'Banana wars'

Another banana skin looms in trade relations between the United States and Europe. Two weeks ago, Washington aligned itself with Latin America at the World Trade Organization (WTO), alleging that Brussels treats the continent's banana producers unfairly.

Washington wants the WTO to overturn an EU system that grants preferential conditions to banana producers from former British and French colonies. Its stance could reignite the so-called 'banana wars' of the late 1990s.

A WTO panel may now review whether the European Union's banana import regime breaches its obligations of more than a decade ago. Washington will claim the bloc failed to implement WTO rulings in a 1996 action initiated by Ecuador, Guatemala, Honduras, Mexico and the United States.

The EU banana regime features a zero-duty tariff rate quota that is allocated exclusively to fruit from African, Caribbean and Pacific (ACP) countries. These former colonies can import bananas into the EU duty-free if they do not exceed 775,000 tons per year. Above that, they are submitted to the same duty level as Latin America -- 176 euros per tonne.

A ripe old dispute

This game of tit-for-tat will drag on. In 1999, Washington won the right to impose trade sanctions on European goods after the WTO found the EU's rules to be illegal. Brussels, however, says that the 176-euro tariff established last year has brought it into line with WTO rulings. It claims the tariff is based on a methodology to calculate "tariff equivalents" enshrined in the WTO texts and on objective data. 

There is little doubt that major US banana suppliers such as Chiquita and Dole lobbied hard for the Bush administration and Congress to take up the case. Ohio-based Chiquita has increased its prices in Europe and the United States in a move designed to offset the negative impact of higher tariffs.

Europe is divided on the issue. Brussels will claim that there is no basis for a challenge to the tariff as Latin American banana exports to the EU actually increased last year. Latin American bananas currently have around 60% of the market, while African and Caribbean producers have 20%. Some countries, such as Germany, would prefer an almost unrestricted market so that their consumers could get bananas at the lowest prices.

Stagnant atmosphere

The US complaint against the EU comes amid heightened tensions in the global trading system, after the collapse earlier this month of an effort by the so-called 'G4' -- the United States, European Union, Brazil and India -- to resuscitate the Doha round of WTO negotiations.

This stagnant atmosphere will be reflected in the banana wars. The compliance panel of neutral trade experts will rule on whether Brussels has implemented the WTO ruling, but the EU will probably veto the request of the panel's ruling as a deliberate delaying tactic. No end is in sight in this food fight.