TWN Info Service on WTO and Trade Issues (Dec09/14)
22 December 2009
Third World Network

EU, US, Latin American countries end long-running banana dispute
Published in SUNS #6837 dated  17 December 2009

Geneva, 16 Dec (Kanaga Raja) -- The European Union and the Latin American banana-producing countries on Tuesday agreed to end a nearly-eighteen-year dispute concerning imports of bananas into the European Union.

Meeting in the WTO on Tuesday afternoon, ambassadors from the EU and the Latin American countries initialled an agreement that would result in the EU cutting gradually its import tariffs on bananas from Latin America.

In a parallel move, the United States and the EU initialled an agreement whereby the US agreed to settle its dispute with the EU. While the US is not a banana exporter, it is home to several banana transnational companies such as Chiquita and Dole, which have operations in the Latin American countries.

Once the EU Council approves the banana deal, the EU will sign the deal with the Latin American countries, as well as the agreement with the US.

According to a press release issued from Brussels, the EU will cut its import tariffs on bananas in stages, from the current rate of Euro 176/tonne to Euro 114/tonne in 2017, at the earliest. The EU will first cut its tariff by Euro 28/tonne to Euro 148/tonne once all parties sign the deal. This will apply retroactively from the date when all parties initialled the agreement, the EU said.

In return, according to the EU press release, the Latin American countries will not demand further cuts and will drop their dispute cases against the EU. The EU has also proposed mobilizing up to 200 million Euros from the EU budget to support the adaptation of the main ACP exporting countries.

According to trade officials, the banana issue has been one of the longest running disputes in the post-WWII multilateral trading system. It has run through the whole gamut of multiple legal rulings by dispute panels (including two under the old GATT), the Appellate Body and arbitration proceedings.

The dispute involved the treatment that the EC has provided to banana imports from the African, Caribbean and Pacific (ACP) countries in preference to bananas from Latin America.

After the WTO came into being, the US joined the Latin American exporting countries in raising a fresh dispute - with the US complaining of the EU violations of its GATS commitments on wholesale distribution services trade with negative effects on US enterprises supplying bananas.

On April 1999, the WTO granted US authorization to impose sanctions up to an amount of $191.4 million per year on EU products entering the US market. In May 2000, the WTO granted Ecuador authorization to impose sanctions up to an amount of $201.6 million per year on EU exports to Ecuador, a leading banana producer.

Commenting on the agreement initialled on Tuesday, EC Trade Commissioner Benita Ferrero-Waldner said: "Today is a very good day for banana producers worldwide and for consumers, as we finally see the 'longest trade dispute in history' solved. After years of tedious negotiations, the deal reached will provide an important push for progress in the Doha Round talks and for the multilateral trading system in general."

WTO Director-General Pascal Lamy said: "I welcome the news that a comprehensive agreement on bananas has now been reached. This has been one of the most technically complex, politically sensitive and commercially meaningful legal disputes ever brought to the WTO. It has also been one of the longest running 'sagas' in the history of the post-WWII multilateral trading system."

"This proves there is no trade issue which lies beyond the reach of WTO members when they exhibit good will and a spirit of compromise. I hope that the same pragmatism, creativity and diplomacy will help move forward the Doha Round negotiations," he added.

Speaking to SUNS at the WTO on Tuesday afternoon just before the signing ceremony, the coordinator of the ACP Group, Ambassador Servansing of Mauritius said that the only good thing that this agreement is doing is that it is at least solving a long-standing problem that existed between the ACP group a group of developing countries - vis-a-vis another group of developing countries such as the tropical products group.

"That's I think a systemic development in the positive sense, but as far as the details of the agreement itself is concerned, you would be aware and you'd appreciate that for the ACP, they are the losers in this agreement," the Mauritian envoy said, adding that the ACP are the losers because they depended on preferences and they had a long-standing preferential agreement (with the EU).

Any sharp or high tariff dismantlement inevitably affects the competitive advantage of those very poor and vulnerable ACP developing countries. "So, that's the downside of this agreement," he said.

But then, the ACP has come to realize that preferences are not something that they could depend on forever for their development. "So, this is why they are the ones accepting this sacrifice in the spirit of the system in order to advance those negotiations," he said, so that at least, some progress can be had on such a long-standing issue and also on the Doha Development Agenda negotiations.

A communication dated 15 December 2009 from Brazil, Colombia, Costa Rica, Ecuador, European Union, Guatemala, Honduras, Mexico, Nicaragua, Panama, Peru and Venezuela on the "Geneva Agreement on Trade in Bananas" provides details of the deal concerning the structure and operation of the EU trading regime for fresh bananas, excluding plantains, classified under HS tariff line 0803.00.19 and the terms and conditions that apply thereto.

According to trade officials, the agreement is to be officially reported to the WTO General Council meeting on 17-18 December.

