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July 20, 2008

Latin American vs. ACP differences over EU banana tariffs threaten WTO talks

Latin America was on a collision course with rival exporters on July 17 over the European Union's banana import tariffs, a long-standing dispute that threatens to spill into world trade talks this week.

The EU has been at loggerheads with Latin American exporters for more than a decade because it offers preferential terms to former European colonies in Africa, the Caribbean and the Pacific, putting no tariffs on their bananas.

World Trade Organisation Director-General Pascal Lamy tried last week to settle the banana dispute and prevent the issue from further complicating attempts at a breakthrough in Doha Round negotiations over a global trade deal. Lamy said the EU should make annual cuts to its tariff of 176 euros ($280) per tonne of bananas, to reach 116 euros by 2015. In return, Latin American governments would sign a "peace clause" and drop lawsuits against the European Union.

The African, Caribbean and Pacific (ACP) countries are angry at not being consulted over Lamy's proposal and said that such a tariff cut would devastate their production.

Latin American banana exporters, which over the years have filed a string of WTO cases against the EU's banana policy, say they will push hard for better terms.

The world's top banana exporter, Ecuador, said Lamy's offer fell short and asked for deeper and more immediate duty cuts but hoped to reach an agreement before next week's trade talks in Switzerland.

"Latin American countries should not be blamed for hurting trade rounds, but instead the European Union for not being willing to give us a proper duty 12 to 15 years ago," said Mentor Villagomez, Ecuador's head trade negotiator. "We think there is still time ... if both parties are willing, I think we could reach an agreement in time."

In a joint statement, Panama's WTO ambassador and the country's chief trade negotiator said Latin American banana exporters were entitled to a substantial cut applied to the existing EU tariff "plus proper Doha cuts on top of that."

"They are willing to be reasonable in the interest of settling this long dispute but will need to see a better starting reduction, phase-in period and final rate than the one the EC (European Commission) is willing to accept," it said.

Costa Rica seemed more positive on Lamy's proposal. "We hope we can secure an agreement. We are seeing very positive signs so far," said Costa Rica's trade minister Marco Vinicio Ruiz.

Industry sources said Colombia is also willing to accept the offer to quickly lock a separate trade deal with the EU over a wider range of products.But experts said Latin American exporters were unlikely to agree as heavyweights Ecuador, Colombia and Costa Rica have different interests.

Ecuador said it held talks with ACP members over the possible impact on their exports to Europe but was not willing to jeopardize its "legitimate rights" to demand a tariff cut.

ACP banana exporters include Cameroon and Ivory Coast, Africa's leading producers of the fruit.
The group issued a veiled threat, hinting it might not sign up to either a Doha deal or long-awaited preferential trade deals with Brussels, known as Economic Partnership Agreements.

If bananas get dragged into the wider WTO negotiations on farm tariffs, then the Lamy proposal could face a veto from ACP countries which do not want rival Latin American exporters to grab a larger share of the lucrative EU market.

"There is no way they can reach an agreement before trade talks. This banana problem goes all the way back to when the European Union was being formed," said Thomas Spreen, a food economics professor at the University of Florida."There are too many interests involved."

Earlier on July 17, EU Trade Commissioner Peter Mandelson warned banana exporters that they risked derailing the trade talks if they refused to be flexible on EU import duties.

U.S. Trade Representative Susan Schwab, speaking on a conference call, said she had pledged to work with European, Latin American and ACP countries to resolve the banana issue before next week's talks, and if not, in Geneva itself.

"I think it would be a very sad commentary if we had all the makings of a breakthrough on the Doha Round and then it fell apart on this issue," Schwab said.

The Guardian

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