Latin American anger over banana duty

Date: 25/11/04

By David Cronin

A new campaign is opening up in the banana wars, after a proposal by Pascal Lamy, the recently departed trade commissioner, to impose a duty on banana imports of €230 per tonne.

Colombia, Ecuador, Guatemala, Honduras and Panama have threatened to seek arbitration from the World Trade Organization (WTO) over the issue. They claim the duty sought by Lamy would amount to a 300% rise on the current levy for Latin American producers.

The rationale behind Lamy's proposal is that it would simplify the European Union's complex quota system and find a middle ground between conflicting demands of African, Caribbean and Pacific (ACP) countries and Latin American producers. Under the current system, the three quotas set by the EU come to 3.4 million tonnes. A duty-free quota of 750,000 tonnes applies to the ACP countries, while Latin American suppliers have to pay a tariff on the remaining two quotas of €75 per tonne.

The preference for ACP countries was granted a waiver by the WTO at a 2001 conference in Doha after the EU lost, in 1999, a long dispute with the US, Mexico, Guatemala, Honduras and Ecuador over its banana import regime. The WTO ruled against the system of quotas and licences introduced by the EU some six years earlier claiming that the preferences granted to imports of the fruit from ACP countries discriminated unfairly against bananas from Latin America. But the harmony introduced by the 2001 agreement did not last long.

Talks between the European Commission and some Latin American countries recently began at the WTO's Geneva headquarters, with the latter seeking an explanation about how the EU executive arrived at the €230 per tonne suggestion.

Latin American countries want either a zero tariff or to see the current €75 tariff maintained. ACP countries wish to see an even higher tariff than that suggested by Lamy. They have recommended a €275 per tonne duty, on the grounds that setting a lower one could enable Latin American banana exporters - with cheaper production costs - to flood the European market.

“We need a high tariff in order to remain competitive,” explains a diplomat representing the eastern Caribbean states.

Constantino Casasbuenas, of anti-poverty group Oxfam, points out that the structure of banana production is radically different between Latin America, where large companies such as Chiquita are dominant, and Caribbean islands such as St Vincent and the Grenadines, where smaller cooperative structures are more typical.

He says trade unions in Latin America would support a higher tariff.

“I don't think a high tariff would hurt workers so much in Latin American countries as it would affect the big transnational companies,” he adds.

“That is not the case with ACP countries, perhaps with the exception of Barbados. If you look at St Vincent and the Grenadines, you have the poorest people growing bananas and they have developed their own cooperative organizations.”

Another campaign group, Banana Link, has complained that placating larger producers could squeeze Caribbean farmers out of the international fruit trade. At present five companies account for 80% of the global banana trade: Chiquita, Dole, Fyffes, Noboa and Del Monte. These, it says, have resorted to a growing use of chemicals on vast monocultures to ensure that the bananas found in western supermarkets are uniformly yellow and blemish-free. Organic production is more common in smaller holdings.

EU governments are split on what tariffs should be applied. France is backing the ACP countries, not least because some of its dependent territories rely heavily on the fruit. Spain, Portugal, Greece and Cyprus are known to have similar views. But Sweden, Denmark, Slovenia, Sweden, Finland, the Baltic states, Poland and the Netherlands have sided more recently with the Latin American arguments.

In September, Stockholm issued a study concluding that a high tariff was bad for European consumers. It estimates that EU consumers, who on average eat 10.2 kg of bananas each every year, pay 6 billion euros annually for the fruit. Price increases caused by higher levies would discourage low-income families in Europe from eating more fruit, according to the paper.

The Swedes also contest how much ACP countries benefit from high EU preferences, pointing out that Caribbean imports into the EU have fallen by 28% from 1994 because of increased competition within the ACP. But the eastern Caribbean diplomat says this decline can be attributed to declining prices paid to producers and growers and that the sector would have been hurt even more without the protection offered by the EU's quota system.

Dacio Castillo, Ecuador's ambassador to the WTO, says that a high tariff will “break all the poor countries of Latin America”, however, stating that bananas are worth more than 150 million euros to his economy per year.

He signals that a bruising battle lies ahead. “Before we go to arbitration, we will appeal to European countries to see our situation. If they do not see it, we will definitely have to go to arbitration.”

• Pascal Lamy has suggested imposing a duty on banana imports of 230 euros per tonne for Latin American producers;
• Latin American producers are generally large companies such as Chiquita;
• ACP producers are generally smaller cooperatives;
• Chiquita, Dole, Fyffes, Noboa and Del Monte account for 80% of the world's banana production;
• ACP representatives want an import duty of at least e275 per tonne on Latin American bananas to the EU;
• EU consumers eat 10.2 kg of bananas each on average every year at a cost of 6 billion euros.

Article says that a new campaign is opening up in the banana wars, after a proposal by Pascal Lamy, the recently departed European Commissioner for Trade, to impose a duty on banana imports of €230 per tonne.