TRADE-COMMODITIES: EU Delays Compliance with WTO Banana Ruling

By Gustavo Capdevila Reprint | | Print |

Gustavo Capdevila

GENEVA, Oct 17 1997 (IPS) - The European Union (EU) postponed the announcement of the conditions of its capitulation in the ‘banana war’ it is waging against the United States and a group of Latin American countries in the World Trade Organisation (WTO).

EU representative Roderick Abbott was to explain to the WTO Disputes Panel Thursday the measures the bloc planned to adopt in observation of a ruling which condemned its import regime as protectionist.

But the European negotiator’s failure to mention a precise timeframe for the modification of its banana import regime has revived the conflict which seemed to have been laid to rest Sep. 25, when the WTO appeal body confirmed a March decision by the Disputes Panel which ruled that “the European Union’s banana import regime violates open trading rules” and unfairly favours exporters from African, Caribbean and Pacific states (ACP).

Ecuador’s representative to the WTO, Roberto Betancur, said he lamented the “ambiguity” of the European response.

WTO conflict resolution norms and procedures allow up to 15 months for a country to comply with an unfavourable ruling. That means the EU has up to January 1999 to overhaul its import system and allow Latin American bananas free access to its market.

But since the WTO began to settle trade conflicts between countries in 1995, no nation has ever taken so long to comply with a decision.

One of the most drawn-out cases was the application of a ruling that found the United States guilty of imposing unfair barriers to imports of reformulated gasoline from Venezuela and Brazil.

But Betancur told IPS that the delay in that case was due to particularities of U.S. legislation, which demands that a variety of sectors be consulted before environmental legislation can be modified.

The Europeans had nurtured the hope that some legal loophole would allow them to postpone an unfavourable ruling, he said.

Two unfavourable rulings against European banana policy handed down by the General Agreement on Tariffs and Trade (GATT), the WTO’s predecessor, were never applied, he added.

Ecuador, Guatemala, the United States, Honduras and Mexico are putting up a united front in the present dispute. The United States does not itself export bananas, but two of the largest transnational companies operating in the banana industry, Chiquita and Dole, are U.S.-owned and heavily based in Latin America.

The EU, meanwhile, is protecting its former ACP colonies, whose exports to the bloc enjoy trade preferences.

A third key player in the conflict is a group of Latin American nations – Colombia, Costa Rica, Nicaragua and Venezuela – which signed a ‘framework accord’ with the EU in 1993 that ensured them 48 percent of the 2.2 million-tonne quota reserved for the continent.

The EU alleges that its delay in applying the WTO recommendations is due to the difficulties of designing a market without preferences while addressing the needs of the former colonies.

The ACP countries maintain that the elimination of trade preferences for their bananas will ruin them economically, due to their heavy dependence on revenues from that sector.

The group is planning an informal meeting, on the occasion of the Oct. 24-27 British Community of Nations conference in Edinburgh, to discuss the trade dispute.

Betancur maintained that the EU delay in modifying its import system favoured British, French and Spanish companies (the latter in the Canary Islands).

The EU system of import licenses, which according to the WTO ruling must be dismantled, gave rise to improvised importers who are reaping juicy profits, and who “have never seen a banana and are only familiar with the customs documents,” he added.