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August 07, 2008

Jamaica to focus on local market for bananas over EU market competitiveness fears

Jamaica has virtually written off bananas as an export crop, and will be using the next five years to develop niche markets for the fruit and grow local consumption.

"The future of banana, for me, is primarily in local consumption, including local value-added," said Agriculture Minister Dr Christopher Tufton.

The fruit is popular in desserts and baked goods, and processed into snacks. Jamaicans consumed 100,000 tonnes or more than three times the 32,000 tonnes of bananas sold to foreign markets in 2006.

Given those numbers, Jamaican policymakers and private farm operators were not overly concerned about the eroding competitiveness of Caribbean bananas in Europe, which a week ago, worsened with the planning of a new EU banana tariff regime that will allow Latin American bananas to enter that market even more cheaply.

Instead of €176 per tonne, the tariff will fall to €148 on January 1, 2009 and to €114 by 2016.

"Worst case scenario is that we have about four to five years at which point the gradual decline of the tariff will make us uncompetitive as a local sector because it is going to be difficult for us to compete with cheaper bananas from other countries," the agriculture minister said.

Dr Marshall Hall, shareholder and former managing director of the Jamaica Producers Group, the largest banana producer in Jamaica, believes the EU might not follow through on the proposed reduction of the tariff. "The European Union, the Latins and the USA had reached an agreement that was subject to there being an agreement to what's called the Doha Round," he said. "The Doha Round broke down and that agreement is no longer discussed," he said. "There is nothing that has been agreed recently that is on the table."

Tufton says the next five years allows Jamaica a window to reorganise the sector - looking at niche markets and value-added products.

Tufton and Hall said there were opportunities from Fair Trade certification that allows its recipients to trade bananas at a premium price.

"We have concluded an arrangement which will allow us to do that," Hall said. "Fair Trade is a label, which says to the buyer 'you have produced the material, in this case bananas, with no herbicides, you have employed workers fairly, you have no child labour, you are concerned about the environment'," he said.

About 60-70 per cent of the local industry has already received Fair Trade certification, which will be on the labels of bananas scheduled for export starting this month, Hall said.

The EU has long bought bananas from the African Caribbean Pacific (ACP) group at preferential rates under a tariff structure that made it more expensive to import the fruit from outside the ACP group. A sustained lobby by Latin American producers has seen a gradual erosion of preferences and adjustment of the tariffs.

Prior to 2006, exports to the EU, from Latam producers, were limited by quota, with the first 2.7 million tonnes attracting a tariff of €75, and €680 on any amount exported thereafter.

Latin America accounts for 60 per cent of bananas imported by the EU. The ACP accounts for 20 per cent.

Jamaica's banana growers had anticipated the new adjustments and so were prepared for bad news.

"We have been expecting some sort of negative reports, for some time, and it is not as bad as we expected. It could have been an entire preference gone but we get a gradual reprieve until the year 2016 to get it right," said Bobby Pottinger, president of the Banana Growers Association.

Pottinger anticipates that there will eventually be a fallout in the industry, as a result of this new development, but says the sector would likely retain most of its farmers. His reason: "From the simple fact that we use 150,000 tonnes locally, each year, and the price is good."

"We believe that the possibilities for local consumption are tremendous," said Tufton.

Jamaica Gleaner

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