Frustration Grows in US and Latin America over EU Banana Policy

  
The latest salvo in the long battle between the European Union and the United States over the former's banana import regime has taken a new turn. The EU regime favors ACP (Asia, Caribbean, Pacific) bananas over Latin American bananas and discriminates against non-EU banana marketing firms, such as Dole and Chiquita. The US first took its complaint of discriminatory trade preferences to the World Trade Organization in 1997[1] and eventually won an appeal ruling in April 1999. Since then, the US has been allowed to impose $191 million in additional tariffs and Ecuador has been authorized to impose $200 million. The US has tried to find a WTO-consistent solution to the impasse that would satisfy US distributors, as well as Latin American and Caribbean producers. In response, the EU Commission has offered only delays that reflect the disagreement on the issue among its members.

In December 1999, the Caribbean banana-producing countries themselves put forward a proposal for a two-tier tariff rate quota system. The first tier would allow the import of 2.7 million tons of bananas yearly without a fee from any source. The second tier would allow 850,000 tons of annual imports from ACP countries duty free, but Latin American producers would pay a tariff of 115 euros per ton (the Windward Islands would receive an additional preference). Prices are not expected to vary, as the amount imported into the EU will remain the same as it has since 1993. First-tier import licenses would be issued based on import experience prior to the discriminatory preferences enacted in 1993. Eventually, this regime would be phased out to a flat tariff, non-quota regime.

The US government supported this proposal as WTO consistent, and all Latin American producing countries-except Ecuador-agreed. However, the EU objected. After a long but ultimately failed effort to find a formula acceptable to all parties that would maintain a tariff rate quota based on historical trade patterns, the EU promised a draft proposal of its own by October 9. But so far, all of the initial drafts that have emerged are unacceptably discriminatory against non-ACP and non-European countries and, therefore, are not compliant with WTO norms, US government sources say.

Earlier, EU Commission negotiators announced a proposal to allocate import licenses during the transitional tariff-quota phase on a "first come, first served" basis. If agreement could not be reached on this basis, the regime would move to a tariff-only system. The Caribbean Banana Exporters Association (CBEA) vigorously opposes the "first come, first served" license allocation, and argues that it would erase the guarantee of access to the EU market. The CBEA also opposes the tariff-only system; even with a preferential rate for ACP countries, it believes that multinationals would flood the EU market, lowering prices and driving out Caribbean bananas.

If implemented now, these measures would cause severe economic and social upheaval in the Caribbean. This is especially true of the Eastern Caribbean countries, the source of most of the region's $300 million in banana exports. In some countries, bananas account for more than half of exports and 40% of employment. In addition, the CBEA points out that the EU proposals run counter to the Banana Protocol to the EU-ACP Partnership Agreement.

At least some EU Commission members agree with the CBEA's analysis and oppose the implementation of the EU approach. In fact, the commission has never given its negotiators the authority to negotiate this issue because of the differences among its members as to whether or not Caribbean exporters can compete under the proposed rules.

For the time being, the commission believes that quotas must be maintained to assist ACP banana exporters. There appears to be recognition that a tariff-only system could be implemented after a long transition period. Presumably, this would allow Caribbean producers to either become more efficient or switch to alternative crops or economic occupations.

The banana issue is important because it raises questions about the effectiveness of the WTO's international system. The EU has been able to thumb its nose at the WTO and get away with it. The US government has done its best to be flexible, but it is growing increasingly frustrated with the EU's intransigence and the WTO's inability to bring the issue to resolution.

[1] The USA began lobbying and started the complaint process in 1995 largely at the behest of the largest US banana trading company - Chiquita.

www.cbea.com   www.eurunion.org  EU Delegation Washington DC USTR US Department of State