[Giovanni Anania, University of Calabria, Italy – Europes Strategy for the Outermost Regions (Brussels, May 2008) 1 The Expected Market Impact of the Reform of the EU Domestic Policy Regime for Bananas and of the Interim Economic Partnership Agreements Giovanni Anania Department of Economics and Statistics University of Calabria, Italy The Future of Europes Strategy for the Outermost Regions

[Giovanni Anania, University of Calabria, Italy – Europes Strategy for the Outermost Regions (Brussels, May 2008) 2 the reform of the EU domestic policy regime the pre-2007 regime provided generous, fully coupled support (deficiency payments) the December 2006 reform canceled the previous regime: - support (278.8 million ) for banana producers in EU Outermost Regions (Canary Islands; Guadalupe & Martinique; Azores and Madeira) has been added to the financial allocation for the POSEI programmes - support (4.6 million ) for banana producers in Greece, Cyprus and continental Portugal has been decoupled

[Giovanni Anania, University of Calabria, Italy – Europes Strategy for the Outermost Regions (Brussels, May 2008) 3 the reform of the EU domestic policy regime the implementation in the POSEI programmes (2007) (a)in Spain financial resources have been devoted to decoupled payments (and to a specific aid for open air banana production of 1,200 /ha, paid on maximum 7,600 ha). Decoupled payments to individual farms are based on the support each of them received in the past; in order to receive the entire payment they are entitled to, farms are required to produce at least 70% of what they produced, on average, in

[Giovanni Anania, University of Calabria, Italy – Europes Strategy for the Outermost Regions (Brussels, May 2008) 4 the reform of the EU domestic policy regime (c) in Portugal (Azores and Maderira) financial resources are used to provide banana producers with a fixed, fully coupled production subsidy (b)in France financial resources have been entirely devoted to decoupled payments. Decoupled payments to individual farms are based on the support each of them received in the past; in order to receive the entire payment they are entitled to, farms are required to produce at least 80% of what they produced, on average, in

[Giovanni Anania, University of Calabria, Italy – Europes Strategy for the Outermost Regions (Brussels, May 2008) 5 the reform of the EU domestic policy regime a strong reduction in banana production in Canary Islands, Guadalupe and Martinique [the decoupled payments are around 11,700 /ha; farms will find profitable to produce 70% (Canary Islands) and 80% (Guadaloupe and Martinique) of what they produced in the reference periods, but no much more than that] the expected impact: an increase in imports (increases by individual sources depend on the trade policy regime in place)

[Giovanni Anania, University of Calabria, Italy – Europes Strategy for the Outermost Regions (Brussels, May 2008) 6 the reform of the EU domestic policy regime

[Giovanni Anania, University of Calabria, Italy – Europes Strategy for the Outermost Regions (Brussels, May 2008) 7 the reform of the EU domestic policy regime

[Giovanni Anania, University of Calabria, Italy – Europes Strategy for the Outermost Regions (Brussels, May 2008) 8 what if… countries modify their choices within the POSEI programmes? the EU domestic policy regime, what if…? what if… France, Spain and Portugal decide to keep unchanged the amount of support they provide to banana producers but make it fully decoupled? a further reduction in banana production (of an order of magnitude of an additional %) an increase in farm incomes a further increase in imports

[Giovanni Anania, University of Calabria, Italy – Europes Strategy for the Outermost Regions (Brussels, May 2008) 9 the interim EPA on 1 January 2008 the EU implemented the trade arrangements under the interim and full Economic Partnership Agreements with many ACP countries bananas from ACP countries now enter the EU (except the Outermost Regions, at least until ) quota- and duty-free

[Giovanni Anania, University of Calabria, Italy – Europes Strategy for the Outermost Regions (Brussels, May 2008) 10 the interim EPA an increase in EU imports from ACP countries the expected impact: very little impact on EU domestic production a reduction in EU imports from MFN and LDC countries an increase in EU consumption increased market access change in relative competitiveness of suppliers on the EU market

[Giovanni Anania, University of Calabria, Italy – Europes Strategy for the Outermost Regions (Brussels, May 2008) 11 the interim EPA

[Giovanni Anania, University of Calabria, Italy – Europes Strategy for the Outermost Regions (Brussels, May 2008) 12 the interim EPA

[Giovanni Anania, University of Calabria, Italy – Europes Strategy for the Outermost Regions (Brussels, May 2008) 13 …models vs. reality some of the issues associated with the assumptions made in the modeling exercise: quality of data available perfectly competitive markets bananas as an homogeneous product perfectly elastic transportation services supply response to policy and price changes in each country demand response to changes in incomes and prices in each country

[Giovanni Anania, University of Calabria, Italy – Europes Strategy for the Outermost Regions (Brussels, May 2008) 14 conclusions the December 2006 reform of the EU domestic policy regime for bananas reduced the distortions in domestic production decisions and will bring a significant decline in EU domestic production of bananas and an equally significant increase in EU imports

[Giovanni Anania, University of Calabria, Italy – Europes Strategy for the Outermost Regions (Brussels, May 2008) 15 conclusions the interim EPA will not significantly change EU domestic production and imports of bananas but the preference it grants to ACP countries will affect the relative competitiveness of their exports to the EU (expected to increase by 80%) vs. those of MFN countries (expected to decline by 7%)

[Giovanni Anania, University of Calabria, Italy – Europes Strategy for the Outermost Regions (Brussels, May 2008) 16 Thank you!