With price wars breaking out between Britain’s leading supermarkets, banana prices are being cut dramatically. The Daily Telegraph website notes that ‘prices of bananas are being cut from 98p to 77p per kilo’, a reduction of some 22.5%. This comes on the back of price developments in the UK, which, according to analysis from Banana Link, ‘stripped more than half the total value out of the banana chain’ in 2009. While retailers claim that cheap bananas are ‘not at the expense of producers and intermediaries, as the cuts have come out of retail margins’, the question arises: will this continue to remain the case following the conclusion of the WTO deal? Fears are rising that once contracts come up for renewal, intensified price competition between supermarkets and the reduction on duties on Latin American bananas will ‘plunge banana growers into a race to the bottom’.

Analysis from Banana Link suggests that currently ‘prices paid to suppliers of UK supermarkets are one-third lower than seven years ago’. Banana Link highlights the rise of the ‘buying power of the supermarket chains’, which is eclipsing the former power of the big banana companies. While in the past EU and national authorities have used competition investigations to rein in the market power of the big banana companies, ‘competition law has not yet evolved to contemplate abuses of buying power at the top of the supply chain’.

In this context, it should be noted that the EC confirmed that in December 2009 it had ‘sent a Statement of Objections under anti-trust rules to a number of companies active in the import and marketing of bananas, concerning their alleged participation in a cartel’. According to press reports, the unidentified companies were in southern Europe, and this followed on from ‘surprise inspections’ carried out by the EC in November 2007. According to the reports, this follows actions last year which resulted in the EC ‘[fining] banana importers Dole and Del Monte for running a cartel’, while Chiquita ‘escaped fines because it blew the whistle on the illegal price fixing in northern European nations’.

In a press release issued on 17 December, Dole Food Company confirmed that the Statement of Objections issued by the EC did not affect any of its subsidiaries, and that it had maintained good cooperation with the EC in the process leading up to the issuing of the Statement of Objections.

Banana Link is arguing for a rethinking of price formation in the banana supply chain and looks to the work of the ‘fair trade’ movement for the basis on which this might occur. This would involve using calculations of ‘sustainable costs’ as the basis for price formation in the banana sector. This is seen as essential, since the current retailer ‘price wars’, over-supply situation and pending implementation of the banana deal are all likely to put pressure on the ‘fair trade’ model of price formation, even giving rise to a ‘race to the bottom’ among ‘fair trade’ suppliers as supermarkets chase cheaper ‘fair trade’ bananas. The significance of this issue is illustrated by the fact that, despite wider trends, the ‘fair trade’ minimum price for bananas has risen 21% since 2006 (with additional price premiums for organic bananas).

Banana Link is looking to the new World Banana Forum as a vehicle to promote broader use of ‘sustainable cost’ pricing as the basis for price formation in the banana sector. Against this background the ‘fair trade’ labelling and certification agency, FLO, plans to organise round tables in 2010 designed to promote the idea of ‘sustainable cost’ pricing. It is argued, however, that moves towards such a basis for price formation will require a review of the current retailer practices which it says are ‘stripping value out of the whole chain from the top down’.

Meanwhile, press reports in January noted complaints from Suriname’s banana-exporting company that for the second year running they were being offered ‘unreasonably low prices’ by their Dutch importer. This is despite improvements in the food safety and quality of bananas supplied following a five-year restructuring programme designed to lay the basis for full privatisation of the local banana sector. As a consequence a new Dutch importer is being sought.

With price wars breaking out between Britain’s leading supermarkets, banana prices are being cut dramatically. The Daily Telegraph website notes that ‘prices of bananas are being cut from 98p to 77p per kilo’, a reduction of some 22.5%. This comes on the back of price developments in the UK, which, according to analysis from Banana Link, ‘stripped more than half the total value out of the banana chain’ in 2009. While retailers claim that cheap bananas are ‘not at the expense of producers and intermediaries, as the cuts have come out of retail margins’, the question arises: will this continue to remain the case following the conclusion of the WTO deal? Fears are rising that once contracts come up for renewal, intensified price competition between supermarkets and the reduction on duties on Latin American bananas will ‘plunge banana growers into a race to the bottom’.

