By IPS Correspondents
BRUSSELS, Dec 21 2000 (IPS)

Franz Fischler, the European Union (EU) Commissioner for Agriculture and Fisheries, has welcomed the decision by EU ministers to adopt a new “first come, first served (FCFS)” import system for bananas put forth by the executive Commission earlier this year.

The EU, which purchases 40 percent of the bananas sold on the world market, has already been censured seven times by international courts that examined the legality of its import, sales and distribution system for the tropical fruit.

The World Trade Organisation (WTO) ruled in April 1999 that the current EU banana regime discriminated against producers outside of the African, Caribbean and Pacific (ACP) group of states – the majority of which are former European colonies – and set a deadline of Jan 1, 2000 for the EU to bring the regime into compliance.

When the EU failed to meet the January deadline, Ecuador, the world’s leading producer, and the United States, home to major transnational corporations that place Latin American bananas on the European market, announced hundreds of millions of dollars’ worth of sanctions against the EU.

These sanctions are supported by the Latin American banana producing states of Colombia, Costa Rica, Guatemala, Honduras, Mexico, Nicaragua, Panama and Venezuela.

On Tuesday, the EU Agriculture Council adopted a regulation on the system, designed to end the long-running trade dispute with the United States and major Latin American producers of the fruit, which should come into force on Apr 1 next year.

The Commission could defer the date until Jul 1, if the technical preparation by the 15 EU member states’ customs authorities to apply the first come first served system cannot be completed by that time.

Welcoming the decision, said Fischler. “The Commission has taken the lead and I am glad that the Council followed our proposal. I am extremely pleased that this saga can now come to an end. It has been on the table long enough, even too long”.

However, comments by a senior US official in Washington on Monday suggest the trade dispute, which centres on compatibility with WTO rules, is unresolved.

Following the conclusion of the US-EU Summit in Washington between President Bill Clinton and French President Jacques Chirac and EU President Romano Prodi, US National Economic Advisor Gene Sperling had been “some closing of differences” to bananas imported from Central and South America but “no resolution.”

Indicative of the sensitivity of the trade dispute – and how far the parties still remain — when asked the likelihood of a resolution on the banana issue and the separate of access of US hormone-treated beef to EU markets, the US official quipped: “In our lifetimes?”

The US and Latin American banana exporters have insisted that the EU grant licenses in consideration of each country’s prior levels of banana trade with Europe, but no agreement has been reached.

Sperling said that the US had made clear “we cannot comply with a ‘first come, first served’ system,” though hastening to add, “I think we feel it is not out of the question that this could be resolved in the life of this administration”.

For its part, the EU is equally convinced that the new EU regime is WTO compatible.

“First, the WTO panel itself indicated ‘first come, first served’ as a possible management system for bananas. Also, the US itself twice proposed a ‘first come, first served’ system,” said Fischler in a statement Wednesday.

“I believe it would be difficult for other WTO Members, including the US, to demonstrate that the revised system is not consistent with WTO rules.

The new system is also transparent and simple, and hence provides a viable alternative to a system based on historical references”.

The EU Council, composed of Agricultural ministers, agreed Tuesday that the tariff quota regime on the basis of a ‘first come, first served’ system is a transitional measure that would lead to a flat tariff in 2006 at the latest.

Before a flat tariff can be applied, the Commission will have to conduct negotiations with the main banana suppliers under Article XXVIII of the GATT, the system that preceded the WTO system.

For the purposes of modification or withdrawal of a concession, Article XXVIII states that the (now WTO) member that has the highest ratio of exports affected by the concession (eg exports of the product to the market of the Member modifying or withdrawing the concession) to its total exports shall be deemed to have a “principal supplying interest”.

This means that consideration may be given to possible “improvements”, including the adoption of a criterion based on the ratio of exports affected by the concession to exports to all markets of the product in question.

Whatever the result of such negotiations, the result must then be approved by the Council.

Fischler, joined by EU Trade Commissioner Pascal Lamy, underlined that the latest attempt to reach some form of agreement based on historical references with the US side failed.

“The positions put forward by the US presented insurmountable problems both with regard to WTO and EU law. The US were not able to overcome their differences of views with other interested countries, in particular with Ecuador who has expressed support for a ‘first come, first served’ system.

But the door is not closed. If the Americans come up with a solution compatible with the principles of EU law and acceptable to all players involved, we will be ready to listen to them,” Fischler said.

The EU believes that a ‘first come, first served’ is a valid instrument for quota management following WTO panel rulings on the EU banana regime; that it is a straightforward, transparent and flexible way of administering quotas with no special management tools (e.g. licence allocation or definition of operator); and that the current distinction between traditional operators and newcomers would disappear.

The European Parliament Dec 14 restated its opposition to many aspects of the Commission’s package of reforms intended to bring the EU’s banana import regime into line with world trade rules, in particular the automatic abolition of tariff quotas in 2006, and repeated its demand that the transitional tariff-quota regime should run for at least 10 years.

Whilst parliamentarians said they were eager to see the issue resolved, they are refusing to “let the Commission off the hook” and are demanding an annual report assessing the impact of the new banana market rules on EU producers and consumers, on the ACP countries and on the trade in organic and fair-trade bananas.

They want the first report by January 2002 and say the Commission must put forward proposals to alter the system if necessary.

Fischler told the Parliament last week that whilst he could agree to a mid-term review of the new system, he would not be able to provide a report until the end of 2004 and could not agree to an annual report.

Nor could he accept the bulk of Parliament’s amendments passed in April and later adopted again.

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