rural Development appointed Mrs Redondo Jiménez draftsman.

It considered the draft opinion at its meeting of 2 and 3 June 1998.

At the latter meeting it adopted the following conclusions unanimously.

The following took part in the vote: Colino Salamanca, chairman; Graefe zu Baringdorf, vicechairman; Redondo Jiménez, draftsman; Anttila, Campos, Ephremidis (for Querbes), Fantuzzi, Filippi, Fraga Estévez, Funk, Garot, Goepel, Hardstaff, Jové Peres, Kindermann, Lambraki, Lulling (for Schierhuber) Mayer, Rosado Fernandes and Thomas.

I. BACKGROUND

Protocol No 5 to the Fourth Lomé Convention requires the EU to maintain preferential access for all ACP bananas and to provide additional benefits to traditional ACP bananas. Thus, no traditional ACP supplies of bananas may 'be placed, as regards access to its traditional markets and its advantages on those markets, in a less favourable situation than in the past or at present'. These arrangements were respected by the EU when the COM for bananas was established, and the Community provided significant guarantees for the production of ACP countries and traditional ACP suppliers in two ways:

1. reserving a share of the Community market for traditional ACP suppliers by applying zero duty for the import of 857 000 t setting up and the import licence scheme laid down in Title IV of Regulation (EEC) No 404/93, which provided an incentive for operators to market ACP and Community bananas through the 'B licence' mechanism and in practice made it possible to improve their competitiveness by comparison with dollar bananas, and

2. the special system of assistance to traditional ACP suppliers of bananas established by Regulation (EC) No 2686/94[1], which was extended until 31 December 1996 under Regulation 2320/96.

These provisions represented a necessary response on the part of the Community in order to ensure the viability of both Community and ACP production given the particular conditions under which their producers operate and given that both face the same structural disadvantages: insularity, small size of farms, remoteness from markets, additional marketing problems, a regional economy which is heavily dependent on banana exports, etc.

II. THE CURRENT PROBLEM

Ever since it was set up, the Community banana import regime has been contested by some producer countries in the dollar zone under the auspices of multinational banana-marketing companies. In May 1997 the WTO adopted a decision ratified by the dispute-settlement body which regarded some aspects of the Community rules as being in breach of both GATT and GATS rules. As a result, the EU is required to make appropriate changes to its legislation so as to meet its WTO commitments and while allowing Community preference to be maintained and its commitments to ACP countries to be upheld. The new regime is to enter into force in January 1999.

Amendments to Regulation No 404/93 proposed by the Commission

The special treatment of traditional ACP exports is retained for 857 000 t at nil duty, even though the allocation between ACP countries has been abolished given that it has been condemned by the WTO, while the tariff preference to be granted to non-traditional importers has been fixed at ECU 200/t in order to safeguard import flows. The most important point, however, is the derogation from the current system of import licence certificates, in particular the B licence which favoured the marketing of ACP and Community production.

The Commission also recommends to the Council that it authorize it to negotiate with countries having a substantial interest in the supply of bananas to the Community with a view to allocation of import tariff quotas and the traditional ACP quantity previously laid down in the annex to Regulation No 404/93, which represents a further element of uncertainty for the ACP countries.

III. SPECIAL FRAMEWORK OF ASSISTANCE FOR TRADITIONAL ACP SUPPLIERS OF BANANAS

It is planned to grant an overall amount of ECU 366.8 m over a maximum period of ten years starting on 1 January 1999, which is to be allocated on a degressive basis with the specific funding being defined for each traditional ACP state in line with its needs. In practice, the total amount will be distributed among the 12 traditional ACP countries on the basis of their level of competitiveness and the importance of banana production for their economy, and it is expected that it will be possible to apply a reduction coefficient of up to 15%, from the year 2004, to the aid granted to suppliers who do not achieve a sufficient increase in competitiveness.

Article 3 of the Commission proposal defines the possible content of programmes eligible for funding, the fundamental objective in each case being to improve the competitiveness of traditional ACP production, which faces higher production costs and does not benefit from the economies of scale available to producers of dollar bananas, and to help them to adapt to the new conditions on the international market.

IV. COMMENTS ON THE COMMISSION PROPOSAL

The fact that the Commission has not explained how the B licence system, which safeguarded the marketing of ACP bananas, is to be replaced has aroused significant concerns among ACP producers, who may see it as the dismantling of a favourable regime without its being replaced by a different system offering identical guarantees as regards preserving the level of income of producers.

