CAP Reform: EU Commission proposes new banana regime

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The European Commission today proposed a thoroughgoing reform of the aid scheme to banana producers, which aims to bring the system into line with reforms in the other agricultural sectors, while ensuring a fair standard of living for EU banana producers and taking account of the particularities of the regions where bananas are grown. The proposal follows a thorough debate with all interested parties and an in-depth assessment of the impact of the reform. The Commission has come out clearly in favour of abolishing the current compensatory aid scheme for banana growers, and adopting the so-called "POSEI" option. This would add money used to support banana producers to the so-called POSEI programme, which supports agricultural production in the outermost regions of the EU. For bananas produced in regions other than the outermost regions, the money would be transferred to the Single Payment Scheme which applies to agricultural products covered by previous reforms. Following adoption by the Council, the Commission wants the new rules to apply from the 2007 marketing year.

"The current aid scheme for EU banana producers is a relic from the past and has to change," said Mariann Fischer Boel, Commissioner for Agriculture and Rural Development. "Producers are artificially isolated from the market by payments which automatically compensate them for price changes. This is inconsistent with our modernised Common Agricultural Policy which aims to encourage producers to follow market signals. Such payments are also difficult to defend in global trade terms. We therefore have to act urgently to bring this regime into line with our reformed CAP. We aim to contribute to ensure a fair standard of living for producers, stabilise public expenditure and increase market-orientation, while taking into account the fact that bananas are an important part of the economy of regions which are often handicapped by their remoteness and the difficulties resulting from the small size of holdings and the hilly topography."

Bananas grown within the EU account for 16% of total EU supply. They are produced in the outermost regions (the Canary Islands, the French overseas departments of Guadeloupe and Martinique, the Azores and Madeira) situated in tropical or sub-tropical areas, as well as certain quantities (less than 2% of the total) produced in Cyprus, Greece and continental Portugal.

The proposal for reform comes against the background of the new EU import arrangements for bananas, global trade negotiations, a new generation of partnership agreements with the ACP countries and the renewal of the EU's policy towards its outermost regions and the POSEI programmes specifically dedicated to supporting their agriculture.

The Commission proposes to abolish the current aid scheme in the CMO, which compensates producers for drops in prices. It would be replaced with a budget transfer to the POSEI scheme that will become the main regulatory instrument for bananas in the outermost regions. POSEI provides an envelope of money for agricultural production in the outermost regions and gives the Member States concerned the flexibility to decide how to apportion the money. For areas where bananas are grown outside the outermost regions (continental Portugal, Greece and Cyprus), aid would be included in the single payment scheme introduced for other sectors by the reforms of 2003/04/05.

The plan aims: to contribute to ensure a fair standard of living for the agricultural community in regions where bananas are produced, while stabilising public expenditure; to align the regime with the main principles of the CAP reform - sustainability, competitiveness, market-orientation - and ensure the respect of the EU's international obligations; to take adequately into account the particularities of the producing regions; and to simplify the management of the regime.

Details of the proposed measures for Reform of the Banana CMO

Aid to producers in the outermost regions:

Council Regulation (EC) No 247/2006 of 30 January 2006 provides for the establishment of EU support programmes for the outermost regions containing specific measures to assist local agricultural production. This instrument is best adapted to support banana production in each of the regions concerned, allowing the respective Member States to propose measures, in the framework of their overall support programmes, which take account of regional particularities. The Commission will undertake a review of the workings of the scheme by the end of 2009, and earlier if there are substantial changes to the economic conditions affecting livelihoods in the outermost regions.

It is proposed to increase the budgetary allocation of the POSEI scheme by EUR 278,8 million in order to fully include EU support to banana producers in those programmes as of 1 January 2007, hence reinforcing the coherence of the strategies for support of agricultural production in these regions. At the request of the producing Member States, this aid will be distributed to the producing regions following the share in the year 2000: Spain 50.4%, France 46.1%, Portugal 3.1% and Greece 0.4%.

Aid to producers in other banana regions

For Greece, continental Portugal and Cyprus, it is no longer necessary to provide for a specific aid scheme for bananas, given the small proportion of total EU production concerned.

It is proposed to allow for the shift from production support to producer support, by abolishing the existing compensatory aid scheme for bananas and including it into the Single Payment Scheme. Member States will establish the reference amounts and eligible hectares under the Single Payment Scheme on the basis of a representative period appropriate to the banana market. It is proposed to increase the national ceilings for Greece and Portugal by EUR 1.1 million and EUR 0.1 million respectively. An additional budget is also proposed for the implementation of the Single Payment Scheme in Cyprus, where about 10 000 tonnes of bananas are grown. The additional amount would be phased in as of 2009 and would reach a full level of EUR 3.4 million in 2013.

For more background information, please see MEMO/06/335 and MEMO/06/336. http://ec.europa.eu/agriculture/capreform/bananas/index_en.htm

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