EU banana subsidy reform

BRUSSELS – Europe’s farm chief plans to stop shielding less efficient banana producers from market forces and let governments hand out the cash instead if they want to keep growers in business, a document showed on Thursday. In a proposal for reforming the 13-year-old policy, the European Commission plans to shift most banana production subsidies into a separate budget known as POSEI to boost the economies and development of some of the EU’s remotest regions. The main subsidy, known as compensatory aid, is based on the difference between a flat-rate historical income rate and the EU’s average banana price for a particular year – so the lower the EU price, the more money producers get from Brussels. The plan, authorized by EU Agriculture Commissioner Mariann Fischer Boel, would be to scrap compensatory aid and use the cash to raise the POSEI budgets for France, Portugal and Spain by 241.3 million euros ($310 million) from January 2007. France, Spain and Portugal are the EU’s main banana producers and grow the fruit in far-flung islands such as Martinique, Guadeloupe, the Canary Islands and Madeira. Under the proposal, to be published on September 13, governments would get a relatively free hand in distributing the subsidies. «The current aid scheme for banana producers is based on principles which for other common market organizations have been substantially reformed,» said the document, obtained by Reuters. «Producers are artificially isolated from the market trends since the aid automatically compensates for price changes.» The EU spends 230-240 million euros a year on banana subsidies, which are linked to volume of production, unlike many of the EU’s other farm subsidies where that tie has already been broken in a reform process known as decoupling. Based on the average subsidies that were paid out between 2000 and 2004 and annual EU banana production of 750,000 tons, Spain would get the lion’s share with 122.2 million euros for its Canary Islands growers, the document showed. The Canary Islands are Europe’s largest banana producer, turning out 412,000 tons in 2004. Martinique ranks second with about 253,000 tons, followed by Guadeloupe with 70,000 tons. Canary Islands producers have by far the largest yield among EU producers, which collectively only account for 18 percent of Europe’s annual banana supply of some 4.1 million tons. The biggest share of the balance comes from Latin America, with the rest provided by former European colonies in the Africa, Caribbean and Pacific group of countries. France’s banana-growing overseas departments would receive 111.7 million euros. For the EU’s other banana regions where production is minimal – Greece, Cyprus and mainland Portugal – the amounts of annual compensatory aid would be integrated into the single farm payment, which has mandatory environment requirements. Greece and Portugal would together receive an extra 1.07 million euros, the document showed. Greece’s banana growers are concentrated in Crete and Laconia, while Portugal grows small amounts of the fruit in the Algarve. Cyprus, which as one of the EU’s newest members does not yet apply the single farm payment as agreed under the EU’s 2003 farm reform, would receive 3.00 million euros from 2009.