15-Year Banana Tariff Dispute Finally Settled

by Ulrika Lomas, Tax-News.com, Brussels

16 December 2009

The European Union and Latin American countries on December 15 settled a long-running trade dispute, on EU banana import tariffs.

As part of 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 EUR176 (USD256) to EUR114 per tonne by 2017 at the earliest, with an immediate cut to EUR148 per tonne when the agreement is signed.

In parallel, the US has agreed to settle a similar dispute with the EU. The EU has also offered to mobilize up to EUR200m for the main African and Caribbean banana-exporting countries to help them adjust to stiffer competition from Latin America.

Commenting on the agreement, European Commission President José Manuel Barroso announced that:

"I am delighted that we have finally found a way to solve the bananas dispute with a compromise that works for all sides. This is an important boost for the multilateral system."

European Trade Commissioner Benita Ferrero-Waldner added: "Today is a very good day for banana producers worldwide and for consumers, as we finally see the 'longest trade dispute in history' solved. After years of tedious negotiations the deal reached will provide an important push for progress in the Doha Round talks and for the multilateral trading systems in general."

"At this occasion let me pay tribute to my predecessor as Trade Commissioner, Cathy Ashton, and senior Commission officials, who have been instrumental in achieving this deal."

In return for the agreement on reduced tariffs, Latin American 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 dating as far back as 1993.

Bananas from African, Caribbean and Pacific (ACP) countries will continue to enjoy duty- and quota-free access to the EU under separate trade and development agreements.

The deal offers ACP countries two important outcomes:

  • Predictability – the EU guarantees it will not cut its bananas tariff any further in the framework of the Doha Round; and
  • Time to adapt – ACP countries will have several years to adjust to stiffer competition from Latin America.

In parallel, the EU, ACP and Latin American countries have agreed on an approach to the so-called "tropical" and "preference erosion" products, which they will promote jointly in the context of the ongoing Doha Development Agenda negotiations.

"Tropical products" will be subject to deeper tariff cuts, while tariff cuts for "preference erosion" products of interest to ACP countries wil be conducted over a relatively longer period.

The World Trade Organization’s (WTO) Secretary General, Pascal Lamy, commented: “I welcome the news that a comprehensive agreement on bananas has now been reached. This has been one of the most technically complex, politically sensitive and commercially meaningful legal disputes ever brought to the WTO. It has also been one of the longest running 'sagas' in the history of the post-World War II multilateral trading system.”

“After lengthy consultations, legal examinations, negotiations, and gentle prodding by an 'honest broker,' a solution has been found. This proves there is no trade issue which lies beyond the reach of WTO members when they exhibit good will and a spirit of compromise. I hope that the same pragmatism, creativity and diplomacy will help move forward the Doha Round negotiations.”

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