Analysis from Banana Link suggests that currently ‘prices paid to suppliers of UK supermarkets are one-third lower than seven years ago’. Banana Link highlights the rise of the ‘buying power of the supermarket chains’, which is eclipsing the former power of the big banana companies. While in the past EU and national authorities have used competition investigations to rein in the market power of the big banana companies, ‘competition law has not yet evolved to contemplate abuses of buying power at the top of the supply chain’.

In this context, it should be noted that the EC confirmed that in December 2009 it had ‘sent a Statement of Objections under anti-trust rules to a number of companies active in the import and marketing of bananas, concerning their alleged participation in a cartel’. According to press reports, the unidentified companies were in southern Europe, and this followed on from ‘surprise inspections’ carried out by the EC in November 2007. According to the reports, this follows actions last year which resulted in the EC ‘[fining] banana importers Dole and Del Monte for running a cartel’, while Chiquita ‘escaped fines because it blew the whistle on the illegal price fixing in northern European nations’.

In a press release issued on 17 December, Dole Food Company confirmed that the Statement of Objections issued by the EC did not affect any of its subsidiaries, and that it had maintained good cooperation with the EC in the process leading up to the issuing of the Statement of Objections.

Banana Link is arguing for a rethinking of price formation in the banana supply chain and looks to the work of the ‘fair trade’ movement for the basis on which this might occur. This would involve using calculations of ‘sustainable costs’ as the basis for price formation in the banana sector. This is seen as essential, since the current retailer ‘price wars’, over-supply situation and pending implementation of the banana deal are all likely to put pressure on the ‘fair trade’ model of price formation, even giving rise to a ‘race to the bottom’ among ‘fair trade’ suppliers as supermarkets chase cheaper ‘fair trade’ bananas. The significance of this issue is illustrated by the fact that, despite wider trends, the ‘fair trade’ minimum price for bananas has risen 21% since 2006 (with additional price premiums for organic bananas).

Banana Link is looking to the new World Banana Forum as a vehicle to promote broader use of ‘sustainable cost’ pricing as the basis for price formation in the banana sector. Against this background the ‘fair trade’ labelling and certification agency, FLO, plans to organise round tables in 2010 designed to promote the idea of ‘sustainable cost’ pricing. It is argued, however, that moves towards such a basis for price formation will require a review of the current retailer practices which it says are ‘stripping value out of the whole chain from the top down’.

Meanwhile, press reports in January noted complaints from Suriname’s banana-exporting company that for the second year running they were being offered ‘unreasonably low prices’ by their Dutch importer. This is despite improvements in the food safety and quality of bananas supplied following a five-year restructuring programme designed to lay the basis for full privatisation of the local banana sector. As a consequence a new Dutch importer is being sought.

December saw the launch of the World Banana Forum, which aims at ‘sharing information, ideas and best practices among stakeholders of the banana sector’ on issues such as ‘sustainable production systems, environmental impact, workplace issues and value distribution along the marketing chain’. The forum brings together ‘banana trade associations, private companies (major banana marketing companies and retailers), civil society and small farmers’ organisations and government representatives’. Progress reports on the deliberations of the forum will appear on the Banana Link website.

The background to the launch of the World Banana Forum can be found in GEM’s summary report of the multi-stakeholder round table on bananas held in Paris in March 2009, which includes a discussion document on the establishment of a multi-stakeholder forum for sustainable banana production and trade. A number of issues are highlighted in this report, including:

• the possible emergence of major banana producers as significant banana exporters (notably India);
• the high biological challenge facing Cavendish banana production, the most common variety of internationally traded bananas;
• the capacity to reduce production costs demonstrated by formerly high-cost Caribbean banana producers (notably Jamaica and Suriname, which moved from being the most expensive to the least expensive ACP producers, although at reduced volumes);
• the scope for diversification through product differentiation in a context where ‘organic’ and ‘fair trade’ bananas for example now account for 30% of total UK banana consumption and 60% of Swiss banana consumption;
• the importance of cooperation throughout the supply chain in developing differentiated marketing of bananas;
• the dominant role in marketing played by two multinational companies and the strong influence of the policies of large retailers on the functioning of banana markets, hence the large inequalities of market power within the banana supply chain and the scope for a greater role for competition policy in regulating relations within the banana supply chain;
• the increasing role of private standards in regulating access to the market.

