Ecuador has requested ‘prompt consultations’ over whether the European Union’s banana import tariff complies with its WTO commitments.
Ecuador’s compliance consultation request bears on three points in particular: (i) whether the different import duties applied by the EU to bananas from most-favoured-nation (MFN) suppliers and those from the African, Caribbean and Pacific (ACP) Group of States are consistent with the GATT’s general MFN treatment obligation; (ii) whether the new dutyfree tariff rate quota reserved exclusively to ACP countries is consistent with GATT Article XIII on quantitative restrictions, and; (iii) whether the new MFN tariff complies with WTO rules on changes to a Member’s schedule of concessions.
Background
Following the loss of a protracted WTO dispute, the EU decided in 2001 to replace its complex banana import arrangements with a ‘tariff-only’ regime by January 2006. Quotas were to be abolished and a new MFN tariff negotiated with trading partners. It also agreed that the new tariff should “at least maintain total market access for MFN banana suppliers.” When the two sides failed to reach a negotiated solution, the EU unilaterally set the tariff at 176/tonne and reinstated a 775,000 tonne duty-free quota for ACP countries.
MFN exporters have repeatedly charged that the tariff is too high to ensure pre-2006 market access, discriminates against non-ACP suppliers, and is designed to protect EU producers in the Canary Islands and the French overseas departments of Guadaloupe and Martinique. WTO Members have also questioned the legitimacy of the ACP quota since their acceptance of the EU’s proposed implementation of WTO rulings was based on the understanding that the future banana import regime would be quota-free (Bridges Year 10 No.1, page 14).
When the 176/tonne tariff was announced, the EU said it would monitor trade flows from MFN suppliers and adjust the tariff if data showed that their imports had decreased. The issue flared up again at the 2005 Hong Kong Ministerial Conference, where the EU and MFN banana producers ultimately agreed to continue the mediation started there under the ‘good offices’ of Norway’s Foreign Minister Jonas Gahr Store. That process is still going on outside the WTO, but according to Ecuador it has not yielded significant progress.
Uneven MFN Gains
The EU’s banana import data for January-July 2006 shows an average seven percent gain for MFN exporters. The growth in unevenly distributed, however, with exports from Costa Rica up by 16.4 percent, followed by a 3.7 percent increase for Ecuador and 1.4 percent for Colombia. Exports from Panama declined by 4 percent. EU Agriculture Commissioner Mariann Fischer Boel said that the figures proved that the new system was “fair and working well.”
A source familiar with the case told Bridges that Ecuador’s own export data showed a 2.5 percent decrease in bananas shipped to the EU between January and September 2006. After crude oil, bananas are Ecuador’s second biggest export product – worth US$1.085 billion in 2005.
ACP Exports Grow Strongly
According to EU data, imports from ACP countries increased by 18 percent between January and July 2006. While the largest exporters registered significant gains (31.3 percent for Cameroon, 27 percent for the Dominican Republic and 3.1 percent for the Ivory Coast), some of the smaller producers showed even greater growth, including a 155 percent increase for Jamaica and more than 20 percent for St Lucia, and St Vincent and the Grenadines. Only the Caribbean island of Dominica saw its exports drop.
Ecuador’s foreign trade minister Trade Tomás Peribonio, quoted in local press, said on 25 October that the country had lost 6.4 percent of the European market, even when the overall volume of its exports had grown. Some of the countries that successfully challenged the EU’s old import regime could join the dispute as third parties this time around. While Colombia, Honduras and are possible candidates, Costa Rica has already declined, saying that it prefers the Norwegian- led mediation process to litigation.
EU Banana Subsidy Reform
In related news, the European Commission has proposed to eliminate price support payments to EU banana producers. In Cyprus, Greece and continental Portugal they will be replaced by single payments decoupled from production. Banana growers in the Canary Islands, Guadaloupe, Martinique, the Azores and Madeira will be included in a special agricultural support programme for the ‘outermost regions’, which provide about 14 percent of the EU’s total supply of bananas. Funds distributed through this scheme – amounting to nearly 280 million – will be allocated to the governments of Spain, France and Portugal, which can decide what specific measures to fund in order to support banana producers. If adopted by member states, the new subsidy regime will enter into force as of January 2007.