Brussels, July 16 - Latin America is gearing up to press Europe for immediate cuts in import duties on bananas, with officials hoping the long-running dispute will not sour prospects for a breakthrough in world trade talks next week.
World Trade Organisation Director-General Pascal Lamy proposed last week the EU should make annual cuts to its tariff of 176 euros ($280) per tonne of bananas to reach 116 euros by 2015. The steepest cuts would apply in the earlier years.
In return, Latin American governments would sign a "peace clause", dropping lawsuits against the European Union that they filed over its single-rate tariff which they say is too high and discriminatory, and also agreeing not to launch more challenges.
The European Commission, the EU's executive arm charged with negotiating foreign trade on behalf of the bloc's 27 member states, is facing at least three legal challenges to its banana regime from Latin America, as well as from the United States.
Ideally, the Commission wants to resolve the tariff row outside a wider WTO deal for the Doha round of trade talks, where the EU has offered to cut farm import tariffs across the board provided its main trading partners make concessions too.
"Conditions for us would be a permanent peace clause, the end of outstanding problems with enlargement and the end of litigation," one Commission official said. "We would not want to come back to bananas as part of an international negotiation."
The single-rate, 176-euro tariff was the WTO agreement struck to end the 1990s "banana wars" which Europe lost to the United States and Ecuador. It replaces a complex system of quotas and duties and has been in force since January 2006.
Before the new regime kicked in, Latin American exporters paid 75 euros per tonne, under quota, to get fruit into Europe. Anything over that faced a prohibitive duty of 680 euros.
LATIN DISAGREEMENT
Whether the banana issue becomes a stumbling block for next week's crucial WTO talks in Geneva or whether the two sides can sort it out separately, remains to be seen.
The Doha round was launched in 2001 but faces possibly years of further delay without a breakthrough next week, before the U.S. presidential elections put the process on hold.
If bananas get dragged into the wider negotiations on farm tariffs, then the Lamy proposal could also face a veto from the African, Caribbean and Pacific (ACP) group of countries who do not want rival Latin American banana exporters to grab a larger share of the lucrative European Union market, diplomats say.
The ACP group of former European colonies have no tariffs on their banana exports to the EU under a preferential trade deal.
"It's likely to be tied up during next week," one industry source said. "It's separate but could be folded into Doha."
Another problem is whether the Latin Americans can agree among themselves on the Lamy proposal. The key player is Ecuador, the world's largest banana exporter, but regional heavyweight Colombia also has much influence. And Panama, Costa Rica, Guatemala, Honduras and Nicaragua all have interests.
While Colombia is believed to be fairly supportive of the Lamy tariff proposal, countries like Ecuador and Panama are still holding out for lower tariff levels. Most Latin American countries want a tariff between 75 and 116 euros, officials say.
"The Latins have different levels of disagreement with it," the industry source said. "They also want a shorter implementation period, five years or less."