Estimated banana exports/sales certified to selected sustainable agriculture standards

Meanwhile, according to FAO the volume of global banana exports has held up relatively well under the impact of the global economic downturn, with EU consumption down only 4%, US consumption down only 3.5% and consumption in other developed economies down 3.2%. This has been counterbalanced by a continued growth in banana consumption in developing countries (+2%), and largely driven by an increase in Chinese demand. If the global recession bottoms out at the end of 2009, global demand for bananas is projected to increase 7.8% (compared to a 2% increase for all tropical fruit). Launching its analysis, FAO has called for the establishment of ‘a global map of banana and plantain diseases’ to combat serious disease outbreaks, which it estimates could cause $4 billion of economic damage by 2010 if left unchecked. To date limited resources have held back efforts to combat these diseases.

While earlier press reports suggested that a final resolution of the banana dispute could be held back by US and ACP concerns or linked to deals on other commodities (sugar, rum, tobacco), this has not proved to be the case, with a final deal being initialled on 15 December 2009. Parties who initialled the deal included the USA.

The deal will cut tariffs from €176/tonne to €114/t by 2017, with an immediate reduction to €148/t once the agreement has been signed by the parties, probably in around four months’ time. In exchange, Latin American banana exporters will drop all actions against the EU in the WTO and will not seek further tariff reductions on bananas in the Doha Round. Parallel to this, the EU has agreed on the approach to be adopted in dealing with ‘tropical products’ and ‘preference erosion’. In a side agreement, the EU has agreed to make available some €200 million in new funding under the ‘Banana Assistance Measures’ programme.

ICTSD reports that a deal is likely to reduce ACP banana exports by 14%, while Latin American banana exports would grow around 17%. While overall imports of bananas into the EU have increased from 545,000 tonnes in 1992 to 927,000 tonnes in 2007, the share of traditional Caribbean suppliers has slumped dramatically. In 2008, Latin American suppliers accounted for 72.5% of the 5.4 million tonnes of banana sold on the EU market, with the ACP accounting for 17% and EU producers 10.5%. The conclusion of the banana deal is expected to facilitate EU FTA negotiations with Colombia, Peru and Ecuador, which are being accorded a high priority by the Spanish presidency of the EU.

In terms of the price effects of a deal, press reports note that banana prices on the UK market have already been falling. Indeed a report in the UK industry paper, the Grocer, notes that while fruit-and-vegetable prices have fallen 9.9% in the year to November 2009, banana prices in the UK have seen a 36% fall. Other media analysis however suggests that this is largely being driven by the pricing policies of supermarket chains in the UK, which use low-priced bananas to bring consumers through the door, hence the periodic outbreak of ‘banana wars’ among UK supermarkets.

In response to the deal, some African banana exporters are reported to be looking to develop national and regional markets for bananas.

ICTSD reports intensified negotiations to conclude a banana deal, with a deal expected before the 30 November WTO Ministerial meeting. The deal, nominally entitled the ‘Geneva Agreement on Trade in Bananas’ is expected to resemble the July 2008 arrangement. This would see the duty paid by Latin American suppliers fall progressively from the current €176/tonne to €114/t after seven years. The new agreement would ‘mandate that bananas receive “stand-alone” treatment and be excluded from the Tropical Products list – a list of products that will receive the “fullest liberalisation”, settle all pending disputes with Latin American exporters, and provide a “credit clause” to mark the lowered MFN tariff as the EU’s final market access commitment in the Doha Round’. In addition, if no deal is reached in the multilateral trade talks by 2013, the process of tariff reductions will be temporarily halted after two years. Reports of a pending deal have seen the share value of Fyffes plc increase by 8%. In contrast it is feared that the deal will result in a 12% decline in banana prices and a decline of 14% in ACP banana exports to the EU. This, it is feared, could be ‘devastating’ for the economies of the Windward Islands. Against this background ‘Britain’s shoppers are being urged to keep faith with fair trade Caribbean banana growers’.

