The WTO’s war on the African, Caribbean and Pacific countries: part 1

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Last week, the WTO’s Dispute Settlement Body issued its decision on whether or not the EC had complied with the previous ruling in the long running banana dispute. In brief, the EC allows 775,000 tonnes of bananas to be imported from the African, Caribbean and Pacific (ACP) countries duty-free each year, while imports from other countries have to pay a (fairly substantial) tariff. The US has challenged this, leading to a seemingly endless dispute.

The ruling is that the EC’s preferences are inconsistent with WTO rules on non-discrimination. The Dispute Panel appeared to accept the EC’s contention that the preferences did not reduce the value of US banana exports in any way, but nevertheless the US has faced diminished ‘competitive opportunities’ due to the EC banana rules. That is, the handful of banana growers in the US were unfairly affected by not having full access to the EC market.

In reality it is not bananas grown in Florida and Puerto Rico that motivated the US to challenge the EC preferences. Rather it is the very many more bananas grown by US corporations in Ecuador, Columbia, the Philippines, Costa Rica and other countries that it is concerned about. Over 50% of total banana exports are controlled by just two companies, both of which are American, grown mostly in those four countries. That these countries already account for around 60% of EU banana imports doesn’t seem to matter.

The US’s ‘competitive opportunities’ that the WTO is steadfastly protecting come at the expense of some of the poorest countries in the world. Estimates made by the FAO have suggested that if the EU abandons the quota, as they have been instructed to do by the WTO, and replaces it with a tariff of €75 per tonne with ACP countries given duty-free access, exports from Caribbean ACP countries will decline by 30% by 2010. For many of these countries, bananas account for a huge share of their total export revenue – over 30% for the Windward Islands for instance. The loss of this revenue will be devastating to their economies.

While it should be recognised that the ruling will potentially increase the exports of a few countries that are themselves developing countries, notably Ecuador and the Philippines, the degree to which the people of these countries will benefit is a debatable point. With such a large concentration of the banana production and export market controlled by a handful of companies based in the US or indeed Ireland (Fyffes is an Irish company that is the fifth largest banana exporter), the control they exercise over the banana trade is likely to ensure that the benefits of any liberalisation remain firmly with themselves. What is certain is that the people in ACP countries relying on growing bananas for a living will suffer.

This is the latest in a series of adverse decisions the WTO Dispute Settlement body has made that impact very negatively on ACP countries. Over the coming weeks some more of these will be examined here, so keep reading!

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