U.S., European Union end fight over bananas

It's a symbolic boost for world trading system

April 12, 2001|By LOS ANGELES TIMES

The United States agreed yesterday to call a truce in its bitter eight-year banana dispute with Europe, clearing the way for improved relations with a key ally in the battle to liberalize global trade.

Under the deal announced in Brussels, Belgium, the European Union agreed to amend a controversial banana import system opposed by Chiquita Brands International and Dole Food Co. by July 1, and the United States said it would drop stiff sanctions it imposed two years ago on European goods. Those penalties, in the form of duties, had raised the cost of European products by $191 million.

While the deal's economic benefits are largely limited to a handful of companies and banana-exporting nations, it gives a symbolic boost to the beleaguered global-trading system by clearing away a festering issue between two of the world's most powerful trade advocates, according to experts.

It also is the first trade settlement brokered by new U.S. Trade Representative Robert Zoellick, an aggressive negotiator brought in by President Bush to pursue his free-trade agenda.

This deal, finalized Tuesday night in a series of trans-Atlantic telephone calls, marked a compromise in a highly contentious battle that pitted U.S. fruit giants, who buy their bananas from cheaper Latin American producers, against European importers representing banana growers in the Caribbean, Africa and the Pacific Islands. Those regions have special trade arrangements with Europe dating to colonial days.

Since the controversial banana import system was instituted in 1993, the United States has won two separate cases at the Geneva-based World Trade Organization, but the Europeans have balked at making the changes.

In a joint statement yesterday, Zoellick, U.S. Commerce Secretary Don Evans and EU Trade Commissioner Pascal Lamy called the deal a "significant breakthrough" that will "end the past friction and move us toward a better basis for the banana trade."

Chiquita, the biggest beneficiary of the agreement, said yesterday that it was "pleased" with the deal and expected it to result in a "partial recovery" of its sales in Europe. Chiquita had sued the EU in international court, claiming the banana-import program cost it more than $525 million in lost sales. The ailing Ohio-based company said it still plans to proceed with a debt restructuring, which it blames on poor sales in Europe.

Dole, which also has filed numerous lawsuits alleging damage caused by the European banana policy, did not respond to a request for an interview yesterday.

Under the agreement, Europe will create a transition system in which banana-import licenses are allocated based on past sales. They will expand quotas for Latin American-grown bananas but still set aside a portion of the market for banana producers with ties to Europe dating to colonial days. After 2006, the Europeans will shift all banana trade to a tariff system.

In Berlin, German Economics Minister Werner Mueller said resolution of the banana standoff should benefit trans-Atlantic trade.

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