Banana deal ends EU’s longest trade dispute

Finance minister Scholz has presented a bill to give German customs more employees and powers.

The European Union and United States initialled a deal on Tuesday with Latin American, African and Caribbean nations ending a decades-old trade war over bananas.

The pact ends the world’s longest-running trade dispute and also removes a potential obstacle to a new deal to open global commerce in the World Trade Organisation’s eight-year-old Doha round. Final signature is expected to take place next year.

“I’m very happy to see the longest-running trade dispute finally solved,” said European Trade Commissioner Benita Ferrero-Waldner. “History is being made today because this dispute has soured global trade relations for too long,” she told Reuters.

Under the deal, the EU – the world’s biggest importer of bananas – will cut the duty it applies to bananas from Latin American countries such as Ecuador and Costa Rica which have long complained of discriminatory treatment.

It will also give aid of about 200 million euros to banana growers in certain African, Caribbean and Pacific countries.

These mainly former European colonies currently enjoy preferential treatment on exports to the EU and will see their relative advantage eroded under the deal. 

They will still have duty-free access to the EU for their produce, but the aid package will help them adjust to greater competition from more efficient Latin American growers.

Bananas are a key export and economic cornerstone for many countries including Cameroon and Dominica.

Although the United States does not export bananas, it is a party to the deal because major distributors of the fruit Chiquita, Del Monte and Dole are US corporations. Ireland’s Fyffes is also an important distributor.

Tense negotiations

WTO Director-General Pascal Lamy, who played a discreet role nudging the tense negotiations towards a conclusion during the global trade body’s 30 November – 2 December ministerial conference, welcomed the deal on Tuesday.

“I hope the same spirit of pragmatism, creativity and diplomacy will re-invigorate the Doha round negotiations,” he said in a statement.

The agreement is good news for consumers in the European Union as well as banana producers in Latin America as it stands to increase supplies of cheap fruit.

Costa Rica’s ambassador to the WTO, Ronald Saborio, who led the negotiations for the Latin Americans, said the deal was a success for those poor countries who wanted increased trading opportunities from the Doha round rather than special treatment.

“There’s an important number of developing countries that want to have market access as a result of this round. This shows they can obtain the results they seek,” he told Reuters.

Six months to signature

The deal will cut the tariff paid on bananas from Latin American countries in eight stages to 114 euros a tonne in 2017, from 176 euros now, with an initial cut to 148 euros on final signature of the deal but taking effect retroactively to Tuesday’s initialling.

Because the deal must be approved by the EU’s 27 member states, requiring translation into 23 official languages, it may be six to nine months before signature is possible.

In return, Latin American banana producers and the United States will drop legal challenges to the EU over its banana regime, which has been repeatedly condemned by WTO courts for discriminating against the Latin American growers.

The Latin Americans will also not press for further cuts in banana duties in the Doha round.

The bananas pact will go into effect whether there is a Doha deal or not, but the phasing-in of the tariff cuts could be delayed for up to two years if there is no Doha deal by 2013.

An accompanying agreement, regulating the EU’s treatment of tropical products where the Latin Americans want faster and deeper cuts in tariffs, while ACP countries seek slower and less marked reductions, will be embedded in a future Doha deal.

The dispute, dating back to at least the 1957 Treaty of Rome founding the European Economic Community, the EU’s precursor, was finally resolved over the past few weeks in day after day of talks until late into the night, compared by one weary negotiator to “three-dimensional chess”.

(EURACTIV with Reuters.)

The 17-year-old banana dispute had been a key sticking point in agricultural negotiations, preventing a wider deal on the treatment of tropical goods and the question of erosion of preferences that are crucial to the conclusion of an overall global trade pact (EURACTIV 18/07/08). 

  • 15 Dec. 2009
    • Maximum EU tariff falls to 148 euros per tonne, down from 176 euros.
    • Expected date of phasing-in of tariff cuts, in seven stages at the start of each year.
  • June-Sept. 2010: EU-27 member states to officially sign deal, which would enter into force with retroactive effect as of 15 Dec. 2009. 
  • 2017: EU tariffs on banana imports from Latin American countries capped at 114 euros maximum.
  • The phasing-in can be delayed for up to two years if there is no outline agreement in the World Trade Organisation's Doha round by the end of 2013.

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