WTO Rules Against Banana Tariff, Europe Must Negotiate Fair Resolution

CHRIST CHURCH, BARBADOS – A ruling handed down by World Trade Organization (WTO) Arbitrators October 27 on the proposed European Union banana tariff has met with deep shock and disappointment across the Caribbean. The Arbitrators ruled that the proposal would not maintain market access for third country or most favoured nation (MFN) suppliers. The Arbitrators’ ruling determined that “the European Communities’ proposed rectification, consisting of a new MFN tariff rate on bananas of €187 per metric ton and a 775,000 mt tariff quota on imports of bananas of ACP origin, would not result “in at least maintaining total market access for MFN banana suppliers”, taking into account “all EC WTO market-access commitments relating to bananas”. Consequently, the Arbitrator finds that the European Communities has failed to rectify the matter, in accordance with the fifth tiret of the Annex to the Doha Waiver.” The ruling exposes Caribbean banana trade to new uncertainties, at a time when preferences are being scaled-back. The livelihoods of tens of thousands of families in the Region, especially in rural areas, hangs in the balance. “There is a feeling of outrage in the Region,” said Director General of the Caribbean Regional Negotiating Machinery (RNM) Ambassador Dr. Richard Bernal. Swift action has been taken to muster a broad range of stakeholders throughout the Caribbean’s banana-producing states, to take stock of the Arbitrators’ ruling and discuss options on the way forward. Caribbean countries are organizing themselves at the highest levels. Emanating from an Organisation of Eastern Caribbean States (OECS) Trade Ministers meeting last week in St. John’s, Antigua, a decision was taken to convene a meeting at Ministerial level of Caribbean Windward Island banana-supplying countries, in light of recent developments in the second banana arbitration process. “Yesterday’s Arbitrators’ ruling reinforces our conviction to convene such a meeting as a matter of urgency, to discuss the way forward on bananas and a strategy in this regard ahead of the Sixth WTO Ministerial Meeting in Hong Kong this December,” St. Lucia’s Minister of External Affairs, International Trade and Civil Aviation Hon. Petrus Compton said. The Commonwealth of Dominica’s Minister of Foreign Affairs, Trade and Labour Hon. Charles Savarin said of the decision, “it raises serious questions as to whether small countries can continue to compete and trade under the WTO system. It seems we have no place in the multilateral trading system, which is confining and consigning small, vulnerable developing countries to the dustbin, forcing them to be dependent on alms and handouts, rather than embracing them and enabling them to forge their own path to development.” Minister Compton reinforced Minister Savarin’s sentiments, arguing that “it is immediately clear that the ruling goes beyond bananas, affecting the capacity of the Caribbean’s small, vulnerable banana-producing states to effectively trade a vitally important commodity. If WTO rules are undermining our ability to trade, what then is the value of the WTO system to the most vulnerable? The WTO system is marginalizing small economies.” Dr. Marshall Hall, Chairman of the Caribbean Banana Exporters Association, characterized yesterday’s ruling as a “monumental disaster for the Africa, Caribbean and Pacific (ACP) banana-supplying countries.” Caribbean banana exporting countries, as did ACP banana suppliers at large, previously indicated that a tariff of €275 per tonne for MFN suppliers was necessary, in order for farmers to remain competitive. These countries were dealt a crippling blow in August, when WTO Arbitrators handed down a ruling against the EC-proposed tariff of €230 per tonne, that states it would not maintain total market access for MFN banana suppliers. Last month, the European Commission submitted a revised banana tariff proposal of €187 per tonne on MFN banana imports under a Tariff Only system, to come into effect as of January 1, 2006. Since the second Arbitrators’ ruling has also found against the EU, then in the absence of a negotiated settlement involving the MFN suppliers the Contonou waiver will seize to apply on January 1, 2006, in relation to ACP banana exports to the EU. A solution must therefore be found for the current situation, as a matter of urgency. The Region calls on the EU to negotiate with MFN and ACP suppliers, to arrive at a mutually satisfactory solution that ultimately is fair to both. That solution must provide for market stability. The Caribbean expects that the EU will honour its commitments as regards ACP banana market access to the European market, in keeping with the Cotonou Partnership Agreement. The destabilisation of the market and resultant loss of income is in no one’s interest. The legitimate interests of all banana producers must be safeguarded. Some groups have argued for the postponement of the single tariff, pending negotiation and agreement on a fair and equitable solution, that will enable all suppliers to continue to trade. Recognizing that it provides for stable market conditions, industry groups like the Windward Islands Banana Development and Exporting Company (WIBDECO) have called for the maintenance of the current TRQ system. “The current TRQ system must be extended for a sufficient period, to enable the parties to agree to a suitable timeframe and tariff level for the introduction of a tariff-only import regime. This is the only viable option to maintain market stability and access for the ACP and MFN suppliers at current levels,” said the Chief Executive Officer of WIBDECO, Mr. Cornibert. The solution involving MFN countries must also allow the “Doha Waiver” to be maintained, WIBDECO has said. The Caribbean calls on MFN suppliers to appreciate that its producers want access to the EU market under ‘fair conditions’, otherwise the livelihoods of tens of thousands of families in the Region will be put at risk. The Trade Minister of the small Caribbean banana-producing country of St. Lucia with a population of just over 160,000 has underscored that “bananas are the bedrock upon which St. Lucia’s most vulnerable communities – especially those in the rural areas – are constituted. Banana exports sustain a way of life, like no other sector in St. Lucia can. If we are unable to profitably trade in bananas, the very social fabric of St. Lucia will be dislocated.” At hearings last week in Geneva, further to the second arbitration process, an oral statement was delivered on behalf of ACP banana-suppliers to the WTO Tribunal. Three key points were underscored: i) Under the Cotonou partnership agreement, the EU has a legal obligation to provide certain conditions of access to its market for ACP suppliers; ii) while ACP banana-suppliers have access to the EU market, their market share is not sufficiently large to pose any competitive danger to MFN suppliers; and, iii) the EU had not improved preferential access for ACP countries, because a quota for duty free access for ACP suppliers would be maintained.