US embassy cable - 05QUITO263

UNCLAS SECTION 01 OF 02 QUITO 000263 
 
SIPDIS 
 
E.O. 12958: PREL, 
TAGS: ECON, ETRD, EAGR, PGOV, KDEM, EC, Trade 
SUBJECT: BANANA EXPORTERS CONTEST PROPOSED EU TARIFF 
 
 
1.   Summary.  On January 26, Quito hosted a meeting of 
representatives from seven Latin American banana- 
exporting countries who oppose a recent European Union 
decision to impose a 230 Euro (US$ 300) per metric ton 
tariff on banana imports beginning in January 2006. 
The presidents of Guatemala, Costa Rica, Panama, 
Colombia, and Ecuador attended the summit, as did the 
Honduran foreign minister and a delegation from 
Nicaragua.  The final declaration included a call for a 
follow-on technical meeting February 14-15 in Colombia, 
at which officials will consider next steps.  EU 
officials said they intend to "carefully study" the 
summit's results but go forward nonetheless with plans 
to impose the tariff in 2006; the EU formally notified 
its new levy to the WTO on January 31.  Local leaders 
believe the EU decision threatens Latin American 
interests considerably.  End summary. 
 
Banana Summit 
------------- 
 
2.  The EU has proposed charging 230 Euro per ton for bananas 
imported from Latin America, to go into effect in January 
2006.  Besides generating revenues, the tariff is intended to 
protect fruit production in EU members' former colonies in 
Africa, the Caribbean and Southeast Asia.  Former Spanish 
colonies in Latin America are not provided such protection. 
Latin American producing nations claim that a tariff greater 
than 75 Euro, the current within quota rate, is unfair. 
 
3.  Ecuadorian FM Patricio Zuquilanda, allegedly speaking for 
the Latin Americans January 18, called for the complete 
elimination of the banana tax.  Subsequently, ministers of 
trade, agriculture, and foreign affairs from the seven Latin 
producers gathered in Panama City January 25, a day before the 
Quito summit, to craft a joint declaration in opposition to 
the levy.  The ministers claim that the high tariff proposed 
by the EU violates the EU's World Trade Organization (WTO) 
obligations.  Their draft declaration called on the EU to 
respect its Doha Round commitments on market access for 
tropics-grown agricultural products. 
 
5.  Presidents and country representatives signed the document 
in Quito January 26.  The statement formalizes their intention 
to conduct joint banana export negotiations with the EU, 
though there is no agreement on a specific negotiating 
position.  Leaders committed to evaluating the progress of 
their discussions before the end of March.  At a February 14- 
15 technical meeting in Colombia, Latin producers plan to 
analyze various counter-proposals to the EU measure. 
According to an aide to Ecuadorian Trade Minister Baki, when 
the EU officially notified the 230 Euro tariff on January 31 
it effectively started the 60-day clock for WTO arbitration, 
making the extension of the current quota system much less 
likely.  Prospects were also not good for resolving the 
dispute outside of arbitration, in his opinion. 
 
6.  Delegations in Quito also agreed to convey the Quito 
Declaration points to EU authorities via their missions in 
Brussels.  In comments to the press January 26, Ecuadorian 
Minister of Agriculture Leonardo Escobar "leaked" another next 
step:  issuing a joint presidential statement seeking a 
reduced EU tariff that guaranteed Latin American access to the 
European banana market. 
 
7.   European Union representatives were present in  Quito  as 
observers.  They later told media they would closely study the 
declaration  and future Latin American requests, but  asserted 
the EU remained committed to implementing the tariff regime in 
2006. 
 
U.S. Banana Company Comments 
---------------------------- 
 
8.  Ecuadorian representatives from Del Monte, Chiquita and 
Dole told Embassy officials that they favored a tariff of 75 
Euros.  If the tariff were set much higher, Chiquita would 
prefer to keep the current quota system.  (Chiquita has 
licenses it would like to retain to protect its European 
market.)  Del Monte, on the other hand, described the quota 
and license system as a "disaster."  Dole, while opposed to 
the 230 Euro tariff was willing to consider a tariff higher 
than 75 Euros. 
 
COMMENT 
------- 
 
9.    The EU tariff decision will impact banana exporters of 
the region, many of which are U.S.-based companies.  Press 
accounts estimate adverse economic impact to the seven Latin 
American countries as some $4.4 billion per year.  There are 
social costs as well, mainly associated with increased 
unemployment the European tax could bring.  For example, 
Colombian President Alvaro Uribe, in remarks in Quito, claimed 
that "ten thousand Colombians (former illegal combatants) have 
been demobilized and need to find jobs, but where are they 
going to find them if this crisis is not solved?" 
 
KENNEY