US faces a banana backlash

THE American action over the banana trade is both frustrating and irrational. There is a genuine sense of astonishment among Europeans that the United States should think - in trade matters at least - that might is right. Last Tuesday, Stephen Byers and I met the Borders MPs, Archy Kirkwood and Michael Moore, along with representatives of the cashmere knitwear industry at the Department of Trade and Industry in London. The purpose was to brief them on the latest developments in the "banana war". The mood was one of relief and modest optimism.

The arbitrator appointed by the World Trade Organisation to assess the value of any unauthorised damage done to American banana interests by the European Union had just been reported. Effectively, he had kicked the matter into touch for a few weeks by calling for further information from both sides. This was welcome news.

By April 12, the parallel report by a WTO settlement panel will have reported. Confusingly, it is examining the fundamental merits of the American case. Only if it finds in their favour will the question of compensation arise. The cart has been due to report before the horse and it would make obvious sense for both conclusions to arrive at least on the same day, April 12. The arbitrator's delay opened the door to this. The obvious question, by Tuesday, was whether the Americans would see it that way. Britain's senior trade policy officials, who are steeped in the theology of bananas and have been engaged in constant dialogue with the Americans, were confident that they would. They could not believe that the US would go outside WTO procedures in order to act unilaterally. Everyone accepted this opinion in good faith. We particularly welcomed the arbitrator's recommendation of intensified consultation and discussion in the meantime. The focus of the UK strategy was - and will continue to be - that if the American case is to any extent upheld, the remedy should be found within the relevant sector and not be directed against innocent third parties. On the basis of what we had discussed, I did some interviews and the Borders MPs went off to brief their local press. The tone was cautiously optimistic. Before the ink was dry it was out of date. Contrary to all expectations, the Americans had headed in a diametrically different direction and declared unilateral actions. Pressure within Washington for action on trade issues had proved irresistible. There had been too much build-up to Wednesday, March 3 - the date long trailed as retribution day in the Bananas War - for the US trade officials to feel able to delay action. And so the extraordinary chain of events, which included the calling-in of the US Ambassador to London, was triggered. THERE are two issues which must be treated separately. The first is the actual grievance about bananas which has its origins in colonial history and has been running since the end of the Second World War. Bananas was the last issue to be settled before the Treaty of Rome was signed and the final hurdle prior to Britain's EU accession. In its most recent form, the dispute began in 1993 when the EU put in place a new banana imports regime which formalised the commitment to banana-producing countries in Africa, the Caribbean and Pacific under the Lome Convention. Producer countries in these areas were given quota equal to their best exporting figures. There were also incentives to traders in EU countries to handle that fruit. Crucially, a limit was set on the level of imports of so-called "dollar" bananas; the ones which are, by and large, produced in Latin America by US interests. Ever since, that regime has been subject to challenge from the other producer countries, none of which could be regarded as wealthy. But it is undoubtedly the American connection which has given their case muscle. To cut a long story short, the WTO has made various orders which would dilute the level of protection afforded to ACP bananas. The EU has altered the regime in response. But the US insists the changes failed to adequately implement the spirit of what the WTO told the EU to do. It is for the WTO panel, not America, to determine whether or not the EU has been in breach of its obligations. We are within touching distance of a final adjudication, yet the Americans have chosen now to pull the trigger and blast away the whole framework of international trade dispute settlement. Then there is the second issue - the use of reprisals against innocent third parties; in this case small industries based in fragile communities, like our cashmere industry, unrelated to the core dispute. There is a grim irony about the US government designating the beleaguered Scottish Borders as the prime target. While I am more than willing to be open-minded and to suspend judgment on the first issue, there can be no compromise on the second. It is indefensibly wrong for the Americans to direct their action against a hit-list of vulnerable victims. What is their defence for behaving this way? We can only draw on the words of Jay Ziegler, the US trade spokesman. Asked if the US would "look at the social consequence of the action that you have taken or the number of people who may lose their jobs in the industries which you propose to target" he replied, coldly: "No, I think that it is a concern that these industries should express to the European Union." With all due respect to Mr Ziegler, this is an appalling line of defence. As the rationale for the tactics of a friendly government in pursuit of a trade dispute, it is pretty dreadful stuff. Those responsible for American policy should stand back and consider whether friends deserve to be treated as enemies. And they should await the outcome of the legally-recognised settlement procedures on April 12, like good international citizens. The World Trade Organisation General Council is meeting tomorrow to discuss the row between the European Union and America over banana imports. The US said it would require importers to post bonds to cover threatened 100% duties on European goods ranging from cashmere sweaters to cheese. Washington insists the EU's banana regime discriminates in favour of former European colonies and against fruit marketing companies

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