TCS Daily

Going Bananas

By Jens Kyed - October 16, 2002 12:00 AM

The European Union's banana policy is totally bananas. A fresh report from the European Court of Auditors removes all doubt about its usefulness. Piece for piece the new report picks the whole policy apart and shows that the only benefactors are the highly subsidised banana growers within the EU.

The banana market is the world's second-largest fruit market after citrus. The new report from the Court of Auditors hits the EU's system of subsidizing its own banana growers hard. Mainly located in the Spanish Canary Islands and the French overseas departments of Guadeloupe and Martinique, these growers are branded as too small and highly uncompetitive.

The surrealism becomes clear when one looks at the numbers. Of their total income, more than 50 percent is derived from EU subsidies. Some 700,000 tonnes of bananas are produced within the EU every year - covering about 20 percent of the total demand for bananas within the 15 member states. Thanks to subsidies these are doubtless the world's most expensive bananas.

And what is worse, the court points out, the system of subsidies has encouraged EU growers to increase their production in a situation where the world market for bananas is over-saturated and prices dwindling. This has made EU producers ever more reliant on subsidies to survive. What's more, a program established to help EU banana growers change their production to more profitable and less subsidy-prone crops has been a total failure, the report states.

Also, the auditors have found grave gaps in the administration of the many support and subsidy regimes for the banana growers. The Spanish and French authorities do not seem to have any proper system for controlling their growers and are solely relying on numbers and data submitted by the producers and handlers. As the report points out, this makes it very simple to trick the numbers. There appears to be a total lack of reliable data and statistics that would enable the auditors to control whether the producers have received the correct amount of economic support. The report points out how the current management system easily opens for possible fraud.

How damaging the system is for the world trade in bananas is also indicated in the report. A highly complicated system of quotas and tariffs are applied so as to reduce and control the influx of cheap "dollar bananas" produced by huge multinational (mostly US-controlled) banana plantations in Latin America.

Likewise there are certain quotas for bananas from African, Caribbean and Pacific states - a noble idea as such but as the report points out totally unworkable in its current form. As the trade is regulated through quotas that are divided among traditional and new importers, a subsequent secondary market for the trade in licences has emerged. The report quotes one of the biggest multinational operators interviewed by the auditors has valued the licenses at about $5 per standard case (18.5 kilos), which equates to $270 per ton. This trade in import licenses has in effect favored the "dollar bananas" to those from the ACP states, the EU auditors claim.

Finally the auditors had a look at the practices of measuring and controlling the import of bananas by the customs officers. The auditors visited the port of Antwerp, Belgium, which handles a large portion of the banana imports to the EU. They found that there are no clearly established guidelines for how to control the amount of bananas imported. Especially with large shiploads the control is insufficient, the report states. As a consequence there is really no way to establish exactly how many tons of bananas are entering the EU every year, where they come from and under which quotas they are imported. Thus the EU risks losing millions of euros every year in lost revenue from tariffs on bananas.

In its conclusion the Court of Auditors comes very close to suggesting that the EU should scrap the whole banana policy - without actually saying it. As the court is an EU institution, it cannot tell the European Commission to scrap the whole deal, despite all the findings of irregularities. However, the auditors give some strong indications to the Commission and point out that there are a number of things that should be done.

The total lack of control at all levels and at all points of the production and importation process is at best highly questionable and the auditors strongly recommend that the Commission look further into this issue. A recommendation is also given for a changeover from the quota-system to a plain system of import tariffs, which the EU auditors believe would be easier to administer.



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