Cablegate: Latin America Banana Producers Hit Eu Tariff

VZCZCXYZ0019
RR RUEHWEB

DE RUEHZP #1673/01 2881526
ZNR UUUUU ZZH
R 151526Z OCT 07
FM AMEMBASSY PANAMA
TO RUEHC/SECSTATE WASHDC 1294
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEHBO/AMEMBASSY BOGOTA 2636
RUEHBR/AMEMBASSY BRASILIA 0344
RUEHPE/AMEMBASSY LIMA 0714
RUEHQT/AMEMBASSY QUITO 0943
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHDC
RUEHGV/USMISSION GENEVA 0290

UNCLAS PANAMA 001673

SIPDIS

SIPDIS

FOR STATE WHA/CEN - TELLO
FOR USTR - MOWREY

E.O. 12958: N/A
TAGS: ECON ETRD PM
SUBJECT: LATIN AMERICA BANANA PRODUCERS HIT EU TARIFF
PROPOSAL

1. (U) SUMMARY. On October 4, 2007, representatives of
Colombia, Ecuador, Guatemala, Honduras, Nicaragua, Panama,
Brazil and the United States met in Panama City to discuss a
collective response to the July 2007 European Union (EU)
proposed changes to the EU's current banana tariff regime.
The representatives of the banana supplying countries signed
a joint declaration (Declaration) stating that the EU
proposal fails to comply with stated EU commitments or WTO
decisions. The Declaration called for a speedier reduction
in EU banana tariff, a reduction in the tariffs significantly
greater than the EU proposal, a tariff regime consistent with
WTO rulings and an action on the preferential treatment
afforded African, Caribbean and Pacific (ACP) suppliers.
Separately, Chiquita Brands International executives briefed
Post on the diminishing EU market share for Panamanian
bananas and the poor financial state of its Panamanian
operations. END SUMMARY.

--------------------------------------------- ----------
Latin American Banana Producers Issue Joint Declaration
--------------------------------------------- ----------

2. (U) On October 4, 2007, representatives of Colombia,
Ecuador, Guatemala, Honduras, Nicaragua, Panama, Brazil and
the United States met in Panama City to discuss a collective
response to the July 2007 EU proposed changes to the EU's
current banana tariff regime. The purpose of the meeting was
to evaluate the EU proposal and each country's position on
the initial and final bound rate, the initial and final
applied rate, the reduction period, its starting and ending
date, the preferential treatment afforded ACP suppliers,
waiver of any future rights and main concerns regarding the
Doha negotiations. The parties also discussed the importance
of maintaining a common position.

3. (U) The representatives quickly agreed to issue a
Declaration, which was signed by Colombia, Ecuador,
Guatemala, Honduras, Nicaragua and Panama. (An English
version of the Declaration is set forth in paragraph 7
below.) The USG did not sign since it is not a banana
supplier. The GOB representative said he did not have signing
authority. The Declaration states that the EU's proposal
fails to comply with stated EU commitments or WTO decisions.
The Declaration, among other things, states that (i) tariff
reduction should begin no later than January 1, 2008, (ii)
the first reduction must be more that the 170 euro per ton EU
proposal, (iii) the final reduction be lower than the 123
Euro per ton EU proposal, (iv) the tariff reductions be
consistent with the 2005 arbitration findings (including the
finding that any tariff over 75 euros per ton would be
detrimental to Latin American suppliers, (v) the preferential
treatment between ACP and Latin American suppliers be
resolved, and (vi) any settlement be enforceable before the
WTO.

-----------------
Meeting Attendees
-----------------

4. (U) The USG was represented by Mark J. Mowry, Deputy
Assistant U.S. Trade Representative, Europe and the Middle
East; the GOP by Leroy Sheffer, Ministry of Commerce and
Industry, Chief Trade Negotiator, Minister of Agriculture
Guillermo Salazar and WTO Representative Norman Harris; the
GOC by Commerce Ministry Vice Minister Eduardo Munoz; the GOG
by Ingrid Barillas, WTO Representative, and Lionel Maza,
Guatemalan Embassy in Panama; the GOH by Jorge Rosas,
Ministry of Industry and Commerce; the GON by Veronica Rojas
and Ramiro Bordesa, Vice Ministers, Ministry of Finance and
Commerce; the GOE by Mentor Villagomez, Ministry of Commerce
and Elsa Roca, Ecuadorian Embassy in Panama, and the GOB by
Fernando Muggiatti, Brazilian Embassy in Panama. Costa Rica
and Peru were invited, but were unable to attend.

