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EC & US AGREE TO END EIGHT-YEAR BANANA WAR; ECUADOR THREATENS WTO ACTION
On 11 April, the US Government and the European Commission reached an
agreement to resolve their long-standing dispute over bananas. Under
the accord, the EC will abandon its contentious first come - first
served (FCFS) import system of bananas in favour of a new regime that
will provide a transition to a tariff-only system by 2006. Washington
argued that the FCFS favoured banana growers in former European
colonies over Latin American producers and US marketing companies such
as Chiquita Brands International. Until 2006, bananas will be imported
into the EU market through import licenses distributed on the basis of
past trade as pushed for previously by the US (see BRIDGES Weekly, 10
April 2001). In
return, the US will suspend sanctions it imposed on US$191 million
worth of EU exports following a WTO ruling that declared the EC banana
import policy in violation with world trade rules.
EC Trade Commissioner Pascal Lamy, in a declaration following the
conclusion of the agreement, qualified the deal as a "balanced
compromise between the interests of the diverse parties involved," but
cautioned the agreement must now be endorsed by the EU Council of
Ministers and the European Parliament.
The new system is scheduled to take effect on 1 July 2001, at which
point the US will also suspend trade sanctions against the EU. The US
will lift sanctions definitively once the accord is fully in place.
Under the agreement, EU import licenses will be allotted based on the
way they were distributed during a 'historical reference period' of
1994-1996. The European Commission will also initiate the necessary
procedures to propose to the EU Council of Ministers an adjustment to
expand access for Latin American bananas and to secure a market share
for a specific quantity of bananas of ACP (African, Caribbean, and
Pacific) origin.
According to Pascal Lamy, the new scheme still guarantees ACP producers
a share of the EU market, but would not contravene WTO rules. A special
quota of 750 000 metric tons of ACP produced bananas -- a slightly
smaller amount than the 850 000 metric tons proposed previously -- will
still be reserved the right to enter the EU market free of duty.
Since quotas are being treated as a transitional measure, the EC will
begin negotiations with main suppliers as mandated by WTO rules
(Article XXVIII GATT) in time to introduce a flat tariff system
("tariff-only") in 2006. The Commission has also agreed to table the
necessary proposals to the EU Council of Ministers and the European
Parliament in order to fully implement the agreement as soon as
possible.
German Economics Minister Werner Muller said the agreement, and the
lifting of the sanctions, were positive signs for conciliation in EU-US
relations. "This could have a positive influence on attempts to launch
a new round of global trade liberalisation talks this year," he added.
For its part, Chiquita said it was pleased by the agreement, which it
expected would lead to a "partial recovery" of the company's market
opportunities in the 15-Nation EU. Chiquita, which currently faces
bankruptcy, recently sued the European Commission for US$525 million in
damages it said it had suffered due to EU banana restrictions. The
historical reference period retained in the new proposal -- 1994-1996 --
is seen as benefiting Chiquita, which posted strong sales to Europe
during that period.
Ecuador unhappy with new arrangement
While several small Caribbean growers and most Latin American officials
and producers have pronounced themselves in favour of the new
agreement, both Ecuador and Chiquita's rival Dole are fiercely opposed
to the proposal.
Ecuador, the world's largest banana exporter, said on Tuesday 17 April
that the EC-US plan contravened global trade rules, and Ecuadorian
officials threatened to take the dispute back to the WTO if the EC
didn't amend its proposals. In a statement from its Brussels mission to
the EU, Ecuador accused the EU and the US of reaching the agreement
behind its back and said aspects of the pact were in flagrant violation
of WTO rules. "It is disconcerting...that the US and the EU...believe
that their will can prevail over the principles of the multilateral
trading system," the statement said.
In a letter to EC Trade Commissioner Pascal Lamy and Farm Commissioner
Franz Fischler, Ecuador's Ambassador to the EU Alfredo Pinoargote said
Ecuador would give the EU a chance to "rectify" its proposal. If it
failed to do so, Ecuador would have no alternative but to ask for WTO
consultations with the EU - the first stage in the global trade body's
dispute settlement procedure, Pinoargote said.
Ecuador -- the world's largest exporter of bananas -- and Dole both
backed "first come, first served" because they saw a chance to expand
their exports to Europe. In a statement issued last week, Dole's
chairman and chief executive David Murdock said the FCFS system would
have been "the most pro free trade, open competitive system possible."
Concerning the new deal, the statement claimed that "this action gives
one company, Chiquita Brands International Inc., a dominant, fixed
market share of the European Union's closed quota market, and continues
to allocate licenses to protectionist European Union traders."
"To be legally valid, any agreement must win Ecuador's approval,"
Ecuador said Tuesday. It particularly faulted the new proposal for
refusing access to the European market for new exporters from
developing countries and advocated a return to the FCFS system. If that
isn't possible, Ecuador Agriculture Minister Galo Plaza Pallares said
Monday, Ecuador wants the reference period moved to 1995-1997, when the
Andean Community exported more bananas to Europe.
"Ecuador threatens new WTO move on bananas," REUTERS 17 April
2001; "Ecuador To Seek Adjustments To US-EU Banana Accord," DOW JONES
16 April 2001; "Dole Blasts Accord to End Banana Dispute," REUTERS 13
April 2001; "Sanctions to go as EU, U.S. end banana row," REUTERS 11
April 2001; "Latin nations mostly praise new EU-US banana deal," ATP 11
April 2001; "Caribbean growers welcome end to EU-US banana war,"
REUTERS 11 April 2001; "La Commission et l'Administration Américaine
d'accord sur une solution au conflit de la banane," DECLARATION DE
PASCAL LAMY 11 April 2001; "EU, US reach agreement to resolve long-
standing dispute on bananas," EC PRESS RELEASE 11 April 2001; "EU-US
banana dispute over? - Ecuador under pressure to challenge new deal,"
EURO STEP 13 April 2001.
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