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The slippery, overripe banana at the WTO

by Chakravarthi Raghavan

Geneva, 24 Oct 2000 -- Nearly twentyone months after the European Union was to comply with its WTO obligations and put in place a new ‘banana regime’, for import and marketing of bananas, protagonists on all sides of this dispute are still arguing on how the EC is to give effect to the rulings, and maintain the preferences to the ACP countries.

While the entire banana issue has pitted one group of banana producers in Latin and Central America against mainly the Caribbean producers, and US-based transnational marketing enterprises against those based in Europe, and involving campaign funding in the United States, the entire issue has also brought to the fore the basic weakness and the asymmetries of the ‘rules-based’ WTO system, including its dispute settlement mechanism.

The conflict between two groups of developing countries, over the preferences granted to one group of them (former European colonies) in the EC market against another group, got complicated as a result of the panel and the appellate body rulings—bundling up the GATT, GATS and other obligations and making them into cumulative obligations, and thus providing the US, which produces no bananas but has three banana TNCs running plantation economies in Latin and Central America, to secure rights for the TNCs and their interests.

Competent outside trade observers have said that the problems of dispute settlement and rulings and recommendations being carried out at the WTO have become complicated essentially because of the way the secretariat-guided panel and appellate body system has carried forward the political concepts (‘single undertaking’ of the goods negotiations) of the Uruguay Round into the WTO legal regime, and creating obligations.

Until this issue is tackled both in respect of the past, and the future of any WTO negotiations, the system faces an uncertain future and increasing challenges to its legitimacy, the observers have said.

But trade negotiators and diplomats at the WTO have become ‘prisoners’ of the system - and only pressures from non-trade parts of governments of developing countries and civil society can join to break this deadlock.

At the meeting of the WTO’s Dispute Settlement Body this week, the EC Commission representative reported on its progress in finding a solution to the dispute (whose origins go back to the old GATT) that would meet the conflicting interests of the various sides, and putting in place a new regime, and the protagonists made their points.

A new twist perhaps was the view of the Latin and Central American banana producing countries, and even of the US, advanced at the DSB meeting that a ‘Caribbean’ compromise proposal - a reference to a proposal of the Prime Minister of Dominica in November 1999 for a two-tier tariff rate quota regime (before the reasonable period of time for the EC to comply had expired, and the US had applied sanctions) - could be the basis for a solution satisfactory to all.

At the time it was made, while the US was reported as being favourable ‘in principle’, Ecuador a major Latin exporter was opposed. Since then, there have been reports that the Quito government may have changed its views or in the process. But no confirmation of this was available.

[As then reported in ‘Inside US Trade’ in December 1999, the Dominica Prime Minister had proposed a TRQ regime (after discussions with the USTR and the other banana producers), with an allocation system based on traditional or historical trade.]

Caribbean sources in Geneva however said that the proposal of the Dominica Prime Minister even when it was made did not have the full endorsement of the Caribbean banana producers, and much less so after the US trade sanctions against the EU, the new EU-Lome agreement and the transition period towards it, and other factors.

At the DSB meeting, the EC, in a progress report on its implementing the DSB recommendations and rulings, said it envisaged for a transitional period of time banana imports to be regulated by the establishment of tariff rate quotas (TRQs), managed on the basis of a ‘first come, first served’ (FCFS) system, and that before the end of the transitional period, the EC would undertake GATT Art.XXVIII consultations with a view to establish a flat tariff system.

The EC said its proposed FCFS was a WTO compatible system, and a straightforward and transparent one.

There would be three tariff rate quotas open for bananas of all origins, with management of all three TRQs identical and with a tariff preference for ACP countries. The tariff levels would not be prohibitive for non-ACP origin bananas, the EC claimed, adding that if this assessment proved wrong, the EC would reduce the inquota tariff for non-ACP bananas in the third tariff quota, during the year as necessary.

But the joint application of the EU and the ACP countries for an extension of the waiver enabling ACP preferences (under the Lome-IV) for a further period (of five years) until the new EU-ACP integration agreement is put in place has been prevented from being brought up for consideration by the Latin American banana producing countries.

At the DSB this week, Honduras, speaking on behalf of a group of Latin and Central American producers—Colombia, Costa Rica, Guatemala, Nicaragua, Panama and Venezuela—cited a communique of these countries after a meeting in Panama.

This joint statement sent to the EU Council of Ministers and member-states, had said the Commission proposals would neither help to resolve the trade dispute within the WTO, nor the adoption of the waiver for the ACP preferences under the Cotonou Agreement.

Honduras, which was supported by the other participants in the Panama meeting, made clear that the EC proposals would not be acceptable to them, and suggested that instead the ‘Caribbean proposal’ could provide a basis for an acceptable solution.

Ecuador (not a part of the group that met in Panama) said the information provided by the EC did not enable it to make a definitive assessment, and hoped the EC would make a very detail proposal, while also stressing Ecuador’s own preference for a single tariff. Ecuador complained of lack of information in the EC proposal on the management of the TRQ quotas and distribution of licences.

Jamaica said that a TRQ system, with licences allocated taking into account historical trade, would not only be more favourable to Jamaica but also to Caribbean banana producers. Jamaica reiterated its commitment to work with all to find a fair resolution to the dispute that would safeguard the legitimate interests of all parties, including those most vulnerable.

The United States said that the EC had taken considerable time to develop its proposal. The US had informed the Commission that the US could not endorse the proposal, and that the lack of details had caused considerable concern to the US.

Among the other interventions, the Dominica urged all parties to show political will to bring the dispute to an end, while St. Lucia said that there was only a very narrow area of disagreement and repeated Dominica’s view that all sides should show political will.

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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