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EU, U.S., Latin America initial banana deal to end decades-old dispute

December 15, 2009

By Jonathan Lynn

GENEVA, Dec 15 (Reuters) – The European Union and United States initialled a deal on Tuesday with Latin American, African and Caribbean nations ending a decades-old trade war over bananas.

The pact ends the world’s longest-running trade dispute and also removes a potential obstacle to a new deal to open global commerce in the World Trade Organisation’s 8-year-old Doha round. Final signature is expected to take place next year.

“I’m very happy to see the longest-running trade dispute finally solved,” said European Trade Commissioner Benita Ferrero-Waldner. “History is being made today because this dispute has soured global trade relations for too long,” she told Reuters.

Under the deal, the EU -- the world’s biggest importer of bananas — will cut the duty it applies to bananas from Latin American countries such as Ecuador and Costa Rica which have long complained of discriminatory treatment.

It will also give aid of about 200 million euros ($300 million) to banana growers in certain African, Caribbean and Pacific countries.

These mainly former European colonies currently enjoy preferential treatment on exports to the EU and will see their relative advantage eroded under the deal. The aid package is meant to help them to adjust.

Bananas are a key export and economic cornerstone for many countries including Cameroon and Dominica.

Although the United States does not export bananas, it is a party to the deal because major distributors of the fruit Chiquita, Del Monte and Dole are U.S. corporations.

Ireland’s Fyffes is also an important distributor.

TENSE NEGOTIATIONS

WTO Director-General Pascal Lamy, who played a discreet role nudging the tense negotiations towards a conclusion during the global trade body’s Nov. 30-Dec. 2 ministerial conference, welcomed the deal on Tuesday.

“I hope the same spirit of pragmatism, creativity and diplomacy will re-invigorate the Doha round negotiations,” he said in a statement.

The agreement is good news for consumers in the European Union as well as banana producers in Latin America as it stands to increase supplies of cheap fruit.

“The new deal on EU banana import tariffs will be a boon to Latin American exporters but would trigger a drop in exports of the fruit from African, Caribbean and Pacific countries,” the International Centre for Trade and Sustainable Development said.

“The blow to ACP banana exporters may be cushioned by the aid money that the EU has promised in conjunction with the deal,” it said, citing a recent study by the centre.

The deal will cut the tariff paid on bananas from Latin American countries in eight stages to $114 a tonne in 2017, from $176 now, with an initial cut to $148 on final signature of the deal but taking effect retroactively to Tuesday’s initialling.

Because the deal must be approved by the EU’s 27 member states, requiring translation into 23 official languages, it may be six to nine months before signature is possible.

In return, Latin American banana producers and the United States will drop legal challenges to the EU over its banana regime, which has been repeatedly condemned by WTO courts for discriminating against the Latin American growers.

The dispute, dating back to at least the 1957 Treaty of Rome founding the European Economic Community, the EU’s precursor, was finally resolved over the past few weeks in day after day of talks until late into the night, compared by one weary negotiator to “three-dimensional chess”.

(editing by David Stamp) ((jonathan.lynn@reuters.com; +41 22 733 3831; Reuters Messaging: jonathan.lynn.reuters.com@reuters.net)) ($1=.6831 Euro)

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