Monday, July 28, 2008

Trade deal ends 16-year banana wars

A worker tests the ripening process on bananas at the Penhamo farm, 60 km north of San Jose, a banana-dedicated plantation area in Costa Rica. (AFP File / Mayela Lopez)By Jonathan Lynn

Geneva (Reuters) - Latin American fruit exporters and the European Union settled their long-standing dispute over EU imports of bananas on Sunday, ministers and diplomats said.

But former European colonies in the African, Caribbean and Pacific (ACP) countries still need to be brought on board before the row, a major obstacle to an overall agreement on a new trade pact, is completely defused.

Brazil's Foreign Minister Celso Amorim told reporters that a historic deal had been reached on bananas after a meeting of ministers from 35 key players during talks at the World Trade Organisation (WTO) on the Doha round to free up world trade.

But a spokesman for the European Commission, which is at the centre of the banana dispute, said the negotiations were not concluded: "There is very substantial progress on bananas."

Bananas are an export product of vital importance to the economies of many ACP and Latin American countries, including the world's top banana exporter Ecuador.

Latin American and EU negotiators worked through the night on Saturday to reach a deal in the early hours of Sunday settling their dispute that dates back to the WTO's predecessor, the General Agreement on Tariffs and Trade (GATT).

Banana Wars

"The 16-year-old bananas wars are finished. We can finally leave behind the most difficult dispute in the history of the GATT and the WTO," Costa Rica's WTO ambassador Ronald Saborio Soto said. "For the moment one of the most divisive disputes in the Doha round has been settled," he told Reuters.

Costa Rica coordinates the Tropical Products group of Latin American countries at the WTO and is the second-biggest supplier of bananas to the EU market.

But Cameroon, which speaks on behalf of ACP banana exporters, said the deal was unacceptable as it stood.

"We still go on in discussions and negotiations ... Today is today, we have to see what will happen tomorrow," Cameroon's trade minister Luc Magloire Atangana Mbarga told reporters.

He said Cameroon wanted financial support to compensate for the export revenues lost to Latin American competitors and a two- or three-year grace period before EU tariffs are lowered.

Latin American producers and the United States on behalf of U.S. fruit distributors have mounted nearly a dozen successful challenges to the EU's banana import regime, which gives preferential treatment to ACP countries.

In response to these challenges the EU cut its tariff on bananas to 176 euros ($276) a tonne, while preserving duty-free access within a large quota for the ACP countries.

The Latin Americans argued this was still unfair.

Sunday's deal, building on an earlier compromise brokered by WTO Director-General Pascal Lamy, cuts the tariff further to 114 euros by 2016, with an initial cut next year to 148 euros.

The ACP countries said they wanted an initial cut to only 150 euros in 2009 and 2010 before falling slowly to the final rate of 109 euros by 2017.

That would give them more time to restructure their less competitive industry, which risks devastation in some cases as more efficient Latin American growers take market share.

EU member states France and Spain also have farmers in the Caribbean territories and the Canary Islands who grow bananas.

Failure to fully resolve the banana dispute would see the fruit become an insuperable barrier to broader discussions between the Latin American and ACP countries over tropical products in the WTO's agriculture negotiations.

Under Doha's agriculture proposals, tropical produce from Latin America would have faster, steeper tariff cuts than usual.

But ACP exports stand to see duties come down more slowly so they can retain some preferential access to rich markets.

The two sides have been working to tidy up overlaps of products on the tropical and preferential access lists but agreement would be impossible with a deal on bananas.

(Additional reporting by Robin Pomeroy and William Schomberg)

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