* Oldest trade dispute could be settled this year
* EU to cut tariffs, compensate former colonies
* Legal questions still to be agreed
By Jonathan Lynn
GENEVA, Nov 2 (Reuters) - An end is in sight to the world's longest-running trade dispute, involving bananas, and a deal could be in place by the end of the year, senior European and Latin American trade negotiators said on Monday.
Settling the banana dispute would be a fillip for the World Trade Organisation, whose long-running Doha round to free up global commerce, like other trade negotiations, has at times been held hostage by the decades-old row.
"We are not yet there, but I perceive a willingness on all sides to come to an agreement," Costa Rica's WTO ambassador, Ronald Saborio Soto, who coordinates Latin American countries at the WTO in negotiations on tropical products, told Reuters
Cesar Montano Huerta, the top diplomat at the WTO mission of Ecuador, the world's biggest banana exporter, said officials were negotiating intensively and even hoped to clinch a deal in the next couple of weeks.
"We feel the elements are now there, we feel we could close this quite quickly," said David O'Sullivan, director-general for trade in the European commission, told Reuters.
None were willing to comment on details of the emerging deal, but the outlines are clear, according to officials.
PHASED CUTS AND COMPENSATION
The deal -- which could be reached before the WTO's ministerial conference starting Nov. 30 -- would see the European Union cutting tariffs on bananas for suppliers in Latin America and elsewhere.
In return the Latin Americans would drop outstanding challenges to the EU at the WTO, and Brussels would provide compensation to African, Caribbean and Pacific (ACP) countries -- mainly former British, French and Portuguese colonies -- who would lose their preferential access to the European market. The detailed terms are likely to resemble an agreement almost reached in July last year on the fringes of a meeting of trade ministers seeking a breakthrough on the Doha talks.
That banana agreement was linked to a broader Doha deal in agriculture, and when the July meeting collapsed, the European Union walked away.
Under that deal, the EU would have cut the tariff on bananas to $114 a tonnes by 2016 from $176, with an initial cut to $148.
Negotiators say those tariff figures are likely to be in a
new deal, but the timing of the reduction is still open and may
not complete in 2016.
The WTO has ruled that the current EU regime for bananas for
Latin American countries -- who market their fruit through U.S.
distributors like Chiquita
Brussels has replaced these with new "economic partnership agreements" to comply with WTO rules, but the Latin Americans say their fruit still suffers discrimination, and Ecuador has threatened to retaliate against the EU under WTO rules.
One issue still to be decided is whether the Latin Americans will drop their outstanding challenges at the WTO once Brussels has notified the WTO of its tariff plans, or when they have been certified -- become legally binding and irrevocable, a legal process that could take years.
Another is the future treatment of bananas under a Doha deal -- whenever that happens.
If there is no Doha deal, the phasing of tariff cuts could be delayed, but would go ahead eventually.
But if there is a deal, Brussels would want assurances that bananas will be treated as normal agricultural goods and not as tropical products, which would be subject to faster and deeper tariff cuts than other farm products.
That is to assure the ACP countries, who would lose their preferential treatment under a stand-alone banana deal, that they would not become even less competitive in a Doha pact.
The Latin Americans already have some 80 percent of the EU market and less efficient ACP states, used to years of duty-free access to the EU market, fear they will be squeezed further.
The EU will also have to persuade all its member states to support a deal which is resented by domestic producers -- mainly in Spain's Canary Islands and the French Caribbean.