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

Publisher Name: 
Inter Press Service

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.

AMP Section Name:Trade Justice