The EU and the Latin American states have put an end to a ‘banana war’ that has lasted some 16 years by sealing a deal that paves the way to a phased-in decrease of EU customs duties. The agreement, initialled on 15 December in Geneva after a marathon of discussions that had been stepped up in recent weeks, brings to a close one of the longest sagas in the history of international trade. “This proves that there are no issues that cannot be settled by WTO members,” commented its Director, Pascal Lamy, who added that the dispute had been “one of the most technically complex, politically sensitive and commercially significant ever brought before the WTO”.

The ‘banana war’ accelerated in 1993, when the EU put in place a preferential scheme for the ACP (African, Caribbean, Pacific) states. This customs scheme gave ACP banana producers duty-free access to the European market, triggering a long series of complaints to the WTO from the Latin American countries, each ending with a ruling against the EU.

DUTIES TO BE CUT UNTIL 2017

Under the agreement, the EU will lower its customs duties on bananas every year, from €176 a tonne at present to €114 in 2017. The first cut to €148 will be applied as soon as the agreement has been signed by the parties, ie in around four months, according to Ecuador, with retroactive effect to the date of initialling. The European Parliament will still have to issue its assent for the agreement to take on the force of law.

In exchange, the Latin American countries drop their actions against the EU in the WTO and will not seek further cuts as part of the Doha round talks. In other words, the agreement will be valid irrespective of whether the Doha talks are brought to a successful conclusion.

The deal also contains several clauses concerning other stakeholders in the conflict. The United States, where three of the biggest Latin American producers are established (Chiquita, Del Monte and Dole) and which was associated with the complaints against the EU in the WTO, also initialled a complementary agreement with the EU.

ACP STATES

The European Commission will propose to the member states and the European Parliament to adopt an appropriation of €200 million to help the ACP states adapt to the tougher competition from Latin America. This aid will come on top of the €450 million provided since 1994. “We are not pleased with this amount,” reacted the head of the ACP group, Surinam’s Ambassador to Brussels, Gerhard Otmar Hiwat.

In 2008, 72.5% of the 5.4 million tonnes of bananas sold in the EU already came from the dollar zone (mainly Ecuador, Colombia, Costa Rica and Panama), 17% from the ACP states (basically Cameroon, Côte d’Ivoire, Dominican Republic, Belize and Surinam) and 10.5% from the EU itself (mainly Canary Islands, Guadeloupe, Martinique and Madeira). According to a study by the NGO International Centre for Trade and Sustainable Development (ICTSD), the agreement is expected to result in a 14% cut in ACP exports and a 17% increase in Latin American exports. Small producers like Ghana and Jamaica are likely to feel more of an impact than Cameroon or Côte d’Ivoire.

“We will find remedies: Ivorian producers will put the accent on developing the internal market as well as the regional and sub-regional market,” declared Michel Gnui, president of the Central Organisation of Ivorian Producers and Exporters of Pineapple and Bananas. “With a more stable environment, all players will be able to concentrate on improving production conditions,” commented Development Commissioner Karel De Gucht. European producers already receive annual support of €279 million under agricultural aid for very remote regions.

POSITIVE SIGNAL FOR DOHA

The agreement will apply irrespective of the outcome of the Doha round. However, the Latin American, ACP and EU states agreed at the same time on two key questions in the Doha agriculture talks: ‘tropical products’ and the ‘erosion of preferences’. The long list of ‘tropical products’ includes both processed and non-processed products (fruit, beverages, spices, plants, tobacco, etc.) for which the Latin American countries are seeking faster opening of the European market.

The ‘erosion of preferences’ is another list of agricultural producers for which the EU will on the contrary lower its customs duties more slowly to allow the ACP states to hold on a bit longer to their comparative advantages over their Latin American competitors. Under the economic partnership agreements, these ACP products have free access to the EU, apart from rice and sugar. Unlike bananas, the agreement on these two lists will only apply once a comprehensive Doha deal has been concluded.

Agriculture Commissioner Mariann Fischer Boel commented that the banana agreement “is a positive signal for the entire Doha round”. “I hope that the same spirit of pragmatism, creativity and diplomacy will give fresh impetus to the Doha talks,” added Lamy, who has been trying for months to rekindle the laborious talks that started in 2001.

The banana deal is also expected to facilitate conclusion of the free trade agreements being negotiated by the EU with Colombia, Peru and Ecuador, one of the objectives of the Spanish EU Presidency in the first half of next year. n