GENEVA - In a ruling that could hurt Jamaican and Caribbean producers, the World Trade Organisation (WTO) said yesterday that a new EU tariff on imported bananas is illegal, siding with nine Latin American countries who said Brussels' proposal would seriously limit their ability to export the fruit.

A WTO arbitration body backed a claim by the Latin American countries - including Brazil, Colombia and Venezuela - who said the proposed European Union tariff of euro230 (US$279) per ton would have a "devastating effect" on the development of their economies.

PATTERSON. I have already initiated a process of diplomatic action

The report concluded that new tariff "would not result in at least maintaining total market access" for Latin American exporters and queried Brussels' methodology for arriving at the euro230 figure. It did not suggest a new figure.

Yesterday, Jamaica's Prime Minister P J Patterson said his government was actively examining the implications of the WTO ruling.

CLARKE. we have to analyse now in detail what the implications are

"I have already initiated a process of diplomatic action for us to insulate ourselves as far as we can from any adverse effects that will flow from that ruling," Patterson said while addressing yesterday's final day of the Denbigh Agricultural Show in Clarendon.

At the same time, Roger Clarke, Jamaica's agriculture minister, said: "We have to analyse now in detail what the implications are...I understand that they have time to put new proposals on the table, we just have to wait," Clarke told the Observer.

"We will get our people in Brussels and Geneva to look at the situation. I'm sure that at the ambassadorial level we will make whatever initiatives to deal with that," Clarke added.

The EU now has 10 days in which to enter into consultations with the Latin American group, which also includes Costa Rica, Ecuador, Guatemala, Honduras, Nicaragua and Panama, the arbitrators' report said.

"We will start consultations with interested parties without delay," said EU Trade Commissioner Peter Mandelson. "I hope that everyone will cooperate in finding a mutually acceptable solution within the strict deadline set by the WTO."

If they are unable to agree a new tariff in that time, both parties can then request another arbitration procedure. The process must be completed before the new tariff is due to enter into force January 1, the report said.

"We are currently evaluating the options available for putting into place the new import regime for bananas," Agriculture Commissioner Mariann Fischer Boel added.

Latin American officials in Geneva were not immediately available to comment yesterday, a national holiday in Switzerland.

Earlier this year, the European Union formally proposed an overhaul of its banana import programme at the WTO after its previous system of tariffs and quotas had been ruled illegal, saying the euro230 tariff would strike a balance between the demands of large-scale growers in Latin America and interests of traditional suppliers in Africa and the Caribbean.

Some Caribbean officials criticised the WTO ruling, saying it will hurt the region's vital banana exports by squeezing producers out of the crucial European market.

"The European market will be flooded with cheap bananas against which we will not be able to compete," said Julius Timothy, a former finance minister in the tiny island of Dominica.

Guyana Foreign Trade Minister Clement Rohee, who represents the 15-member Caribbean Community on WTO matters, called the ruling "a terrible blow" to regional countries already facing deep cuts in EU subsidies for sugar producers.

The proposed new duties would apply to Latin American nations. Under the current quota system, Latin American countries can export up to 2.7 million tons of bananas a year at a tariff rate of euro75 (US$91) per ton. Any more than that is subject to a euro680 (US$825) per ton tariff.

Latin American producers had hoped the EU would set a tariff of euro75 (US$91) per ton, while Caribbean producers had pushed for euro275 (US$333) per ton.

Latin American producers and banana companies based in the United States have long complained that EU rules favour Caribbean and African producers. The smaller producers say they risk getting squeezed out of the market.

The nine countries said the tariff failed to comply with the EU's multilateral commitments to guarantee access to the European market.

Latin American bananas currently have around 60 per cent of the market, while African and Caribbean producers have 20 per cent, EU officials have said. Bananas grown in the EU - mostly on Spanish and French islands - account for another 20 per cent.

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