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Thursday, March 4, 1999 Published at 10:54 GMT

Business: The Economy

Bananas split trading giants

US wants equal treatment for "dollar" bananas

A row over bananas has blown up into a massive argument between the US and the European Union, with the US slapping import restrictions on certain EU goods

The BBC's Peter Morgan: "A severe failure of diplomacy"
A six year quarrel has come to a head with US authorities targetting a range of European products, varying from French cheese to Scottish cashmere, with damaging import charges.

The move has been condemned as "over the top", but the US remains steadfast in its plans, despite an EU complaint to the body which polices such matters, the World Trade Organisation(WTO).

At the heart of the problem is Washington's claim that European import rules favour bananas from former Caribbean colonies over those from central American companies.

The EU continues to maintain its import rules have been changed to bring them into line with WTO regulations.

To date, the WTO has delayed a decision on whether the EU is breaking trading laws.

'Unlawful' move

[ image:  ]
European Trade Commissioner Sir Leon Brittan denounced the US move as "unacceptable and unlawful" and the UK Prime Minister Tony Blair warned Britain would do everything it could to protect its interests.

The US is imposing a 'bond' charge on certain EU imports. An exporter will need to lodge a sum of money with US Customs equal to value of goods being sold.

After this was announced, the US ambassador to London was summoned for urgent talks by the UK's Trade Secretary.

Downing Street officials were then locked in talks with their White House counterparts.

Mr Blair said: "No one should be in any doubt about our determination to make sure British jobs are protected."

Representatives of Dominica and St Lucia, whose banana trade with the EU has so incensed the US, said: "It is deeply unfair to the industries affected, which have no connection whatever with the banana dispute."

Determined American line

US Special Trade Negotiator Peter Scher: "We don't take these steps lightly"
The US ambassador to London, Philip Lader, emerged from his 90 minutes long meeting and told reporters it had been "very cordial".

"The important point is that it's not about specific bananas, it's not about retaliation, it's not about cashmere, it's about the WTO and its regulations."

"The friendship between our two countries is extraordinary and it's in the context of that friendship that we are seeking an acceptable solution."

UK government angry

[ image: The banana war threatens to hit Scottish jobs]
The banana war threatens to hit Scottish jobs
The Department of Trade and Industry estimates that the tariffs will affect £80m worth of UK exports to the US.

UK Trade Minister Brian Wilson said: "This action will in no way help resolve the actual dispute. The World Trade Organisation panel process, which is in hand, offers a rapid route towards a solution.

"The UK has firmly committed itself to respecting the outcome of the arbitration and panel processes. All that we ask is that the United States should suspend action and await the same outcomes."

Mr Wilson warned the American action could be "potentially catastrophic" to the UK's cashmere industry.

He said: "I cannot imagine there are many, ordinary decent Americans who want to declare economic warfare on communities and people in the Scottish borders.

"They don't grow many bananas in that part of the world and the people there are saddened and utterly bewildered that the United States should attack them in this way over a dispute which has absolutely nothing to do with them or their industry."

Jobs worries

There are fears that thousands of jobs across Europe could be put at risk and that the banana row poses a particular threat to the cashmere industry in the Scottish Borders.

Scotland is the world's major producer of knitted cashmere goods and exports £20m ($32m) worth to the US each year.

Chairman of the Scottish Cashmere Association, George Peden, warned: "If you raise the duty from 6% to 100%, cashmere will quickly become unsellable."

Jonathan Beale: "The EU says innocent companies are being punished"
One producer, Columba Reid, managing director of Clan Douglas Ltd, said: "We could go out of business because the Europe and America can't agree over a product that has nothing to do with us whatsoever."

Bond deal

The UK Government has singled out its cashmere industry for preferential treatment and announced it will underwrite the bonds, in other words it will issue certificates to the value of the goods exported to the US.

If the WTO should rule in favour of America, then the British Government will pay US Customs the face value of those certificates.

This saves UK exporters having to stump up cash to the full value of their goods before they will be allowed to sell in the US market.

The UK says it has singled out the cashmere industry for this assistance because it is seasonal and will be so badly affected.

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