According to ICTSD the EU will provide ‘a substantial amount of aid through “Banana Accompanying Measures”’ reported to consist of €190 million ‘beyond the support offered through the European Development Fund’.

At the ACP Ministerial meeting on 19 November a resolution was adopted which:

• reaffirmed ‘the serious social, economic and political dislocation that could result from the destruction of the banana industry in ACP countries’;
• reiterated the ACP view that bananas should have ‘a separate tariff treatment in the DDA modalities on agriculture’ and should not be subject to treatment as a ‘Tropical Product’, and that the EU and ACP should ‘jointly agree on the modalities for addressing preference erosion products/tropical products in the agriculture negotiations’;
• stressed that the banana deal should be implemented as an integral part of the Doha Round package;
• argued that the current EU offer to MFN suppliers exceeded what was necessary to ‘fulfil the EC’s obligations under Article XXVIII of the GATT and for complying with the WTO Appellate Body’s ruling’;
• called for the ‘implementation of tariff cuts in instalments spread over at least 10 years’, a three-year moratorium following the first reduction in the tariff, the allocation of €250 million to the ‘Banana Accompanying Measures’ programme, with a review of the situation of ACP banana suppliers in 2013 to determine whether additional resources are required.

The ICTSD reports ‘“progress” in moving towards agreement on bananas’ and says that ‘reports indicate that the tentative deal that was struck in July 2008 could eventually be the basis of the accord’. A critical issue under discussion, however, is ‘when the new agreement would become legally binding on the EU’. Specifically the deal would need ‘to establish how the WTO’s Doha Round would provide faster liberalisation for “tropical products”, and slower and gentler liberalisation for products that have traditionally benefited from trade preferences’. ACP countries meanwhile are emphasising that ‘the agreement would also need to resolve outstanding questions regarding the amount of adjustment aid that the EU would provide to them’. However a note of caution on the imminence of a solution has been sounded, with the suggestion that ‘Brussels is asking the Latin American countries to give up too much’, and the Costa Rican trade minister Marco Vinicio Ruiz publicly stating, ‘I don’t feel close to an agreement’.

Press reports note that the Dominican Republic agriculture ministry and the Export and Investment Center have reported a record crop of ‘organic’ bananas, which have become, ‘next to coffee and cacao, the flagship of the non-traditional product exports’. The reports highlight the growth of banana exports from the Dominican Republic, stating that [all] banana exports to the UK market in the first half of 2008 increased some 15.4% in value terms and 14.5% in volume terms. Bananas from the Dominican Republic were also exported to other EU member states, including Belgium, Holland, Germany, France, Sweden and Italy.

Meanwhile press reports indicate that Mozambique is on the verge of exporting 700 tonnes of bananas to Europe in 2009, based on the development of new production techniques which allow the production of a more homogenous crop.

The ICTSD reports unconfirmed reports that an EU-Latin American banana deal is close, although opposition from the ACP group, linked to the adjustment package to be extended by the EU, is reported to be holding up final agreement. The emerging deal is reported to be broadly based on the July 2008 agreement, with any deal ‘expected to include clauses referring back to the Doha negotiations … to ensure that the EU is not obliged to undertake further liberalisation at a later stage’. If the EU does not resolve this issue before the summer on the basis of the July 2008 agreement, Ecuadorian producers have called on their government to impose sanctions on imports from the EU.

In a related development the EU is reported to be close to a trade deal with Costa Rica, although Costa Rican negotiators are said to be reluctant to accept the current offer on bananas since ‘a similar reduction had already been offered to the WTO’.

Meanwhile the Spanish, French and Portuguese governments are reported to be uneasy about any banana deal which could threaten domestic banana production in these countries. Ministers have committed themselves to working together to ensure the EU banana sector gets ‘the support it needs’.

