WTO News - July Fallout: Bananas, Tropical Products

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Resolution of the long-running banana dispute between the European Union and Latin American exporters is among the key might-have-beens of the failed Geneva mini-ministerial.

The broader context for the banana discussions was the 2004 mandate that the Doha Round farm negotiations must effectively address “the long-standing commitment to achieve the fullest liberalisation of trade in tropical agricultural products,” including those cultivated in order to shift production away from the growing of illicit narcotic crops. Inextricably linked with this mandate was a recognition that liberalising trade in tropical products would lead to the erosion of the long-standing market access preferences of certain countries, and that this question would also be addressed in the negotiations.

Due to the conflicting interests of preference-receiving states on the one hand and those seeking dramatically lower tariffs on tropical products on the other, negotiations on the twin topics had made scant progress in the run-up to the July mini-ministerial. The main difficulty was bananas, which the African, Caribbean and Pacific (ACP) group wanted excluded from the tropical products list so as preserve the preferential margin their duty-free exports enjoy in the European Union. In contrast, Latin American exporters – which had won countless WTO dispute settlement rulings against the EU’s banana import regime – were seeking more market access either through designating bananas as a tropical product (tentatively slated for an 85-percent tariff cut) or through a separate agreement negotiated with the EU.

The Deal on the Table
After intense negotiations, the EU, Colombia, Costa Rica, Ecuador, Guatemala and Panama reached a deal on 27 July: bananas would not be included in the tropical products list. Instead, the EU would lower its current most-favoured-nation tariff from –176 per tonne to –114/tonne over eight years, with a –28 per tonne downpayment as of January 2009. In exchange, the Latin Americans would drop all outstanding WTO litigation.

The solution paved the way for rapid progress in the tropical products/preference erosion discussions. The large list of products potentially slated for deep cuts was whittled down to 42 items, or even 30 according to some sources. When the talks collapsed, about a dozen of these were still listed as both tropical and erosion products. The chair of the farm talks, Crawford Falconer, predicted that the overlap “would have been resolved on the basis specific understandings” developed over the last days. Members had already agreed not to designate sugar as a tropical product.

ACP Objects to the Compromise
Costa Rica’s trade minister Marco Vinicio Ruiz hailed the banana compromise as a ‘tremendous advance’ in the tropical products negotiations, but several ACP countries complained that they had not been sufficiently consulted. Speaking for the group, Cameroon’s trade minister Luc Magloire Mbarga Atangana said the ACP would block any result of the Geneva meeting if their counter-proposal – a reduction to –117 by 2016 – were not accepted. Latin American negotiators insisted that the deal was final, and that it was up to the EU to bring ACP countries on board. Some of the latter indicated that they might be able to show more flexibility if the EU offered them additional financial assistance during the transition period.

Deal Off the Table, Litigation Set to Continue
It never came to that, however. The broader talks broke down two days later, and the EU made it clear the banana deal was off as well. “This was not a stand-alone agreement and was going to be part of a Doha package, so there is no banana deal as of now,” EU Trade Commissioner Peter Mandelson’s spokesperson Peter Power said. His statement was backed up by the commission’s 27 August announcement of appeals on the latest adverse WTO rulings on the EU’s banana import regime. “It is only through negotiation, not litigation, that we will find a solution that is satisfactory for all sides, be they EU, ACP or Latin American,” the commission said, adding that it remained ‘absolutely committed’ to finding a solution. Without one, the impasse on tropical products looks set to continue as well.