The Commission had proposed a single tariff of €187 per tonne for bananas imported from countries - mainly in Latin America - enjoying Most Favoured Nation status, as well as a duty-free quota of 775,000 tonnes for ACP bananas, as from 1 January 2006.
But this second round of arbitration was again thrown out by WTO. The EC claimed that it was regrettable that the arbitrators had not issued more clarity as to how this long-standing dispute could be resolved.
"We believed that the system we proposed would have maintained access to our markets in a fair manner," said Mariann Fischer Boel, EU Commissioner for Agriculture and Rural Development.
"We will now carefully study the decision before deciding how to proceed."
The long-running banana dispute is highly complex. In 2001, the EU agreed with Ecuador and the United States to move from a complex import system based on a combination of tariffs and quotas for MFN bananas to a regime solely based on a tariff by 1 January 2006.
It obtained two waivers from its WTO obligations for the preference granted to bananas from the ACP countries under the terms of the ACP-EC Partnership Agreement (the Cotonou Agreement). However the first arbitration award issued on 1 August 2005 found that the proposed tariff of €230/tonne would not result in at least maintaining total market access for suppliers under the Most Favoured Nations (MFN) clause.
The WTO arbitrators concluded that the new import regime did not take into account ACP (African, Caribbean and Pacific) preference. In addition, some companies have expressed fears that changes in the EU banana tariff import system could adversely affect their European business and overall operating results.
Chiquita for example has said that any change could result in its bananas being more expensive than imports from countries exempted from a higher tariff system. As the new tariff system would not apply to bananas imported from certain countries in Africa, the Caribbean and the Pacific, it would put Latin-America-based Chiquita at a disadvantage, the company said.
The intention remains to have a tariff only system in place on 1 January 2006, as agreed at the WTO Doha Ministerial held in 2001. But this latest rebuffal from the WTO puts this in jeopardy.
"We now need to bring an end to this dispute," said Peter Mandelson, the EU's Trade Commissioner. "For too many years it has poisoned relations between the developing countries that sell bananas to Europe."