Voluntary Report - public distribution

**Date:** 2/25/2005

**GAIN Report Number:** E35036

E35036

**EU-25**

**Trade Policy Monitoring**

**European Commission Proposes New Tariffs for Bananas**

**2005**

**Approved by:**

![](media/image1.wmf)Norval E. Francis, Jr.

U.S. Mission to the EU

**Prepared by:**

Hilde Brans

**Report Highlights:**

On January 31, the European Commission formally notified the WTO of its
proposed tariff-only system for imports of bananas. The proposal has
been met with strong opposition from the main Latin American banana
producing countries who signed a declaration rejecting the proposal.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Brussels USEU \[BE2\]

\[E3\]

**European Commission Proposes New Tariffs for Bananas**

On January 31, 2005, the European Commission formally notified the WTO
of its proposed tariff-only system for imports of bananas. The proposed
new system, scheduled to enter into force on January 1, 2006, would
replace the current complex quota and tariff system. Latin American
exporters would no longer be limited by quotas but would pay a higher
duty (EUR 230/MT) than the current in-quota duty (EUR 75/MT). African,
Caribbean and Pacific (ACP) suppliers would continue to export bananas
under preferential arrangements. The new tariff is lower than the EUR
275/MT duty requested by the ACP countries but significantly higher than
the EUR 75/MT duty pushed for by the Latin American banana producers.
According to a Commission press release, "the proposed new tariff is
based on a methodology to calculate tariff equivalents enshrined in the
WTO texts and on objective data".

The proposal has been met with strong opposition from the main Latin
American banana producing countries who signed a declaration rejecting
the proposal. They maintain that the EU's proposal is in contradiction
with the WTO ruling that the preferential import rules for ACP bananas
were discriminating against Latin American suppliers. Growers in
countries whose currencies are linked to the dollar say that the new
tariff will result in a loss of market share. Latin American suppliers
have 30 days to request the WTO to arbitrate over the EU's proposal.
Arbitration would take 3 months once officials are appointed.

According to the EU, ACP banana producers are small-scale producers who
struggle to compete with the much larger-scale Latin American producers.
The new tariff is meant to "strike a balance" between the demands of the
larger Latin American producers and the interests of the traditional ACP
producers. Roughly 82 percent of EU-15 banana imports come from third
countries: 63 percent are "dollar bananas" originating in Latin America
with the four biggest exporters being Ecuador, Costa Rica, Colombia and
Panama; 19 percent originate in ACP countries, mainly former European
colonies. The remaining 18 percent of the market share are bananas of EU
origin.

**Background**

In the 1990's, the EU lost a WTO dispute initiated by the U.S. on behalf
of U.S. companies operating in Latin America. The WTO ruled that the
EU's import regime favored imports from ACP countries and discriminated
against Latin American suppliers. The so-called banana war started when
the U.S. was allowed to impose 191.4 million dollars in trade sanctions
against EU imports. A truce was called in 2001 when the EU agreed to
change its import system and established an interim regime.

The EU obtained two waivers in the WTO to cover the preferential import
arrangements for ACP countries. The first waiver covers the tariff
preference for the import of bananas for ACP countries under the Cotonou
Agreement until January 1, 2008. The second waiver covers the
reservation of quota C for ACP countries until January 1, 2006.

Since January 1, 2002, the following tariff quotas apply:

\- Quota A: 2,200,000 MT at a tariff of EUR 75/MT (0 for ACP bananas)

\- Quota B: 453,000 MT at a tariff of EUR 75/MT (0 for ACP bananas)

\- Quota C: 750,000 MT at a tariff of EUR 0/MT (reserved for ACP
bananas)

Quotas A and B are open to bananas from any origin, the C quota is
reserved for ACP countries. Banana imports outside the quotas are
subject to a customs duty of EUR 680/MT; ACP countries benefit from a
tariff preference of EUR 300/MT.

**Visit our website:** our website
**[www.useu.be/agri/usda.html]{.underline}** provides a broad range of
useful information on EU import rules and food laws and allows easy
access to USEU reports, trade information and other practical
information. More information on horticultural products can be found at
www.useu.be/agri/hortireps. E-mail: AgUSEUBrussels@usda.gov

**Related reports from USEU Brussels:**

  ------------------------------------------------------------ ------------------------------------ ------------------
  **Report Number**                                            **Title**                            **Date Released**

  E24072                                                       European Commission proposes banana  4/27/2004
                                                               import quota for new member states   

  These reports can be accessed through our website                                                 
  [www.useu.be/agri](http://www.useu.be/agri) or through the                                        
  FAS website                                                                                       
  <http://www.fas.usda.gov/scriptsw/attacherep/default.asp>.                                        
  ------------------------------------------------------------ ------------------------------------ ------------------