7:02 AM Mar 15, 1996

CONSULTATIONS ON BANANA DISPUTE

Geneva 14 Mar (Chakravarthi Raghavan) -- The United States and four Latin American banana exporting countries (Ecuador, Guatemala, Honduras and Mexico) held consultations here over the European Union's single market banana regime and the quota allocations under that scheme.

The WTO/GATT consultations are the first step towards invoking the Dispute Settlement Mechanism to adjudicate this long-running dispute which involves the question of preferences for the Lome countries.

All save Ecuador had brought up a case last year, but when Ecuador, the largest supplier to the EU market, joined the WTO, the US and the other three Latin Americans withdrew their original complaint, to file a joint one with Ecuador. The US, though itself not a banana producer/exporter, is pushing the interests of its chiquita and dole transnational enterprises.

Under schedules filed in WTO/GATT 1994, in pursuance of the agricultural accord, the EU set a tariff quota of some 2 million tons, with all imports above this (mostly from the Latin America) subject to heavy tariffs. After disputes with the other Latin American exporters including Costa Rica and Colombia, the EU compromised by allocating country-quotas and enabling the countries to distribute the quotas among their producers/exporters which has effectively reduced the monopoly of Chiquita company in these countries.

The ACP producers through the quota allocation have been assured of their traditional duty free access.

Two earlier panels under the old GATT looked into these special preferences for the ACP countries under the Lome accord and held them to be GATT illegal. The EU had contended the accord to be a free trade agreement, but the two panels disagreed. However, the EU and the ACP countries were able to block the adoption of those panel rulings.

The WTO dispute settlement system would preclude this. If the ruling goes against the EU, the latter will be obliged to change its regime or compensate the others. But with the EU members divided on the regime, either way the EU would have headaches.

Most trade diplomats think that the WTO panel would not be able to depart from the unadopted earlier rulings and arguments of those panels about the discrimination involved in the EU trade preferences as between the Lome and non-Lome developing countries. But whether the US case on behalf of its chiquita TNC (as an investor in Latin American export trade) could also be upheld, in terms of trade damage, is not clear.