Commission bids to end banana war with the US

Date: 21/10/1999

By Simon Taylor

THE European Commission has drawn up a two-stage plan for reforming the EU's banana regime which could end its long-running and costly trade dispute with the US.

Senior officials believe the formula, which has been devised after months of agonised deliberations, will be enough to satisfy both Union governments and Washington - and convince the US to drop sanctions on European goods worth €193 million.

This would also provide a powerful boost to EU-US relations on the eve of the ministerial meeting in Seattle next month which will launch the millennium round of global trade talks.

The plan drawn up by Commission Deputy Secretary-General Bernhard Zepter is expected to be approved by the full Commission early next month. It envisages keeping existing import quotas for up to five years to protect vulnerable banana growers in the African, Caribbean and Pacific region before abandoning import restrictions in favour of a single tariff.

However, officials stress that the EU would only agree to move to a single-tariff system if the US and the four Latin American countries which challenged the Union's original regime promised not to contest the new rules in the World Trade Organisation.

The Commission believes the two-staged approach would be accepted by member states because it would give producers in the EU's former colonies time to adjust. “The approach is logical because you are moving to a more liberal system but keeping part of the old one which gives an income to some vulnerable producers,” said a senior official.

US banana multinational Chiquita, which has been the main driving force behind the WTO challenge to the EU's import regime, said this week that the plan was likely to be accepted by the US industry and government.

However, company president Steven Warshaw said Chiquita would only support the plan if the tariff applied in the second phase was no higher than that now levied on ACP producers. “We would favour a tariff-rate quota approach with the proviso that the transition is to a tariff which approximates to the current level,” he said.

US trade officials have indicated that Washington could accept a two-stage approach, provided that the regime in the first phase complied with WTO rules. The Commission is seeking to satisfy this requirement by proposing to allocate licences on a 'first come, first served' basis.

Assuming the plan is approved by the full Commission on 3 November, as expected, officials intend to hold discussions on the final shape of the reform - including the ultimate tariff level - in tandem with the forthcoming world trade negotiations. “A tariff solution could only be agreed in parallel with multilateral negotiations in the WTO,” said one.

Within the EU, the Commission's biggest challenge will be to convince France, Spain and the UK to agree to abandon quotas, because of their concerns about the impact this would have on producers in the Caribbean and the Canary islands. Banana-growers in the former colonies fear a tariff-only system would lead to a “commercial bloodbath” which could only benefit the big US firms.

However, Paris, Madrid and London will come under intense pressure to accept the formula, amid signs that the transatlantic trade war over the issue could escalate if a solution is not found soon. The US administration is coming under intense pressure from Congress to increase the sanctions on EU goods because of the Union's failure to reform its regime.