BANANA IMPORTS
(21437)
10233/00
COM(00)431
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Commission Communication on its consultations with Third Country suppliers on the amendments needed to the Community's banana import arrangements in order to resolve the current dispute within the World Trade Organisation.
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| Legal base: |
— |
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| Department: |
Agriculture, Fisheries and Food
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| Basis of consideration:
| EM of 24 July 2000 |
| Previous Committee Report:
| None; but see (20731) 13048/99: HC 23-v (1999-2000), paragraph 3 (19 January 2000) and HC 23-x (1999-2000), paragraph 1 (1 March 2000)
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| To be discussed in Council:
| Autumn 2000 |
| Committee's assessment:
| Politically important |
| Committee's decision:
| Cleared on the basis of information supplied by the Government
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Background
22.1 Details of the Community's arrangements
for bananas, which seek (among other things) to safeguard its
traditional suppliers, are set out in our Report of 11 February
1998[46].
In essence, however, they have involved a duty-free quota of 857,700
tonnes for traditional ACP (African, Caribbean and Pacific) suppliers;
a tariff quota of 2.2 million tonnes for non-traditional ACP and
third country suppliers, bound under the General Agreement on
Tariffs and Trade (GATT) at rates of zero for ACP suppliers and
75 euro per tonne for third countries (rising respectively to
665 euro per tonne and 765 euro per tonne beyond this quantity);
an import system which provided incentives to traders to handle
ACP and Community fruit; and income aid in the form of deficiency
payments for Community producers.
22.2 Following an adverse ruling by the
World Trade Organisation (WTO) Dispute Settlement Body in 1997
that these arrangements discriminated unfairly against non-ACP
products, new arrangements have applied since 1 January 1999.
The 2.2 million tonne tariff quota was increased by 353,000 tonnes
following the accession of Austria, Finland and Sweden; and the
tariff rates for quantities above that limit were changed to 737
euro per tonne (falling to 680 euro per tonne from July 2000)
for third country suppliers, with ACP suppliers enjoying a preference
of 200 euro per tonne. In addition, tariff quota shares were given
to Colombia, Costa Rica, Ecuador and Panama; and the existing
licensing system was replaced by a new one, based on traders'
"historic rights" to licences.
22.3 However, a further WTO Panel report
found that the Community's quota and licensing systems were still
discriminatory. This in turn has led the United States to impose
WTO-sanctioned 100% import duties on Community products to the
value of $191 million. As a result, the Commission put forward
in May 1999 a Communication[47]
outlining possible courses of action, including:
- a tariff only option, with a high tariff for
non-ACP imports;
- a quota for non-ACP imports, but unlimited access
for ACP imports;
22.4 Following further consultations with
interested parties, the Commission put forward in November 1999
a proposal[48]
which aimed to meet the Community's obligations under the WTO,
as well as its key concerns regarding Community and ACP banana
producers. This would involve a two-stage process, under which
a tariff-only régime would apply from 1 January 2006. Up
until then, there would be a transitional system, with three tariff
rate quotas, virtually identical to those in place at present,
namely:
- a quota of 2.2 million tonnes ("quota A");
- an additional quota of 353,000 tonnes ("quota
B"); and
- an autonomous quota of 850,000 tonnes ("quota
C").
22.5 These quotas would be open to products
originating in all third countries. However, imports under quotas
A and B would continue to be bound at their present level of 75
euro per tonne, with those from the ACP countries entering duty
free. Imports under quota C would initially be subject to duty
at a rate of 708 euro per tonne, reducing to 680 euro per tonne
from 1 July 2000. The actual rate would be set by an auction procedure,
under which ACP imports would receive a preference of 275 euro
per tonne. However, since the Commission envisaged that more licences
would be requested under quotas A and B than could be allocated,
their distribution has assumed a particular importance. After
exploring the various alternatives[49],
the Commission concluded that the approach favoured by all the
interested parties was one based on an historical reference period,
though it added that this required the chosen period to be uncontested,
which was proving difficult to achieve, given the differing views
of suppliers. It therefore made it clear that, if no feasible
administrative system could be found to resolve the dispute, a
transitional régime would not be possible. It had therefore
sought a mandate from the Council to initiate GATT Article XXVIII
negotiations immediately, with a view to replacing the current
régime with a flat tariff.