According to the agreement, the EU shall apply tariffs for bananas not greater than the following: From 15 December 2009 until 31 December 2010 - Euro 148/metric tonne (mt); 1 January 2011 - Euro 143/mt; 1 January 2012 - Euro 136/mt; 1 January 2013 - Euro 132/mt; 1 January 2014 - Euro 127/mt; 1 January 2015 Euro 122/mt; 1 January 2016 - Euro 117/mt; 1 January 2017 - Euro 114/mt.

The agreement said that if the Doha Modalities are not established by 31 December 2013, the ensuing tariff cuts highlighted above will be delayed until the Doha Modalities are established.

Under no circumstances shall the delay extend beyond 31 December 2015. The applicable tariff rate during that period of delay shall be 132 Euro/mt.

After the two year period expires, or immediately after Doha Modalities are established, whichever occurs first, the tariff rate shall be 127 Euro/mt. The ensuing tariffs for the next three years, as from 1 January of each year, shall be no greater than 122 Euro/mt, 117 Euro/mt and 114 Euro/mt, respectively, said the communication.

The EU shall maintain a MFN tariff-only regime for the importation of bananas, and that it shall bind the tariff cuts provided above.

To this effect, added the communication, this Agreement shall be incorporated into the EU's WTO Schedule by means of Certification in accordance with the Decision of 26 March 1980 on Procedures for the Modification and Rectification of Schedules of Tariff Concessions (L/4962).

Upon entry into force of this Agreement, the EU shall communicate a draft Schedule on bananas incorporating the text of this Agreement to the Director-General for Certification.

The communication further said that upon Certification, the pending disputes WT/DS27; WT/DS361; WT/DS364; WT/DS16; WT/DS105; WT/DS158; WT/L/616; WT/L/625 and all claims filed to date by any and all Latin American MFN banana suppliers under the procedures of Articles XXIV and XXVIII of the GATT 1994 with respect to the EU trading regime for bananas (including G/SECRET/22 item 0803.00.19 and G/SECRET/22/Add.1; G/SECRET/20 and G/SECRET/20/Add.1; and G/SECRET/26) shall be settled.

Within two weeks after Certification, the relevant parties to this Agreement shall jointly notify the DSB that they have reached a mutually agreed solution through which they have agreed to end these disputes.

According to the communication, the Latin American MFN banana suppliers agree that this Agreement shall constitute the EU's final market access commitments for bananas for inclusion in the final results of the next multilateral market access negotiation for agriculture products successfully concluded in the WTO (including the Doha Round).

Meanwhile, in a separate release also on 15 December, US Trade Representative Ron Kirk announced that the United States and the European Union (EU) had initialled an agreement designed to lead to settlement of a longstanding dispute over the EU's bananas trading regime.

In the agreement, said the release, the EU undertakes not to reintroduce measures that discriminate among banana distributors based on the ownership or control of the distributor or the source of the bananas, and to maintain a non-discriminatory, tariff-only regime for the importation of bananas.

The release said that the US-EU agreement complements the Geneva Agreement on Trade in Bananas (GATB), concluded between the EU and several Latin American banana-supplying countries.

"The United States has worked closely over the years with Latin American banana-producing countries to ensure that the EU's bananas import regime was consistent with its WTO obligations. It has been a long road, and we still have more to travel before we finally and conclusively settle this dispute. But we believe that we have turned the corner toward that destination and look forward to getting there as soon as possible," said Ambassador Kirk.

According to the US-EU agreement, upon settlement by all the signatories to the GATB of the pending disputes and claims listed in that agreement, the dispute EC - Regime for the Importation, Sale and Distribution of Bananas (WT/DS27)  shall be settled as between the United States and the EU.

Immediately after the last notification to the Dispute Settlement Body of all the mutually agreed solutions referred to in the GATB has been submitted, the United States and the EU shall jointly notify to the Dispute Settlement Body, pursuant to Article 3.6 of the Understanding on Rules and Procedures Governing the Settlement of Disputes, that they have reached a mutually agreed solution through which they have agreed to end the dispute, said the agreement.

According to the US-EU agreement, the EU further undertakes:

(a) to apply a MFN tariff-only regime for the importation of bananas and therefore not to apply  measures affecting the importation of bananas into its territory in the form of quotas, tariff rate quotas, or import licensing regimes for bananas supplied from any source (other than automatic licensing regimes solely for market monitoring purposes); and

(b) not to apply any measure that discriminates between suppliers of banana distribution services based on the ownership or control of the service supplier or the origin of the bananas distributed.

In a post at the International Economic Law and Policy (IELP) Blog, trade lawyer Simon Lester cited Professor Giovanni Anania of the University of Calabria in Italy as saying that banana prices in the EU will drop 11% while Latin American producers will see exports climb.

"The clear winner will be the Latin American countries, because they will expand their exports to the EU by roughly 17%," Prof. Anania said in a telephone interview with Lester, who cited it on his blog post.

"Total exports of bananas from Latin America to all markets will increase by 3.2%" while producers in African and Caribbean countries will see shipments of the fruit to the EU decline 14%.

Lester said that Chiquita Brands International Inc. could get a $35 million boost from the settlement of a trade dispute between the European Union and Latin America.+