- The Washington Times - Wednesday, May 26, 2004

The world’s major buyers and sellers of bananas are starting to renegotiate a truce in a decade-old trade war.

“The implications are really very serious,” said Mario Canahuati, Honduras’ ambassador to the United States.

The European Union, United States, Ecuador, Honduras and other major banana importers and exporters in 2001 settled the running trade war. The dispute had erupted in 1993 when Europe instituted a unionwide system that favored bananas grown in EU territories and former colonies, especially in Africa and the Caribbean and some Pacific islands.

The World Trade Organization said the system discriminated against Latin American producers and American firms and in April 1999 authorized U.S. retaliatory tariffs of $191.4 million a year. Ecuador was authorized for $201.6 million.

The 2001 settlement ended the sanctions and began a system of quotas, licenses and tariffs that protected some of the smaller island and African exports but also maintained a Latin American share for the EU market.

But as part of that agreement, the quotas end and a tariff-only system is scheduled to take effect January 2006. The European Union will have to balance demands of banana producers worldwide — or face another case at the WTO.

“For us to begin talks on this well before that date is what is required. We are not under any illusions that will be an easy task,” said Anthony Gooch, EU spokesman in Washington.

Bananas are economically vital to many developing nations. More than 13 million tons of the fruit cross the seas and oceans each year, according to the U.N. Food and Agriculture Organization.

The European Union and the United States are the biggest markets, and Latin American, Caribbean and other nations are demanding a fair share of the EU market after quotas fall in 2006.

EU and Latin American leaders meeting tomorrow in Guadalajara, Mexico, are scheduled to discuss economic development, peace and political stability in the region. The region’s biggest banana exporters are worried that the goal of economic development could be undermined as the 25-nation European Union phases out its system for importing bananas.

Bananas are not on the official agenda at the summit in Guadalajara, but officials expect that the topic will be discussed informally. Latin America wants to ensure low tariffs, and a market, for its products.

U.S.-based fruit companies also are monitoring the situation closely.

“The question is, will the EU come up with a tariff that is prohibitively high? Dole wants to make sure that is a result that does not happen,” said Genevieve Kelly, assistant general counsel for Dole Food Co. Inc.

Brent Borrell, director of the Center for International Economics in Canberra, Australia, authored a study examining possible tariff levels, from zero, through the current rate of about $90 per ton to a potential $360 per ton.

Anything above the current level means almost-certain loss of market share and a “real kick in the gut” for Latin American economic development, Mr. Borrell said.

But traditional suppliers are not ready to cede anything. Caribbean nations already complain that they are suffering from a lack of preferences.

And a meeting of African, Caribbean and Pacific (ACP) nations in May called for “immediate measures to … ensure that access to the European market for ACP bananas at a remunerative price is preserved.”

The European Union has not officially staked out a post-2005 position on bananas. EU Trade Commissioner Pascal Lamy said last week that ACP states would retain advantages.

Countries such as Honduras worry that means high tariffs on Latin American goods.

“In one year you can destroy the whole sector,” Mr. Canahuati said.

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