22.6 In our Report of 19 January 2000, we
noted that the Government had said that it could "support
and work with" the Commission's basic model of a transitional
quota régime leading to a tariff-only arrangement, provided
this is adjusted to reflect the needs of vulnerable Caribbean
suppliers, particularly as regards the licensing system for quota
C. In our Conclusion, we raised a number of questions about the
extent to which those suppliers would be able to compete successfully
both during the transitional period and thereafter. These were
dealt with in a Supplementary Explanatory Memorandum of 22 February
2000 from the Minister of State at the Ministry of Agriculture,
Fisheries and Food (The Rt. Hon. Joyce Quin), following which
we recommended the proposal for debate in European Standing Committee
A (which took place on 4 April 2000).
22.7 In doing so, we commented that any
outcome likely to be compatible with the Community's WTO obligations
would almost certainly involve some dilution of the preferences
currently enjoyed by traditional suppliers, and that the Government
therefore faced a very delicate task in striking a balance between
these conflicting considerations. We also noted the Minister's
comments both on the attempts being made to find an acceptable
reference period for the allocation of licences under the transitional
arrangements, and on the willingness of Caribbean interests to
move eventually to a tariff-only approach. We commented that it
remained to be seen whether it would be possible to agree an outcome,
in both the intermediate and the longer terms, which adequately
protected traditional suppliers.
The current document
22.8 We have now received an Explanatory
Memorandum of 24 July 2000 from the Minister about a Communication
from the Commission to the Council on the further discussions
it has had with interested Third Countries in an attempt to find
an acceptable means of allocating quotas during the transitional
period. Although an official text of the Communication is not
available, the Minister says that discussion has focussed on the
method based on traditional trade patterns, which is the system
favoured by most parties. However, as previously noted, the reference
period chosen requires the agreement of all the parties, and the
Commission has concluded that, despite months of intensive contacts,
negotiations on this issue are "going nowhere".
22.9 The Minister goes on to say that the
Commission acknowledges that, of the two remaining alternative
systems for licence allocation, that of a "striking price"
auction has proved universally unpopular. That leaves the "first
come/first served" method, and, although the Commission has
highlighted some of the practical and administrative difficulties
this would entail, it nevertheless suggests that these can be
overcome. It also suggests that such a system would be more secure
from WTO challenge if it were applied to all three quotas. The
Community now intends to undertake a further examination of this
approach in consultation with third parties, and to report its
conclusions back to the Council as soon as possible. It has also
asked for a mandate to begin negotiations with the main suppliers
on implementing a tariff-only régime, in accordance with
Article XXVIII of GATT, lest problems associated with "first
come/first served" prove insurmountable (and thus rule out
any transitional quota).
22.10 The Minister says that the Communication
was discussed at the General Affairs Council (GAC) on 10 July
2000, when the Commission was invited to investigate "first
come/first served", and to report back on that and other
solutions, including tariff-only. The Council also reiterated
its concern to reach a solution which would end the dispute as
quickly as possible, while having regard to the interests of Community
producers and commitments to producers in the ACP countries, particularly
the most vulnerable.
22.11 In commenting on these developments,
the Minister points out that, since November 1999, the UK has
been working hard to promote a deal based on what is known as
the Caribbean proposal (transitional tariff quotas with historical
reference periods), and that it will now examine, in consultation
with its traditional suppliers how a transitional "first
come/first served" system could be made to work in a way
which is acceptable to the Caribbean. She stresses that, if no
licensing system for a transitional quota régime can be
agreed, the Commission will propose moving to tariff-only immediately.
She adds that it is helpful that the GAC conclusions refer specifically
to the needs of the most vulnerable ACP producers.
Conclusion
22.12 Since we have already reported
extensively on this subject, we are on this occasion clearing
this latest Communication, and simply drawing to the attention
of the House the current state of play on the efforts being made
to find a way through the difficult impasse which exists over
the Community's banana import arrangements. We will await with
interest further information on the prospects of a "first
come/first served" solution.
23. We consider that the following documents do
not raise questions of legal or political importance :-
46 (18808) 5357/98; see HC 155-xvi (1997-98), paragraph
1 (11 February 1998). Back
47 (20185)
8967/99; see HC 34-xxiv (1998-99), paragraph 7 (30 June 1999). Back
48 (20731)
13048/99; see headnotes to this paragraph. Back
49 Set
out in paragraph 3.10 of our Report of 19 January 2000. Back
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