Main Causes of the Banana War
- European countries limited the imports of bananas
- Companies complained to the World Trade Organization (WTO)
- The United States responded by imposing a stiff tariff on European goods shipped to the United States
- Overall cause is due to the European Union’s (EU) failure to amend to America’s satisfaction on their banana-import rules
World Trade Organization’s Role in the Banana War
WTO agrees with the United States position, but they are seen as incapable of enforcing their position
Main problem is that the WTO doesn’t appear to be capable of enforcing its rules
WTO has twice told the EU that its banana regime is illegal, however, they are unable to bring the EU into line because its rules on compliance are so unclear
WTO’s dispute-settlement mechanism strength is that countries cannot veto WTO rulings against them. They have the right to appeal once; if they lose again, they have 15 months in which to fall into line with world trade law. If they do not comply, the plaintiff can demand compensation or impose retaliatory sanctions.
Fine Details Up to the War
Before Lindner bought in, Chiquita Brands was the old United Fruit Co., a ruthless buccaneer that earned a justifiable reputation as a tyrant that bribed officials of foreign governments, used armed force to keep its workers in line and generally mistreated its thousands of dirt-poor laborers on impoverished Caribbean islands and Central American plantations. All of which helps explain why Chiquita was--and is--the world's dominant banana producer.
But how did it come to pass that the U.S. government launched a trade
war over bananas at the expense of small American businesses, especially
since the U.S. does not export bananas and Chiquita employs no American
production workers? (See How the Banana War
started)
- The E.U. announced that instead of an open market, which Chiquita had hoped for, it would expand the old system, with quotas and tariffs on bananas brought in from Latin America and preferential treatment for bananas grown in the former colonies. The new rules went into effect on July 1, 1993.
- Chiquita's business was tanking. From 1992 to 1994, the company racked up $407 million in losses. Its stock price plunged from $40 to $11 a share. In meetings with government officials, Chiquita laid the blame squarely on the EU's trade restrictions.
Timeline
July 19, 1998- Carl and Keith Lindner wrote to Kantor again, expressing their dissatisfaction with proposals put forth by the Europeans to resolve the banana dispute. The view of the Lindners was that war should be waged as a joint effort, with Chiquita and its ally, the U.S. government, on one side and the European Union Commission on the other.
August 3, 1998- The four-member Hawaiian congressional delegation sent a letter to Kantor saying they were prepared to talk about possible "international courses of action" against the E.U. As America's only state producing bananas--most were grown for consumption on the islands--Hawaii had an indirect stake in the outcome of the banana war; because Chiquita, Dole and other producers had flooded the European market, tariffs notwithstanding, the overflow had found its way back into the U.S., driving down retail prices.
November 3, 1998- The Lindners advised Kantor's staff that it was "very important" they get together for 20 minutes. This particular meeting did not take place, but nine days later, on a Sunday night, Lindner was sitting behind Clinton at a presidential gala in Ford's Theatre.
May 8, 1998- With at least an additional $95,000 of Lindner money in
the Democratic Party's bank accounts, the U.S. Trade Representative took
its banana case to the WTO. At long last, the Clinton Administration was
ready to mount a global trade war on Lindner's behalf. (Click here for more Info)
December 9, 1998- At a USTR hearing attended by trade associations and Washington lobbyists, various interest groups spoke out against the tariffs, saying they would cripple or possibly destroy their businesses.
December 21, 1998- Products imported by Gillette, Mattel and fur retailers, as well as those of some two dozen other trade groups and industries that testified at the hearing or lobbied the USTR, were dropped from the list.
March 17, 1999- Ecuador won WTO’s authorization to hit the European Union with sanctions woth $201,6 million a year to cover losses in sales caused by the EU’s banana import policies. WTO arbitrators also told Ecuador it could impose the sanctions not only on goods imported from the EU’s 15 member states but also in the area of service and intellectual property rights.
April 19, 1999- When the final list was published, most of the goods once proposed for high tariffs had been stricken from the list. Only nine types of products were covered. Also, the U.S. Trade Representative imposed the punitive tariffs on nine types of European goods. To be sure, trade experts outside the European Union generally agree that the restrictive banana policies do violate free-trade rules. Indeed, four global trade panels have reached that conclusion over the years. But restrictive trade policies are hardly peculiar to Europe. The U.S. has its own, notably those that restrict the free access of sugar and peanuts to the American market.
