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February 26, 2009

EU offers cuts to import duties on Latin American bananas

by Darren Ennis

The European Union has offered Latin America's top banana suppliers to initially cut duties on bananas to 148 euros per tonne from 176 euros now to try and end the world's longest-running trade dispute, a draft showed.

Under a draft proposal, the European Commission -- which oversees trade policy for the 27-nation bloc -- has proposed gradually lowering taxes on banana imports from Latin American countries to 114 euros per tonne by 2016.

The Commission's offer outlines possible arrangements if the stalled World Trade Organisation (WTO) Doha is not completed.

Ecuador, the world's largest exporter of bananas, has led pressure from Latin America for the EU to stick to the tariff deal negotiated in July 2008 on the sidelines of a Geneva meeting of ministers seeking a breakthrough in the WTO talks aimed at liberalising global trade.

When the WTO talks collapsed, the EU walked away, saying the banana deal had to be part of a wider Doha agreement. In the meantime Brussels has been pressing forward with talks aimed at securing free trade agreements (FTAs) with several Latin American countries. But the Latin Americans insist that bananas should be included in a separate pact.

"The initial reaction has been relatively positive from the Latin Americans. But the main stumbling block is the Doha caviat and the condition that any deal would have to be approved by the whole WTO which would give ACP (African, Caribbean and Pacific) countries a veto," a source familiar with the talks said.

The EU offers preferential access to its markets for the African, Caribbean and Pacific (ACP) countries, who are mainly former European colonies. African producers, like Cameroon, are particularly annoyed by the EU proposal. But Brussels is trying to find a package of financial aid for ACP banana producing countries to compensate them for any losses to their industry and unlock one of the barriers to a Doha deal.

Failure to resolve the banana row could block an overall Doha deal because the Doha proposals offer both slower tariff cuts on produce from poor developing countries, like the ACP states, and steeper cuts on tropical produce from countries like the Latin Americans.

The WTO has ruled that charging a tariff on Latin American bananas while letting in ACP fruit duty-free is discriminatory. It said the EU's previous regime, which admitted a quota of 2.2 million tonnes of Latin American bananas with a tariff of 75 euros a tonnes, was still in force.

In November, the WTO's top court ruled again against the EU in what has turned into the world's longest-running trade dispute. The following month, Ecuador said it could exercise its right to slap sanctions on the EU if the row was not settled.

Besides imposing trade sanctions, Ecuador could also challenge the controversial economic partnership agreements (EPAs) that Brussels is forging with developing countries to replace earlier illegal arrangements.

It could also challenge EU domestic subsidies at the WTO.

The EU's own producers in the French Caribbean and Spanish Canary Islands also objected to the July deal, but the source said Paris and Madrid "can be persuaded to get on board in return for some form of financial compensation for their producers".


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