Bridges Weekly Trade News Digest • Volume 13 • Number 41 • 25th November 2009

Banana Agreement Nearly Ripe: Delegates

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The long-running dispute over trade in bananas is close to being settled, say delegates familiar with intensive talks held recently on the controversial issue. However, negotiators warn that a final banana accord may only be inked when a deal is also struck on other key products in the WTO’s Doha Round - such as sugar, rum or tobacco.

“The deal is almost done, and I think it cannot be undone,” sighed one official whose country has sought gentler and slower tariff cuts for products such as bananas and sugar in the Doha talks.

While Latin American countries in particular have argued for faster and more extensive liberalisation for bananas and other products, this has been resisted by former European colonies in the African, Caribbean and Pacific (ACP) group. Often less competitive than their Latin American counterparts, ACP countries fear that losing preferential access to EU markets could badly hurt their producers.

EU Trade Commissioner Catherine Ashton told Reuters last week that the dispute could be resolved “later this week or early next week,” raising expectations of a rapid conclusion to the talks. “We are in the closing stages of what could be the end of this long dispute,” she said.

One delegate acknowledged that the banana deal was “basically there,” with few remaining areas of outstanding contention. However, another official who is involved in the talks warned that it would be “premature to say we’re there yet,” and emphasised the need to “have the banana agreement inscribed in the wider logic” of related negotiations on ‘tropical products’ and preference erosion before a final deal is concluded.

“The three strands need to come together at the same time,” the official said.

Tariff cuts

The draft deal is expected to cut the EU tariff faced by Latin American exporters to 114 euros per tonne, from the current 176 euro per tonne over a period of eight years (see Bridges Weekly, 11 November 2009, http://ictsd.org/i/news/bridgesweekly/59222/). The tariff cuts would begin with an immediate ‘down payment’ cut of 28 euros per tonne.

The deal is based on an outline accord between the EU and Latin American in July 2008, ahead of a mini-ministerial gathering in Geneva. When talks broke down on other issues, the tentative agreement on bananas was never finalised.

One recent study by Professor Giovanni Anania of the University of Calabria looked at the implications of the July 2008 accord and projected that EU banana imports would increase by 6 percent between 2005 and 2016. ACP exports to the EU would decrease by 14 percent over the same period, while there would be a 17 percent increase in exports from other countries, largely Latin American. (The study was commissioned by ICTSD, which also publishes Bridges Weekly.)

One source indicated that the banana deal had now been submitted to the US for “legal vetting,” a prerequisite for finalising any eventual pact. Another noted that the entry into force of the Lisbon Agreement in the EU could mean that governments’ legal experts were also reviewing the procedural requirements for approving the agreement in Europe.

Aid

Key to any eventual accord would be the amount of aid that the EU agrees to provide to ACP countries. A draft text seen by Bridges would require the EU to provide 190 million euros as ‘Banana Accompanying Measures’ - or BAMs - to help these countries restructure their economies.

One negotiator who is close to the negotiations indicated that the ACP had initially sought compensation of 500 million euros, while the EU offered a lower figure of around 100 million euros (see also Bridges Weekly, 29 April 2009, http://ictsd.org/i/news/bridgesweekly/45769/). The latest proposal from the EU would provide up to 190 million euros, plus an additional 10 million euros if these “should become available in the course of the annual budget procedure.” However, the source reported that “the EU has said it can’t go beyond that”.

The ACP countries are keen to include a ‘more mandatory’ clause requiring the EU to review the situation in the future and provide additional aid if needed, the source said.

Tropical products, preference erosion

Talks are continuing on the specific cuts that would be undertaken by ‘tropical products’ - for which Latin American countries in particular seek faster and deeper tariff cuts in the Doha Round - and also on products likely to be affected by preference erosion, for which ACP countries are seeking the opposite treatment. As there is considerable overlap between the lists of products that have been proposed by both groups, negotiations have been taking place at a highly detailed level, with talks on how individual tariff lines will be treated in given import markets.

“We’ve concentrated on talks with the EC, but now we need to finish work with the US and Japan,” said one exporting country involved in the negotiations. Other sources confirmed that negotiations are now focusing on how products would be treated in the US.

With agreement on bananas reportedly close, sugar remains the next most controversial product; however, delegates mentioned that rum, tobacco, cut flowers, arrowroot, palm oil, groundnut oil, coffee and melons were also under discussion with importers.

A small-group meeting convened on Thursday by the chair of the agriculture negotiations, Ambassador David Walker of New Zealand, lasted only half an hour, one source said. Negotiators have asked to be allowed to conclude their bilateral talks in this area before presenting the progress achieved to the broader WTO membership.

An announcement on the banana deal at next week’s WTO ministerial conference was now unlikely, several sources said. Instead, the agreement was more likely to be submitted to the organisation’s General Council when it meets on 17 December. Members would have 90 days to raise objections; however, if ACP countries were to do so, the EU would not consider itself bound to follow through on its promised commitments concerning Banana Adjustment Measures.

More information

The ICTSD report on bananas is available at http://ictsd.org/i/publications/50782/

ICTSD reporting; “EU set to cut tariffs on Latin American bananas,” REUTERS, 18 November.