Bananas, worth billions of dollars on world markets and a key revenue-earner for many Latin American countries, are the world's second-largest fruit market after citrus and have a long history in Europe as a particularly sensitive area.
   
After losing the bitter banana wars of the 1990s at the World Trade Organisation, the EU pledged to scrap its complex system of quotas and import duties for a tariff-only system to run from January 2006. The problem is how high to set the duty. 
   
While the EU wants a new tariff of 230 euros ($296) a tonne, producers in Latin America and in Europe's former African, Caribbean and Pacific (ACP) colonies - the EU's two main banana suppliers - say that level is unacceptable. 
  
Suppliers' demand

ACP suppliers, whose fruit enters EU markets free of duty, want the tariff to be at least 275 euros to prevent cheaper Latin bananas from flooding Europe. The ACP group includes top African producers Ivory Coast and Cameroon, and Caribbean suppliers such as the Windward Islands.

After weeks of dithering by Latin America, which wants 75 euros or less, it looks as if the gloves have now come off.

The present banana battle pits
the EU against Latin America

Six Latin countries led by the world's top exporter Ecuador asked the WTO recently to step in and say if a 230-euro duty will preserve their existing share of Europe's banana market.

The problem is that the WTO is unlikely to give its view before late July. Then, the EU may have to propose a new duty, which may - or may not - satisfy the Latin Americans. If not, they can ask for a second round of WTO arbitration.
   
For the European Commission (EC), which negotiates EU foreign-trade policy, a second request would be a nightmare scenario as there would be little time to wrap up the talks before the new banana regime comes into force.
   
No guarantee

WTO arbitration can take several months, with no guarantee at the end that all sides are happy.

"We would like to have it sorted out in mid-September so we have time to take it through the council. And that won't be an easy debate," an EC official said.

"We would like to have the WTO case sorted out
in mid-September"

European Commission official

If the process drags on, this would cast a shadow over a key WTO meeting on the Doha Round of trade talks scheduled for Hong Kong in December where the EU, and the US, are likely to face pressure to make more cuts in farm support programmes.

One month before that, EU ministers will debate a reform of the sugar regime, a much-criticised subsidy system that has survived virtually untouched since its birth in the late 1960s.

The EC makes no secret of the fact that it wants to go to the Hong Kong meeting with deals on bananas and sugar.
   
But diplomats and industry insiders say the EC's desired timeframe may be a little ambitious, believing a second round of WTO arbitration is almost a certainty.
   
The EU is the world's largest importer of bananas.