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TRADE-EU: New Banana Battle Looms

Stefania Bianchi

BRUSSELS, Mar 31 2005 (IPS) - The European Union says that although it "regrets" the decision of Latin American banana producers to challenge its proposed new tariff, it will defend its proposals.

Latin American banana producers lodged a challenge against the European Union (EU) at the World Trade Organisation (WTO) Wednesday (Mar. 30), over the bloc’s planned new import tariffs on bananas.

Ecuador, the world’s biggest banana producer, Costa Rica, Colombia, Guatemala, Honduras and Panama called on the WTO to arbitrate in the dispute amid fears that the EU’s proposed replacement of its controversial quota system next year will be discriminatory against Latin American banana producers.

"While the EU regrets the decision of these WTO members to request arbitration, it will defend its proposal before the arbitrator and remains open for constructive engagement with interested WTO members," the European Commission, the executive arm of the EU, said in a statement Thursday.

The Commission formally notified the Geneva-based global trade body in January that it intends to impose a blanket 230 euro (297 dollars) a tonne levy on banana imports to replace its import quota system in January 2006.

The quota system, which offers privileged access to European markets for bananas produced in Africa, Caribbean and Pacific (ACP) countries, was ruled illegal by the WTO in 2000.

Under the new regime, Latin American countries would no longer be limited by quotas but would pay higher duties from January. The current duty is 75 euros (97 dollars) a tonne.

The EU says the new tariff aims to "strike a balance" between the demands of large-scale growers in Latin America and the interests of traditional banana suppliers in ACP countries.

The Commission said the figure had been carefully calculated.

"The EU banana import regime is changing but the level of protection is not increasing. The proposed new tariff is based on a methodology to calculate tariff equivalents enshrined in the WTO texts and on objective data," Mariann Fischer Boel, EU commissioner for agriculture and rural development said Wednesday.

"I believe this figure and methodology has allowed us to square the circle and safeguard the sometimes conflicting interests of our consumers, producers and trading partners," she added.

According to the EU, ACP countries currently have a 20 percent share of the EU banana market. EU producers – mainly Spain – have 20 percent, while Latin American producers dominate the market with 60 percent.

The new EU regime is designed to help producers in former European colonies in the ACP states which have a preferential trade agreement with the EU to compete with larger growers in Latin America, many of which are controlled by U.S.-based multinational companies.

Under the new regime, ACP producers will continue to export bananas duty free. But they see the European Commission’s planned tariff levels as too low. These producers would like to see a duty as high as 300 euros (390 dollars) a tonne on the cheaper Latin American bananas to stop them flooding the lucrative EU market.

Latin American countries fear that they would have no chance of maintaining their market share in the EU with the planned levy weighing on the prices of their bananas. The Latin American countries have been considering action for several months.

During a summit in Ecuador in January, five Latin American presidents urged the EU to open immediate negotiations on the issue, warning that the planned changes to the EU banana regime would violate the EU’s obligations before the WTO.

Mentor Villagomez, the Ecuadorian ambassador in Brussels told IPS that "the European Union’s announcement on tariffs has left us no other option but to start a request for arbitration at the WTO."

Euroban (the European Banana Action Network), which brings together trade unions, environment, development non-governmental organisations (NGOs) and fair trade organisations, warned Thursday that the proposed EU regime could have serious social and environmental consequences in Latin American countries.

"Any new European import regime based solely on tariffs will not only cause severe social and environmental damage in Latin America, which will face greatly increased tariffs, but also in the Caribbean, which has so far had preferential access to EU markets under the quota system and where the end of the quota could well deliver a death-blow to the industry," the group said in a statement.

The WTO arbitrator must be appointed within 30 days and will then have 90 days to make a decision. If the EU tariff is judged to be excessive, Brussels will be forced to propose another amount.