UPDATE 2-End to 16-yr WTO banana wars seen Friday-diplomats

Wed Dec 2, 2009 7:27pm EST

* Deal to cut tariff on bananas from Latin America

* ACP states to get around 200 mln euros compensation

* U.S. expected to support deal

* Latin America, EU agree to avoid WTO legal action

(Recasts with date for deal, adds Brussels story)

By Jonathan Lynn and Darren Ennis

GENEVA/BRUSSELS, Dec 2 (Reuters) - A deal to end the world's longest running trade dispute over import tariffs on bananas is expected to be signed on Friday between the European Union and Latin American countries, diplomats involved in the talks said.

The deal to end the 16 year-old "banana wars" -- which also includes African Caribbean and Pacific states (ACP) and the United States -- will cut the tariff paid on bananas from Latin America and shield the European Union from further legal action at the WTO, which has condemned its import regime.

"Everybody is on board. The last obstacles have been cleared and closure is expected in the next 24 hours allowing for an initialling of the deal on Friday," a diplomat told Reuters.

The essential element was that the tariff on bananas would fall to $114 a tonne by 2016 from $176, with an initial cut to $148.

Poorer ACP growers in mostly former European colonies will get around 200 billion euros ($301.4 billion) in compensation as part of the pact, diplomats said.

EU Agriculture Commissioner Fischer Boel said earlier on Wednesday agreement had been reached between the two main parties -- Latin American producers and less efficient ACP growers which have preferential access to EU markets.

Although the United States does not export bananas, it is a party to the agreement because several big distributors and processors such as Chiquita (CQB.N), Dole DOLE.N and Del Monte DLM.N are U.S. corporations. Another big distributor is the Irish company Fyffes (FFY.I).

"There are some minor housekeeping points to be finalised with the U.S., but this should happen in the next 24 hours," one diplomat said.

PEACE CLAUSE

Ministers from Caribbean countries, who say their economies will be devastated by an agreement they recognise as inevitable, said they had not seen details of the deal and raised concerns about its possible economic effects.

Banana exports are the mainstay of many Caribbean economies and adjusting to the loss of markets is already hurting producers and communities on the tiny islands.

"The ACP are now on board. We have reached a breakthrough," another diplomat involved in the negotiations said.

Diplomats said a compromise, or so-called "peace clause", had been reached over an EU demand that the 27-nation bloc should be exempt from further legal challenges as soon as the deal is signed rather than when the tariff changes have been registered at the WTO.

Formal registration, known as certification, could take months or years if other WTO members challenge the new tariffs.

But under the peace clause, Latin American exporters have agreed not to launch any new disputes during the certification process if Brussels was implementing the deal as agreed, the diplomats said.

The deal -- removing an obstacle to an eventual agreement in the WTO's long-running Doha Round -- is linked to a broader pact in trade in tropical products, such as rum, tobacco, sugar, arrowroot and cut flowers.

Concessions by Latin American banana exporters such as Colombia and Ecuador, plus an aid package from Brussels, will have persuaded the ACP countries to sign up to a deal that erodes their competitive edge in the lucrative European market.

Caribbean ministers said it remained to be seen how the aid would be divided up among ACP members with diverging interests. (Editing by Myra MacDonald) ((jonathan.lynn@reuters.com; +41 22 733 3831; Reuters Messaging: jonathan.lynn.reuters.com@reuters.net )) ($1=.6635 Euro)

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