The long running saga of ‘the banana wars’ involving the African, Caribbean and Pacific (ACP) group of countries, the EU and the United States has taken another twist in its plot. Estelle Drew explains.

Under the Lomé Convention, banana producers from the ACP have guaranteed markets in Europe at a pricing structure that ensures sustainability of the crop. American banana producers have repeatedly challenged this protocol. Only Cameroon and C™te d’Ivoire have any realistic possibility of competing with non-ACP banana exporters. This is particularly worrying for banana producers in the Caribbean.

An historic overview of the dispute

Negotiators have been working hard to find a solution to the banana dispute, which has put a strain on relations between the European Union and the United States. The US imposed unilateral sanctions against the EU over a year ago, arguing that the EU banana regime was not WTO compatible. The EU’s stance on the banana trade was brought into line with GATT regulations following the creation of the single European Market in 1993.

However, in 1995, Chiquita - one of the world’s major banana companies and US-based - together with four Latin American countries (Ecuador, Guatemala, Honduras and Mexico) complained that the regime put their businesses at a disadvantage in Europe. It also managed to convince the US to pursue the matter further on its behalf in the WTO, the successor to the GATT. As a result, the US challenged the banana regime in 1996. In September 1997, the WTO concluded that elements of the regime were not WTO compatible. Consequently, the EU was given until 1 January 1999 to bring the regime in line with the rules of the WTO, which it did. However, countries like Ecuador did not consider these new measures sufficient.

As a result, in February 1999, the US sought permission to use retaliatory trade measures against EU exporters in the hope that they would put pressure on their respective governments to be more conciliatory with the US over the banana issue. At the time, there were two WTO panels dealing with the banana issue. One was considering the level of award to be granted to the US and the other addressed the question of whether the banana regime was in breach of WTO rules. A few weeks before the first matter went to arbitration in the WTO, the US decided to take unilateral sanctions against the EU, in violation of WTO rules.

This created tension between member states of the EU. The Dutch government was against the banana regime and saw some of its trade - along with trade in other European countries - suffer from the retaliatory measures imposed by the US. Eventually, in April 1999 the second panel ruled against several aspects of the banana regime and allowed the US to take retaliatory measures costing the EU up to $191.4m.

The plot thickens

In November 1999, the European Commission put forward a proposal aimed at bringing the EU and the US closer to an agreement over the banana dispute by aligning the banana regime more closely with WTO rules. This proposal consists of a tariff quota system for several years to be replaced by a tariff only system for banana imports by 1 January 2006. The tariff quota system would maintain the two existing tariff quotas but with a licence system on a “ first come-first served” basis. Moreover, a third tariff quota would be made available to all suppliers.

Nevertheless, this proposal has encountered strong opposition from the European Parliament’s agriculture committee, which voted unanimously to reject it. However, once this reached the plenary session of the parliament in April this year, the committee report was rejected and referred back to the parliament’s agriculture committee.

This followed the commission’s refusal to accept the amendments being tabled by the parliament to the draft regulation. The European Parliament considered that this proposal did not to go far enough to protect EU and ACP producers and demanded the retention of tariff quotas for at least ten years. Those opposed to the tariff-only regime point out the risk of saturation of the banana market with prices falling. As a result, ACP countries would be unable to compete with producers from other countries. However, there are other members of the European Parliament who have found this proposal balanced.

Companies have been lobbying at EU level to find a rapid solution to the dispute, which has brought to the forefront the lack of cohesion within the EU over its development policy when this comes into conflict with the individual interests of member states. Nevertheless, this proposal is very likely to become legislation, as the European Parliament still holds little power in such matters.

Friendships put to the test

The dispute over the banana protocol is seen as a confrontation between the commercial ambitions of one US multinational against the interest of many developing countries. The US has appeared more concerned to help a multinational increase its market share than to respect a formal engagement, such as the one it signed in May 1997 with Caribbean countries - the ‘Partnership for Prosperity and Security in the Caribbean’. This accord between Caribbean states and the US agreed to “work with all concerned parties to achieve mutually satisfactory marketing arrangements for the Caribbean bananas, recognising the critical importance to Caribbean countries of the continued access of Caribbean bananas to the traditional markets of the European Union.”

As such, ACP countries’ faith in the commitment of the European institutions and their development policy has been tested by the banana dispute and some ACP countries have been left with a view that the EU was increasingly looking eastwards rather than towards the needs of their traditional ACP partners. If this is the case, then ACP countries will need to be sharper at making their European friends aware of the needs of the developing world within the corridors of Brussels.

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