EU pact ends long trade battle over bananas

After losing several cases at the World Trade Organization, the European Union agreed to cut the tariff applied to Latin American bananas, thereby reducing the preferential treatment given to growers in former colonies in the Caribbean and Africa.

The move could open opportunities for producers in Ecuador and other Latin American nations to increase exports to the European Union, the world’s biggest trading bloc. The deal was initialed by the European Union, the United States and Latin American, African and Caribbean nations. As part of the agreement, Washington said it would settle its WTO dispute with the Europeans over bananas.

Import regime

Tension over European rules on banana imports date back to the late 1950s, when the forerunner of the European Union was created. But it was not until the 1990s that the dispute heated up, after the creation of common European rules on banana imports on July 1, 1993.

The rules were challenged by five Latin American countries. On Feb. 11, 1994, a panel at GATT — the General Agreement on Tariffs and Trade, the predecessor body to the WTO — ruled against the new banana import regime, which was then challenged in 1996 at the WTO.

Latin American nations and American corporations complained bitterly about preferential treatment of Europe’s former colonies in the Caribbean and Africa. Under the deal initialed Tuesday, the European Union will cut the tariff paid on bananas from Latin American countries in eight stages, reducing it to $114 a ton in 2017, from $176 a tonne currently.

An initial cut to $148 a ton will apply once the deal has been signed. That is likely to take several months, but exporters will be able claim the benefit of this first cut from the date of initialing.

The European Commission president, José Manuel Barroso, described the agreement as “a compromise that works for all sides.” He added that it was “an important boost for the multilateral system.”

In 1999 and 2000, the United States and Ecuador won the right to impose trade sanctions on European goods after the WTO ruled that the banana tariffs were illegal.

Europe subsequently changed its import requirements more than once. So sensitikve was the issue that the negotiation over bananas formed part of the talks during the Doha global trade round before it collapsed.