US stands firm on bananas

Date: 19/11/1998

By Simon Taylor

THE EU is hoping that Washington will drop its threat to take unilateral action over Europe's banana regime and follow the lead set by Ecuador, which has launched a bid to resolve the dispute through the World Trade Organisation.

Commission officials this week called on the US to “see the error of its ways” and withdraw its threat to impose sanctions on nearly 1.5-billion-ecu worth of Union exports.

They suggested that one way to defuse the row could be for the US to join Ecuador in trying to settle the dispute using WTO mechanisms. “Ecuador's request for consultations is one way to work through WTO channels,” said one.

Ecuador, one of the four banana-producing countries which joined the US in the initial challenge to the EU's import arrangements, this week asked for consultations with the Union under the auspices of the WTO over its revised import scheme.

The Commission is still waiting for a reply to the letter which President Jacques Santer sent to US President Bill Clinton last week warning that the EU would launch a countersuit in the WTO if Washington did not pledge to drop the threatened sanctions ahead of a crucial meeting of the Geneva-based organisation next Wednesday (25 Nov-ember). The letter was prompted by the US decision to publish a list of EU exports which could be hit with retaliatory penalty duties if the Union did not make further changes to its banana regime, claiming the reforms introduced so far did not go far enough to comply with a WTO ruling that it discriminated against cheaper Latin American bananas.

But US officials rejected speculation that Washington was about to back down. “We have every right to take Article 22 action,” said one, referring to a clause in WTO rules which allows members to impose import duties on another country if the world trade body agrees that the penalties are justified.

Trade officials in Geneva said that the fact that Ecuador was trying to settle the issue through established WTO mechanisms was a step in the right direction, adding that they hoped the US would join the action. “This is a much more grown up way of dealing with things,” said one.

He added that if the WTO upheld Washington's argument that the EU's new regime was still in breach of global trade rules, the US could go ahead with sanctions early next year.

He also said that while the EU could refuse Ecuador's request to hold consultations, this would result in them losing the “moral high ground.”