NCPA - National Center for Policy Analysis

World Trade Organization May Enter The Banana War

February 5, 1999

The European Union gives favored trade treatment to bananas from former British colonies in the Caribbean, whereas the U.S. wants fair treatment for banana exporting countries in Latin America. The World Trade Organization has twice ruled against the EU position.

But the EU has not backed down -- which has prompted the U.S. to threatened trade sanctions against the EU amounting to $520 million.

If neither side gives, the WTO may have to back sanctions against the EU. If the EU balks at any penalties the WTO hands down, that might be the end of the WTO.

Why is that important?

  • The four-year-old WTO facilitates global trade -- acting as an impartial mediator to settle trade disputes among its 133 member countries.
  • Trade experts say the organization makes it easier for inexpensive imports to enter the U.S.
  • The U.S. and the EU swapped more than $300 billion in goods from January 1998 through November 1998.
  • If the WTO proves incapable of enforcing trade sanctions, it will lose respect and clout among nations.

Then there would likely be a return to trade barriers and a resurgence of protectionism.

Source: Jim Christie, "U.S., EU Go Bananas Over Trade," Investor's Business Daily, February 5, 1999.


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