Bridges Weekly Trade News Digest • Volume 11 • Number 11 • 28th March 2007

EU Banana Import Rules Challenged Again, This Time By Colombia

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The EU is facing a second WTO challenge to its banana import rules after Colombia last week initiated a dispute against them, claiming that the duties and quotas maintained by Brussels were discriminatory and in violation of its multilateral commitments.

Colombia’s 21 March request for consultations, the first step in WTO dispute settlement procedures, came only a day after a panel was created to adjudicate Ecuador’s separate complaint against the EU’s banana import regime. Colombia is a third-party observer in Ecuador’s case, which means that it would be unable to impose retaliatory sanctions against the EU even if Ecuador were victorious. This is why it has launched a case of its own.

EU banana import policies - especially its trade preferences for bananas from its former colonies in the African, Caribbean, and Pacific (ACP) group of countries - have been the subject of a decade-long row at the WTO, pitting Brussels against several Latin American banana producers and the US.

At issue in both cases is the EU’s current import regime: a 176 euros/tonne tariff on bananas from most-favoured nation (MFN) suppliers, alongside a 775,000 tonne duty-free import quota reserved for the African, Caribbean, and Pacific group of states.

Colombia, like Ecuador, claims that this violates the EU’s WTO obligations by discriminating in favor of bananas from ACP countries. Like Ecuador, it argues that the ACP-specific quota violates WTO rules on quantitative restrictions (see BRIDGES Weekly, 22 November 2006).

The roots of the current cases lie in the late 1990s, when the EU lost a protracted WTO dispute on bananas. In 2001, Brussels promised to replace its complex quota and licence system for banana imports with a ‘tariff-only’ regime by January 2006, in return for being allowed to maintain its ACP trade preferences for the intervening five years. Crucially, it agreed that the new tariff should "at least maintain total market access" for countries that did not benefit from preferences. After proving unable to negotiate the value of this tariff with its trading partners, the EU unilaterally introduced the current system at the start of 2006.

Ecuador and Colombia have both targeted the EU’s 176 euros/tonne tariff for two reasons. First, they argue that it fails to maintain total market access for MFN suppliers. Brussels has disputed Ecuador’s claims that its banana exports to the EU have suffered since the new tariff and quota came into force. In any event, EU banana imports from ACP countries have grown much faster than those from elsewhere since the beginning of 2006.

Second, they contend that it exceeds the 75 euros/tonne in-quota MFN tariff formally bound in the EU’s own schedule of commitments at the WTO (the over-quota MFN duty under the old import regime was 680 euros/tonne).

Pursuing a more specific line of argument that Ecuador did not make in its own case, Colombia contended that the fact that the EU’s schedule provided for an in-quota duty of 75 euros per tonne within a quota of 2.2 million tonnes did not justify levying a higher tariff on all MFN bananas. In order to apply a higher duty, Colombia argued in its request for consultations, the EU "should have renegotiated its tariff concession" with potentially-affected banana producing countries in accordance with WTO rules on modifying bound commitments (set out in GATT Article XXVIII), as well as with its 2001 agreements on bananas with the US and Ecuador.

Another difference between the two cases is procedural. Ecuador has asked for a ‘compliance panel’ to determine whether the EU is violating past WTO rulings, as allowed by Article 21.5 of the Dispute Settlement Understanding.

Colombia was not party to Ecuador’s past dispute. Its entirely separate, though very similar, case focuses exclusively on the EU’s compliance with its own WTO commitments.

Furthermore, Colombia is seeking to subject the case to accelerated procedures, arguing that "as a developing country heavily dependent on bananas… [it] can ill-afford yet another lengthy dispute settlement proceeding conducted according to standard time frames." It wants the EU to start consultations within ten days of its request and may ask the WTO Director-General to try to facilitate a solution to the dispute.

The standard period for a WTO dispute panel to issue its report is six to nine months after its composition. Under the expedited process sought by Colombia, it would have to do so within two months.

ICTSD reporting; "UE advierte a Colombia que nueva demanda enreda acuerdo commercial," EL TIEMPO, 26 March 2007.