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CARIBBEAN: Banana Producers Fear Falling Victim to US-EU Trade War

by Brian KenetyInter Press Service
March 16th, 2000

A group of Caribbean banana-producing states fear that a prolonged lull in negotiations between the European Union (EU) and the United States over the EU's banana import regime could work against them.

The joint mission of the Organization of Eastern Caribbean States (OECS) here said in its weekly newsletter that the EU-US negotiations "seem to have come to a halt...The danger though is that if the matter drags on, pressure will increase for a simple tariff solution."

Under the current EU system, producers in the African, Caribbean and Pacific (ACP) states that have preferential trade ties with the EU enjoy a duty-free quota of around 850,000 tons of bananas a year.

U.S. marketing companies and Latin American producers have long complained that the EU's banana rules favored former European colonies in the Caribbean at their expense and the United States has fought to open the EU market via the World Trade Organization (WTO).

In November last year, the EU executive Commission adopted a proposal to make modifications that would bring the grouping's banana regime into line with WTO commitments, while respecting a system of preferences for ACP states outlined in the Lome IV Convention, the comprehensive EU-ACP trade and aid pact.

The two-step approach adopted by the EU was of a transitional tariff rate quota system until Jan. 1, 2006 at the lates, after which a tariff-only system would apply. Under tariff rate-quotas, imports are subject to normal tariffs up to the quota level and to much higher tariffs above that level.

EU Commission trade negotiators said that the Commission has concluded that the acceptance of a tariff rate quota system "if it can be achieved, can only be achieved on a transitional basis, leading to a flat tariff system."

"A transitional system would ease the adjustment to a flat tariff system, and would facilitate the necessary adaptations in the ACP banana supplying countries and in the banana producing regions of the EU."

U.S. officials complained that the EU would maintain high tariffs and unfairly favor former European colonies over Latin American growers and U.S. marketing giants like Chiquita and Dole and Washington announced its intention to impose retaliatory sanctions.

The EU claims that the U.S. acted "illegally" by announcing sanctions before a decision was made by the WTO on the matter. Regardless, the WTO Dispute Settlement Body found that the EU's revised banana regime -- which envisaged a separate quota for ACP states -- was not fully compatible with the organization's rules and the United States was given authorization to "suspend concession" to the value of $191.4 million.

But Europe has been slow to reform its banana import regime and on March 2 the WTO formally criticised the EU for dragging its feet on the issue.

In spelling out the EU's development policy priorities, Poul Nielson, Commission for Development Cooperation and Humanitarian Aid, told the European Parliament last month that whilst the banana protocol could not be maintained, "we agree to provide appropriate preferential access for ACP bananas under the EU's future banana regime."

Furthermore, he said that the EU was ready to support measures to improve the competitiveness of the producers and the conditions for production and marketing of bananas.

As the OECS joint mission noted, the political will does not exist to dismantle traditional preferences for the ACP states. European Parliament committees for Agriculture, Development and Industry have "all adopted a very positive position towards the safeguarding of ACP (states) interests," it said.

Their concerns, said the eastern Caribbean states, are "well reflected in the (committee) reports, namely, a rejection of the auctioning of licenses for ACP (states) bananas, as well as the retention of a sufficiently long period for the tariff quota system" of 10 years.

The OECS is concerned that a company such as Dole, which has major interests in West Africa, "would have both the interest and the ability to obtain a substantial portion of the licenses to market the already very competitive West African fruit."

All of the committees "appreciate that both the EU and the ACP are not able to compete with Latin American bananas" and will push for the regulatory quota system to be in place at least until 2010, said the OECS report.

The European Parliament's agriculture committee considers that there should be no prescribed termination date for the system, given the structural disadvantages of the ACP and the EU producers.

A request for a WTO waiver for the ACP-EU Convention has been signed in Geneva on behalf of the ACP by the Ambassadors of Jamaica and Tanzania.

Competing interests in Ecuador, Honduras and Mexico -- countries that have joined the U.S. in official complaints before the WTO -- commented that the EU is apparently "not ready to change its regime." Ecuador is pursuing $450 million in retaliatory sanctions against the EU for its failure to comply with the WTO ruling against its discriminatory banana import regime.

Meanwhile, several Members of the European Parliament's Development and Co-operation Committee said in a recent joint statement they would "mount a vigorous attack" on the Commission's latest proposals to alter the EU's banana import regime to comply with WTO rulings.

MEP Fernando Fernandez Martin, draftsman of the committee's opinion on the proposed new market rules, said they fail to take account of the needs of the most fragile producers and "pose a real threat to the survival of thousands of small producers in the (ACP) countries affected."

Placing the banana dispute in the wider context of the EU's future trade relations with the developing countries, he has urged the committee to send out a strong political signal of support for ACP producers.

Martin believes the proposed switch from customs quotas to a tariff-only system in 2006 could drive large numbers of ACP producers out of business.

He is calling for a transition period of at least 10 years. He is supported by Socialist MEPs Glenys Kinnock (UK) and Marie-Arlette Carlotti (France), who called for a "frontal assault" saying it was intolerable for the EU to renege on its development commitments and a WTO waiver must be sought in order to secure market access for ACP suppliers.

The Commission's proposed "first come first served" or "boat race" system for auctioning licenses under the transitional quota arrangements was condemned as unacceptable by Jean-Claude Fruteau, another French Socialist MEP, who said it would only favor the U.S. multinationals.

The Commission defended its proposals as being "workable" and the only means of withstanding further attacks from the WTO.

The Development Committee chair, Joaquim Miranda (EUL-NGL, Portugal), in a January session acknowledged the Commission's difficulties in trying to square the circle between the EU's commitment to its traditional banana exporters and the need to comply with WTO rules but declared "We cannot abandon ACP producers."

The banana import regime is scheduled for debate by the full European Parliament in April.





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