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EU-Latin America longest trade deadlock over

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The European Union has finally ended one 16-year-old trade dispute as it agreed to cut import tariffs on bananas from Latin America grown by U.S. corporations like Dole Food Co., Fresh Del Monte Produce Inc. and Chiquita Brands International Inc. The socialist President of Ecuador, Rafael Correa, was in fact the star campaigner at the WTO to abolish ACP import quotas.

Background: Two American companies-Chiquita and Dole-dominate the production of bananas in the Latin American countries, in which Ecuador is the largest producer, followed by Colombia, Costa Rica, Guatemala, Honduras, Mexico, Panama, Brazil and Venezuela. The European banana market is the largest in the world, with 5.5 million tonnes of the fruit imported in 2008. This speaks the interest of EU in dealing with banana. In 1993, the European Union has offered the best import rates to 12 former colonies, places like Cameroon, Ivory Coast and Belize. The deal adversely affected governments in countries such as Colombia, Costa Rica and Guatemala, where U.S. companies run industrial fruit plantations. Therefore, the dispute revolves around the EU’s regulatory regime for imported bananas commonly known as Common Market Organisation for Bananas (CMOB), enacted in 1993. As a result of this, five Latin American countries, backed by the U.S. approached the World Trade Organization in 1993 and filed a complaint against the deal. Ecuador, the world’s biggest banana exporter, first brought the case in 1996 with Guatemala, Honduras, Mexico and the US. Colombia, Nicaragua and Panama who also joined the dispute.

-September 1997: The WTO rules in favour of the plaintiffs, stating that the EU system is “inconsistent” with global trade rules.

- January 1999: While the United States threatens unilateral retaliatory sanctions against the EU, a deadline for the EU to change its regulations expires.

- April 1999: The WTO authorises the United States to impose up to 191.4 million dollars a year in sanctions against the EU over the banana issue. In the meantime a new agricultural trade row breaks out between the two over beef.

- May 2000: The WTO allows Ecuador to impose penalties of up to 201.6 million dollars per year on EU products.

- April 2001: The banana dispute is suspended after an agreement by the EU to levy only import taxes, and not impose a quota on Latin America bananas. Three months later, the US lifts its sanctions against the EU.

- November 2001: During a meeting in Qatari capital Doha, WTO member states formalise the April deal and set out a timetable and procedures for arbitration if the EU was unable to reach an agreement with Latin American countries on the level of

- January 2005: The EU proposes a new banana tariff of 230 euros per tonne.

- March/April 2005: Latin American countries challenge the EU under the Doha decision.

- August 2005: The WTO rules against the EU.

- September 2005: The EU revises its tariff proposal to 187 euros per tonne. It also launched a legal challenge at the WTO, arguing that the Latin American countries had not made any counter-offers, other than asking for tariffs to fall to zero. Therefore, it said there was no basis for a solution.

- October 2005: The WTO rules against the EU.

- November 2006: Latin American countries complain anew to the WTO.

- April 2007: The WTO rules against the EU.

- June 2007: Following the collapse of the “Doha Round” of WTO trade talks, the US rejoins the conflict over EU banana tariffs.

- July 2008: The parties, including ACP states, came close to a deal under the Doha Round but the talks fall apart as it was tied to the overall WTO free trade negotiations which broke down again. Finally, this year, the four groups involved found common ground in a separate deal. Delegates from the EU, U.S., former EU colonies and the Latin American banana powers met in Geneva over 100 times for a total of 400 hours of talks. WTO Director-General Pascal Lamy has welcomed the end of “one of the most technically complex, politically sensitive and commercially meaningful legal disputes ever brought to the WTO.”

Possible Implications:

1. The move is likely to disadvantage the banana industries in Africa, the Caribbean and the Pacific (known as the ACP countries), who do not pay tariffs on imports to the EU. Although, compensation package for Dominica and the other ACP countries, worth 200m euros, is included in the deal. But it would not be enough.

2. Ecuador, the world’s largest banana exporter, hailed the deal as a victory “for all Latin American nations.” The head of the Ecuadorean Banana Exporters’ Association, Eduardo Ledesma, said “this is a great victory for both producers and consumers.”

3. Banana imports from the former colonies will fall 14 per cent, costing them $40 million a year, and imports from other countries will increase 17 per cent, according to a study by the Geneva-based International Centre for Sustainable Trade and Development. Banana prices in Europe will fall by 12 per cent, the study indicated.

4. Less-expensive bananas will be available for Europeans;

5. The US companies would get more  profit over their investment;

6. As a result of this, the revenue collection would be adversely affected.

7. It has ended 16-year-old trade dispute over access to the EU’s $6.7  billion banana market, the world’s largest.

The Deal

1. In the deal, seen as a boost for the Doha Round of world trade talks, the EU will gradually cut its import tariff on bananas from Latin America from 176 euros per tonne to 114 euros (255 to 165 dollars) tonne in 2017, at the earli-est; and make the bigg-est cut first - the EU will first cut its tariff by •28/tonne to •148/per tonne.

2. In return, Latin A m e r i c a n countries will: not demand further cuts - the EU will not cut its tariff further once the Doha Round of talks on global trade resumes; and drop cases against the EU - Latin American producers will settle several legal disputes pending against the EU at the WTO; some date back as far as 1993.

3. Bananas from African, Caribbean and Pacific countries (ACP) will continue to enjoy duty- and quotafree access to the EU under separate trade and development agreements. The deal offers these countries two important outcomes: Predicta-bility-the EU guarant-ees it won’t cut its bananas tariff any further in the frame-work of the Doha Round; Time to adapt - ACP countries will have several years to adjust to stiffer competition from Latin America.

4. Furthermore, the Commission will propose mobilising up to •200 million from the EU budget to support the main ACP exporting countries’ adaptation - in addition to existing aid.

5. In parallel, the EU, ACP and Latin American countries have agreed on an approach on the so-called ‘tropical’ and ‘preference erosion’ products, which they will jointly promote in the context of the on-going DDA negotiations. ‘Tropical products’ will be subject to deeper tariff cuts, while tariff cuts for ‘preference erosion’ products of interest to ACP countries will be conducted over a relatively longer period.

What is ACP?
The African, Caribbean and Pacific Group of States (ACP) is a group of countries (currently 79: 48 African, 16 Caribbean and 15 Pacific), created by the Georgetown Agreement in 1975.  All of the member states, except Cuba, are signatories of the Cotonou Agreement with the European Union. The Cotonou Agreement is a treaty between the European Union and the African, Caribbean and Pacific Group of States (‘ACP countries’). It was signed in June 2000 in Cotonou, the largest city in Benin, by 79 ACP countries and the then fifteen Member States of the European Union. It entered into force in 2003 and is the most recent agreement in the history of ACP-EU Development Cooperation. The Cotonou Agreement is aimed at the reduction and eventual eradication of poverty while contributing to sustainable development and to the gradual integration of ACP countries into the world economy. The Cotonou Agreement is adapted every 5 years and the next revision will take place in 2010.