Banana war to drag on into autumn

Date: 22/07/1999

By Simon Taylor

US SANCTIONS on almost €190 million worth of Union goods will continue until next year because of delays in drawing up plans to make the EU's banana regime compatible with world trade rules.

Officials say a special European Commission team will not be able to come forward with firm proposals for overhauling the Union's complex banana system by the end of this month, because of difficulties in reconciling the conflicting demands of the parties to the four-year-old dispute.

The team is now aiming to put forward reform ideas in time for the first meeting of the full Commission in September. But even when this has been done, it will take EU governments several months to thrash out an acceptable deal. "I think they will be very lucky to have something in place by the early part of next year," said one banana industry expert.

Until the Union agrees changes to the system which are acceptable to the US and the banana-producing countries involved in the dispute, Washington will be allowed to continue levying penalties on EU exports.

The hardest-hit companies include French and Italian leather goods manufacturers, German tea and coffee-makers and British battery firms.

A representative of the European employers' federation UNICE expressed concern that it was taking so long to find a way to settle the banana dispute. "The search for a solution which satisfies everybody is very difficult, but that is no reason not to intensify discussions," he said, adding that the final outcome must be immune to further attack in the World Trade Organisation.

Despite intense consultations with the US and other parties involved in the dispute, the Commission has had little success so far in narrowing down the range of options for reform. Although a majority of EU member states supports the idea of scrapping the system of quotas which guarantees market share for less competitive producers in Africa and the Caribbean, the French, Spanish and Portuguese governments are fighting to keep them.

Trade experts expect the EU to agree a two-stage solution, with a two-to-five year transitional regime to allow producers to adjust before implementing a more free-market system with safeguards for vulnerable growers.

The Commission is also expected to make sure its final proposal is acceptable to Washington before putting it to EU governments. The US imposed sanctions on Union exports earlier this year after the WTO ruled that the EU's banana regime discriminated against Latin American growers.

In a separate development this week, the US announced it would impose further sanctions on h114 million worth of EU exports in retaliation for the Union's ban on hormone-treated meat.

The sanctions, due to come into effect next Thursday (29 July), will mainly hit EU pigmeat exports, with France and Germany facing losses of €28 million each. Italy faces penalties on €24 million of exports, while Denmark will be hit with €17 million of sanctions. Luxury foods will be affected, including truffles, Roquefort cheese and goose livers.

• Primary Source