The transcontinental tussle brewing over banana involving the European Union, Latin America and the US for more than two decades on the EU's preferential import treatment to African, Caribbean and the Pacific (ACP) countries has at last been laid to rest.
According to a communiqué from Brussels, Ambassadors from the EU and Latin American countries agreed in Geneva on Tuesday to end the long-simmering dispute over the EU banana imports, which is construed as a booster dose for the protracted Doha Round of trade talks.
The EU has traditionally extended special tariff preferences for bananas from the ACP countries, destabilising the climate for production and trade in the subject goods being exported principally from the Latin American countries and the US in particular and some from Asia in general.
Import tariff cut
In parallel, the EU concluded an agreement with the US in which the US acknowledges the EU's commitments to Latin American suppliers and agrees to settle its dispute definitely with the EU over bananas.
According to the deal hammered out, the EU would gradually slash its import tariff on bananas from Latin America from € 176 per tonne to € 114 in 2017 at the earliest and make the biggest cut first by € 28 per tonne to €148 per tonne, once all the parties sign the deal. The tariff will then fall again at the start of each year for seven years in annual instalments, beginning January 1, 2011.
In return, Latin American countries will not demand further cuts (the EU will not cut its tariff further once the Doha Round of talks on global trade resumes) and drop several legal disputes pending against the EU at the WTO, some of which predates WTO's advent and far back to 1993!
Bound tariff
Trade policy analysts say the EU is making a firm commitment not to raise its tariffs above a certain level and is setting what are known in trade parlance as “bound tariffs”.
On this count, they say, it is a good news for global trade because first, it meant there is one less major issue which negotiators have to resolve in order to conclude the current Doha Round and second the EU and ACP and Latin American countries have agreed on an approach on so-called ‘tropical' and ‘preference erosion' products with all the three groups jointly promoting this approach in the ongoing Doha negotiations.
The implication of this is tropical products will be subject to deeper tariff cuts, even while tariff cuts on ‘preference erosion' products of interest to ACP countries will be conducted over a relatively longer period. Given India's position as exporter of tropical products, including mangoes, bananas, grapes, jackfruit, pineapple or any other exportable fruits or vegetables, our exporters of these products would be at a disadvantage.
This is particularly so because bananas from ACP countries have been allowed in the EU duty and quota-free since 2008, thanks to Economic Partnership Agreements (EPAs).
Though the EU will continue to apply a substantial duty on bananas from Latin America with the so-called MFN duty falling gradually over at least eight years, this would continue to put others such as India from being priced out of the lucrative EU markets in view of the longer phase-out of import tariff cuts for ACP countries envisaged.
Support programme
To help banana producers from ACP and within the EU such as Cyprus, France, Greece, Portugal and Spain, the European Commissionhas in place a new support programme “Banana Accompanying Measures”(BAM) for ACP countries and more generous handouts to domestic producers to help them in adjusting.
According to WTO figures, the EU imported $4.3 billion worth of bananas in 2008, accounting for 49 per cent of the world imports, while the US imported $1.4 billion accounting for 16 per cent of world imports. In fine, the transcontinental deal on bananas typifies the segmented approach to trade on a particular product by trade majors which has the danger of hurting other competing exporters of the same product unless the right trade rules are in place.
Source : Business Line