The Banana Case

Miguel Green, Arianne Confesor,

James Lobo, and Brittany Whiting

Origin of Bananas

Source: The Guardian Newspaper, UK

Banana exporters & importers

Intl 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

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

EU Banana Trade
Regime
Under the Lom Convention, preferential trade
and quotas with former European colonies:
Traditional ACP countries such as Cameroon, Cote
dIvoire, Somalia, etc.
Special protection for DOM (Departements dOutre
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.

EU Import Regime
Contd
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-vis third-country operators.

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

Nations Involved
Dollar Area siding with the US
Ecuador
Guatemala
Honduras
Mexico
Caribbean middle ground
Jamaica
St. Lucia
St. Vincent
Dominica
The Dominican Republic

Accepting of EU quotas
ACP states
Colombia
Costa Rica
Nicaragua
Venezuela

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

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 Lom 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.

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.

WTO Banana Disputes

Brought by

Versus

Complaint

Guatemala, US,
Honduras, Mexico

European
Community

importation, sale and

distribution

(Feb 1996)

Honduras, Guatemala,
Ecuador, Mexico, US

European
Community

importation, sale and

distribution

DS105

Panama

European
Community

importation, sale and

distribution

European Community

United
States

Section 301310 of 1974

US Trade Act

(Jan 1999)

Guatemala, Honduras,
Mexico, Panama, US

European
Community

implementation

DS165

European Community

United
States

import measures on EC
products

Ecuador

Turkey

SPS measures

DS16
(Sep 1995)

DS27

(Oct 1997)

DS152
(Nov 1998)

DS158

(Mar 1999)

DS237
(Sep 2001)

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.

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 Lom waver.
EU was requited to reform its banana regime
by Jan 1999

Following Developments
July 11th 1997: EU appeals to appellate body.
Sept 9th 1997: Appellate body upholds panel
finding of EUs 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

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.

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

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.

What Were the Impacts?

Exporting countries
Uncertainty Due to Dependency
Dollar Area Producers and ACP
Countries

Impacts Continued
EU Imports Per Country

What about the MNCs?

Loss of Market
Presence
Great Revenue
Loss
Chiquita $1.5 b
Dole
Del Monte

EU Market Shares of
Banana Companies (%)

Chiquita
Dole
Del
Monte

1992
>30
12

1994
18.5
15

1995
19
15-16

1997
15-16
18-19

7-8

10-11

UNCTAD: //r0.unctad.org/
infocomm/anglais/banana

Banana Imports Worldwide

1961 2000 Trajectory

UNCTAD: //r0.un
ctad.org/infoco

World Imports Today

Imports

1997-99 Average

2000

2001

2002

11556

12248

11618

11613

United States

3574

3630

3434

3490

European Union

3108

3265

3169

3252

Japan

911

1079

991

936

Area of former USSR

712

673

761

805

China

506

594

414

374

Canada

418

398

405

417

Argentina

253

340

330

230

Poland

284

285

262

232

Czech Republic

125

105

100

105

Korea Rep.

130

184

195

168

000 tons

World

Bananas Commodity notes:

final results of 2002: fao

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????