BANANA ROW TO BE ON HONG KONG AGENDA

Honduras has asked for its banana dispute with the EU to be placed on the agenda for the 13-18 December WTO Ministerial Conference in Hong Kong.

After its banana import regime was found to be WTO inconsistent in 2001, Members at the Doha Ministerial Conference granted the EU a waiver (the so-called 'Cotonou waiver') allowing it to continue to grant preferential access to African, Caribbean, and Pacific (ACP) banana exports -- so long as its switch to a tariff-only regime by 1 January 2006 maintained total market access for Latin American most-favoured nation (MFN) producers. The waiver specified that MFN banana exporters could seek arbitration if they were unhappy with the tariffs proposed by the EU to replace the quota system. WTO arbitrators have already rejected two EU proposals for tariffs of 230 and later 187 euros per tonne (see BRIDGES Weekly, 2 November 2005).

Article XXVIII of the General Agreement on Trade and Tariff (GATT) allows a WTO Member to modify its commitments -- as the EU plans to do with bananas -- provided that it negotiates with Members that have a 'substantial interest' in the change. While the EU has been negotiating on its future banana import regime with other MFN suppliers such as Colombia, Costa Rica, Ecuador and Panama, it has not done so with Guatemala and Honduras. It does not recognise the latters' substantial interest in the matter, even though they were parties to the disputes and arbitration and are MFN suppliers. Honduras and Guatemala want to be part of any negotiations to arrive at a suitable banana tariff.

WTO practice normally uses 10 percent of the market share in the importing country as the guideline for determining substantial interest. However, this benchmark is of questionable value for countries with small economies. The banana sector accounts for 11,000 jobs and USD 200 million in revenue for Honduras, which has a per capita income of only USD 704; in Guatemala, it is a major employer that produces one of the country's top three exports. Thus, the definition of substantial interest has systemic implications.

Other MFN suppliers including, Brazil, Colombia, Costa Rica, Ecuador, Nicaragua, and Panama have supported Honduras and Guatemala in discussions on the subject in the General Council.

Meanwhile, the 10 November meeting of the Council for Trade in Goods decided to postpone the EU's request to extend the Cotonou waiver until March 2006. Chair Ambassador Vesa Tapani Himanen of Finland said Members had told him that they were still studying the second tariff arbitration report.

The banana issue could potentially take on new significance in Hong Kong. In 2001, ACP countries refused to agree to the launch of the Doha Round trade talks unless ministers approved the Cotonou waiver.

ICTSD reporting; "WTO Receives Request to Put Bananas, Cotton on Hong Kong Ministerial Agenda," WTO REPORTER, 10 November 2005.