OCR A2 Economics F585 (Feb 2011) - Suggested Reading

In this blog we will be updating some suggestions for further reading on aspects of the OCR A2 Economics Pre-Release Case Study for the February 2011 exam

Changes in EU Trade Policy

Here are some suggestions for background articles on the agreement between the EU and Latin American farmers to reduce the import tariff on bananas sourced from Latin America and the possible effect on growers in ACP countries. In short, the December 2009 EU-WTO Banana Agreement will oblige the EU to lower tariffs for imported bananas from Latin American countries from the current level of €176 per ton to €114 per ton before 2017.

Extract 1

Trade deal on bananas finally agreed (BBC World Business News - audio reports, December 2009)

Is it time to boycott Latin American bananas? (Guardian, February 2010)

Banana Wars - The Fruits of International Trade (BBC news, December 2009)

Q&A: The banana wars (BBC news, December 2009)

Fears for fair trade farmers if ‘banana war’ ends (Guardian, November 2009)

Caribbean Banana Exporters Association

Trade in bananas: £170m to support banana exporters in 10 African and Caribbean countries (March 2010)

The Big Question: Why are bananas so cheap, and what does it mean for producers? (Independent, October 2009)

Background to the Issue

For several decades banana industry of the Caribbean has enjoyed significant preferential access to European markets and this has given producers higher export prices than otherwise. The decision in December 2009 to end tariff free access to the EU has important implications given the high dependence on banana production and exports among the Windward Islands. (The Windward Islands comprise the countries of Dominica, Grenada, St. Lucia and St. Vincent and the Grenadines, all of which are members of the Eastern Caribbean Currency Union (ECCU).)

By way of context, it should be noted that banana production in the Windward Islands has become less important as a share of employment and national output. The number of registered banana growers in the Windward Islands has fallen from about 24,000 farmers in 1993 to about 5,000 in 2005.

The move away from trade preferences to ACP countries means that Caribbean banana exporters are likely to face strong competition from more efficient African and Latin American producers. Economists at the IMF have estimated that - on the basis of an EU tariff level close to the current €176 per tonne and individual country supply elasticities - banana production in the Windward Islands countries would decline by between 11-21 percent from its end-2005 level.

ACP bananas countries will continue to enjoy duty- and quota-free access to the EU under separate trade and development agreements, the so-called Economic Partnership Agreements (EPAs)

In 2008, EU consumers bought more than 5.4 million tons of bananas in total. The EU imported almost 90% of the bananas consumed - around 4.8 million tons, worth €2.9 billion. Five EU countries supplied the remaining 10%: Cyprus, the French Overseas Departments of Guadeloupe and Martinique, Greece, Portugal and the Canary Islands in Spain