Bridges • Volume 12 • Number 6 • December 2008

The EU Should Put Its Money Where Its Mouth Is on Free Trade

by Eduardo Ledesma

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As the world moves from credit crunch to economic crisis to wide-scale recession, world leaders have warned that protectionism is a path to global economic ruin.

They have committed themselves to stopping protectionism that would further erode confidence in the global economy and worsen the current crisis. The European Union has been more forceful than most in renouncing the spectre of mounting protectionism.

Yet, by failing to dismantle illegal trade barriers to Latin American banana imports, its actions belie its fine words and threaten the very commitment it professes to promote. By espousing lofty ideals devoid of tangible action, it risks irreparably undermining its credibility and aspiration to global leadership.

A breakthrough agreement between the EU and the Latin countries during lengthy and ill-fated Doha trade talks in July promised to end the long-standing banana dispute once and for all. The settlement was a stand-alone agreement by its express terms. Our government signed it in good faith and departed Geneva. With no explanation other than pressure from banana-producing European Member States, the EU walked away, insisting that the settlement was dependent on the broader global trade deal that had imploded yet again.

On 26 November, the World Trade Organisation’s Appellate Body issued the latest in a long series of rulings condemning the EU’s banana import regime as illegal. This is the 13th condemnation in 15 years. Ecuador’s developing economy, which exports -670 million a year to the EU and contributes -210 million a year to EU coffers to help subsidise EU growers, is the biggest casualty of these repeat offenses.

By again throwing away the rule of law and its own promises in July, the EU threw away another opportunity to end this long-standing dispute and salvage something from the wreckage of the Geneva summit. And by now claiming that any banana redress must be tied to a Doha deal that has nothing to do with its condemned illegalities, it is trying to escape its compliance responsibilities, opting for protectionism, and laying the blame elsewhere.

It is little wonder that bananas have come to be seen as a symbol of EU transgression and evasion of commitments, undermining any credibility to global leadership in promoting trade and development, and poisoning the relationship between the EU and the two Americas.

European Trade Commissioner Catherine Ashton has declared that she will “strive to conclude a deal which prevents any return to protectionism.” But EU actions are not following those lines. It claims leadership on world trade matters, while undermining the credibility of the trading system needed to prevent protectionism. In the current economic crisis, if the EU wants to show authentic leadership by upholding the rule of law, it should start with the case that has the longest record of illegal protectionism and non-compliance in the history of the WTO, bananas.

And so we call on the EU to prove that it is serious about leadership, openness, and the need to avoid protectionism. The current crisis is an opportunity to break the status quo and allow a new, better, more open equilibrium. Whether the global trade talks progress or not, the implementation of the July 27 Agreement on bananas would send a strong signal to the rest of the world that the EU is ready to reverse 15 years of banana illegalities, and do its part to deter protectionism and restore confidence in the trading system.

Eduardo Ledesma is Executive Director of the Association of Ecuadorean Banana Exporters in Guayaquil, Ecuador.