Firms face long wait for end to US sanctions

Date: 15/06/2000

By Simon Taylor

EUROPEAN firms hit by US sanctions in the disputes over bananas and beef face are unlikely to see the penalties lifted before the end of this year.

The European Commission admitted this week that it was powerless to strike a deal with the US to prevent Washington from switching €300-million worth of sanctions to a new list of EU exports next week as the arguments over the Union's banana import regime and ban on hormone-treated beef rumble on.

But Union officials claim that Washington is partly to blame for the failure to resolve the banana dispute because it is refusing to reach an agreement which would antagonise one of the two largest banana-growing companies, Dole and Chiquita, in an election year. The two firms disagree over how the system should be reformed and both are major donors to US political parties.

Trade Commissioner Pascal Lamy had urged EU governments to agree changes to the banana regime by the end of this week to head off the US move to rotate the penalties. A new list of targets is due to be announced next Monday (19 June).

Lamy has threatened to scrap all import quotas for bananas which provide guaranteed market access for struggling growers in the Caribbean and Africa and move to a tariff-only system. This is the approach most likely to find favour with the US, but is being blocked by France, Spain, the UK and Italy because it would hurt producers in poorer countries and force the EU to pay out large sums in compensation from an already squeezed farm budget.

Without the additional leverage which an agreement with the US would provide, Lamy stands little chance of making much head-way - and officials say privately they do not expect Washington to move until after the elections.

This will dismay the scores of European firms already suffering because of the sanctions, and the many more likely to be hit by the US' plan to rotate the penalties. EU industry groups have warned that changing the list of products hit by the sanctions could double their economic impact, because of their lasting effect on companies were targeted the first time around. "Once you are out of the market it is very difficult to get back in," said a spokesman for employers' federation UNICE.

Lamy has challenged the US' decision to rotate the sanctions at the World Trade Organisation by lodging a formal request for consultations with the US. But it can take up to a year for the WTO to deliver a ruling on such disputes and Union exporters fear that any counter-measures approved by the trade body will come too late to help them regain lost markets.

European firms hit by US sanctions in the disputes over bananas and beef are unlikely to see the penalties lifted before the end of 2000.