Unilateral US action follows years on transatlantic wrangling over bananas

At first sight, bananas appear an unlikely commodity over which to embark on a trade war

At first sight, bananas appear an unlikely commodity over which to embark on a trade war. The industry is a tiny fraction of transatlantic trade, and no jobs in either the United States or the European Union are really at risk.

Yet the war has reached such a pitch, after years of desultory negotiation and arbitration, it threatens collateral damage to thousands of British and European jobs.

US firms control production of two-thirds of the 3.9 million tonnes eaten in Europe each year, four times as many as come from Africa and the Caribbean.

The Clinton administration claims that the EU has given unfair preferential access in the issuing of import licences to African and Caribbean countries, mainly former colonies, at the expense of the so-called dollar bananas grown in Central and Latin America for US multi-nationals such as Chiquita, Dole and Del Monte.

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The companies are accomplished lobbyists in Washington; what grates on the Europeans is that Chiquita, in particular, has made political donations. The Clinton administration lodged its complaint to the World Trade Organisation within 24 hours of Chiquita's chairman, Mr Carl H. Lindner Jnr, donating $500,000 to Democratic Party funds.

African, Caribbean and Pacific (ACP) countries have been entitled to import free of tariff while dollar bananas have faced duties, although they can qualify to fill annual shortfalls in ACP quotas. The US firms complain that they lose $520 million a year, though Chiquita alone is estimated to be worth $14 billion.

The EU argues that, under the Lome agreement with the Third World, it is entitled to help ACP countries and the crop is vital to some countries. Caribbean farmers are small scale and cannot produce their crops as cheaply as the large estates of Latin America. In the Windwards, it costs $500 to harvest a tonne compared with $162 in Ecuador.

One reason US companies are so exercised is because they sold their Caribbean plantations to concentrate on Latin America in the expectation their trade with Europe would expand more than it has.

The US retorts that if the EU wants to help Caribbean economies, it can pump in aid. It has complained at the General Agreement on Tariffs and Trade (Gatt) talks and the WTO over six years, and each time received a ruling in its favour. In the words of Mr Peter Scher, its negotiator, this week: "The EU may not like the fact, but we won."

The US accuses the EU of not negotiating in good faith. Europe's trade commissioner, Sir Leon Brittan, maintains that the EU has altered the import regime to bring it into compliance, and, if the US disagrees, it can complain again.

Last week the WTO requested information from both sides before ruling this month about the EU's amended system. The US is pressing ahead with sanctions anyway. It would be entitled to do so if the WTO ruled in its favour, but what has aggravated the EU is that it is acting unilaterally.

Washington announced a list before Christmas of 16 European products (now reduced to 15) against which it proposed to impose 100 per cent import duties; although the duties will not be imposed before the WTO has ruled, exporters must post a bond equivalent to the tariff.

The US claims it selected the products because their annual value equals the $520 million the banana exporters claim to lose. The WTO panel is believed to be sceptical, which is why it has asked for more information.