Europe to Raise Tariffs, Banana Showdown Escalates

February 4, 2005

A transatlantic face-off between the EuropeanUnion and Latin American banana-producingcountries – the latter arguing a proposedEuropean banana tariff hike would devastatetheir economies – reached a point of no returnthis week as both sides took firm stands that willapparently lead to arbitration by the WorldTrade Organization (WTO).Although Latin American leaders formed a unitedfront against the increase at last week’s presidentialsummit in Ecuador (TT, Jan. 28), their QuitoDeclaration did not have the desired effect on E.U.trade leaders.On Monday, the European Commission officiallynotified the WTO of its intention to increase tariffs onbananas from Latin America from the current rate of 75euros ($98) to 230 euros ($300) per ton in 2006, dashingthe Quito signers’ hopes of negotiating an independentagreement.NEWS of the E.U. action was not a surprise, sinceEuropean Commission trade spokesman Claude Veron-Revillehad announced the commission’s intentions last week.Costa Rican Trade Minister Manuel González, reactingto Veron-Reville’s statement, implied the European Union is intimidated by Latin America’sstance.“Latin America has acted like a singlecountry, a single family,” he said. “TheEuropean Union is worried about theunion (our countries) represent.”He also criticized European leadersfor reacting before having formallyreceived the Quito Declaration, and forfailing to explain the reasons behind theproposed tariff change.“They haven’t explained it to us – orat least, they haven’t wanted to give us theinformation,” González said.Veron-Reville said E.U. leaders arenot interested in direct negotiations.“These types of proceedings havetheir place in Geneva, as established inthe agreements we have made with (theLatin American) countries,” he said.ACCORDING to González, theE.U. notification prompts a 60-day consultingperiod during which either partycan request formal arbitration of the dispute.He explained that “arbitration won’tsolve the problem, either,” since its purposewould be to determine whether the230-euro rate would prevent LatinAmerican producers from having access tothe European market, not to prescribe acertain tariff. The two sides would stillneed to renegotiate a lower rate if the WTOfinds the proposed tariff too high.González said he thought the arbitrationprocess would take 10-11 months.ECUADOR’S Ambassador toBrussels, Mentor Villagómez, has saidEcuador would request arbitration if thecommission goes ahead with the notification.“We don’t think it’s an adequateaction,” Villagómez said of the commission’sapparent unwillingness to considerthe Quito Declaration.Ecuador is the world’s largest bananaexporter, with Costa Rica in second place.In Costa Rica, the industry produces10% of the country’s total exports andgenerates approximately 100,000 jobs,according to González.The European Union is the country’ssecond-largest market for bananas, behindthe United States.LATIN American representatives saythe tariff hike would have catastrophiceffects on unemployment and poverty inthe region.The Latin American Human RightsAssociation (ALDHU) said in a statementJan. 28 that the E.U. proposal wouldendanger “more than five million directand indirect jobs, which would increasepoverty, unemployment and the region’smarginalization.”“It’s laudable that the E.U. wants tohelp the economies of its former coloniesin Asia and Africa, but that aid shouldcome from the powerful economies ofEurope and not the weak Latin Americancountries,” the statement said.The European Union’s treatment ofthe African, Caribbean and Pacific (ACP)banana-producing countries has been asore point in Latin America. Gonzálezhas said repeatedly that because the tariffhike would apply only to Latin America,it is unfair (TT, Nov. 26, 2004).HE reiterated the point last week.“They don’t charge (the ACP countries),nor will they charge them in thefuture, any tariff,” he said, calling thepractice “discriminatory.”Under the current tariff regime, theACP countries receive a 750,000-ton tariff-free quota, while Latin American producerspay 75 euros per ton. The proposalwould create a tariff-only system,meaning the European Union wouldrely entirely on tariffs, not quotas, toregulate imports. The increase to 230euros for Latin America is designed tomaintain ACP producers’ preferential status.Leaders from ACP countries have saidthey consider the 230-euro rate insufficientfor this purpose.González said the next summit ofLatin American banana-producing countrieswill take place in Medellín,Colombia, Feb. 14-15, at which time leaderswill evaluate the progress of the tariffdiscussions.

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