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