The French journalist could barely contain his satisfaction. It was the day after the United States had stopped bombing Iraq, with the able assistance of the RAF, and Britain’s little-noticed reward was the announcement in Washington of a list of trade sanctions against the European Union, which will actually bear heaviest on America’s most loyal ally. This is in pursuit of a trade war which, if it goes ahead, will be one of the most grotesque if not malign of recent times. If no solution is found, we are just a month away from a war between the US and EU. Over bananas.
This absurd conflict is over the import licences of bananas. Former European colonies (mainly British and French) get slightly preferential treatment over central American producers exporting bananas to the EU. The banana is a crop which the US does not export to Europe – but many of the Latin American bananas, or”dollar bananas”, happen to be grown on estancias owned by US companies. The crop plays a minuscule part in annual trade between Europe and America; the quarrel over its export to the EU will cost jobs in British industries whose only connection with the fruit is in the lunchboxes of its employees.
It all makes for a notable test for the World Trade Organisation, set up in 1994, which is supposed to handle disputes like this but which may have expected its first big challenge between two of the world’s largest trading blocs to arise from something rather more significant, particularly in a time of international economic crisis. Our government’s much vaunted closeness to Bill Clinton has availed us absolutely nothing. We will be hit hardest by the American sanctions imposed as a result of the dispute. When it comes down to it, Washington knows on which side its fruit is peeled.
Hence the Frenchman’s suave question to the European Commission in Brussels: “Are the sanctions a mark of the special relationship?” he asked smugly. “Or is this Britain’s reward for supporting the United States’ action in the Gulf?”
The Commission estimates that the list of unilateral sanctions the US government announced on 21 December will cost industries in the European Union about £350 million a year, nearly £85 million of that in the UK alone. The products targeted for the imposition of 100 per cent tariffs are a bizarre mix whose only uniting characteristic is that none of them has the remotest link with bananas, or any other fruit for that matter.
In the ponderously exact prose of the US Trade Department, it includes: “Pecorino cheese, from sheep’s milk, in original loaves, not suitable for grating, sweet biscuits, bath preparations, other than bath salts, candles, tapers and the like, handbags, with or without shoulder straps, articles of a kind normally carried in the pocket or handbag with outer surface of reinforced or laminated plastics, uncoated felt paper and paperboard in rolls or sheets, folding cartons, printed cards (except postcards) . . .”
Take that! The rationale in Washington for the list is that it represents the equivalent value in trade of what it estimates US banana companies are losing in Europe. What is really happening, though, is that the American administration is threatening the eclectic mix of goods in pursuit of the right of its own multinational fruit exporters, chiefly the Cincinatti-based company Chiquita, to obtain what would effectively be monopoly rights over the 3.7 million tonnes of bananas consumed in the EU each year.
The EU’s banana regime has long been a source of contention. It was devised to give a certain amount of protection to bananas produced in former colonies, not just in the West Indies but also places such as the Ivory Coast and the Canaries. The American view is that this has handicapped access to European markets for the “dollar bananas” – thus threatening the sacred profit-making potential of US companies. This has not stopped those companies cornering 70 per cent of the banana trade with the EU. As Sir Leon Brittan, the EU Trade Commissioner, sniffed: “They don’t seem to be doing too badly out of it.”
The US itself does not export a single banana to Europe. Politics is behind its stance: the rhetoric from the US has increased markedly since November’s Congressional elections. Although the US first started muttering about bananas under George Bush, it is the Clinton administration that has really pursued the matter. When it made a complaint to the WTO, within 24 hours, the Chiquita chairman, Carl H Lindner Jnr, who had previously made donations only to the Republican Party, suddenly started giving away money to the Democrats as well.
Lindner is a religious man and one who apparently likes to give out gold-embossed cards bearing his philosophy: “I like to do my giving while I’m living so I know where it’s going.” His company is estimated to be worth $14 billion.
If his company and its fellows such as Del Monte get their way, small, independent banana-growers in some of the most impoverished islands of the Caribbean are likely to be pushed out of business. They may then turn to other, more profitable, products with a readier market in the US, such as cocaine. Some believe that Chiquita’s complaint followed its ill-advised decision to sell its Caribbean plantations six years ago.
The American multinationals produce their bananas – larger and less sweet than Caribbean ones – on large estates in central and Latin America where their record as employers is distinctly unsavoury.
Peter Scher, the US administration’s special trade ambassador, disavows any notion of wanting to harm the Caribbean banana trade. The regrettable necessity was that Europe had to be punished for not opening its markets sufficiently in accordance with a ruling by the WTO in Geneva. “We are showing there is a cost to pay for Europe’s failure to comply with its obligations,” he said. “This is about a much broader issue than bananas. It is about whether the WTO system will work. If it fails, there will be pressure in this country to act unilaterally.”
The WTO panel ruled in September 1997 that the US was justified in its complaint that the EU’s fiendishly complicated banana import regulations amounted to unfair discrimination and that the rules must be changed. The Caribbean countries were not allowed to give evidence as they were not a direct party to the issue. The panel, chaired by a former US congressman, contained a Japanese representative but no one from the developing world.
The EU claims it has now changed its rules in ten respects. The US contends that not enough has been done to make access fair. Bananas merely head a rising number of complaints from US producers against the EU and its regulatory approach over issues such as genetically modified crops and meat reared using hormones and antibiotics.
Sir Leon claims the US is defying the spirit of the WTO by imposing unilateral duties. The US claims it is entitled to do so because the EU failed to meet its responsibilities by obeying the WTO ruling against it. The only thing standing in the way of hostilities is a request by Ecuador that the WTO panel should reconvene to decide whether the EU’s revised regulations do indeed comply with the ruling.
That will be a big test of the WTO’s authority. Should European consumers be free to choose bananas from the Windward Islands? Or should an elderly American billionaire be licensed to extend his empire as a domestic political trade-off? One is tempted to say that it’s a banana skin on which the WTO should not be allowed to slip.
Stephen Bates is European affairs editor of the “Guardian”