15th December 2009

Bananas sweeten Doha’s future

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GENEVA LUNCH

By Ellen Wallace

Bananas have come close to being the fruit that broke the Doha Round’s back, but they could in the end save the talks, says the International Centre for Trade and Sustainable Development (ICTSD). The European Union (EU) and Latin American exporters initialed an agreement Tuesday 15 December at the World Trade Organization (WTO) in Geneva. It will settle their dispute over the banana trade and tariffs, which has been running for more than 10 years.

”An agreement on bananas is widely viewed as a critical condition for a conclusion to the stalled WTO Doha Round of trade negotiations,” says the Geneva-based ICTSD. The organization provides the international trade system with input on sustainable development aspects of trade.

A study published Tuesday by the ICTSD shows that “a new deal on European Union banana import tariffs will be a boon to Latin American exporters but would trigger a drop in exports of the fruit from African, Caribbean and Pacific (ACP) countries. But the blow to ACP banana exporters may be cushioned by the aid money that the EU has promised in conjunction with the deal.”

The Geneva agreement is designed to end the preferential access for bananas granted to Europe’s former colonies. Latin American producers have argued this is in violation of WTO rules.

The agreement will cut the EU tariff faced by Latin American exporters to €114 per tonne from the current €176 per tonne over a period of several years – giving ACP countries time to adjust to fiercer competition, says the ICTSD.

The study, by Giovanni Anania of the University of Calabria in Italy, projects that, after the cuts, EU imports of bananas will increase by 6 percent. ACP exports to the EU will decrease by 14 percent, and there will be a 17 percent increase in exports from other countries, largely Latin American.

It shows that “ACP countries will face smaller export revenue losses if the Geneva Agreement on Trade in Bananas and a Doha Round deal are concluded together,” notes the ICTSD. “Both the Latin American and ACP exporters would in fact benefit most if the banana deal is part of a broader Doha Round deal – meaning that the two groups share at least one common interest,’ says Anania.”

He explains that lower tariffs across the world will open up markets for both Latin American and ACP bananas, and this increased access will partially compensate for the drop in ACP exports to the EU.

The study suggests that with the banana deal in place, ACP exports are likely to grow by around 100 percent in the period examined in the study. Without the Geneva Agreement on Trade in Bananas, exports would have grown by around 130 percent over the same period. Latin American and ACP countries, together, could stand to lose $381 million in export revenues after the cuts if a banana deal occurs without a Doha agreement in place. ACP countries alone would lose US$40 million.

The study cautions policy makers “on the need to provide aid to increase the competitiveness of ACP banana exports. Under the Banana Adjustment Measures, a precondition for an agreement, the EU will provide €190 million to help improve competitiveness, economic diversification and to mitigate the social consequences of adjustment for the ACP.”