The World Trade Organisation (WTO) yesterday invalidated European Union plans to overhaul its import rules for bananas, backing a complaint by Latin American producers that argued the common tariff proposed by the EU would cripple their exports to Europe.
However, the decision by the Geneva trade arbiter raises the likelihood that the banana dispute will drag on at least into the autumn and could undermine efforts to complete the Doha round of world trade talks, in which agriculture is a key dossier.
The WTO arbitration panel ruled against a proposed EU banana tariff of €230 per tonne, saying it would "not maintain total market access" for Latin American suppliers, but did not make clear what it would consider to be an adequate banana tariff. The dispute has underlined the difficulties of opening trade in a sector that has pitted two sets of developing countries against each other.
European import rules have been designed to favour former colonies from Africa and the Caribbean (ACP) region rather than Latin America, where US companies control vast banana plantations. Brussels tabled its proposal last October, arguing that it would not only simplify an existing three-part quota system but also provide a fair compromise between the competing demands of Latin American and ACP producers.
However, the proposal was criticised by both sets of developing countries and eventually challenged before the WTO by Latin American nations led by Ecuador, the world's largest banana producer.
The dispute has not only threatened to turn into a repeat of an earlier WTO rift over bananas that soured trade relations for much of the 1990s but is also clashing with efforts to complete the Doha round. For many developing countries, agriculture is the most important element of the Doha talks, not least since the banana industry employs more than 500,000 plantation workers worldwide.
Ronald Saborio, Costa Rica's ambassador to the WTO, yesterday welcomed the ruling. "Bananas are a product where Latin America has improved its productivity but has got only very limited benefits from that because of the EU [ import] regime," he said.
If no compromise can be found on a new tariff, either side can take the dispute back for a second and final round of arbitration, the outcome of which would be binding.
A proposed new EU tariff regime could also have significant implications for multinational banana suppliers such as the Irish firm Fyffes and its rivals Chiquita and Dole.
Fyffes said yesterday that the rejection of the EU's plan would not impact negatively on the company, which wants to maintain the current EU tariff structure.
A spokesman for Fyffes said that the firm did not know what the EU planned to do but the company would continue to support the current status quo in tariffs.
The current tariff is about €75 per tonne, it said. - (Financial Times Service)
