Officials inspect new terms to end banana row

The European Union and the United States were presented yesterday with a blueprint for a way out of their banana row which has paralysed the World Trade Organisation (WTO) and created a crisis for its authority.

Officials from the EU and Caribbean states which benefit from Brussels' banana import and marketing regime said the plan, put up by WTO chief Renato Ruggiero, was generally acceptable as a solution to the immediate impasse in the trade body.

But there was no firm word from the US side, which had agreed to an earlier Ruggiero proposal. Some diplomats said the latest ideas might not be to the US liking.

The WTO director-general, who steps down in April after four years in his post, called the ambassadors of the trading superpowers to his office to go over his plan, and they were understood to be still arguing over detail an hour later.

The banana row, originally about the EU regime, has degenerated into what one official called "a street fight" over procedure in the WTO and how the four-year-old body operates in enforcing its rules in trade disputes.

In the past few days, ambassadors from many of its 133 member countries have openly voiced fears the WTO was being pushed towards a systemic collapse which could have incalculable effects on trade and the global economy.

In a heated session of the WTO's Dispute Settlement Body (DSB) late on Thursday, many envoys called on both powers to end the squabbling for the sake of the organisation's future and of all its members, rich and poor.

Hanging over the procedural argument was a US decision to impose tariffs worth $520 million (€457 million) a year on a range of EU products from porkmeat through cashmere sweaters to biscuits in the next few weeks unless the banana regime was changed.

The prospect of such a move has sent shivers through a wide range of firms, both large and small, in most of the EU's 15 member states who export to the United States, and to US companies who import and market these goods.

Washington argues the punitive 100 per cent import levies on EU products ranging from cashmere sweaters to pork and pecorino cheese are justified on the grounds that the 15-nation bloc's banana import and marketing regime breaches world free trade rules.

Washington insists that it has the right under WTO rules to impose the sanctions because, it says, the EU has failed to bring the banana regime into line with a panel finding in 1997 that it violated free trading accords.

Brussels says a new version of the regime introduced from January 1st meets the panel objections.

For two weeks, both have been arguing over the timing for the three members of that panel to come up with a ruling on the revamped regime - and for arbitration on the amount of the trade loss the United States says it has suffered.

But the EU also insists that the DSB, which under procedural rules is supposed to give its formal approval for the sanctions, cannot consider a US request for the green light until the panel has handed down its finding, in early April.

Another issue that has raised fears among most WTO members is the appearance given by the United States of wanting to impose a right to determine unilaterally - a dreaded word in the WTO lexicon - if trading partners are not playing fair.

Under Ruggiero's latest plan, the two powers would agree to take the strict banana issue out of the WTO and start quick bilateral negotiations on how to resolve it -leaving open the timeframe for allowing US sanctions to go into place.

In a separate trade conflict, Commission officials said the EU would back Japan if it launched a WTO challenge against the US's 1916 Anti-Dumping Act. US officials have warned Tokyo to curb cheap steel exports to the United States or face possible sanctions.