Banana trade war may cost Irish exporters millions in lost sales

 

Irish companies could lose millions of dollars worth of sales if a trade war over bananas continues between the United States and the European Union. Cream liqueur is among the list of luxury products scheduled by the US for punitive, 100-per-cent taxes at the end of February.

R. A. Bailey exports 12 million bottles of its famous Irish cream product to North America each year, the vast bulk to the US market. Several smaller companies also make Irish cream liqueurs and could be hit by the move.

"We are worried," said a director at Bailey's, Mr Peter O'Connor. "Bailey's is already a premium brand in the United States. It costs $18 to $20 a bottle, compared to, say, a bottle of Smirnoff at $10. So, at $40 a bottle you can forget it. Nobody would buy it with those sort of tariffs." Faced some years ago by a similar threat from the US, he said, Bailey's had calculated it would lose around 80 per cent of its sales there.

Bailey's had nothing to do with the trade dispute, he added, and the company was disappointed to see the United States "resorting to its old tactics instead of negotiating" within the World Trade Organisation (WTO) structure.

The EU trade commissioner Sir Leon Brittan has already called the US action "unilateralism at its worst". He said the EU was accelerating its WTO challenge to US Section 301 trade legislation, on which the threatened sanctions are based.

The US has not given the value of the EU exports threatened, but the Commission said they were worth 501 million ecus (£396 million) annually. British, Italian, French and German exports are likely to be hit hardest; those of Denmark and the Netherlands were exempted because they had not supported the EU's banana import regime.

A WTO disputes panel last year upheld a complaint by the US and five Latin American countries against the regime, which favours imports from former British and French colonies in Africa, the Caribbean and the Pacific.

Although the EU is modifying the regime, Washington says it still does not comply with WTO rules and discriminates against US distributors of Latin American bananas. The US list covers 16 types of EU export and is designed to match the annual cost to the US of EU restrictions on banana imports.

The US plans on January 21st to seek WTO authorisation to put sanctions into effect on February 2nd. Imposition would be delayed until March 3rd if the EU requested WTO arbitration on the value of exports covered.

Yesterday, France said it deplored the US action and said the EU should make a retaliatory move.