SUNS4316 Wednesday 4 November 1998

Latin America: Banana growers gear up for fresh fight with EU

Panama City, Nov 2 (IPS/Silvio Hernandez) -- A group of Latin American banana exporting countries is gearing up for a new battle in the ongoing fight against the European Union's (EU) quotas on bananas from the region.

Although the World Trade Organisation (WTO) ruled against the EU's banana regime, the European Commission - the EU's executive body - approved a new system last Wednesday which basically maintains the controversial quota system.

Late last year, the WTO appeal ruling, accepted by the Dispute Settlement Body, asked the EU to undertake a complete overhaul of its system of import preferences for banana producers from former European colonies and current possessions in Africa, the Caribbean and the Pacific region (ACP).

Following complaints by the United States and Latin American nations, the WTO ruled that parts of the EU banana trade regime, such as trade import licensing agreements and the dividing up of quotas among ACP states, breached WTO trade rules.

The 'Group of Six' - Ecuador, Guatemala, Honduras, Mexico, Panama and the United States (home to the trio of transnationals that dominate Central America's banana industry: Dole, Del Monte and Chiquita Brands) - announced that they were preparing to fight the European Commission's latest decision.

The group wants the EU to return to the free market system that governed banana imports up to July 1993.

Panama's coordinator in the banana negotiations with the EU, Francisco Alvarez de Soto, said his country was "prepared to take the measures necessary for protecting and ensuring" its banana exports. He stressed that in spite of the EU's attempt to delay the final outcome, "the final decision will come from the WTO."
The United States, whose TNCs account for 70% of Latin America's banana exports to Europe, is considering the possibility of taking commercial reprisals against the EU, said Trade Representative Charlene Barshefsky.

Panama and Ecuador will be hit hardest by the EU's new quota system, because the quotas are assigned on the basis of sales post-July 1993, when the first restrictions were slapped on bananas from Latin America.

The initial restrictions cut from 2.7 to 2.2 million tonnes the total amount of bananas that could be exported by Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Nicaragua and Panama - the region's leading producers - as well as Mexico, the Dominican Republic and Venezuela, which are keen on penetrating the EU market with their fruit.

The WTO had asked the EU to bring its banana trade regime into line with its free trade rules by January 1999.

But under the new system, as of next year Ecuador's share of Latin America's overall quota of 2.2  million tonnes will be limited to 26.17 percent, while Panama was assigned only 15.7 percent.

The 2.2 million tonnes will carry a duty of $82.5 per tonne, while a tariff of $330 per tonne will be paid on another 353,000 tonnes to be sold to the EU's newest member states.

Meanwhile, the banana regime authorises ACPs to introduce up to 857,700 duty-free tonnes of bananas into the EU annually.

And in the quota assigned for new EU member states, ACP exporters will pay a duty of only $119, compared to the $330 to be charged Latin American exporters.

Ecuador's Central Bank recently reported that the country's January to mid-October banana exports were down around $170 million with respect to sales in the same period of 1997 - equivalent to around 25% of revenues prior to 1993.

And the vice-president of the Panama branch of Chiquita Brands, Virgilio Aizprua, said that country's banana exports crashed nearly 50 percent from 1996 to 1998.

Until the initial EU quota system went into effect, Panama earned around $210 million a year through exports of 40 million 18.4-kg boxes of bananas, 81% of which went to the EU. This year banana export revenues are expected to be down by some $120 million.

Up to 1993, the country sold some 32 million boxes to EU countries, but the new quota assigned to Panama limits exports to 14 million tonnes a year, according to former director of the National Banana Commission, Euclides Diaz.

Costa Rica and Colombia, the region's other two big producers, have not joined the protests by the Group of Six because within the EU system they have been favoured with just over 25 and 23 percent, respectively, of Latin America's 2.2 million tonne quota, Diaz explained.