Developing countries face various sanitary standards and other requirements when exporting agricultural products to developed country markets. These standards often have different impacts on large, small and medium-sized farms.
This article explores the impact of non-tariff requirements that Ecuadorian banana and pineapple farmers and exporters face in their major export markets. As such, it contributes to a better understanding of to what extent – and for what products – sanitary and phytosanitary (SPS) standards and technical barriers to trade (TBT) in developed countries present obstacles to exports of tropical products.
Cultivation and export of bananas
Bananas are Ecuador’s main tropical export, representing approximately two thirds of total tropical exports. Pineapples are a less important agricultural export, barely representing two percent of total agricultural exports. They are, however, an export product on the rise and one of Ecuador’s top three tropical product exports. Both bananas and pineapples face non-tariff requirements in their export markets.
There are thousands of banana producers in Ecuador, displaying different levels of technological implementation, productivity, and cultivation practices. Banana production is centred around large and medium producers (by farm size), which are more productive and have better cultivation practices. According to data from the last agricultural census in Ecuador (CNA, 2000) on water use, pesticide use, and SPS measures in small, medium and large farms, only medium and large farms have access to irrigation, and regularly use pesticides and SPS measures. Most banana producers sell their produce to exporters. In a few cases, producers (in general, multinational companies) sell directly to foreign markets. The main export markets for Ecuadorian bananas are the EU (the countries by the Mediterranean and Baltic Sea), the US, and Russia, receiving 43, 22, and 20 percent of Ecuadorian banana exports, respectively.
Cultivation and export of pineapples
There are approximately six thousand hectares of pineapple farms in Ecuador. Approximately a third of this land is dedicated to growing pineapples for export. In general, pineapples intended for export are grown on large- or medium-sized farm. There are only a few farms large enough to grow pineapples for export, and small pineapple farms usually produce for the local market. Cultivation practices also differ among the large, medium and small pineapple farms. Most large pineapple farms, as well as the medium-sized ones, generally, have access to irrigation systems, apply fertilizer, and follow consistent sanitary and phytosanitary standards. In contrast, most small pineapple farms do not have irrigation, do not apply fertilizer and do not follow SPS practices. According to the trade statistics of the Central Bank of Ecuador, the main export markets for Ecuadorian pineapples are the EU and the US. In 2006, 45 percent of the total value of Ecuadorian pineapple exports went to the EU and 40 percent to the US. Eighty percent of pineapple exports were handled by banana export companies (Ecuador Exporta, 2007).
Understanding the barriers banana and pineapple exports face
To gain a better understanding of the operating conditions, we surveyed thirteen banana exporters and farmers, and five pineapple exporters and farmers. Each survey questionnaire was complemented by interviews with the corresponding exporter and farmer. The companies were selected so as to include the majority of banana and pineapple exports in Ecuador in the sample. In the case of bananas, the sample included at least one company representative of large-, medium-, and small-sized companies (by volume of exports or production), a cooperative of farmers, and an export association. For pineapples, the sample was planned in the same way. However, the final sample included large or medium-sized companies, as no small farms, cooperatives or associations of pineapple producers/ exporters were found.
The questions were of a general nature (years in business, volume or value of dollar exports, main export markets, mode of transport used), about the non-tariff barriers faced, the impact of non-tariff barriers on costs, degree of competition from other export companies, and assistance received either from the government or from private firms.
The results
All the farmers and exporters interviewed reported at least three non-tariff barriers for banana exports, and at least seven in the case of pineapple exports. They all said they had to deal with SPS and environmental rules and requirements. Almost all of the banana farmers and exporters, and all of the pineapple producers and exporters, mentioned that they also had to deal with labelling regulations and labour requirements. Certification requirements were also reported by some farmers and exporters. Medium and small farmers and exporters in particular reported they had do deal with challenging procedural and administrative tasks.
The farmers and exporters of bananas and pineapples clearly identified SPS standards as the most difficult and frequent non-tariff measures they faced. The most frequent were certification and testing requirements, labelling, and environmental rules. Labour rules, certification and testing requirements, labelling, and environmental rules were considered the most difficult measures (see figure 1 for pineapples).
Escalating requirements
All the farmers and exporters interviewed had the perception that they had to comply with more and more non-tariff requirements each year. When asked about private-sector standards for fresh bananas and pineapples, only respondents representing small farms said they did not know about these standards. Respondents representing large and medium-sized farms reported that they were facing private-sector standards such as those of EUREPGAP as well as consumers’ demand for a certain size, weight, presentation, and quality. In all the banana and pineapple businesses, compliance with non-tariff measures implied higher costs, either in export or production, according to the nature of their business. This higher cost did not mean, however, that the businesses lost export markets.
Seventy-five percent of the banana exporters or producers and sixty percent of the pineapple exporters and producers had not received any assistance from the Ecuadorian government to meet non-tariff requirements. The banana exporters or producers that mentioned some help from the government pointed out that this had consisted of measures to maintain a minimum price for bananas, and in getting information on non-tariff barriers. The respondents from small farms said they had not received any government assistance.
Small producers hard-hit – cooperatives a solution
In general, the ability to cope with SPS and technical requirements appeared to differ between large, medium, and small banana and pineapple producers. The large producers did not experience problems complying with SPS and technical standards. However, medium and small producers found it very difficult, if not impossible, to comply with the most stringent SPS and technical requirements on markets such as the EU market.
One possible solution would be for the farmers to create cooperatives. An interview with a banana cooperative illustrated the positive results that small farmers could reach when working together to meet world market demands. The cooperative gave some (local) market power to small producers allowing the farmers to receive better prices for the bananas they sold, as compared to a situation in which they would have sold the fruit by themselves. The cooperative also provided the associates with information about the standards they needed to meet, provided follow-up in the implementation process, and kept them abreast of developments with regard to requirements on the world market. Another issue that came up in the interviews was the growing importance of export contracts (between exporters and farmers), which established long-term business relationships and ensured quality control.
Perceptions of standards as a trade barrier
Most banana exporters and producers (85 percent) reported that they did not consider the standards (SPS, technical, and others) barriers to their trade. This was also the case for most pineapple exporters and producers, although with a smaller margin (60 percent). In fact, when asked if their production or exports had increased as a consequence of their compliance with the standards imposed by the importing countries, just over half of the banana exporters and producers said yes (while just under half did not respond), and 60 percent of the pineapple exporters and producers said yes (40 percent of the pineapple producers and exporters did not respond).
When comparing tariff and non-tariff barriers, all banana exporters and producers agreed that tariffs were the main barrier to banana trade (mainly due to an EUR176 per MT duty imposed by the EU); not the SPS or technical standards set by the importing markets.
On the contrary, pineapple producers and exporters – which do not face tariffs in their main importing countries, the US and the EU – considered the non-tariff requirements, rather than tariffs, the main trade barrier.
To conclude, Ecuador complies with a number of SPS and technical standards defined in its export markets. However, the level of compliance and associated market access varies according to the type of farmer. In order to comply with reasonable SPS and technical standards, and to gain access to markets in developed countries, it is important for Ecuadorian farmers to receive necessary technical support. Help provided by developed countries in setting up these processes is a key factor.
Sara Wong is Assistant Professor at the Escuela de Postgrado en Administración de Empresas Escuela Superior Politécnica del Litoral (ESPOL)
For further information on a dialogue on “Tropical Products, Trade, Natural Resources Management and Poverty” organised by ICTSD and ICONE, see http://www.ictsd.org/dlogue/2007- 12-03/2007-12-03-desc.htm