Ecuador withdraws challenge to EU-US banana deal

by Brian Kenety

Brussels, 30 Apr 2001 (IPS) - Ecuador has withdrawn its threat to challenge the European Union’s new banana import regime before the World Trade Organisation (WTO), thus removing the last obstacle to ending the long-running transatlantic trade dispute.

Ecuadorian Foreign Minister Heinz Moeller and the EU commissioners for trade and agriculture said in a joint statement Monday: “This is a decisive step to put this saga to rest. It is a landmark result in that the European Commission and Ecuador, a developing country, and the single largest exporter of bananas, have achieved this satisfactory outcome”.

Over the weekend, slight technical changes were made to placate Ecuador on a compromise agreement hammered out earlier this month between the EU and the United States. Officials here said that the modified agreement was still “fully compatible” with WTO regulations and acceptable to all parties concerned.

The changes included tightening the requirements for obtaining banana licences, in order to deter speculators, and refining the definition of would-be entrants to the EU banana market.

Moeller, and EU commissioners Pascal Lamy (trade) and Franz Fischler (agriculture) said that a fair balance between the competing interests had been achieved.

They said these interests include the main supplier of bananas to the EU, the producers of bananas in the EU, the 77 member states of the African, Caribbean and Pacific (ACP) group of countries, “and, of course, the European consumers”.

The United States and Ecuador had argued that the previous EU banana regime had unfairly benefited producers and exporters from former European colonies in the ACP group, because it reserved a part of the European market solely for ACP imports. They also objected to the EU’s system of allocating licences, which they said, did not eliminate discrimination vis-a-vis third-country operators.

In 1997, the WTO ruled that the EU’s import regime, based on a 2,553-million-tonne tariff quota, with an additional quantity assigned globally to the ACP, was found to be illegal. A revised scheme, implemented on 1 January 1999, was also declared illegal by the WTO.

After the EU failed to meet a WTO-imposed deadline of 1 January 2000 to bring its banana import regime into compliance, the United States, home to major transnational corporations that place Latin American bananas on the European market, and Ecuador, the world’s leading producer, announced sanctions of over $190 million and $20 million, respectively, against the EU, although Ecuador never imposed them.

These sanctions were also supported by the Latin American banana producing states of Colombia, Costa Rica, Guatemala, Honduras, Mexico, Nicaragua, Panama and Venezuela.

Developing countries have long argued that they could not get a fair deal at the WTO, as poorer countries lacked technical know-how and financial resources on how to make the trading body work for them. The joint Ecuador-EU statement issued Monday said the understanding reached over the weekend “is also a clear victory for the WTO, as it helped resolve a difficult dispute between developing and developed countries”.

Bananas are Ecuador’s second largest source of foreign exchange, after oil.  According to the country’s foreign ministry, nearly two million people in this Latin American country of 12.4 million are directly or indirectly involved in the banana industry.

“The new EU banana regime will provide increased opportunities for Ecuadorian exports,” said the joint statement. “It abolishes the EU’s import breakdown on a country quota basis, increases the import volumes from Latin America by 100,000 tonnes, and improves market access to both traditional and non-traditional importers from Ecuador.”

The new regime will hold for a transitional period through to the establishment of a tariff-only system by 2006.

The new system is scheduled to take effect on 1 July 2001, at which time the EU will institute a system of licensing, based on historic reference periods.

A “very significant” share of the trade will be reserved for non-traditional operators working within an open and competitive environment, thus facilitating access for small- and medium-sized businesses.

The European Commission said it would also initiate the necessary procedures to propose to its member states, an adjustment of the quantities in the various quotas, in order to expand access for Latin American bananas and to secure a market share for a specific quantity of bananas of ACP origin.

Ecuador has pledged to work actively to secure acceptance of the EU’s request for the necessary WTO authorisation.

The tariff-only system is scheduled to take effect on 1 January 2006 and the EU will begin negotiations with producing countries, necessary under WTO rules, in good time to introduce the tariff-only system by then.

In order to enter into force, all the 15 EU member states and the European Parliament must endorse the agreement.

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