The World Trade Organization has ruled against the European Union’s import tariffs for bananas, officials said Friday, possibly opening the door to millions of dollars in U.S. commercial sanctions.
The confidential decision — distributed earlier this week to the parties and confirmed by U.S. and EU officials — is an important development in the decade-old WTO dispute pitting Latin American countries and the United States against the EU. The EU can still appeal.
The verdict will be closely followed by Chiquita Brands International Inc., the Cincinnati-based produce distributor. The tariff costs Chiquita $1 per share annually, according to Barry Sine, an Oppenheimer & Co. analyst.
The WTO has consistently ruled against how Brussels sets tariffs for bananas, forcing it to overhaul a system that grants preferential conditions for producers from African and Caribbean countries, mainly former British and French colonies. While the EU repeatedly has tinkered with the import rules in recent years, none of the changes has withstood challenges at the trade body.
“The United States prevailed in its challenge,” the Office of the U.S. Trade Representative said in an e-mailed statement. “This is the 10th proceeding against the (EU). We hope that the (EU) will finally ensure that it puts in place a bananas import regime that is WTO consistent.”
Trade officials said the latest ruling closely follows the findings by a separate panel that found in Ecuador’s favor in December. Both decisions remain confidential and are only expected to be released in the coming months.
Michael Mann, spokesman for EU Farm Commissioner Marian Fisher Boel, confirmed the EU’s loss in the latest ruling, but criticized the WTO panel for taking a “purely formalistic approach that found against something that does not exist anymore” — a reference to new rules for European banana imports that came into effect this year. Mann also expressed disappointment that confidentiality arrangements had been broken.
The case centered on a banana tariff established by the EU in 2006 — 176 euros ($258) per ton — which the bloc claimed was in line with WTO rulings. But the U.S. rejected the argument. Ecuador, the world’s largest banana producer, contended in its complaint that the new tariff cost it market share in Europe, hurting more than 1 million Ecuadoreans dependent on the banana industry.
The U.S. has never declared the loss suffered by American companies because of the tariff, while Ecuador said last year that it had lost $131 million in the first 15 months of the tariff’s existence. If Washington ultimately prevails in the dispute, it could levy retaliatory taxes on European goods equal to the amount of damage incurred by American companies, as recognized by the WTO.
The EU can lodge a final appeal in the disputes against the U.S. and Ecuador. Colombia has also initiated a banana case against the EU, but that is still at an earlier stage.
Latin American bananas currently have around 60 percent of the EU banana market, while African and Caribbean producers have 20 percent, according to EU officials. Bananas grown in the EU — mostly on Spanish and French islands — account for another 20 percent.
The banana tariff case was first brought to the Geneva-based trade referee in 1996, but has since spawned a series of disputes as trade lawyers wrangled over procedural intricacies and legislation that had previously never been tested.
The U.S., in 1999, and Ecuador a year later both won the right to impose trade sanctions on European goods after the WTO found the EU’s rules to be illegal. A deal in 2001 gave the EU five years to comply with WTO rulings.