May 9, 2001
Could the Agreement between
the US and EU, to resolve long-standing dispute on bananas,
have an adverse effect for Thailand?
In 1993 the EC adopted
a Common Market Organization for bananas (HTS# 0803001900).
Until the begining of 2002, the EU regulated the Commone
Market Organization for banana imports with a GATT bound
quota of 2,200,000 tons and an autonomous quota of 353,000
ton. The import quota was specifically divided up as follows:
|
Countries
|
In-quota
|
Over-quota
|
| ACP countries |
0 EUR/ton
|
200 EUR/ton
|
| Other countries
(including Thailand) |
75 EUR/ton
|
680 EUR/ton
|
Under WTO laws, however,
the US claimed that the EU's banana import licensing and
quota system was illegal. A WTO ruling in 1997 found the
EU guilty. Folowing the WTO decision, the U.S. was granted
the right to impose trade sanctions against the EU until
a resolution could be found.
On April 30, 2001, in an
attempt to resolve the trade dispute, the Bush Administration
and the European Commission recognized that they had shared
objectives: to reach agreement on a WTO-compliant system,
to ensure fair and satisfactory access to the European
market for bananas from all origins and all operators,
and to protect the vulnerable African Caribbean Pacific
(ACP) producers. In conclusion to the April 30th meeting,
the two parties constructed a system to which they both
agreed, it is laid out as follows:
|
Quota
|
Quota amount (in tones)
|
Tariff (in-quota)
|
| Quota A |
2,200,000
|
75 EUR/ton
|
| Qutoa B |
435,000
|
75 EUR/ton
|
| Qutoa C (reserved only for bananas
of ACP origin) |
750,000
|
300 EUR/ton
|
The newly devised quota
system will take effect on July 1, 2001. However, Pascal
Lemy, the European Commissioner, proposes to make changes
to this new quota system, in order to allow increased access
for Latin American bananas. He also contintues working to
ensure a market share for a specific quantity of bananas
of ACP origin.
In addition to the new
quota system, the European Union will also institute a new
system for licensing. Unfortunately, for Asian exporters,
the new system is to be based on historic references. Both
the EU's 'new' licensing system and the U.S.'s hand in ensuring
market access for Latin American exporters could have serious
adverse effects for Thailand's banana exporters.
From January - December
2000, Thailand alone exported a total of 95, 226 kilograms
of bananas to the European Union.
|
Country
|
Quantity (kilograms)
|
| France |
13,508
|
| Germany |
73,235
|
| Italy |
6,190
|
| Netherlands |
858
|
| Norway |
131
|
| Sweden |
507
|
| Switzerland |
77
|
| United Kingdom |
720
|
| Grand Total |
95226
|
Source: Royal Thai
Customs
EU consumption is estimated
at around 3,934,000 tons per annum of which 854,000 tons
are EU produced. The EU therefore, imports a total of 3,080,000
tons of bananas a year. The new quota system allows for
a total of 3,385,000 tons of banana imports. It is unlikely
that imports will exceed quotas. The problem is not so much,
what can happen in the EU market, but what will happen in
the world banana market in responce to EU's changes.
Under the new tariff structure
ACP producers will likely increase production, as they will
no longer enjoy a zero tariff competitive advantage. The
EU market is very sensitive to increased supplies. The most
obvious effect may be a notable reduction in the price of
bananas in the EU market. In the following years, increased
banana production, in ACP and Latin American countries,
will spill over into the world market, therefore, reducing
world market price.
In addition to increased
supply in the following years, the U.S. and Ecuador may
persuade Pascal Lamy to ensure increased market access for
Latin American bananas. Increasing EU incentives for importing
Ecuadorian bananas adversely reduces demand for Thai bananas.
Therefore, reduced world banana prices and reduced demand
in the EU market, will have serious effects for Thai banana
exporters between now and 2006.
The agreed up on quota
and licensing system will only be in effect until January
1, 2006. After that time a tariff-only system will be implemented.
However, the details of the 2006 system are not yet agreed
upon. In the mean time, the European Commission is preparing
the necessary proposals to the Council of Ministers and
the European parliament to gain authorization needed to
fully implement the agreement as soon as possible.
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