The Banana Case

1. The Banana Case Miguel Green, Arianne Confesor, James Lobo, and Brittany Whiting

2. Origin of Bananas Source: The Guardian Newspaper, UK

3. Banana exporters & importers

4. Int’l Banana Economy • Bananas 3rd most important traded foodstuff by value • Exports worth $4.7 billion in 1999 after wheat and coffee • Production in tropics & largest consumption in US, EU & Japan • 60% of trade controlled by US MNCs • Dualistic structure of banana trade Source: Robert Read, Department of Economics, University of Lancaster , The Anatomy of the EU-US WTO Banana Trade Dispute

5. US MNC Banana Regime • MNCs began the banana trade to U.S. in late 1800s • Historical US Gov. protection over banana trade • In the 1960s began exporting to Europe • Today, control 60% of global banana production, shipping, ripening and retail distribution • Dole had total revenues of $4.4 billion in 2002 • Chiquita sales in 2002 of $1.4 billion; recently emerged from bankruptcy

6. EU Banana Trade Regime • Under the Lomé Convention, preferential trade and quotas with former European colonies: • Traditional ACP countries such as Cameroon, Cote d’Ivoire, Somalia, etc. • Special protection for DOM (Departements d’Outre –Mer): French Caribbean, Madeira, Canary Islands • Price support payments under CAP since 1993 • Imports from other countries (Dollar Area) were subject to tariffs and licensing restrictions.

7. EU Import Regime Cont’d • This import regime was found to be illegal by the WTO in 1997. • The main criticisms were the setting aside of a quantity reserved solely for ACP imports, and the system of allocation of licenses which did not completely eliminate discrimination vis-à-vis third-country operators.

8. The Issues • 3 US MNCs Chiquita, Dole & Del Monte control 2/3 world trade in bananas • US estimated $520m in lost revenue

9. Dollar Area siding with the US Ecuador Guatemala Honduras Mexico Accepting of EU quotas ACP states Colombia Costa Rica Nicaragua Venezuela Nations Involved Caribbean middle ground • Jamaica • St. Lucia • St. Vincent • Dominica • The Dominican Republic

10. Banana Trade Cases • Complaints against the EU • EU preferential treatment to former colonies while discriminating against other countries • First GATT Complaint – Feb 1993 • Second GATT Complaint – July 1993 • WTO Complaints – beginning Sep 1995

11. The First GATT Complaint • Feb 1993: EU vs. Complainants (supported by the U.S.): Colombia, Costa Rica, Guatemala, Nicaragua, and Venezuela • Issues • Preferential tariff violated GATT Article I.1 – Most-Favored-Nation (MFN) • Use of discriminatory tariff quotas contrary to GATT Article XIII.1 • Outcome • Panel decided that Lomé Waiver did not give the EU carte blanche in its use of discrimination. The panel required that the tariff quotas should be brought under the GATT rules • The GATT panel was unenforceable because of the weakness of the GATT dispute settlement procedures.

12. The Second GATT Complaint • July 1993: First complaint renewed after the expiry of the old regime of the EU. • Issues • Licences to import under general quota violated Article III .4 on national treatment. ( Discriminatory against non-EU banana distributors) • The use of discriminatory tariff quotas in place of specific national quotas contravened Article XIII of discriminatory tariff quotas. • Outcome • The second GATT panel found against EU that the quotas were in contravention of Art XIII • Licensing system found to be in contravention of Article X on National Treatment • The GATT panel was unenforceable because of the weakness of the GATT dispute settlement procedures.

13. Broughtby Versus Complaint DS16 (Sep 1995) Guatemala, US, Honduras, Mexico European Community importation, sale and distribution DS27 (Feb 1996) Honduras, Guatemala, Ecuador, Mexico, US European Community importation, sale and distribution DS105 (Oct 1997) Panama European Community importation, sale and distribution DS152 (Nov 1998) European Community United States Section 301–310 of 1974 US Trade Act DS158 (Jan 1999) Guatemala, Honduras, Mexico, Panama, US European Community implementation DS165 (Mar 1999) European Community United States import measures on EC products DS237 (Sep 2001) Ecuador Turkey SPS measures WTO Banana Disputes

14. The WTO Complaint • DS 16 filed in Sept 1995 and was subjected to the WTO dispute settlement procedures • US participated as a lead plaintiff and supported by Guatemala, Honduras, Mexico and Ecuador. • Tariff Issue • EU regime contravened Article I.1 of GATT 1994 with regard to non-discrimination and application of MFN (discriminatory tariff favoring ACP countries) • Tariff Quota Allocation Issue • The EU regime contravened Article XIII.1 of the GATT 1994 with regard to non discriminatory quantitative restrictions • Import Licensing Regime Issues • Allocation of special distribution licences contravened GATT 1994 Articles I, III.4, XI and XIII; the agreement on Agricultural Agreement 4.2 and GATS Articles II and XVII.

15. The WTO Panel Decision • WTO Panel Conclusion: May 22nd 1997 • EU was in violation of the WTO commitments with regards to allocation of import licences and the use of tariff quotas. • Same time acknowledged that the preferential tariff treatment of ACP exporting countries was permitted under the Lomé waver. • EU was requited to reform its banana regime by Jan 1999

16. Following Developments • July 11th 1997: EU appeals to appellate body. • Sept 9th 1997: Appellate body upholds panel finding of EU’s Violations. • Sept 25th 1997: WTO Dispute Settlement body (DSB) adopts panel and Appellate Body reports. • WTO gives EU time (until Jan 1999) to comply with the WTO rules

17. Case Implications • In response to this EU eases its licensing conditions and does very little to change the tariff quotas. • Tariff Quota identified as recurring problem by plaintiff countries in Aug 1998 • Dispute moves to Arbitration panel which finds modified regime non complaint with WTO rules.

18. WTO Rulings • April 1999, WTO gives clearance to United States to impose trade sanctions worth 191.4 million US dollars • Sanction were in form of suspension of trade concession • Ecuador gets authorization to impose sanctions of worth 201.6 million dollars

19. Current Regime • In response to the sanctions EU made number of changes to its banana import regime • April 11 2001, US and the EU reach on an agreement • The new regime will provide transition to tariff only system by 2006. (effect from Jan 1st 2006) • During this transition, bananas will be imported into the EU through import licences based on past trade. • July 1st 2001 – US Suspends Trade Sanctions imposed on EU since 1999.

20. What Were the Impacts? • Exporting countries • Uncertainty Due to Dependency • “Dollar Area” Producers and ACP Countries

21. EU Imports Per Country Impacts Continued…

22. What about the MNCs? • Loss of Market Presence • Great Revenue Loss • Chiquita $1.5 b • Dole • Del Monte

23. EU Market Shares of Banana Companies (%) UNCTAD: //r0.unctad.org/infocomm/anglais/banana

24. 1961 – 2000 Trajectory Banana Imports Worldwide

25. World Imports Today… Bananas Commodity notes: final results of 2002: fao.org

26. In Conclusion… • Status of Regime changes • Transition to tariff only system by 2006 • Changes Implications on ACP and MNCs • Market access loss overall • And the WTO. . . Any Questions????