Cattle Network, February 27, 2007
After months of threats and backroom talks, Ecuador, the world's biggest banana exporter, Monday informed the European Union that it has asked lawyers at the World Trade Organization to dust off its files and reopen, with new threats of fines and sanctions, more than 15 years of previous legal battles. And while Ecuador is wading into this battle alone, other disgruntled nations may join.
Ecuador accuses Europe of imposing illegally high tariffs to protect banana producers on its far-flung Canaries Islands and remaining Caribbean territories, as well as those in its former African and Caribbean colonies.
The battle pitches the world's largest producer against the world's largest consumer of fruit which, stacked high in European supermarkets, yields unrivaled profits for multinational producers and retailers. It also underlines how, despite free trade rules, Europe continues to protect its own producers and those in its former colonies.
Critics say large buyers and producers such as Chiquita Brands International (CQB), Dole Food Co. (DOLE.Xx) and Del Monte Foods Co. (DLM), are playing both sides of the dispute, bringing pressure to bear in the trade dispute to prop up their Latin American operations, while also setting up large scale production in West Africa at the expense of the livelihoods of small African and Caribbean banana farmers.
Behind the battle is a shift in banana production away from Latin America to former European African colonies such as Cameroon, Ghana and the Ivory Coast.
"With Dole and Chiquita both involved in new planting in West Africa, with their industrial sized production facilities on traditional tribal lands, Ecuador is looking at increased competition from a region which also benefits from zero tariffs under the current system," says Alistair Smith, International Coordinator at Banana Link, a not-for-profit lobby group campaigning for sustainable banana trade and funded by grants from a range of charities.
The big losers under any new system will be the Caribbean high-cost producers, he says.
Juan Holguin, Ecuador's ambassador at the WTO and trade negotiator on the issue says his country has no choice but to resort to legal action after months of talks with Brussels yielded what he considers to be empty promises to ease the farmers' plight.
"General offers were made, but nothing concrete was put on the table," he says.
European Union officialssay E.U. negotiators have variously offered money to help Ecuador diversify its economy away from the fruit and also considered the idea of setting up an account to raise environmental standards, using some of the windfall Europe has accrued from the new tariffs to do so.
Brussels officials say they were caught off guard by Ecuador's stance.
"Ecuador has not given the possibility of finding a negotiated solution enough time," says E.U. spokesman Peter Power. "This would have been the best solution for all parties concerned."
For Ecuador, the line is clear: in the year since the new tariffs came into place in January 2006, its exports to the E.U. fell 3%. Meanwhile, Ivory Coast, whose ex-colony status secures it duty-free access to Europe up to a 775,000 ton ceiling, saw sales soar 26.6% in the same period.
"Ecuador believes it's unfair to give tariff preferences to Africa, when African plantations are operating on a similar scale, and on top of that, with lower wage costs," says Smith at Banana Link.
The banana trade has enflamed passions around the globe for years, and though it's unclear whether a new panel at the WTO will solve the issue, it's likely the fight will once again be heated.
Officials are already expecting other countries to enter the fray against Europe, as they have done in the past. In 1999, Washington was awarded the right to sue Europe for $191 million in damages because the bloc refused to reform an illegal quota system on Latin American banana imports.
Under a truce brokered in 2001, the E.U. agreed to implement a tariff system for the fruit by 2006. The E.U. went ahead and imposed a new fixed-tariff system in January, 2006.
The problem this time is the new level of tariffs. Since last January, the E.U. has charged EUR176 a ton for Latin American banana imports. Ecuador says this duty is too high as it hampers its exports. They say the current E.U. duties add four euros to every box of fruit exported to Europe.
At the same time, former colonies can sell up to 775,000 tons a year of bananas to Europe duty-free.
"This loss of market share remains the central argument at the consultations," says Ecuador's Holguin. Ecuador wants the WTO to mediate a compromise tariff.
However the E.U. disputes the loss of market share and says that while Latin America's market share dropped as a whole, and someindividual countries' sales fell, the region's overall sales boomed. Stimulated by demand for bananas from the E.U.'s newly prosperous Eastern European states, producers have fed the market despite the new tariff.
"Banana imports from Latin American countries have increased 8% this year," says E.U. agriculture spokesman Michael Mann. "So the idea that their trade has been restricted by our new tariff is not true."
Ecuador is not alone in disagreeing strongly with this view. Colombia, Panama, several Caribbean Islands and the U.S. sat in on the debates between Ecuador and Europe of the past months, and may participate in a similar vein again. Officials at the Panama and Colombia embassies in Geneva could not be reached for comment.
While attempting to avoid antagonizing the U.S. and Ecuador, the E.U. is also struggling to satisfy its former African, Caribbean and Pacific colonies. For many of these countries, bananas represent a key export. They contribute a total of about 15% of GDP for the former U.K. colonies of Dominica, St. Vincent and St. Lucia islands, according to an Oxfam report on Caribbean bananas.
These small island producers have in the past struggled to compete with their Latin American neighbors. If the E.U. imposed the same tariff on these small states as it does on exporters in Latin America, Oxfam says the island growers would go out of business.
Yet while Europe struggles to find a tariff agreeable to producers on both sides of the Atlantic, its current tariffs benefit big multinationals most, say anti-poverty campaigners.
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