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EU banana preferences could end
The Packer / February 24, 1997

By Larry Luxner

WASHINGTON -- The Geneva-based World Trade Organization is expected to issue a ruling sometime in mid-March that will end European Union trade preferences for bananas produced by Europe's former colonies in Africa, the Caribbean and the Pacific (the so-called "ACP" countries).

The WTO is the successor to GATT (Generalized Agreement on Tariffs and Trade), which has already ruled twice against the EU quotas, pleasing most Latin American banana producers.

For several years, the EU has helped ACP producers -- who grow 3% of the world's bananas -- remain competitive by giving them a preferential duty-free quota of 857,000 metric tons a year. The Latin American quota, which was set at 2.1 million tons in 1993, has since risen to 2.5 million tons. Nevertheless, Ecuador, Guatemala, Honduras and Mexico all oppose such quotas -- viewing them as a restriction on free trade. So does the United States, which filed the November 1994 challenge on behalf of Chiquita Brands International and the Hawaii Banana Growers Association.

Colombia, Costa Rica, Nicaragua and Venezuela, on the other hand, have signed "framework agreements" with the EU allowing them to sell limited quantities of bananas to the 15-member trading bloc. So Latin American producers themselves are sharply divided on the issue.

Meanwhile, European nations led by Great Britain and France argue that without the preferences, tiny Caribbean islands like St. Vincent, Guadeloupe and Martinique would lose their chief banana markets and suffer widespread unemployment.

"The only market for the Caribbean is Europe, and we will fight to hold onto this market," warned Edison James, prime minister of the island nation of Dominica, at a recent conference in Miami. He suggested that abolishing the complicated trade regime would force countries like his to turn to illegal drugs as a way of preventing economic collapse. "If this is what free trade means, then we in the Caribbean need to think again. The stakes are too high."

In Dominica alone, the banana industry accounts for up to 50% of export revenue and employs 15% of the population. Without EU trade preferences, the Caribbean -- where production costs are three times as high -- claims it would have no way of competing with Latin American producers like Ecuador and Colombia.

Recognizing that, the National Bar Association of the United States -- a lobby for 17,000 African-American lawyers -- has thrown its total support behind the Caribbean.

"Should the United States action not be withdrawn and should the WTO rule in favor of Chiquita, we urge President Clinton to ensure non-enforcement of the WTO ruling by the United States so as to avert economic and political destabilization throughout the Caribbean," said the NBA resolution passed in early February 1997. "Short-sighted policies that would undermine Caribbean economies will create instability, lead to increases in emigration, and narcotics growth and trafficking in the region."

Chiquita totally disputes that claim.

"We have worked for over 100 years to sell bananas. The reward for that was a market leadership position," a top Chiquita official told South America Report. "Through no effort on our own, but an adverserial effort by Europe, that market access was confiscated in a direct attempt at reattributing those profits to certain Europeans who were not formally in the Laitn American banana trade. Our investors have been damaged because no one has rectified this illegal expropriation and travesty of world justice."

The official, who asked not to be named, said Europe's quotas have deprived Chiquita of $3 billion in revenue since their inception. That will end immediately, he said, once the WTO rules in favor of Chiquita and the five nations opposing EU quotas, as is widely expected to happen.

"The depth of WTO law is far greater than the depth of GATT law that could apply to the case. With the WTO, there's a greater ability to assess punitive damages."

The official added that "the comments about the lack of competitiveness on a cost basis are excessive. We have produced bananas in those regions, and find that with the appropriate technology, those bananas can compete with Latin America."

In late 1995, Ecuador's Congress ratified the country's membership in the WTO, a decision praised by Jose Vicente Maldonado, Ecuador's then-minister of industry, commerce and integration, as "the most important decision on foreign trade in Ecuadoran history." In principle, Ecuador supports Washington's argument that the EU stop giving preferential access to those countries at the expense of Ecuador and others which refuse to sign so-called "framework agreements" with the EU.

"The framework agreement is absolutely in opposition to the WTO," said Patricio Izurieta Mora-Bowen, a former economic official at Ecuador's Foreign Ministry. "We feel that the current system is discriminatory, unfair and unjust, and creates a difficult situation for banana exporters. It has increased our costs. Our producers aren't getting the money they should."

Izurieta added that "we hope that Europe will reformulate its banana regime, and that the framework agreement will be eliminated, or redone so it would be less unfair."

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