For months now, agricultural trade experts at the European Commission -- the EU executive -- have been discussing banana import tariffs with a string of Latin American countries with a view to eventually reducing the EU's entry duty for the fruit.
The talks have mostly been held in Geneva, the headquarters of the World Trade Organization (WTO), since the Commission is facing at least three legal challenges there to its banana regime from Latin America, as well as from the United States.
Now, in a bid to halt the litigation and the likelihood of a full-blown "banana war", the Commission has proposed two options for cutting the tariff. The duty, in force since January 2006, is now 176 euros ($240.3) a ton -- a rate that Latin American exporters say is far too high and discriminates against them. "One option depends on if there's a Doha deal and the other on if there's not," one industry source said. "It's about a 'landing rate' of 123 euros a ton over five years," he said.
"That would require no more WTO cases and a peace clause."
Ideally, the Commission would like to resolve the tariff row within a wider WTO agreement for the Doha round of trade talks, where the EU has offered to cut farm import tariffs across the board -- depending on what its main trading partners sign up to.
It would bind the duty at a high level so it could then fall, in a wider tariff-cutting deal, to a rate more acceptable to countries like Ecuador, the world's largest banana exporter.
The crucial difference is between the applied and bound tariff rates. The bound rate, the one used as a baseline in international trade agreements, is the maximum tariff legally allowed, while the applied rate is the duty actually imposed.
For both options, the applied rate would start at 170 euros. While it is not clear when that would begin, officials said the six-euro cut could kick in more or less "immediately."
In the first option, which anticipates some kind of Doha deal, the Commission would bind the import tariff somewhere between 273 and 307 euros, depending on the eventual farm tariff bands and associated percentage cuts that are agreed under Doha.
The other scenario, where there is no Doha deal, would see the EU tariff bound at 185 euros. But both options envisage an applied rate at 123 euros after five years, the sources said.
The single tariff was the WTO agreement struck to end the 1990s "banana wars," which Europe lost to the United States and Ecuador. It replaces a complex system of quotas and duties.
FRANCE, SPAIN WORRIED
The idea of cutting tariffs to placate the Latin Americans, and Washington, has irked France and Spain -- the EU's main internal suppliers of the fruit -- as well as Europe's former colonies in the African, Caribbean and Pacific (ACP) group.
ACP bananas enter the EU's lucrative markets free of duty, inside an annual quota of 775,000 tons, but anything shipped above that attracts the standard 176-euro duty.
Before the new regime kicked in, Latin American exporters paid 75 euros per ton, under quota, to get fruit into Europe. Anything over that faced a prohibitive duty of 680 euros.
ACP countries are unhappy about the prospect of the EU lowering its banana entry tariff, fearing that cheaper Latin American fruit may swamp lucrative EU markets.
Latin American banana exporting countries now have August to consider the Commission's offers, but are themselves divided on what level of import duty they think is acceptable.
Colombia and Nicaragua, for example, are believed to want a tariff set below 100 euros, while Honduras would like to be treated the same as ACP suppliers with a zero tariff. (Reuters)
