Africa, Economy & Trade, Europe, Headlines, Latin America & the Caribbean

TRADE-EU: Banana War Looms Once Again

Stefania Bianchi

BRUSSELS, Feb 1 2005 (IPS) - The European Union moved closer to a trade war with Latin America Monday when it formally notified the World Trade Organisation that it will triple import tariffs on bananas next year.

Under the proposals Latin American countries will no longer be limited by quotas but will pay higher duties of 230 euros (290 dollars) per tonne of bananas when the new regime enters into force January 2006. The current duty is 75 euros (97 dollars) a tonne.

The European Union’s (EU) announcement is likely to trigger a request from Latin America for the World Trade Organisation (WTO) to step in to head off a repeat of the bitter 1990s banana wars. The EU had to overhaul its banana regime after the trade body ruled in 1997 that EU preferential banana import rules were discriminatory.

The bloc pledged to switch to a system of tariff only, but there has been no agreement on the rate.

Under the old rules, the African, Caribbean and Pacific (ACP) group of 79 countries had almost exclusive access to the European market for their bananas. This angered Latin American banana producers and top banana companies based in the United States who said that such preferences were unfair.

In a case initiated by the United States on behalf of U.S. companies operating in Central and South America, the WTO ruled that key elements of the EU import regime, in particular the method of allocation of licences and the national allocation of ACP quotas, were discriminatory.

A WTO ruling two years later allowed the United States to impose 191.4 million dollars in trade sanctions against EU goods. This led to the so-called banana war. However a ‘cease-fire’ was reached in 2001 when the EU agreed to change its import system and negotiate a unified tariff for all exporters.

According to the EU, ACP countries currently have a 20 percent share of the EU banana market. EU producers – mainly Spain – have 20 percent, while Latin American producers dominate the market with 60 percent.

To help ease the shift to a more competitive import system, the EU has provided ACP countries millions of dollars in aid to diversify from banana production to other agricultural crops.

The EU says the new tariff aims to "strike a balance" between the demands of large-scale growers in Latin America and interests of traditional banana suppliers in Africa, Caribbean and Pacific (ACP) countries.

ACP countries, mainly former European colonies, want a duty as high as 300 euros (390 dollars) a tonne on the cheaper Latin American bananas to stop them flooding the lucrative EU market. ACP bananas enter the EU duty-free.

"The EU banana import regime is changing but the level of protection is not increasing. The proposed new tariff is based on a methodology to calculate tariff equivalents enshrined in the World Trade Organisation texts and on objective data," Mariann Fischer Boel, EU commissioner for agriculture and rural development said Monday.

"I believe this figure and methodology has allowed us to square the circle and safeguard the sometimes conflicting interests of our consumers, producers and trading partners," she added.

Mentor Villagomez, the Ecuadorian ambassador in Brussels said that his country, which is the world’s biggest banana exporter, will challenge the new regime at the WTO.

"The European Union’s announcement on tariffs has left us no other option but to start a request for arbitration at the WTO. We have 30 days to do this and we are already in discussion about it," he told IPS Tuesday. Last week leaders of seven the main Latin banana producers – Ecuador, Colombia, Guatemala, Honduras, Costa Rica, Panama and Nicaragua – met in Quito in Ecuador to discuss the EU’s new banana regime. They called for the EU to switch to a zero-tariff policy or at least to maintain the current tariff level.

Villagomez said the meeting was an opportunity for negotiation with the EU.

"We wanted to use the Quito meeting to offer the European Union a third way for agreeing a solution, but the EU has decided to ignore this, so now we will have to challenge its proposals," he said.

Competition between ‘ACP bananas’ (principally African) and the ‘dollar bananas’ from Latin America has always been fierce.

In 2000, some four million tonnes of bananas were imported into the EU.