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Ecuador To Take EU To WTO Over Bananas

by Ulrika Lomas,, Brussels

25 October 2006

After ten years of fruitless (so to speak) negotiation, Ecuador, the world's largest exporter of bananas, plans to file a complaint over European Union banana tariffs with the World Trade Organization.

The European Union unilaterally imposed a new import tariff of EUR176 per tonne to apply from 1 January 2006 to bananas imported from countries – mainly in Latin America - enjoying Most Favoured Nation status, which includes Ecuador. The new import regime also includes a duty-free annual import quota of 775,000 tonnes for ACP bananas, also to apply from 1 January 2006.

Said Mariann Fischer Boel, Commissioner for Agriculture and Rural Development:

“It will ensure that growers and traders know what the rules will be from 1 January 2006. I am also convinced that this is a fair and balanced result for everyone, which will fully maintain access for Latin American producers while continuing to take into account EU and ACP producers. At the same time our door remains open to continue talks with the Latin American countries concerned.”

The new regime, reflecting preference for ex-colonies by a number of EU member states, including the UK, was not approved by the WTO, and certainly not by Ecuador, which continued to negotiate in hope of a better outcome.

In an effort to put an end to the long-standing banana dispute, the EU had agreed with Ecuador and the United States in 2001 to move from a complex import system based on a combination of tariffs and quotas for MFN bananas to a regime solely based on a tariff by 1 January 2006, and obtained two waivers from its WTO obligations for the preference granted to bananas from the ACP countries under the terms of the ACP-EC Partnership Agreement (the Cotonou Agreement).

The Commission originally proposed a single tariff of EUR230/tonne. However, following a request from a number of Latin American banana producing countries, a WTO arbitrator found in August 2005 that the proposed tariff would not result in at least maintaining total market access for suppliers under the Most Favoured Nations (MFN) clause.

On 12 September, the EU presented a revised proposal in the light of the arbitrator’s award, for an import duty of EUR187/tonne for MFN suppliers and a tariff quota of 775,000 tons at zero duty for bananas originating in ACP countries. Again, the arbitrator found that the proposal did not rectify the matter.

Throughout this process the Commission had several rounds of consultations with the Latin American countries concerned, as well as with the ACP countries concerned.

The EC observed that: "Regrettably, on none of these occasions did the Latin American countries concerned engage in a meaningful discussion or present a counter proposal that could have led to a negotiated solution. With the arbitration procedure now over, the EU had to set the rate that would apply as from 1.1.2006."

In fact, the game is far from over, because the EU is still trying to resolve tension between the WTO and the ACP countries, and everything, including bananas and sugar, is still on the table.

Peter Mandelson, European Union trade commissioner, was doing his best last week to parlay the conflicting interests of the ACP countries, the EU member states, the WTO's 'Aid for Trade' program and the quarrelsome European Parliament into a coherent developing country strategy.

In an effort to square the circle, the EU at the beginning of the week proposed economic partnership agreements (EPAs) with the 70 plus ACP developing countries, which would combine increased development aid with extended liberalization periods. Predictably, no-one liked what they saw.

EU member states didn't exactly rush forward to find the EUR$2bn that the Commission wants to offer. And the ACP countries have been saying for years that EU aid is much promised but often delivered slowly or not at all.

Mr Mandelson told the European Parliament, which had criticized the Commission's package: "Let's be clear about the value of development aid. It is a means to an end - it's a way of translating policy reform into practice. The money is now on the table but what we really lack are specific, quantified proposals on how to use it."

Specific programmes are often hobbled by protectionist member states and/or cash-strapped producer countries. Sugar and bananas are two examples. The Commission wasn't allowed to cut the EU's sugar price by as much as the WTO demanded because of resistance from Caribbean producers, while at the same time hopelessly uneconomic EU sugar-beet producers were bribed to accept a new regime with five times as much money as was being offered in aid to the Caribbean.

British Trade Minister Ian McCartney and Development Minister Gareth Thomas wrote in a letter to the Commission: "The EU must allow ACP countries as much time as they reasonably need to open their own markets, while providing effective safeguards to prevent unfair competition from subsidized European products undermining African products on their own doorstep." Easy to say, but hard to achieve, especially against the looming 2008 WTO deadline for an end to protectionist regimes.

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