The government of Ecuador has rejected EU calls for it to drop its WTO banana suit, while a settlement is negotiated. The Ecuadorian government has called on the EU to ‘stick to the tariff deal negotiated in July 2008’ on the fringes of the WTO ministerial meeting. Under this deal ‘the EU would have to cut its banana import tariff of US$227.5 per tonne to €114 by 2016, with an initial cut to €148’.

This comes against the background of EU proposals tabled at the end of February 2009 to ‘lower the current tariff of €176 per tonne to €114 per tonne by 2019 … after an initial decline [the tariff] would be frozen at €136 per tonne from 2011 to 2014. Gradual reductions would then resume until 2019’.

ACP countries have responded critically to the EC proposals, estimating that the deal would cost ACP suppliers €350 million in lost revenues between 2009 and 2016. The EC in response has offered to establish a new banana-sector assistance programme with an allocation of €100 million for the 2010-13 period. ACP governments have however rejected this offer as inadequate, arguing that it ‘doesn’t even scratch the surface of the needs of our banana growers’.

On March 12th the EC proposed to reduce the current MFN duties on bananas from €176/t to €136/t by 2011, and to €114/t by 2019. The ACP however has argued that given the expansion in ‘dollar banana’ exports in recent years, these tariff reductions are ‘neither necessary nor justified’. Representatives of Cameroon’s banana exporters have argued that the EC proposal ‘doesn’t give us enough time to adjust’ and that as a consequence ‘for certain countries it would mean saying goodbye to bananas’.

The proposed EC banana sector adjustment package of €100 million for the 2010-13 period is also felt to be ‘clearly insufficient’ by ACP representatives. The ACP has called for restructuring support to be ‘commensurate to the problems created’. The ACP argues that ‘without the additional resources promised by the EC, the longstanding ACP-EU development partnership is thrown into question. The EU, it is argued, is ‘yielding to pressure for trade liberalisation regardless of the consequences for the development objectives set out in the Cotonou Agreement’.

According to press reports the ACP counter-proposal is to lower the tariff to €150/t and to maintain it at this level while accompanying measures to restructure ACP banana sectors are implemented. This is based on an earlier study which suggested that any tariff below €150 would make it very difficult for ACP countries.

ACP government criticism of the EC proposals has been echoed by private sector bodies in Cameroon and Côte d’Ivoire, with the call being made for any restructuring support to be properly endowed.

Meanwhile press reports indicate that the Cameroon Development Corporation is to increase its banana production by 60% by the end of the year.

There is growing anger amongst Latin American banana suppliers at the EC’s new banana offer. Governments of ten ‘dollar banana’ producing countries have now rejected the EU proposal, demanding a return to the July 2008 agreement. They are even ‘threatening to impose retaliatory measures’. Guatemala’s ambassador to the WTO argued ‘we will not accept the introduction of new elements and renegotiations to arrive at something that is completely different and disadvantageous compared to the balanced agreement concluded on July 27th 2008’. The EC continues to argue that the July 2008 agreement does not apply since it was concluded on the assumption that the Doha Round would be completed; since the Doha Round is stalled the ‘old agreement does not apply’.

Meanwhile at the closure of the FTA negotiations between Colombia, Peru, Ecuador and the EU on February 13th 2009 Colombia’s chief negotiator announced ‘we have received an important offer from the European union regarding bananas’, but he declined to elaborate on the nature of this offer. He did however admit that given the consensus achieved during the first round of FTA negotiations it is possible that ‘the FTA could be ready during the next semester’.

Meanwhile strikes in Guadeloupe and Martinique have disrupted banana supplies to the French market and this, alongside flood damage in Costa Rica and supply problems in Ecuador is leading to an increase in banana prices.

Plans are in train for a major expansion of African banana production, primarily for domestic and regional markets, as concerns over basic food security have grown. While action at the local level is seen as critical, governments are seen as having an important role in both setting an appropriate policy framework and addressing capital and infrastructure constraints on the development of local banana production and trade. A number of major multinationals in the banana sector are reported as having an interest in expanding banana production in Africa. Currently just five companies control more than 90% of all internationally traded bananas.

