However, the fear is that the highly competitive dollar area will become an increasingly attractive place of investment, as tariff reductions will gradually be extended under existing EU FREI trade agreements. This represents even the most competitive ACP banana exporters, facing major challenges in the face of increasing market concentration (see Agritrade article “Mergers and acquisitions of the banana sector, Suriname to the main distributors” of 11 May 2014) and the loss of value of some EU banana chains due to the banana pricing policy of some EU supermarkets. The “banana wars” are the culmination of a six-year trade dispute between the United States and the EU. The United States has criticised the fact that EU regulations granting special access to European markets to banana producers from former Caribbean colonies are contrary to free trade rules. But the problem this conflict poses to developing countries could be more serious. 71 African, Caribbean and Pacific (ACP) states are subject to the Lomé Convention, a convention that was established in the 1970s and commits the European Union to promoting trade with its former colonies. Between 2010 and 2013, total imports of bananas from the dollar area increased by 6.4% (from 3,541,760 tonnes to 3,767,328 tonnes). What will be the consequences in developing countries? Bananas are essential for the Caribbean economy. Half of the Caribbean`s population depends on the banana industry to meet its basic needs such as food, housing and education.
If the EU`s preferential treatment is whipped without giving farmers enough time to develop other ways to use the land, the Caribbean economy could collapse. Changes in banana exports to EU-28 countries (tonnes) – The US government is concerned about its economy. The U.S. trade deficit is at a nine-year high. Its current account deficit could reach $300 billion in 1999, surpassing the 1986-197 record. The Government believes that it cannot afford to allow any European protectionism, however petty, to disadvantage its turbulent trade balance. What is the EU`s agreement with the Caribbean? Since 1975, every Caribbean country has had a quota of bananas that allows them to sell as many bananas to Europe as they wanted. The EU hoped that this would allow the economies of these developing countries to grow independently without the need for overseas help.
The situation of dollar-area countries, which did not obtain additional tariff preferences through a free trade agreement, was less positive. Ecuador has seen its banana exports to the EU increase since 2010, but with a lower rate of 4.5%, while Brazilian exports have fallen by almost 32.7% to about 21,000 tonnes. Ecuadorian exporters have complained that in 2014, countries whose governments have free trade agreements with the EU apply only a tariff of $117 compared to $179 tariffs on Imports of Ecuadorian bananas. The German and Belgian markets account for 45.4% and 14.9% of Panama`s exports to European countries respectively, while third-country Georgia accounts for 9.9%. Overall, EU statistics show that banana imports from Panama increased by 32.4% in 2013 compared to 2012 (a bad year, with imports 19.4% below 2010 levels). In 2013, banana imports from Panama exceeded their 2010 level by 6.7%. According to the National Banana Directorate in Panama, this is due to the “tariff preferences” obtained in European markets. Transnational companies are reportedly increasingly interested in investing in banana production in Panama, del Monte, Dole and even “banana producers in the Canary Islands”.