Furthermore, the financial assistance envisaged in the proposal will not go directly to the producer but to programmes aimed at improving competitiveness. The danger is that these funds will remain in the public sector and will have no impact on producers' incomes, which may in some countries lead to social conflict and have a negative influence on the efforts being made in some of the countries concerned to consolidate their precarious democracies.

When the COM for bananas was established, the former Regulation (EC) No 2686/94 on technical assistance for traditional ACP countries was also adopted with a specific title on 'Income support', which was to be paid where the reduction in income derived from banana exports to the Community was directly related to conditions prevailing on the market as a consequence of the creation of the COM. Nevertheless, the Commission is not now proposing a system of direct income support to offset the losses directly related to the change in conditions on the Community market due to modification of the COM, but rather the possible funding of programmes aimed at improving production conditions and competitiveness.

The temporary and degressive nature of assistance and its overall amount also raise a number of questions: after 2008, when this financial assistance is to end, will the ACP countries be in a position to compete with dollar production and no longer require EU aid? Is the quantity of aid sufficient to offset the possible losses due to the change in trade arrangements under the COM for bananas? The Commission maintains that the ACP countries must, in the near future, make greater efforts and implement more complex and long-term programmes. In practice, however, even if such programmes achieve optimum results, they will still not be sufficient to bring the competitiveness of bananas from the countries concerned up to the same level as that of their competitors in the dollar zone, and it might therefore also be appropriate to provide incentives for investment in economic diversification programmes which would in the long term reduce those countries dependence on banana exports.

As regards the financial allocation, the ACP countries are calling for at least ECU 500 million compared with the ECU 366.8 m proposed by the Commission. If, as the Commission's information indicates, the gap in competitiveness between ACP and dollar production amounts to ECU 45 million per marketing year, it might be appropriate to increase the overall amount of assistance, providing it can be guaranteed that this financial assistance will have a direct impact on producers' incomes. At all events, the system proposed by the Commission will not establish direct channels through which ACP producers and their farming communities might use the funds not only to finance specific projects but also as compensation for the greater costs and expenses caused by the new situation on the international market.

A further question concerns the operation of degressivity. The Commission's wording is highly theoretical and is based on the idea that, given that assistance is aimed at increasing competitiveness, in normal circumstances it is to be hoped that the programmes funded will have had positive effects in this area after an initial period of five years, with the result that the 15% reduction coefficient is to be applied in the event that no increase in competitiveness can be observed at the end of that five- year period. How will such an increase in productivity be established in practice?

With regard to the content of programmes eligible for assistance, specific mention is made of the promotion of environment-friendly production methods, but it might be appropriate to extend this criterion to include the promotion of more equitable social production conditions, which might bring a greater proportion of production into the fair trade category and enable it to benefit further in the event that the EU establishes some type of specific aid for such production in the future.

Finally, a further aspect which causes concern is the fact that the Commission will need to proceed with extreme caution in commencing negotiations with countries having a substantial interest in the supply of bananas with a view to reaching an agreement on allocation of the import tariff quotas and the traditional ACP quantity in order to avoid harming those ACP countries with the weakest production structures.

The Committee on Agriculture and Rural Development forwards to the Committee on Development and Cooperation the following:

V. CONCLUSIONS

1. Notes that ACP bananas represent around 20% of the Community market, and that for some of these countries exports are vital to their economic survival. Their high production and marketing costs would not allow them to compete on the Community market without preferential marketing arrangements and, where appropriate, technical and financial assistance measures;

2. Expresses its conviction that the necessary legislative measures must be found which will make it possible to continue to preserve, on the Community market, a balance between the competitiveness of Community and ACP banana production on the one hand and dollar bananas on the other and which will guarantee the coexistence of bananas of various origins at appropriate prices to consumers;

3. Hopes that the mechanism finally adopted by the Council to replace the B-licence system will make it possible to safeguard in the future the current marketing levels for ACP and traditional ACP producers without any loss of income among their producers;

4. Expresses doubts regarding the adequacy of the financial allocation envisaged by the Commission, the ten-year time-scale and its degressive nature in line with increases in productivity. Considers that it might be advisable to make provision for a mid-term review after five years, which would also make it possible to evaluate the actual impact of financial assistance on producers' incomes, taking account of trends on the international market;

5. Takes the view that, in any case, financial assistance should be graded in line with a series of parameters: being sufficient to offset producers' losses of income, benefiting them directly and being granted on the basis of real need and the duration of the period of crisis;

6. Expresses its satisfaction that the promotion of environment-friendly production methods is one of the objectives which must govern the implementation of programmes to improve competitiveness and considers that the promotion of equitable social production conditions should also be included among those objectives.

  • [1] () OJ L 286, 5.11.1994, p. 1.