11:56 AM Sep 10, 1996

WTO PANEL TO BEGIN HEARINGS ON BANANA DISPUTE

Geneva 9 Sep (Chakravarthi Raghavan) -- A dispute settlement panel of the World Trade Organization begins hearings Tuesday on the US complaint, backed by some Latin American countries, against the European Union over its single market banana regime which provides preferences for banana imports from ACP countries.

The Latin Americans backing the US complaint are Ecuador, Guatemala, Honduras and Mexico.

At a news briefing Monday, ahead of the opening of the panel hearings, the Caribbean Banana Producing Countries said their fragile economies face collapse, and their countries face social and political disorders if the US has its way through the panel.

Mr. Edwin Laurent, Ambassador of the East Caribbean States to the EU in Brussels, said their industry could not survive if their banana exports lost the preferences under the Lome accord in Europe.

Laurent complained bitterly that the Caribbean countries most affected by the challenge to the EU regime had been barred from full participation in the panel hearings by the United States.

Neither the US nor Mexico have exported any bananas to the EU. But the US has brought the complaint on behalf of its TNC, Chiquita bananas, based in Cincinatti, with large plantations in Latin American countries.

Mexico had a similar interest in the EU market because of Del Monte, another TNC based in Mexico, but this has now been reportedly bought over by Jordanian interests.

The three large banana TNCs - Chiquita, Dole, Del Monte -- account for about two thirds of the world trade in bananas, and have a 42% share of the European market, according to the Caribbean Banana Exporters Association.

The CBEA's European representative, Gordon Myers, told the news briefing that he found it extraordinary that the US which does not export a single banana is prepared to jeopardise the entire economies of the Caribbean countries for the sake of the Chiquita company.

Other Caribbean leaders have warned publicly, and in letters to the US President that a consequence of ruining these Caribbean economies would be an encouragement for the drug trade and drug exports to the United States.

Other observers say that the entire banana battle is really amongst the US TNCs and one or two European TNCs.

The ACP countries, particularly the countries in the East Caribbean, whose sole or main exports are bananas, and which enjoy the preferential advantage in the EU markets in terms of the Lome Agreement, have been blocked from full participation in the panel proceedings at the instance of the US.

At a press conference Monday, officials from the Caribbean banana-exporting countries complained bitterly over the US stand, and noted that their precarious economies would be devastated if the WTO panel were to rule against the EC banana import regime that is in place under the Lome Agreement.

The banana dispute has a tangled history, with two earlier panels under the GATT 1947 having held against the EC's Lome preferential scheme (which the EU has sought to describe as a free trade agreement under XXIV). This plea was rejected by the two panels, with one of them recommending that the EU should seek a waiver for its preferential trade with the ACP countries.

The EU sought and obtained a waiver from WTO obligations for the Lome Agreement and its preferential regime, but the waiver does not prevent aggrieved contracting parties to bring up a complaint, which is what the United States has done.

However, the United States does not produce or export any bananas to the EU, but has brought up the complaint at the instance of the Chiquita bananas, a US Transnational Company based in Cincinatti, which owns plantations in the Latin Americamn countries and account for 42% of the EU's banana market.

The EU provides the ACP countries preferential imports. This is done through a preferential tariff rate quota for these imports, assigning country specific quota allocations to traditional ACP exports, and allocating licences to ACP market operators for import of non-ACP bananas.

This elaborate licensing scheme ensures that the normal trade gets a bite at these tariff quotas if they source some of their imports from the ACP countries.

For the Caribbean countries of the Windward Islands (St. Lucia, St. Vincent and the Grenadines, Dominica and Grenada), Jamaica, Belize and Suriname, the EC preferential regime enables them to get a higher return for their otherwise more costly production. Loss of the market would inflict severe damage on these economies.

According to the Caribbean Banana Exporters Association (CBEA), the denial of preferences would bring about a collapse of their banana industry leading in turn to major job losses and serious social and political unrest, adverse repercussions to the tourist industry, loss of foreign exchange earnings and inability to service external debts, increased emigration to the US, a growing drugs trade and a ripple effect across the whole Caribbean.

While the dispute thus involves many countries and regions, in fact it is all a battle for market between 3 or 4 transnational corporations who dominate this trade.

One sources said the fight in Europe between the US and an Ireland based TNC.

The EU preferences in the banana regime has been long assailed by the US and its Latin American supporters.

The former US Trade Representative (and now Commerce Secretary), Micky Kantor provided strong backing within the US administration to take up the Chiquita case.

US media reports have identified Chiquita banana corporation as a politically powerful company, being a heavy contributor to coffers of both political parties and Presidential campaigns of Bob Dole and Bill Clinton.

The US would have had no locus to bring up the dispute in terms of the GATT rules, but is in effect raising the complaint on the basis of the General Agreement on Trade in Services (GATS), and the EU's GATS schedules which has placed no restrictions on whole-sale trade and networks.

The US contends that the restrictions and the preferential regime is thus a violation of these GATS commitments.

With so much at stake, the CBEA and the Caribbean countries would have normally been allowed to appear before and plead their case before the Panel. But the US exercising its rights has blocked this, and has said these countries could only participate as observers.

Three large US TNCs -- Chiquita, Dole and Del Monte -- together account for about 65% of the world trade, and about 42% of the EU market.

The Caribbean countries export about 3% of the world's banana exports -- and all to the EU where these bananas account for some seven percent of the EU market.

Total imports from the ACP countries account for about 19.9% of the total EU supplies of about 3.8 tonnes.

Three of the Windward Islands -- St. Lucia, St. Vincent and Dominica -- depend on banana exports to the EU for about 50-60 percent of their export earnings. Their combined GDP is about one billion US dollars -- a quarter of Chiquita's annual turnover in 1992.

The time-table of the dispute suggests that the panel rulings would be made by February next year.

Several WTO diplomats say that it wlll most probably go against the EU, as was the case with the earlier two panels whose adoption was blocked.

This time the adoption of the rulings would be automatic.

And the EU, which itself is deeply divided over this issue, with Germany and a few others backing the dollar bananas, might then be forced to throw up its hands and "implement" the ruling rather than jeopardise its wider trade, economic and political relations with the United States.