This Week in Europe, 7 January 2000
Executive Director of the Caribbean Council for Europe
At the start of November I suggested in this column that there were the signs that the banana dispute may be in the first stage of resolution after exchanges between the US and the EU. Since then it has become clear that while there are still difficult problems to be resolved there is a basis for most, but so far not yet all parties, to reach agreement.
In October the US Administration and the European Commission (EC) conveyed to each other proposals for ending the dispute. The approach of both was similar and represented a significant narrowing of the gap between the two parties. In particular, the US proposal offered a potentially workable tariff and quota based solution that might with certain adjustments offer support for a limited period for vulnerable ACP producers such as those in the Caribbean.
What has happened since is that the region has begun to explore with the US and EC variations on the US scheme. This in outline involves a tiered, tariff-quota system with special provisions for a transition to single, tariff-quota system after an agreed period: in effect, a World Trade Organisation (WTO) compatible transition mechanism for bananas.
Under the original US proposal, it was suggested that two levels might be created initially for banana imports into the EU. The first would be for 2.7m tonnes of bananas for both Latin and Caribbean fruit and be at a zero tariff. This would be without any country specific allocations. A second tier of 750,000 tonnes would also be established with an agreed tariff on Latin fruit, but with a zero tariff for all ACP producers whether traditional or non-traditional. That is to say irrespective of whether, for example, they are in the Windwards, the Dominican Republic or the Côte d’Ivoire.
This approach might be enhanced, it was suggested, by a system that recognised the commercial role of certain ACP states in the banana trade through taking the average of each ACP nation’s individual exports to the EC over an agreed period and varying EC duties by ACP exporting country. This approach the US suggested might recognise vulnerability and the need to enhance competitiveness in agreed nations. In other words, a system that would enable the EU, within WTO rules, to ‘discriminate’ in favour of the most vulnerable of the ACP.
The proposal also suggested ways to deal with the controversial issue of the granting of import licences and the role of the marketing companies, whether EU or US based. The US suggested that import licences should be issued transparently in a way that takes no account of the origin of the fruit, or on a first come first served basis.
Since that time the industry in the Caribbean has been able to have lengthy discussions with the US administration with the encouragement of both the EC and others such as the British Government who support a just solution. The US/Caribbean discussions identified areas where compromises between EC positions and those of the US might be achieved. As a result the Caribbean was then able to send at Heads of Government level to the EC a letter setting out its desired solution, based on broad, if informal, areas of agreement between itself and the United States trade representatives office (USTR). This letter, intended to assist EC thinking, set out the limits within which the Caribbean sought to see an EU/US resolution of the issue take place. In effect it brought together the EC's own proposals with those of the US in a concrete way.
While the issues remain very complex, it is clear that as far as the Caribbean is concerned there is potentially a basis for a transatlantic solution. However, to achieve this a number of key regional concerns will require resolution before there can be any real movement forward. There remain fundamental differences between USTR and the Caribbean over the size of both of the quotas proposed by the US. In order to achieve a final settlement that would meet Caribbean concerns negotiations would have to take place to reconcile the USTR figure with a lower quota proposed by the region so as to ensure the market is not over-supplied. Similarly there are significant differences between the US and the Caribbean over the two tariff levels to be applied. The Caribbean requires a higher tariff for fruit entering at the second tier in order to enable the region to stay in the EU market
Caribbean producers are also very concerned about the duration of any new EU/US arrangement. The EU and the US (under pressure from its multinationals) would appear to favour a transition to a simple tariff/quota system to be respectively either six or four years. The region wants ten but some voices suggest that the post Lomé roll over arrangement of eight might be an acceptable solution. Also in contention is the reference period to be used in any final agreement on a new regime. This would be used in conjunction with imports under the second tier. Caribbean producers argue this would have a material effect on determining levels of ACP access and if mishandled could lead to yet another WTO dispute or calls for compensation.
All of these matters will be difficult to resolve but are not insurmountable. However, there remains uncertainty about the possible reaction of Ecuador, other ACP producers in Africa and European producers in France and Spain. While the US may be able to encourage Ecuador to settle, EU producers are likely to require a very attractive package if they too are to accept a final tariff/quota based solution of limited duration.
The casual observer might see this as more of the same with the dispute continuing and the EU reluctantly accepting that the payment of compensation to the US is the cheapest price for the existing regime until a tariff only solution is agreed. But this is to miss the point.
There are now clear signs that the collapse of the WTO ministerial in Seattle is having an effect on the banana dispute. The US is now prepared to accept solutions previously considered unthinkable while the EU also needs to show sensitivity in its approach to WTO based disputes involving third parties. It may well take to the end of 2000 to agree a final solution but it is clear from Caribbean contact with both the EC and US that the first steps to a negotiated settlement involving indirectly all parties has begun. There is a long way to go, but for the first time for years the political dynamics point towards a solution.