Will Banana Wars End — Boost Doha Round?
Trade negotiators for the EU and Latin American countries may soon be able to say ‘yes, we have no bananas’ crowding their trade agenda. According to a report from the Financial Times, an end to the world’s longest-running trade dispute — involving preferential EU tariffs on bananas — may soon be in sight. The newspaper suggests that a resolution of the 16-year-old conflict may give a boost to the World Trade Organization’s floundering Doha Round negotiations, especially if it leads the way to a resolution of tariffs on dozen of tropical products.
Global trade negotiators would welcome any kind of spur to the Doha Round, which got underway eight years ago this month, and is mired in significant differences between developed and developing countries over a wide range of issues, and between U.S. and EU countries over agricultural subsidies. Other issues stalling a Doha agreement include intellectual property rights, non-tariff barriers, services, and trade remedies.
The Banana War got underway in 1993, stemming from an EU policy to grant preferential access to its markets to bananas from former British and French colonies in Africa, the Caribbean and Pacific region. The move prompted trade complaints from Latin American exporters. The Times reports that the EU will reduce its banana tariff by more than a third over seven years, dismantling much of the tariff advantage currently enjoyed by the African, Caribbean and Pacific countries. In return, those countries would receive 190 million euros in new development aid to help them restructure.
But how much will such an agreement actually do to spur Doha? Will the Round gain momentum if key players are no longer sipping on banana peels? On the plus side, a banana deal would represent the second long-running trade dispute to be settled in six months, on the heels of a provisional deal last May between the EU and U.S. over European imports of hormone-treated U.S. beef.
On the other hand, global trade agreements have been becoming more and more difficult to close. More than anything else, the issues have become more complex and there are far more parties at the table. The first five trade rounds (from 1947 to 1960) were all about tariffs. At no time were there more than 40 countries involved. The next round, the Kennedy Round, (which got undreway in 1964) was more complex. It addressed anti-dumping, and involved more than 60 countries. Not surprisingly, it took 37 months — more than the first five rounds combined.
The rounds grew bigger, more complex — and took longer. The Tokyo Round, launched in 1973, saw over 100 countries negotiating over non-tariff barriers. It lasted more than six years, longer than the Kennedy Round and the first five rounds combined.
By that point, trade negotiators had already picked all of the low-hanging fruit. The Uruguay Round, launched in 1986, began to address intellectual property, services, textiles, agriculture and dispute settlement, as well as overall tariff and non-tariff barriers — with more than 120 countries at the table. Not surprisingly, it took over seven years. The current Doha Round, with over 140 countries dealing with an even longer agenda of issues, has already surpassed that, with little hope of a completion on the horizon.
Will the Banana War prompt a Doha deal? Certainly WTO officials and trade negotiators will try to make as much out of a settleemnt as they can, hoping to build momentum to complete the toughest trade round ever — and keep in check a rising tide of protectionism that stemming from the global economic slowdown.
UPDATE: It appears that we have Banana peace in our time. A deal was inked in Geneva a few days ago. But how much of a boost will that give to the Doha Round? I ran into a former Canadian trade minister the other day, who shared with me his pessimistic view that the Round was pretty much doomed from the start. In his view, the problem was that the only momentum it had at Doha and in the months leading up to the conference was the U.S. desire to promote global links in the face of the 9/11 attack, and there was never sufficient global agreement on a meaningful agenda. One of the best descriptions of the first few years of the Round, starting with the protester-plagued Seattle conference, is found in Paul Blustein’s Misadventures of the Most Favored Nations.