(GENEVA) - Negotiators burning the midnight oil at the World Trade Organisation could yet be tripped up by a long-simmering row over bananas between Europe and Latin America, diplomats say.

WTO Director-General Pascal Lamy last week presented a compromise offer in the hope of resolving the dispute before the Geneva talks got underway, but agreement has so far proved elusive.

Both sides have warned that the whole Doha Round could be scuppered if a solution is not found.

Latin American banana producers have successfully challenged the EU's banana import regime before the WTO on the grounds that it discriminates against them in favour of poor African, Caribbean and Pacific (ACP) countries -- mainly former colonies of European powers.

The EU has accepted Lamy's compromise offer under which Brussels would gradually reduce its import tariff to 116 euros (185 dollars) per tonne by 2015 from 176 euros currently.

But the EU's top trade negotiator Peter Mandelson warned at the time that this was a "take it or leave it offer" and that if others wanted to reject it, then they had to take responsibility for the failure of the whole Doha Round.

This brinkmanship failed to impress Latin American negotiators gathered here at the WTO's headquarters in Geneva.

Dacio Castillo, the ambassador of Honduras, said the Latin American countries were holding out for an EU tariff of 76 euros, or 109 dollars with a quota of 200,000 tonnes of bananas.

They are also outraged at Lamy's proposed "peace clause," under which in effect the Latin American countries would promise not to reopen the case in return for the lower tariff.

"To say this is 'take it or leave it' means you are not negotiating, and that is very dangerous when you're trying to reach an agreement," said Ronald Saborio, Costa Rica's ambassador to the WTO.

"The Latin Americans will not leave here empty-handed."

Diplomatic sources said that Lamy is still directly involved in trying to resolve the dispute and met Wednesday with representatives of the ACP group.

These countries are furious at the compromise proposal which they say will devastate their economies and have threatened to bring the whole Doha negotiations crashing down if their own demands are not met.

"If it's necessary to block the Doha negotiations, we'll do it," said Gerhard Otmar Hiwat, the ambassador of Surinam at the EU.

Text and Picture Copyright 2008 AFP. All other Copyright 2008 EUbusiness Ltd. All rights reserved. This material is intended solely for personal use. Any other reproduction, publication or redistribution of this material without the written agreement of the copyright owner is strictly forbidden and any breach of copyright will be considered actionable.