FACTBOX: Bananas dispute at the World Trade Organization

(Reuters) - A row about the European Union's import regime for bananas is one of the longest-running trade disputes at the World Trade Organization, and threatens to derail talks on a new global trade pact.

Bananas are vital to the economies of several Latin American countries, such as Ecuador, the world's biggest exporter, and to other former European colonies in Africa, the Pacific, and the Caribbean (ACP) -- especially in the West Indies.

But the Caribbean exports rely on preferential treatment in the European market. The Latin Americans are increasing their market share even under present arrangements, but say they are being held back from selling more of a crucial product.

Some ACP countries accept they may have to pull out of the banana business. But whether they quit or attempt to become more competitive, they want time and protection in that transition.

The United States does not grow or export bananas on a large scale, but several U.S. companies are major distributors of Latin American produce -- Chiquita Brands International, Del Monte Foods and Dole Food.

Within the EU, Ireland's Fyffes is an important distributor of bananas.

THE DISPUTES

Latin American producers and U.S. distributors have mounted nearly a dozen successful challenges to EU import rules for bananas that favor imports from former European colonies in the ACP countries.

In the face of those challenges, the EU cut its tariff for bananas to 176 euros ($280) a ton, while retaining a duty-free quota for the ACP countries of 775,000 tons. Previously Latin American exporters paid 75 euros a ton within set quotas but 680 euros a ton in excess of the quotas.

Latin Americans say the new regime is still discriminatory.

The EU has negotiated new preferential arrangements, known as economic partnership agreements (EPAs) with ACP countries that are WTO-compliant, after a previous WTO waiver on special treatment for ACP states expired at the end of 2007.

THE MEDIATION

WTO Director-General Pascal Lamy has brokered a compromise under which the EU tariff on bananas would fall to 116 euros over 7 years, with an initial cut or "down payment" of 26 euros.

Lamy's compromise would also deem outstanding litigation settled and rule out future challenges to the EU in a "peace clause".

The EU has accepted this compromise even though it says it has misgivings about the impact on its own growers in the French Caribbean and Spanish Canary Islands. Colombia, which is keen to reach a free-trade agreement with the EU, has also accepted it.

But other Latin Americans in the WTO's Tropical Products Group chaired by Costa Rica say the numbers are not good enough, and want to negotiate further. ACP countries are also unhappy with the numbers and the implementation period.

THE COUNTER-PROPOSAL

Ecuador and Costa Rica favor dropping the tariff to 109 euros a ton over 7 years, with a down payment of 35 euros, and some other Latin American growers favor steeper cuts.

According to figures from Honduras, under the WTO's current Doha round negotiations the regular agriculture proposals would see the tariff on bananas fall to 76 euros a ton over 5 years.

And if bananas are treated as a tropical product under current proposals to give special treatment to exporters of such produce, the duty would fall to only 26 euros over 4 years.

THE DOHA IMPACT

Lamy has invested so much time on the issue because the dispute risks spilling over into the current Doha round talks on opening up world trade.

That is because the agriculture negotiating text includes two conflicting proposals -- one for countries enjoying preferential access to rich markets, like the ACP states, and one for the exporters of tropical products.

Tropical products would enjoy faster and steeper cuts in tariffs than the round would otherwise generate. But tariffs on products with preferences would be cut more slowly to alleviate the erosion of the developing countries' relative advantage.

The ACP and tropical products countries are negotiating with each other to remove the overlaps from their lists.

But if the banana dispute is not resolved, both would be likely to add the fruit to their lists, making an agreement on that aspect of the talks impossible.

In the WTO's consensus-driven system, agreement is only possible if every member signs up to it. And under the Doha round's single undertaking, nothing is agreed unless everything is agreed. So a dispute about bananas could prevent agreement about liberalizing trade in grain, cars and financial services.