Chiquita has reportedly concluded partnership agreements to invest in export-oriented banana production in Mozambique and Angola, with Mozambican exports to the EU market expected from October 2009. This is seen as responding to the duty-free, quota-free access into the EU which these countries enjoy market as LDCs.

In January, Costa Rica joined Ecuador’s WTO challenge to ‘the EU’s refusal to lower tariffs on banana imports’. Costa Rica’s Foreign Trade Minister Marco Vinicio Ruiz said at the time that Latin American producers felt ‘tricked’ by the EU’s failure to implement the agreement concluded on the fringes of the WTO ministerial meeting in July 2008. Initially optimism had been expressed about the prospect of an agreement by the end of the February 2009, but following the tabling of a new EC proposal that defers the implementation of a tariff of €114/tonne tariff to 2019, rather than 2016 as stated in the July 2008 agreement, Latin American banana suppliers have expressed criticism of this backsliding by the EU on the agreement concluded in July 2008.

Meanwhile UK charities fear the banana price war on the UK high street could result in a deterioration of labour conditions on banana plantations. This is a suggestion which representatives of the retail chain Asda have rejected.

A discussion paper has been posted by the Institute for International Integration Studies reviewing the impact of the termination of the ACP commodity protocols and their replacement by various (I)EPA provisions. After reviewing the erosion of ACP banana preferences since 1990 and the weakening of EU policy commitments the paper notes that the importance of banana-sector preferences nevertheless remained significant enough to ensure that all traditional banana exporters initialled and then signed either a comprehensive (Caribbean) or interim EPA (Côte d’Ivoire and Cameroon). In the latter case this was even done at the expense of regional solidarity. The paper notes the apparent positive economic and legal benefits of the incorporation of banana-sector preferences into the (I)EPAs, although it is acknowledged that the value of the duty-free, quota-free access made available under the (I)EPAs ‘will depend on the extent of continued protection against low-cost dollar bananas’. It notes that ‘Caribbean exporters in particular fear that further erosion of the EU preference margin would undermine the profitability of their industry’. Factors impacting on the value of ACP banana-sector preferences include ‘the unresolved disagreement over the appropriate level of the EU tariff on MFN bananas; the treatment of bananas in the WTO Doha Round negotiations; and the impact of a potential FTA agreement between the EU and Central America’.

In terms of the legal protection, the paper questions whether ‘dollar banana’ exporters will simply accept the WTO legal protection which the EC claims the (I)EPAs bestow on ACP banana-sector preferences. Should ‘dollar banana’ suppliers successfully challenge such banana preferences then this ‘would have significant reverberations for the world trading system’. It further notes that ‘securing the legal certainty of the banana preferences would be a pyrrhic victory if those preferences suffer continued erosion’.

The paper concludes that the duty-free, quota-free access granted under the (I)EPAs needs to be seen in the context of the preference erosion which has occurred and is likely to occur, with benefits primarily accruing to the lower-cost ACP suppliers which can further enhance their competitiveness (Côte d’Ivoire, Cameroon, Dominican Republic and possibly Belize).

According to press reports Jamaica’s agriculture minister Dr Christopher Tufton has stopped short of pronouncing a formal withdrawal from banana exports while indicating the slim possibility of resuming exports given the withdrawal of the major exporter from export sales to the EU. The future framework for banana policy is believed to focus on supplying an expanding domestic market, particularly in the food-processing and snacks industry.

In a related development Costa Rica has announced its intention of establishing carbon-neutral banana production by 2012. One aim of this policy is to ‘differentiate its fruit on this basis and use its sustainability credentials as a marketing tool on international markets’.

ACP governments have indicated to Trade Commissioner Ashton that they will boycott the Doha Round if their demands are not met with regard to the treatment of bananas and sugar.

