Banana dispute set to sour the atmosphere at EU-US summit

Date: 10/12/1998

By Simon Taylor

AGAINST the backdrop of cuts in European interest rates to ward off the threat of an economic slowdown in 1999, next week's EU-US summit will be dominated by efforts to settle a seemingly arcane trade dispute over bananas.

Despite intense diplomatic efforts over the past few weeks, there is as yet no end in sight to the dispute over the EU's controversial banana regime which threatens to undermine the World Trade Organisations' role in settling international disputes.

As a result, the biannual meeting between the world's biggest trading powers will be dominated not by talks about the knock-on effects of the economic crises in Asia, Russia and Latin America, but rather by negotiations on what proportion of its fruit Europe can buy from former colonies in Africa, the Caribbean and the Pacific region.

Trade Commissioner Sir Leon Brittan tried to defuse tensions last week by offering to use special fast-track procedures to get a WTO ruling on the changes made by the EU to its banana regime by next April or May, less than half the time usually required.

He said that if the WTO supported Washington's claim that the revised regime still broke global trade rules, the US administration would be able to go ahead with its plans to penalise EU exports only a few weeks later than it originally planned.

But US Trade Representative Charlene Barshefsky rebuffed his overtures, insisting that the US would implement its plans to block up to 1.3-billion-ecu worth of EU exports on 3 March if the WTO endorsed its claim that the Union's import rules still discriminated against bananas from Latin American countries.

The US maintains that it will be possible for the WTO to reach a decision in time to launch sanctions in March, with or without Brittan's cooperation.

But Commission officials claim that Washington's insistence on such a tight deadline stems rather from a deal President Bill Clinton has struck with the US Congress, which has been leaning on the White House because of pressure from American banana multinationals.

Officials are hoping that EU and US leaders will be able to reach a compromise between the two timetables at next Friday's (18 December) transatlantic summit, averting the threat of swift sanctions while allowing Clinton to save face with Congress.

This would prevent the summit being overshadowed by a trade row driven by domestic political concerns, and allow the two trade giants to concentrate on a range of important economic and geo-political issues.

Clinton, European Commission President Jacques Santer and Austrian Chancellor Viktor Klima are expected to issue a joint declaration on the state of the world's economy, calling for increased action to maintain growth while encouraging greater financial transparency in emerging market economies.

The leaders, who will be accompanied by foreign and trade ministers from both sides, may also use the summit to try to settle a number of other potential transatlantic trade rows. These include a dispute over data protection rules, where the EU's desire for binding regulations clashes with the Americans' reliance on voluntary codes.

They may also tackle the issue of a proposed new European ban on animal offals most likely to be infected with BSE, known as Specified Risk Materials, which the Commission insists is necessary to avoid any risk to human health but the US maintains is unjustified.

The EU will also ask for an update on the fate of the US' Helms-Burton and D'Amato Acts, designed to stop foreign countries doing business with Cuba, Iran and Libya.

One success story in EU-US relations which will be celebrated at the summit is agreement on an action plan for the Transatlantic Economic Partnership (TEP), which sets out how trade can be made easier by reducing regulatory barriers in normally contentious areas like biotechnology, food safety and plant and animal health.

In a bid to ensure that the current unsteady peace in the Serbian province of Kosovo continues after the winter, Clinton, Santer and Klima will urge both sides to continue to work for a breakthrough in talks on an interim settlement in the region.

The state of the Middle East peace process will also be discussed in the light of Jerusalem's shaky performance in complying with the terms of the Wye accord struck between the Israelis and the Palestinians in October.

In addition, Clinton will use the summit to ask for Europe's support for the US' fight against the spread of weapons of mass destruction, an issue which was highlighted by US Secretary of State Madeleine Albright at a NATO meeting in Brussels this week.