UK lead seen as crucial to end long-running banana battle

Date: 24/06/1999

By Simon Taylor

THE UK holds the key to a breakthrough in the banana dispute which is costing EU exporters hundreds of millions of euro in penalty duties, according to Union trade diplomats.

EU governments are currently split down the middle over whether to scrap the quotas which ensure that growers in overseas territories and former colonies can sell their higher priced bananas in the Union's lucrative market.

One group of countries, including Germany, Sweden, the Netherlands, Finland, Austria and Luxembourg, supports the idea of a tariff-only system. This would eliminate the problem of allocating licences which is at the heart of the World Trade Organisation's ruling against the Union's regime.

But France, Spain, Greece and Portugal are violently opposed to this approach, arguing that it is essential to retain quotas to keep market share for higher cost banana growers in overseas territories and former colonies.

This is making life difficult for the caretaker Commission, which does not believe it has the authority to table a reform proposal without stronger political direction from member states. If the institution does not finalise a proposal before the summer break, the EU has little hope of finding a solution which is compatible with WTO rules by the end of this year.

Union diplomats say that the deadlock could be broken if the UK takes the lead because, for most governments, getting a deal which meets the WTO's requirements is more important than what changes are made to the regime. "So far most member states have not taken very strong positions on which option they prefer. But they are stressing that whatever solution is agreed must keep bananas out of the WTO in future," said one.

British officials say the UK is prepared to accept a tariff-based approach provided that Caribbean producers are protected in other ways, but have declined to comment on whether London will take a strong lead in the debate.