In a December 22nd 2008 statement on bananas ACP ministers ‘rejected any proposals to immediately and drastically reduce the current applied rate of €176 per tonne by down-payment and to further reduce the tariff to an unacceptable level after a relatively short implementation period’. It called on the EU to refrain from ‘taking any steps, including in the framework of the conclusion of new FTAs with the MFN countries that might render nugatory the market access secured by the conclusion of EPAs’. It urged the EU to ‘ensure that any solution arrived at with MFN countries at the WTO incorporates necessary targeted technical assistance, including additional financial and capacity building assistance that would allow ACP banana exporting countries to adjust their industries to new trade regimes’. ACP ministers maintained that ‘there must be suitable treatment for products that are benefiting from long-standing preferences’ in any Doha agreement and argued that if this was not the case ‘ACP countries will find it extremely difficult to associate themselves with any consensus’.

Fears have also been expressed about the impact in the banana sector of the planned EU-Central America free-trade agreements. The ACP have called for a ‘financial package for ACP banana producers to offset tariff reductions foreseen in the Geneva compromise … similar to that conferred to EU domestic banana producers that are immune from the deleterious impact of increased competition in the EU market’.

Meanwhile press reports indicate that plans are being developed in Cameroon to expand banana production to ‘400,000 metric tons in the next three years, from 250,000 tons currently’.

Press reports indicate that Ethiopia is seeking to begin exports of bananas, following receipt of technical support from Cameroon. It is as yet unclear which export markets Ethiopian suppliers would hope to serve.

On November 26th 2008 the WTO appellate body rejected the EU’s appeal against the April 2008 ruling against the EU banana regime. The ruling upheld an earlier decision that ‘the EC banana import regime, in particular, its duty-free tariff quota reserved for ACP countries was inconsistent with Article XIII:1 and Article XIII:2 of the GATT 1994’. It further upheld the view that ‘the tariff applied by the European Communities to MFN imports of bananas, set at €176/tonne, without consideration of the tariff quota of 2.2 million tonnes bound at an in-quota tariff rate of €75/tonne, is an ordinary customs duty in excess of that provided for in the European Communities Schedules of Concessions, and thus inconsistent with Article II:1 of the GATT 1994’. The appellate body recommended that the dispute settlement body ‘request the European Communities to bring its measures…into conformity with its obligations under that Agreement’.

According to press reports ‘the EC said it accepted the ruling but that the best means of resolving the dispute was in the context of the WTO’s overall Doha Round of negotiations aimed at liberalising global commerce’. The EC spokesperson Peter Power argued that the Doha Round was ‘the right forum to find a resolution, and we are ready to take up the negotiations on a deal on bananas with all suppliers where they left off in July’.

Following this ruling the US trade representative Susan Schwab argued ‘it is time for the EU to do the right thing and implement a tariff only regime for bananas that meets the interests of all parties involved’. Meanwhile banana companies await the EC’s operational response to the ruling.

A meeting of African banana producers has been urged to move quickly to take advantage of many local and regional market opportunities, as revisions to the EU banana regime see margins of ACP preferences eroded. In this context it was pointed out that already 90% of Africa’s banana production is consumed within Africa, with bananas playing an important role in national food security. A call was made for more liberalised intra-regional trade in bananas, so as to serve growing urban demand. Intensified efforts to develop processed banana products was called for so as to facilitate consumption and trade. Successful initiatives highlighted included ‘organising growers and adopting product standards’ so as to allow farmers to sell directly to retailers, and the promotion of post-harvest processing by small-scale producers.

Meanwhile the prime minister of Dominica Roosevelt Skerrit has highlighted the importance of signing the Caribbean-EU EPA to preserving existing banana exports to the EU.

Elsewhere the EU-Central American free-trade-area negotiations remain bogged down over market access for coffee, sugar and bananas.

At the end of August 2008 the EC formally lodged an appeal against the WTO banana ruling. Its challenge is based on two grounds:

• ‘the panel completely disregarded the evidence showing a significant increase (more than 10%) in access to the EU for Latin American suppliers’;
• the interpretation and application by the panel of the relevant WTO provisions raises significant systemic concerns.

The EC argues that as a consequence of the WTO interpretation ‘any preferential TRQ is by definition a violation of Article XIII of GATT’. It is held that this is ‘inconsistent with WTO practice and has enormous implications for preferential regimes of WTO members’.

