DUNKEL TO USE GOOD OFFICES ON EC BANANA REGIME DISPUTE.

Oct 1, 1992

DUNKEL TO USE GOOD OFFICES ON EC BANANA REGIME DISPUTE.

GENEVA, 29 SEPTEMBER (CHAKRAVARTHI RAGHAVAN) -- The GATT Director-General, Arthur Dunkel, is to use his good offices to promote a settlement of the dispute between Latin American banana producers and the European Community over its banana import regime.

Dunkel's good offices have been invoked, under a 1966 decision of the GATT Contracting Parties, aimed at providing a simple and quick procedure for settling trade disputes between any developing country CP and any industrial country.

While the dispute figured in the GATT Council, with an extensive debate, no Council action was needed on Dunkel's use of good offices, which was automatic under the 1966 decision.

Under the procedure, Dunkel can call for all the information from the parties involved, and has 60 days thereafter to promote an agreement. If no agreement is promoted, it will go before the Council for establishment of a panel and will be settled under an expedited time-bound procedure.

The issue has been raised by the Latin American producers, who are GATT members (Colombia, Costa Rica, Guatemala, Nicaragua and Venezuela), in terms of the current EC import regime, which though has been in place for quite some years.

However, the real dispute is the looming new regime that the EC is to bring into being on 1 January 1993, when the current regime with country quotas and preferential arrangements for imports from the ACP countries governed by the Lome agreement. The EC Commission's proposals are still pending before the EC Council of Ministers.

The proposal would replace the current national import quotas with a community wide quota and licence arrangements to protect the traditional ACP suppliers who export to the EC under duty-free arrangements. The "dollar" imports from the Latin American producers will in addition face an additional 20 percent tariff.

The Latin American producers contend that the new regime will discriminate against them even more, costing them up to $ 500 million. They flout GATT's requirement for non-discriminatory quota regimes even more and run counter to the proposals for agriculture rules in the Uruguay Round Draft Final Act, namely, abolition of all quotas and their substitution by tariffs.

The Latin American producers in talks in Brussels, and in key EC capitals, have been unable to head it off and get it changed.

The Latin American case has received a powerful boost from a just published World Bank staff study, which says the proposed new regime will generate monopoly profits for importers, wholesalers and retailers in the EC, at the expense of consumers, the EC budget and the exporters. The study argues that for every dollar of aid provided to ACP suppliers (the stated objective of the current regime and the proposed new one), EC consumers pay $ 5.30, of which three dollars go into the pockets of the importers, wholesalers and retailers as monopoly profits. It would be better, the study suggests, to help ACP producers by direct payments (through deficiency payments) by a straight 17.3 percent import tariff, as against the proposed 20 percent tariff.

In Council Tuesday, Costa Rica on behalf of the Latin American banana producers, sought the use of good offices by the GATT Director-General in their dispute with the EC over its current import regime.

The Costa Rican delegate said their efforts for consultation with the EC on the current regime had not been satisfactory, and the EC had also refused to consult with them on the new regime.

The proposed new regime, awaiting adoption by the EC Council of Ministers, was more restrictive than the current one, and would go against the Punta del Este standstill commitments, and the principles laid down in the agriculture part of the DFA.

They had hence decided to invoke the procedures laid down in 1966 for developing country CPs to seek the good offices of the Director-General to facilitate a satisfactory solution.

While the Costa Rican proposal received support from a number of Latin American and others, it was also opposed by several of the ACP members. Jamaica, which presented their case, said that these countries, for many of whom bananas was the sole export product, had a very small share of the world trade in bananas or in the EC. Given their economic condition, there was no reason for opposing the preferences they got.

The Council took note of the views expressed and took no action.