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8. The Banana Protocol
| 8.1 | A special protocol of the Lomé Convention assures preferential treatment of banana exports to the EU from ‘traditional’ ACP exporters. These preferences are delivered by the EU’s banana trade regime, which is currently challenged in the WTO. The loss of banana trade preferences could lead to the loss of the banana industry in certain ACP states, notably the islands of the East Caribbean, with far-reaching economic and political effects. |
| 8.2 | The EU banana regime was introduced in 1993 to replace individual member state banana trade policies after the creation of the Single European Market. The EU regime consists of a tariff quota system which guarantees duty-free access for traditional ACP supplies up to 858,000 tonnes and access at around 20% duty of 2.5 million tonnes from Latin-American exporters. Beyond these amounts prohibitive tariffs apply. Import licences are issued for the import of ‘dollar’ bananas with 30% of these (so-called B licences) allocated to traditional ACP traders. |
| 8.3 | The Lomé protocol has been successful in maintaining ACP exports, but less successful in raising competitiveness of ACP exporters. Without the preferential treatment accorded by the EU regime, ACP exports could not compete on EU markets because of high costs and variable quality compared to Latin American supplies. Certain ACP exporters, notably the Windward Islands, are highly dependent on banana exports in terms of contribution to GDP and employment. |
| 8.4 | The future of the Lomé protocol is under threat as a result of the WTO challenge to the EU regime. The Interim Report of the WTO panel has found against the specific mechanisms of the tariff quota and licensing system. It is uncertain whether the preferences can be delivered without these mechanisms, so preservation of the status quo is the best outcome for the ACP exporters. A preferential tariff system would not be sufficient to offset the competitive advantage of the dollar suppliers. |
| 8.5 | Whatever the outcome of the WTO case, it is essential to raise the competitiveness of ACP banana exports, and the trade development provisions of the Lomé protocol need to be emphasised. A smaller industry producing higher quality bananas is the likely result. |
| 8.6 | Diversification opportunities in the Windward Islands are limited. Competition in world markets for alternative horticultural crops is severe. Tourism development thus far has arguably contributed little to the local demand for agricultural products. |