European Union banana market policy changes: Implications for sustainable rural development and sustainability of rural communities in the Windward Islands

Thomas, Anthony Oswald
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University of Guelph

The new banana import regime in the European Union led to significant declines in export earnings of Windward Islands (WI) from banana trade. This study attempts to quantify the impact of the new banana regime on sustainable rural development (SRD) and sustainable rural communities (SRC) in the WI. The objectives of the study are to: (i) compare and contrast SRD and SRC; (ii) quantify the economic impacts in the WI of declining banana trade; and (iii) develop an empirical framework to quantify SRD. The first objective is achieved through a comparative analysis of SRD and SRC. To achieve the second objective, an import demand function for WI bananas in the United Kingdom was estimated and the change in economic welfare was derived. The third objective is achieved by developing a set of multidimensional indicators of SRD from data collected through a survey in a banana-dependent and non banana-dependent community in St. Lucia. Multivariate techniques are used to explain variations in SRD using relevant economic, social and environmental indicators. The results show that SRD and SRC are similar both conceptually and operationally. The average annual economic impacts of the decline in banana trade ranges from 2.65 to 4.15 percent of real GDP for the 1990 to 2000 period. The results from the multivariate analysis suggest that the non banana-dependent community is relatively more sustainable than the banana-dependent community. The results imply that policies for SRD should take into account the heterogeneity of rural communities, and how the variable factors released from declining banana trade might be employed in other productive activities to diversify the rural economic base in the WI.

European Union, Windward Islands, banana trade, sustainable rural development, sustainable rural communities