Stormy weather still for EC banana regime

by Chakravarthi Raghavan

Geneva, 18 Apr 2001 -- The accord between the United States and the European Communities on a banana regime appears to be still facing rough weather, as opposition from several of the Latin American countries Wednesday blocked the efforts of the European Communities and the ACP countries, backed by the United States, to get a process under way at the WTO for consideration of the waiver request.

Last week, the United States and the European Communities announced they had reached an agreement to resolve their long-running dispute over the import and marketing of bananas that would lead to the lifting of US trade sanctions against the EC.

The accord announced by Brussels and Washington, would replace the EC’s proposed regime to give effect to the WTO rulings, with one providing for a licensing system and allocation of quotas based on historical market shares, and ensuring a market share for a specific quantity of the bananas of ACP origin. For the accord to be effective, the EC has to get a waiver from the WTO.

The agreement has been widely interpreted and described in the US media as favouring the Cincinnati-based, US Transnational, Chiquita bananas, whose owner is a heavy contributor to both parties in the US.

The accord is basically a market-sharing accord for the US Chiquita and the traditional Caribbean banana exporters, and has been also welcomed by the ACP countries and particularly the Caribbean banana exporters , whose interests, as single commodity exporters in a region facing considerable fragility, have been safeguarded to some extent.

But Ecuador, the leading Latin American banana exporter (which has also developed a marketing enterprise of its own, and does not depend on the 3-4 major banana marketing TNCs) has objected. And Ecuador has made no secret of its intention to block the accord and the waiver, and start anew the dispute with the EC over the non- compatibility of the regime with the WTO obligations.

At the meeting Wednesday of the WTO’s Council on Trade in Goods (CTG), trade diplomats said, it was apparent that the way forward was not going to be smooth, and that the Ecuador objections appeared to have the backing also of other Latin American countries, and some of the Latin American banana exporters - - most of whom have been pretty miffed by an accord between the two majors behind their backs.

Whether the combined weight of the US (pushing the interest of the Chiquita banana empire) and EC would be able to quickly ‘persuade’ the Latin Americans to give way is not clear - the old GATT assumptions that what suits the two should suit the others and prevail, no longer can be taken for granted..

A joint request of the European Union and the ACP countries for a waiver for the Cotonou accord, described as a transition to the EC-ACP partnership agreement, is pending before the WTO, where the Latin American countries have blocked its consideration and its being taken up for examination (through a working party).  It has so far remained blocked, on the objections of several of the Latin American banana exporting countries, that it could not be considered without full notification of all the details of the EC-ACP accord.

Previous discussions at the CTG had reached an impasse - with several of the Latin American countries (backed at that time by the US too) blocking the consideration of the EC-ACP waiver request. The chairman of the CTG (Uruguay’s Perez Castillo) had then said he would hold consultations. These so far had failed to produce a compromise.

But if the EC-ACP countries, and the US, had hoped that with the US-EC accord on banana, the roadblocks had been removed, they were in for a surprise of sorts at the CTG - when Ecuador and Paraguay objected to the draft agenda, and the meeting had to be suspended - pending consultations.

Little was said at the formal meeting (the normal practice at the WTO), except that Ecuador blocked adoption of the agenda, questioning how the item had been brought on the agenda in the first instance.

However, trade diplomats said, it would appear that the CTG Chair, Hungary’s Istvan Major, had intended to tell the CTG that the item which had been on the agenda before would be closed, and that the waiver request would be taken up after the EC notified the details of the regime. Ecuador and others, the trade diplomats said, objected to this on the basis that in the absence of any compromise in the consultations, the issue could not be put on the agenda in this manner.

The CTG resumed formally in the afternoon, after prolonged consultations resulted in an accord of sorts that after hearing further views, the chair would again merely conclude that further consultations would be held.

At the CTG, the EC said that its agreement with the US on the new banana regime was available informally to delegations, and that the EC would formally submit it to the Dispute Settlement Body (where the issue is pending as a part of the DSB’s surveillance of panel rulings and adopted recommendations). The EC also said that the annexes to the agreement with the US provided further clarifications on the exact shape of the EC banana regime for both the short- and the long-term.

The new regime, the EC explained, was based on three transitional tariff quotas managed on past performance records. The EC was aware that some delegations might not like the new features, but that the WTO provided an adequate means to deal with situations of alleged non-compliance.

In the light of these new developments, the EC saw no valid reason for the blocking the CTG’s consideration of the waiver request.

The United States agreed that it saw no reason why the examination of the waiver request should not be taken up, and that a short adjournment and time would enable the EC to provide full details, after which the waiver could be taken up and considered. The United States also said that (under the agreement with the EC) it was committed to work for the start of the review of the waiver request.

Ecuador and Paraguay spoke in strong criticism of the accord and objected to it.

Ecuador explained that it had objected to the agenda item, because no member had asked for its inscription (thus implying that the Chair had done so on its own).  In Ecuador’s view the US-EC accord did not constitute a reform of the EC banana regime, and Ecuador saw no new elements to enable the waiver review to start.

Paraguay said it objected to the waiver request, since it discriminated against the trade of non-ACP developing countries. Paraguay made the point too that some of those being given preferences had much higher per capita incomes than Paraguay, for example.

Costa Rica, Panama, Honduras, Nicaragua and Guatemala all banana exporters., spoke with varying nuances - with some viewing the US-EC accord as moving in the right direction, but not sufficiently, and others critical. However all of them insisted that before the consideration of the waiver request could move forward all the documentation, including modifications to the EC banana regime arising from the US-EC accord must be completed, and the notifications to the WTO, before the examination of the waiver request could start.

Gabon for the ACP countries, and Mauritius both praised the agreement and supported the demand for taking up the request for waiver in relation to the Cotonou agreement. Gabon said that the ACP group had been patient so far, but that they were now getting impatient. The CTG should move forward now, as the documentation issue (on which the CTG consideration had been held up so far) was no longer a barrier. Gabon asked the other developing countries to support the ACP.

Mauritius, Madagascar, Cote d’Ivoire and St. Lucia also spoke in support of Gabon.

The Chairman said he would hold further informal consultations on the issue. – SUNS4879

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

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