David Jessop, Contributor 
JESSOP
ON MARCH 30, the World Trade Organisation (WTO) received a letter from five Latin nations Honduras, Colombia, Costa Rica, Panama and Guatemala. It requested formal arbitration in the seemingly endless dispute over Europe's banana regime.
The decision to return to the WTO marks a new stage in the banana war and could challenge the ability of the Anglophone Caribbean to retain even its present small share of the EU banana market.
Latin growers decided to seek arbitration following notification to the WTO by Europe that it intends to introduce a EU230 per tonne levy on all banana imports other than those from the ACP, which remain tariff free.
The new regime is intended to replace, in January 2006, the EU's existing system of tariffs and quotas.
ARBITRATION CLAUSE
Latin producers protest that they would lose market share they currently control nearly 63 per cent of the pre-enlargement EU market and provide virtually all of the bananas going to Europe's new member-states.
They suggest that only a figure of somewhere around 75 per tonne would enable them to retain their present market position.
Caribbean and other ACP producers for their part had told the European Commission (EC) that they were seeking a new EU tariff of around EU275 per tonne.
But while the Caribbean was prepared to negotiate, Latin producers have invoked an arbitration clause that was agreed under duress in 2001 when the EC was seeking a WTO waiver for the preferential trade provisions of the EU/ACP Cotonou Convention.
At that time, Latin American nations required special language on arbitration in relation to any future EU banana regime if under the WTO's consensus-based decision-making system, they were to agree to new EU/ACP trade arrangements.
Latin nations now hope that arbitration will enable them to challenge, to their advantage, the WTO formulas that have been used by the EC to determine the proposed new tariff level for bananas.
Responding, the EC's Commissioner for Agriculture, Mariann Fischer Boel, noted her unhappiness with their decision but said that while defending its proposal, Europe remained open for 'constructive engagement'.
What happens next has a significant element of uncertainty about it. There is no fixed WTO procedure for arbitration of this kind, especially where third parties such as the Caribbean have a direct interest in the outcome.
If all goes according to plan, an independent arbitrator will be appointed by the end of April. An arbitrated decision on a new tariff level will then be made ninety days later: that is to say at the end of July.
In practical terms, the outcome for Caribbean banana farmers, particularly in the Windward Islands, could be devastating if the arbitration were to suggest a tariff level significantly below that proposed by the EC.
If for instance, a figure of EU200 per tonne or lower were to be proposed, many farmers in the Eastern Caribbean who have small acreages and high fixed costs would be forced out of
business.
In contrast, lower-cost producers such as the Dominican Republic and ACP nations in Africa with an increasing share of the EU market could probably survive any
decision of this kind.
Moreover, if the arbitrator were to so decide, it would create a political background against which Caribbean governments already fighting desperately for a more
reasoned approach to the EC's WTO-led decision to rapidly cut sugar prices might find it difficult
to avoid rejecting all further
agricultural liberalisation when WTO ministers meet in Hong Kong in December of this year.
Equally, if the arbitrator came up with a figure closer to that required by the Caribbean and the ACP, Latin nations might attempt in Hong Kong to find reasons to block agreement until their demands were met on bananas.
STRAINED RELATIONS
All of this is happening at a time when new problems over trade threaten to divide the EC and the United States.
Over the last few months, trade relations between Washington and Brussels have become strained.
Doubts first began to emerge about matters of substance and the working relationship between the new EC Commissioner Peter Mandelson and his departing counterpart, U.S. Trade Representative, Robert Zoellick, when something close to silence followed a visit by the former to Washington in February.
However, their differences have now burst into the open, around the issue of subsidies for EU and U.S. aircraft production.
Reports in the European media indicate that the all-important issue of personal chemistry, that in the end makes or breaks international negotiations, is not there.
In an unusually pointed series of remarks Robert Zoellick, who has a quiet, sophisticated and intellectual approach to trade negotiations that contrasts sharply with the EC Commissioner's politically-driven and presentation-oriented style, made clear that Mr. Mandelson 'was not' his predecessor, Pascal Lamy.
Mr. Zoellick was reported to have been particularly angered by the trade commissioner's use of selective briefing to the media and a confrontational transatlantic telephone conversation.
All of which adds to a mounting list of problems that seem to make the possibility of rapid progress this year on the WTO's Doha Development agenda less
probable and the need for reform of the WTO more likely.
WTO members are at present considering candidates for the post of a new director-general who has to be in situ by the end of August. The decision on which of the four Carlos Pérez del Castillo of Uruguay, Jaya Krishna Cuttaree of Mauritius, Luiz Felipe de Seixas Corrêa of Brazil and Pascal Lamy of France is in itself divisive.
FATEFUL DECISION IMPENDING
Each wants to be seen as sympathetic to the interests of the developing world without recognising that this catch-all term has little relevance if it encompasses nations as diverse for example as Brazil, a nation with a space programme, Rwanda, a country in conflict or a small island like Dominica.
The Caribbean Banana Exporters' Association describes the outcome of the WTO arbitration process on bananas as 'a fateful decision impending'.
The manner in which the banana and sugar disputes have arisen, their implications for small states and the role played by nations in Latin America and elsewhere in driving them forward, suggest the need for a new understanding of the world order.
For these reasons, the outcome of arbitration in the banana dispute shows real signs of having
ramifications that go far beyond the interests of the industry.
David Jessop is the director of the Caribbean Council and can be contacted at david.jessop@caribbean-council.org