The proposals discussed in Geneva should not be taken out of the wider negotiating context and ‘the failure to reach agreement in Geneva in July on the Doha round also meant no agreement was reached on bananas’. The July 2008 agreement would have seen the import tariff falling from €176 per tonne to €114 per tonne by 2016. The withdrawal of the July proposal has been described by representatives of Ecuador as an ‘extreme disappointment’, with plans now afoot to move ahead with further WTO litigation against the EU’s banana regime.

Two articles published by the ICTSD have reviewed this latest twist in the banana saga. One views it as a lost opportunity for an ultimate breakthrough, with African banana producers able to live with a tariff of €114 per tonne and Windward Island producers willing to accept restructuring support to redefine the future direction of the industry. The second article takes the view that the ‘EPA serves no useful purpose for the ACP banana trade unless it provides the preferential access necessary to permit trade to continue’. It argues that the EPA process ‘created the expectation that for this reason the existing tariff would be maintained for as long as possible and that any ‘unavoidable reduction’ would be phased in over as long a period as possible. Nevertheless it indicates a willingness on the part of Caribbean banana interests to accept ‘additional development aid to cater for the consequences of any reductions from the €176’ tariff providing this supplies ‘the necessary investment to enable the more competitive to realise their full potential and address the problem of those forced out of business by the tariff cuts’. It also calls for ‘a sufficient period of grace to allow the necessary adjustments to take place’.

Meanwhile ACP and EU banana producers joined together to call on the WTO to take full account of current trade trends in responding the EC’s appeal, including a 1 million tonne expansion in MFN banana exports since January 2006 and a declining ACP market share. They called for ‘a tailored, negotiated and balanced solution, enabling a sustainable agreement to be reached for all parties, with this solely being done within the framework of the WTO. They argued that given their importance to ACP economies ‘bananas cannot be subjected to the measures applied to tropical products without being given specific treatment and must be the subject of a legally indisputable agreement’. It called for any agreement to also incorporate ‘the undertakings within the framework of bilateral negotiations between the European Communities and the groups of MFN countries’.

According to press reports Latin American banana exporters tabled a counter-proposal to that earlier advanced by WTO director-general Pascal Lamy and accepted by the EC. This called for a cut in 2009 to €141 (compared to €150), falling to €109 (compared to €116) by 2014. In exchange Latin American exporters agreed to ‘leave bananas out of a list of products for which they are pushing duty-free access to the EU’. According to ICTSD on the fringes of the WTO mini-Ministerial on July 26th ‘eleven Latin American banana exporters and the USA … reached an agreement with the EU’ on the import regime for bananas. ‘The EU would cut its MFN tariffs on bananas to €114 per tonne by the beginning of 2016, with a €28 per tonne down-payment reduction in the first year’. In exchange bananas would not be included in tariff-reduction commitments in the Doha Round and no further disputes would be initiated ‘until the new tariff is fully phased in’.

However the ACP have refused to accept this compromise, with the ACP ministerial spokesperson arguing for greater financial compensation for the export-revenue effects of the proposed measure and a two- to three-year grace period on any tariff reductions. With the collapse of the Doha talks press reports indicate that the EC’s initial agreement to the Lamy proposal is now off the table. Ecuador is insisting that the EC stick to the deal struck on the fringes of the Geneva mini-Ministerial and is reportedly threatened to ‘continue legal action against the bloc if there was no agreement to end the long-standing dispute’. Indeed, press reports suggest a concerted Latin American action could well be possible following the EC’s perceived ‘U-turn’.

On the related issue of tropical products the ICTSD reported an emerging consensus, with tariffs on tropical products below 20% being reduced to zero and those above being cut by 80% over five years. Sugar however would be slated as a sensitive product and not be included in this deal, with gentler cuts being introduced. Again linked to the banana deal, Latin American countries agreed to longer transitions in products where ACP suppliers feared preference erosion, although discussions on rum and arrowroot are still ongoing.

Meanwhile the Jamaican government is placing emphasis on encouraging local use of bananas both for direct consumption and as value-added products, with exports being focussed on ‘fair trade’ markets, now that some 60 to 70% of suppliers have received certification.