EU finds trade trouble on all sides

The European Union hoped to raise its credibility in world trade talks by agreeing to reform its trading regime for sugar and bananas. Instead, the move's consequences for some of the world's poorest countries are threatening to add further discord at next month's Hong Kong ministerial meeting on the Doha round.

In the case of both commodities, the EU has found itself caught between a rock and a hard place.

Its existing banana and sugar rules have separately been condemned by the World Trade Organisation, so failure to reform would have suggested the EU was ready to flout international trade rulings. This would also have exposed the EU to retaliatory action from the likes of Brazil, the world's largest sugar producer.

On the other hand, the reforms have highlighted some flaws and incongruities stemming from Europe's colonial past, including the preferential market access granted to the African, Caribbean and Pacific (ACP) group of countries.

While tariff-free access has helped support the farming economies of ACP countries, it has also made them highly reliant on inflated EU prices for their exports.

Responding to stinging criticism from some developing countries and non-governmental organisations following Thursday's EU sugar deal, which will cut the EU's guaranteed sugar price by 36 per cent over four years, Peter Mandelson, the EU's trade commissioner, said: "The EU is being criticised on the one hand for reforming its trade distorting sugar regime at long last, allegedly to the detriment of poor sugar exporting countries, and on the other hand for not going a lot further in liberalising its agriculture policy yet more. Our critics cannot have it both ways."

For many developing countries, agriculture is the key dossier in the Doha talks. The banana industry employs more than 500,000 plantation workers worldwide and the dispute has underlined the difficulties of opening trade in a sector that has pitted two sets of developing countries against each other.

European import rules were historically designed to favour producers from the ACP rather than Latin America, where US companies control vast plantations. The issue has also divided the 25-nation EU, not least because France, Spain and Portugal grow bananas in their island territories.

The EU has struggled to balance such competing interests, but is expected to adopt today plans to switch to a common banana import tariff of