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EU, Central America No Longer Split Over Bananas

December 18, 2009

The European Union (EU) agreed to reduce tariffs on banana imports on Tuesday, ending one of the world’s most long-standing trade disputes.

Under the agreement, import taxes will drop from ?176 ($256) per ton to ?114 ($166) per ton for bananas entering the EU from Latin America. This will allow Costa Rican producers to compete with fruit imported from countries in Africa and the Pacific region.

“Today is a very good day for banana producers worldwide and for consumers as we finally see the longest trade dispute in history solved,” said European Trade Commissioner Benita Ferrero-Waldner in a statement. “After years of tedious negotiations, the deal reached will provide an important push for … the multilateral trading systems in general.”

The agreement ends a 15-year stand off during which the EU faced accusations that it favors its former colonies over Latin America. In 2008, it eliminated all tariffs on bananas coming from African, Caribbean and Pacific (ACP) countries, including Belize, the Dominican Republic, Cameroon and Côte d’Ivoire. Meanwhile, bananas from Ecuador, Colombia and Costa Rica were levied tariffs of ?176 ($256) per ton.

A study by agricultural economist Giovanni Anania, of Italy’s University of Calabria, predicted this model would quickly result in an 84 percent increase in imports coming from ACP countries and a 5 percent decrease in imports from other countries.

But a group spearheaded by Costa Rica ended the trade preferences before those numbers could play out. By 2017, the EU must lower tariffs to ¢114 per ton, with an immediate ¢28 ($41) cut once all parties sign the deal.

In return, Latin American countries agreed not to ask for further cuts in tariffs and to drop existing World Trade Organization cases against the EU. “This result is very satisfying because we’ve achieved the goals we sought in July 2008 which were denied,” said Marco Vinicio Ruiz, Costa Rican foreign trade minister.

“For this government, the result … concludes the banana controversy with the EU with a positive result and in a defined manner, benefiting one of the agricultural sectors that creates the most employment.”

Europe currently imports more than 4.8 million tons of bananas – 3.8 million from Latin America – and produces only 10.5 percent of the bananas it consumes. The largest Latin American supplier is Ecuador, followed by Colombia and Costa Rica.

ACP countries will still be able to sell bananas duty-free to EU member states under a separate agreement. Furthermore, the EU has said it will offer close to ¢200 million ($291 million) to help those countries compete.

“Because ACP exporters are less efficient in producing and marketing bananas than (Latin American exporters), this suggests that aid targeted at improving efficiency in banana production in ACP countries may be as beneficial as granting them preferential market access,” wrote Anania in his 2009 report’s executive summary.

Costa Rican Agriculture Minister Javier Flores said the agreement will help the banana industry in Costa Rica, where more than 40,000 hectares of land are dedicated to banana production. The industry employs approximately 35,000 people.

“Since 1993, Latin American banana producers have sought the elimination of discriminatory tariff measures,” he said, “During that time the Costa Rican banana industry has made efforts to improve productivity, has continued to grow and has committed to the implementation of good agricultural practices to protect the environment.”

Roughly 50 percent of all of Costa Rica’s bananas are exported to Europe, representing about 16.5 percent of that market.

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