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Issue #584 | Breakbulk Quarterly

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2014 Media Kit
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EU, Latin America likely to talk bananas all summer

By: | at 08:00 PM | Channel(s): International Trade  

EU negotiators look set for a tough summer dealing with Latin America over bananas if they want to stop the simmering fruit row from spoiling world trade talks at the end of the year, diplomats said on Wednesday.

Bananas are a prime export for many Latin American countries and the world’s second-largest fruit market after citrus. In Europe, they have a long history as a highly sensitive area.

After losing the bitter “banana wars” of the 1990s at the World Trade Organization, the EU pledged to scrap its complex system of quotas and import duties for a tariff-only system to run from January 2006. The problem is how high to set the duty.

The EU wants 230 euros/ton as its tariff, with no quotas. For Latin American suppliers, who now pay 75 euros/ton in a set quota to get their fruit into Europe, this is far too high.

After months of wrangling, six Latin countries led by the world’s largest exporter Ecuador asked the WTO to rule whether a 230-euro duty would keep their existing access to EU markets.

A verdict is due by August 1 and is widely expected to recommend that the EU propose a lower duty. It could come as early as July 29, since July 30 and 31 fall on a weekend and August 1 is a holiday in Switzerland, where the WTO is based. If this happens, the European Commission—which negotiates foreign trade on behalf of EU states—would have 10 days to adjust its figures and “rectify the matter”, in WTO-speak.

While the WTO would not suggest a new number, it should at least indicate how far the suggested duty is out of line.

That is unlikely to be the end of the matter, diplomats say, since if the Latinos were still unhappy, they would probably request a second round of arbitration, probably in September.

“There could be another arbitration round of 40-45 days, so this will probably rumble through August,” one EU diplomat said.

“I would imagine it will go to a second round of arbitration as this is just too contentious. If it was so easy to sort out, it would have been solved years ago,” she said.

The Commission will also have to secure agreement on a new tariff from EU agriculture ministers, and is expected to try and do so either in September or October.

EU states are themselves divided on the new banana tariff.

Countries like France and Spain, which produce bananas in Guadeloupe, Martinique and the Canary Islands, want a high duty to protect their growers from more competitive Latin fruit. But EU importer countries want a lower tariff, and cheaper bananas.

The main fear, at least for the Commission, is that the “banana saga” will drag into December and be used by disgruntled Latin American countries as a bargaining chip at a key WTO meeting that month in Hong Kong on liberalizing global trade.

This is something that some Latin governments have already threatened if they do not get their way on the EU tariff.

“If it lasts into the autumn, it’s not the end of the world,” said Michael Mann, the Commission’s agriculture spokesman. “But it’s in nobody’s interests for this to spill into the final WTO negotiations.” (Reuters)