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

TRADE-CARIBBEAN: WTO Ruling Adds to Economic Woes

Peter Richards

PORT OF SPAIN, Aug 2 2005 (IPS) - Caribbean states are deeply unhappy with Monday’s World Trade Organisation (WTO) ruling that a new European Union tariff on imported bananas is illegal, seeing it as yet another blow to an industry that has long been a key element of the Caribbean’s economy.

The dispute has pitted the so-called Most Favoured Nations (MFN) – many in Latin America – against the 25-nation African, Caribbean and Pacific (ACP) group, former European colonies whose banana sectors have for years received duty-free access.

In the 1990s, the “banana wars” forced the European Union to introduce a new set of blanket tariffs on MFN nations by Jan. 1, 2006, to replace its current quota system. But a WTO arbitration body has sided with Latin American countries who argued that the proposed new tariff of 230 euros (279 dollars) per tonne would devastate their industries.

“What the WTO has done is to indicate that the tariff is illegal in the sense that it is not compatible with WTO rules, but they did not proceed to recommend a tariff level or suggest the level at which any tariff is supposed to be placed on bananas coming in from these countries,” Caribbean Community Chairman Dr. Kenny Anthony, who is also St. Lucia’s prime minister, said Tuesday.

The EU currently applies a tariff of 75 euros per tonne for Latin American bananas covered by quotas, and 680 euros per tonne for bananas not covered by quotas.

Keith Mitchell, the prime minister of Grenada – which is still reeling from the effects of two hurricanes in a 10-month period that virtually wiped out the agricultural sector – told IPS the ruling would further disrupt the banana industries of the Windward Islands: Dominica, Grenada, St. Lucia and St. Vincent and the Grenadines.

“Bananas are very much an important element in our economic activity, particularly in the countries of Dominica, St Lucia and St Vincent,” he said. “To have this on top of all the difficulties we’ve been having is clearly not a very good sign, and will certainly create a problem of confidence on the part of farmers and on the part of the subregion.”

CEO of the Windward Islands Banana Exporting Company Bernard Cornibert said that “in the light of the arguments put forward by the Most Favoured Nations suppliers, it is difficult to believe that they would agree to a tariff-only regime with a tariff level that would permit the Caribbean banana industries to survive.”

The MFN nations include Brazil, Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Nicaragua, Panama and Venezuela.

“The negotiations that must now ensue are very serious for much of the Caribbean banana trade, and it is ironic that these negotiations will take place essentially between the EU and the MFN countries,” he said in a prepared statement to IPS. Cornibert said that Caribbean banana-producing states were hoping that “common sense will break through and lead to negotiations for a more gradual transition to tariff-only on a basis that is fair to all suppliers – as well as to consumers.”

MFN suppliers are subject to a tariff of 75 euros (91.50 dollars) per metric tonne, but on Jan. 31, the EU announced that it was raising the duty to 280 dollars per metric tonne. The new tariff was aimed at safeguarding exports from ACP countries.

“In recent years, there has been an erosion of trade preferences, most graphically illustrated by changes in the EU banana regime, the effects of which have resonated most acutely with Caribbean Windward Island small-holder banana farmers,” said the Caribbean Regional Negotiating Machinery (CRNM), the body that coordinates the region’s trade negotiations.

Guyana’s Trade Minister, Clement Rohee, the Caribbean’s spokesman on sugar, called the ruling “a terrible blow”, saying it compounds the threat posed to the region’s economies now that preferential treatment of sugar is also under fire, following plans unveiled by the European Commission last month for an overhaul of the Common Market Organisation for sugar.

The EU said it held consultations in February with MFN exporters. But in March, Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Panama, Venezuela, Nicaragua and Brazil notified the WTO that they were requesting formal arbitration on the issue.

In May, a three-member arbitration panel was appointed to review the matter. At the request of certain African, Caribbean and Pacific (ACP) banana exporting countries, the arbitrator invited some, including St. Lucia, Dominica, Grenada, Jamaica, Suriname, Belize and St. Vincent and the Grenadines, to participate in a limited manner.

In its ruling, the WTO panel said it acknowledged that the issue “raises questions of considerable political, economic and social importance to the members concerned” but the “arbitrator must, of course, decide the issues before it on their merits according to the evidence and submissions before it.”

“For the reasons stated above, the Arbitrator determines that the European Communities’ envisaged rebinding on bananas would not result in at least maintaining total market access for MFN banana suppliers, taking into account all EC WTO market-access commitments relating to bananas,” the panel ruled.

The two sides now have a 10-day period to work out an agreement. An EU statement said that if they fail to do so, it would request a second round of arbitration.

The president of the All-Island Banana Growers Association in Jamaica, Bobby Pottinger, warned that if the ruling stands, Jamaica would not be able to compete with other major banana producers.

“Our main source of income is exporting of bananas and we have been accustomed to a level of protection and we have been negotiating for an increased tariff because àwe cannot be competing with the Latin Americans as it is with cheaper production,” Pottinger said.

Marshall Hall, chairman of the Banana Exporters Association (BEA) in Jamaica, also expressed dissatisfaction with the ruling, adding, “it is not at all in our favour and we are not happy.”

“We bring in about 25 million dollars a year and are employing about 10,000 people,” he added.