Banana Wars

Thursday, March 8th 2007, 8:30 am

By: News On 6

GENEVA (AP) _ The European Union blocked a World Trade Organization investigation of its banana tariffs Thursday, temporarily delaying the inevitable reopening of a decade-old dispute with Latin American countries and the United States over claims of unfair trade discrimination.

A panel will almost certainly be established to examine Brussels' compliance with international trade rules at a future meeting of the WTO's dispute settlement body, officials said.

The WTO has consistently ruled against how the EU sets tariffs for bananas, forcing the 27-nation bloc to overhaul a system that grants preferential conditions for producers from African and Caribbean countries, mainly former British and French colonies.

Brussels, however, says a new banana tariff established last year _ 176 euros ($231) per ton _ has brought its rules for banana imports in line with WTO rulings.

But Ecuador, the world's largest banana producer, is challenging that claim. Under WTO rules, the EU was able to block the first request for a compliance panel. Ecuador has the chance to make a second request later this month, at which point the panel will be automatically established.

``Ecuador has been seriously affected by the new banana import regime,'' Juan Holguin, head of the country's delegation, told the WTO dispute body. ``The Ecuadorean banana sector, on which more than 1 million inhabitants depend, feels asphyxiated and worried about the present situation as well as about future dark prospects should the present situation be continued.''

Ecuador, which has a population of about 13.5 million, said it has paid about $131 million because of the tariff.

EU trade negotiator Raimund Raith expressed Brussels' ``surprise and disappointment at Ecuador's action.'' He said he strongly objected to the panel request and that Ecuador was really after ``preferential treatment'' at the expense of ``some of the most vulnerable'' countries in the global trading system.

Latin American producers and banana companies based in the United States have long complained that the EU rules favor Caribbean and African producers. The United States, in 1999, and Ecuador a year later both won the right to impose trade sanctions on European goods after the WTO found the EU's rules to be illegal.

Cameroon, the Dominican Republic and Jamaica backed the EU at the WTO on Thursday. Colombia, Costa Rica, Guatemala, Honduras, Nicaragua and Panama voiced support for Ecuador's position. The U.S. response was more ambiguous.

Latin American bananas currently have around 60 percent of the EU banana market, while African and Caribbean producers have 20 percent, EU officials have said. Bananas grown in the EU _ mostly on Spanish and French islands _ account for another 20 percent.

The case, originally brought to the Geneva-based trade referee in 1996, spawned a series of disputes in the WTO as lawyers wrangled over procedural intricacies and legislation which had previously never been tested.