US losing ground in banana row

Date: 28/01/1999

By Simon Taylor

The US is facing an uphill battle to win support for its plan to hit EU exports with €490 million of sanctions next month after two banana-growing countries blocked discussions of the move at the World Trade Organisation this week The move came amid warnings that Union exporters are already losing sales before the proposed penalties come into force, because US importers are cancelling orders for goods which could be affected.

After a heated four-hour meeting earlier this week, representatives of the 133 member countries of the WTO agreed to postpone discussions of US sanctions for at least two days. The talks had reached deadlock after Washington refused to drop its bid to win authorisation from the international trade body for its planned penalties.

Earlier in the week, two tiny banana-growing islands in the Caribbean, St Lucia and Dominica, with the support of the Côte d'Ivoire, had blocked discussion of any of the items on the agenda for a WTO meeting in protest at the US request.

They argued that it was premature to debate the possible value of penalties before the trade body had ruled on whether the EU had failed to live up to its international commitments on access for Latin American bananas.

Trade diplomats warned that the ongoing failure to find common ground risked undermining the credibility and effectiveness of the WTO as a forum for settling international disputes. One official commented that once WTO members began blocking agendas, "the whole process starts to break down".

Last weekend, WTO Director-General Renato Ruggiero took the highly unusual step of offering to negotiate a deal to end the banana dispute personally.

But Ruggiero's attempt to defuse the escalating tension failed after the US rejected the offer, because it would require Washington to drop its sanctions threat for the time being.

EU officials warned this week that the looming threat of sanctions was already costing companies sales. A spokesman for Trade Commissioner Sir Leon Brittan said the Scottish cashmere industry, Belgian handbag manufacturers and Italian cheese makers were all losing orders because US importers were postponing purchases until the dispute was resolved.

Even if the US wins support for sanctions from its WTO partners, the penalties would not come into effect before 3 March because the EU is expected to challenge American estimates of the value of trade lost as a result of the Union's import arrangements.