--------------------------------
Chiquita's EU Market Share Slips
--------------------------------

5. (SBU) On October 4, 2007, Chiquita Brands International
executives, Manuel Rodriquez and Manuel Aizpurua, told DCM
and EconOff that Panama banana suppliers have suffered a

greater market share loss than other Latin American
countries. According to a white paper delivered by Chiquita
Brands to Post, between January and May 2006 Panama's
European market share dropped 11% from the comparable period
in the prior year, as compared to 3% for traditional Latin
American producers. The exceutives noted that Latin American
banana suppliers have won all eleven WTO cases brought
against the EU. In addition to the EU tariff, the executives
said Panama is hurt by the comparatively high wages paid to
banana workers. The executives said these comparatively high
wages are a product of decades old labor agreements making
Panama the highest cost banana supplier in Latin America.
The executives said that its competitors, such as Dole Foods,
have already opened facilities in ACP countries (principally
Africa). Chiquita is considering doing the same. They said
that given the current cost structure, no company would ever
consider opening a banana facility in Panama. According to
the white paper, even without the EU tariffs, Panamanian
bananas would still be sold at a loss under current EU prices.

-------------------
Chiquita Background
-------------------

6. (U) Chiquita Brands has been operating in Panama for over
a century. During the 1960's, banana production was a high
margin business and Chiquita was a worldwide price giver.
Downward pressure on prices began as banana demand in the
U.S. leveled off, and European nations began to impose
tariffs on Latin American suppliers and otherwise favor
banana production from former European colonies. The tariffs
imposed by EU's Regime 404 in 1993 resulted in Chiquita
losing 60% of its business. Currently, Chiquita employs
approximately 4,000 banana workers in Panama (65% of them
indigenous). The company operates a facility in the Bocas
del Toro region in northwestern Panama and has a contract
with a cooperative in the Puerto Armuelles region of
southwestern Panama. The cooperative facility was sold to
the workers by Chiquita in 2003. Chiquita has a purchase
contract with the cooperative terminating in 2013. To date,
the cooperative has been a money losing venture with the GOP
and Chiquita continuing to subsidize operations. Panama's
principal banana export market is Europe, and increasingly,
Russia.

-------------------
Text of Declaration
-------------------

7. (U). Below is an English translation of the Declaration
provided by the GOP.

Begin text:

Declaration

The Governments of Colombia, Ecuador, Guatemala, Honduras,
Nicaragua and Panama

Considering that

In the banana-producing countries of Latin America, banana
exports to the European Union (EU) are central to the fight
against poverty; to the basic subsistence of large rural
populations that depend on bananas for wages, revenues and
income; and to the overall economic, political, and social
welfare of these developing countries;

The EU's current banana regime, including a MFN tariff of 176
Euros/mt and a duty-free tariff quota reserved exclusively
for ACP suppliers, is affecting the development needs of
Latin America, and does not comply with EU's expressed
commitment to assisting developing countries;

The 2005 Awards of the Arbitrators determined that the 2006
EU tariff regime does not maintain the total market access to
MFN banana suppliers;

Maintaining the EU banana import regime has raised multiple
claims before the WTO which has motivated the European
Commission to present to various MFN suppliers an outline of

proposals to negotiate a solution to this long lasting
dispute.

Declare that

Without prejudice to all our WTO rights and as a result of
the negotiations of the Association Agreements that are to be
agreed with the European Union, the undesigned governments
consider that an amicable negotiation is a solution to the
Banana Dispute, under a framework in which the MFN tariff is
substantially reduced over a brief period of time in an
effective and timely manner, under the following terms:

(1) the gradual phased reduction period shall be the shortest
possible, with the first of the three resulting tariff cuts
installed no later than 1 January 2008;

(2) the first cut would be far below the EC Commission's
proposed first cut of (170) Euros/tonne and in a consistent
manner with the 2005 Arbitration findings;

(3) the tariff cut in the last year would be substantially
lower than the Commission's proposed final rate of (123)
Euros/tonne and take due account of the Arbitration finding
that any tariff preference higher than 75 Euros./tonne would
be detrimental to Latin American suppliers;

(4) the current preferential treatment between the ACP and
Latin American suppliers shall be resolved; and

(5) the principal elements of the settlement would be
WTO-enforceable;

Our governments consider that the foregoing terms and
conditions establish the framework for a permanent resolution
of this long-standing dispute. To accomplish this objective,
it is necessary to include all the MNF (sic) supplier
countries, by which we reaffirm to the EU the necessity to
include Ecuador in the process.

Issued in the City of Panama, Republic of Panama in October
4, 2007.

/s/ Eduardo Munoz
Republic of Colombia

/s/ (unsigned; to be signed in Guatemala)
Republic of Guatemala

/s/ Veronica Ropas
Republic of Nicaragua

/s/ Mentor Villagomez
Republic of Ecuador

/s/ Jorge Rosas
Republic of Honduras

/s/ Leroy Sheffer
Republic of Panama

End text.

8. (U) Mowry did not have an opportunity to clear this cable.
EATON

© Scoop Media