WTO knocks EU banana regime

The Banana industry is faced with a grave situation.

On Monday, August 1, when Vincentians spent the day celebrating Emancipation Day, the World Trade Organization (WTO) dampened the celebrations with a ruling that could hurt Vincentian and Caribbean producers.{{more}}

The WTO announced that a new EU tariff on imported bananas is illegal, siding with nine Latin American countries including Brazil, Columbia and Venezuela, who said the European Commission’s proposal to introduce from January 1, 2006, a single tariff of 230 euros (US$279)/ tonne on bananas to replace the current import quota system would seriously limit their ability to export the fruit.

The EU had earlier this year announced its replacement to the tariff quota system which the WTO had ruled illegal following the ‘Banana Wars’ of the 1990s when the WTO ruled the EU’s support for ACP countries discriminatory towards the complainants, Latin American producers and United States-based companies. The EU was ordered by the WTO to introduce a tariff-only system by January 1, 2006.

The proposed system that is being rejected was initiated in February 2005 but the Latin American countries objected on the grounds that the rate was too high.

Prime Minister Dr.Ralph Gonsalves in a statement disclosed the Latin Americans are opposed to a tariff of more than 75 euros.

Dr.Gonsalves said although the duty would not apply to African Caribbean and Pacific (ACP) states, the Windward Islands had, from the outset, expressed grave reservations regarding the plan since lifting of the quotas before the introduction of adequate safeguards could result in over-supply, price collapse and the exclusion from the market of the smaller and more vulnerable suppliers.

Dr.Gonsalves said the Commission is to begin consultations and negotiations with the Latin Americans to agree on an acceptable tariff level.

“That will prove an exceedingly difficult task since the Latins are opposed to a tariff of more than Euro 75. Should negotiations fail once again, the Latins, will have recourse to a second Arbitration and if the Arbitrators still do not accept the new rate, then the ACP bananas will also be required to pay that duty.

“ACP bananas would lose their preference on entering the EU market and our exports will therefore cease,” the Prime Minister warned.

Dr. Gonsalves explained this scenario is not only risky but will inevitably leave the Windward Islands and the ACP worse off than “we are currently”.

This, the latest WTO ruling on the issue also questioned how the EU arrived at its 230 euro charge, albeit without suggesting a new figure. Latin American producers wanted the EU to lower the tariff to 75 euros while ACP producers wanted it increased to 275 euros.

Latin American producers supply about 60 per cent of the EU market, ACP producers 20 per cent and EU producers 20 per cent.

Meanwhile, plans for the full conversion of the country’s banana exports to Britain to the Fairtrade label were taken one step further on Tuesday, August 2, when the major stakeholders in the industry met under the auspices of the Ministry of Agriculture to discuss and agree on implementation steps, announced the Windward Islands Farmers Association.

The stakeholders – WIBDECO, the St.Vincent Banana Growers Association, WINFA, the National Fair Trade Committee, the Central Water Authority and the Government of St.Vincent and the Grenadines discussed the organizational, production, marketing, economic and social issues involved in such a conversion and broadly agreed on a common line of action.