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WTO Agrees To Hear Ecuador's Banana Gripe

by Leroy Baker,, New York

23 March 2007

The World Trade Organization this week agreed to establish a compliance panel in response to Ecuador's complaint that the European Union has failed to implement previous rulings over banana tariffs.

Ecuador had filed the request on 8th March, but the EU blocked it in a meeting of the WTO's Disputes Settlement Body, delaying its consideration by the WTO for two weeks.

"Ecuador has been seriously affected by the new banana import regime of the EU in place since Jan 1, 2006," Ecuador said in a statement to the Disputes Settlement Body. "What we need are clear rules and the elimination of discriminatory and distorting measures of the regime."

The EU had installed a revised banana import regime with an overall tariff of 176 euros per tonne in 2006 in response to a previous WTO ruling which obliged it to cut tariffs to banana producers outside its favoured ACP countries, which benefit under the Lome Agreement.

"At the moment, the tariff is discriminatory and doesn't allow our bananas to enter EU markets. Our participation in EU markets is going down," said Ecuadorian trade negotiator Juan Holguin.

"The regime we have in place is completely in line with our international commitments" said Michael Mann, the EU's spokesman, saying that the EU would have preferred to continue to negotiate outside the Dispute Settlement process.

Costa Rica, which also sells bananas to the EU, had said earlier that although it does not agree with the present import regime, it will not support Ecuador's request for a WTO arbitration panel, and will rather continue negotiations to reach a reduction of the tariff. Costa Rican vice minister of foreign affairs, Amparo Pacheco fears that a Latin American request for a WTO arbitration panel in the dispute will put at risk the existing negotiations which were launched in December 2005 in Hong Kong with Norway mediating between the EU, and banana producing countries in Latin America and ACP countries to resolve the dispute.

"Our understanding was that this process was advancing fairly well and its a terrible shame that the challenge has been lodged," said Mann. "It helps no one I think."

Bananas are just one aspect of the EU's trade relations with developing countries. Peter Mandelson, European Union trade commissioner, has been attempting 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 last year 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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