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Friday, March 5, 1999 Published at 12:38 GMT

Business: The Economy

Banana war exposes old trade divisions

Sir Leon Brittan says the US is risking a major trade confrontation

While the world is supposed to be heading towards a new, enlightened era of freer trade and fewer barriers, the banana war has turned into an old-fashioned battle over protection and favoured treatment.

The blazing row between the European Union (EU) and the United States over bananas has its genesis in a dispute over EU tariff duties and import quotas levied against exporters to the region.

The argument centres on the preferential treatment the EU gives to banana producers from former African, Caribbean and Pacific colonies at the expense of Latin American growers and their US backers.

The battle lines drawn over the issue see the US, Ecuador, Guatemala, Honduras and Mexico pitted against the EU whose most ardent supporters are the Caribbean island states of St Lucia and Dominica.

Some pay tariffs, some don't

The EU introduced a new banana import policy in 1993 which protects the former colonies of Britain and France by waiving trade tariffs on their banana trade with Europe and giving them guaranteed quotas. The Latin American growers face tariffs on their exports to the EU and receive no quota guarantees.

[ image: Europe is some exporters' only outlet]
Europe is some exporters' only outlet
Without such preferential treatment the banana industry in the Caribbean would collapse, Brussels maintains. The European market is their only outlet for bananas, St Lucia and Dominica say.

However, after opposing the EU policy since its introduction and appealing to the World Trade Organisation (WTO) in Geneva, the US appeared to have won the case last year.

The EU introduced reforms to its banana import rules on 1 January after a ruling from the WTO that its import regime broke international trading rules designed to offer a level playing field to exporters.

'Token' changes

However the US said the EU's reforms were token, did not go far enough and that Latin American producers were still missing out because the rules are still being flouted.

Some import arrangements were changed giving the favoured countries less security of access, but the preferential tariff regime stayed.

The US went back to the WTO which voted to set up a disputes panel to adjudicate the issue. But this week's scheduled ruling on the matter passed without a resolution. The WTO said more information was needed from both parties before it could make decision.

To show it is serious, the US is applying for the WTO to apply trade sanctions which would amount to 100% taxes on a selection of EU goods.

It is also forcing exporters to guarantee extra tariff payments if they want to trade in the US.

The taxes would effectively double the costs European businesses would have to bear to sell to American consumers.

US political influence

In response to the threat of US sanctions against Europe, Sir Leon Brittan, the EU's trade commissioner, launched a stinging attack on Washington's actions, accusing the US of acting out of purely domestic political motives.

American companies such as the multinationals Dole Food Company and Chiquita Brands International are behind the Latin American growing operations and market and distribute their bananas to the world.

"The whole process is driven by politics in the United States. It is driven by the fact that Chiquita is a company that gives money to the political parties, that the president of Chiquita is very close to Senator Trent Lott," Sir Leon told BBC2's The Money Programme.

The EU says Caribbean banana producers account for only 3% of world banana exports and represent only 7% of the EU market - their only outlet.

Meanwhile, British industry is claiming the threatened retaliatory US trade blacklist will cut £82m from UK exports overall.

UK trade minister Brian Wilson said: "There is absolutely no connection between bananas and cashmere or greetings cards, except in the minds of the US officials who have drawn up this list for random retaliation."

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