TRADE WARS
THE BACKGROUND OF BANANA TRADE WARS
We are told that the world has changed, that because of the WTO there must
be a free market in bananas. But the market should not be so free that it can
destroy people's lives."
Winston Graham, banana farmer, Windward Islands.
"If our banana industry collapses, it will mean poverty for many thousands of
people. I've been a banana farmer all my life. I have nine children. How am I to
earn enough money to feed my children without bananas?"
Claudius Jan-Marie, banana farmer, Roseau Valley, St. Lucia.
The current crisis among the banana trade is just a new form old issue" trade wars" . The blocked type of world which abolished in 1989 made thinks easier for the most powerfull trade nations of the world . After the World war II they were all allied and the very impacts of being in trade war with an ally used to be handled witin quickly. The only great trade war seen was with USA and Japan. But this example don't fit to new situation we now are facing through.This new type of war , the war of the masters of the world .A war witin allies in their neigbourhoods.Before 1989 this kind of problems would have been solved by the threat of Soviets but time has change so the trade.
"The gardens of developed countries" is an old term used for the colonies of that time ,they were the main cause of the worse nightmaires of makind. And now at contemporary ages , the ages of globalizations"The gardens of developed countries" term is being usd by domain writers of world economy.The new crisis is a the most appropriete example for future trade wars.
Banana trade is an example the terms of trade for developing countries many developing countries depend on one or two main item for trade on which they have comperative advabtage. Mostly the trade of these kind production is dominated by huge firms of developed countries. The situation in Carrabianbriefly expressed below ,the future of commodity can draw the destiny of an nation.
This struggle seem to question the role of WTO to solve the problem.WTO face with its best problem before it start to negotiate with an old rival "China" . Many other nations will follow China without doubt , the fact can WTO play its crutial role in globalization of trade or will keep on being the voice of one ?
So you might say we have a clash of U.S. neo-colonialism vs. European neo-colonialism
INTRODUCTION TO SUBJECT
The banana is one of the Caribbean region's most important commodities. The Caribbean's traditional preferential access to European markets safeguards the livelihoods of thousands of families in the Caribbean, and sustains many of the region's economies. The European market is particularly important to the small island economies of the Windward Islands, where income from banana exports to Europe contributes almost half of the economies' total export earnings. However, the Caribbean banana industry is under threat. The European Union is revising its banana import regime to respond to the decision of the World Trade Organisation(WTO) that the regime contravenes free-trade rules by unfairly discriminating against some of the companies importing and marketing Latin American "dollar" bananas. European Commission proposals for a WTO-compatible EU banana import regime will lead to a significant reduction in the Caribbean banana states' traditional share of the European banana market. It is concerned that a squeeze on their share of the European banana market will unnecessarily condemn thousands of people to poverty and hardship. This would be a backward step in realising the OECD/DAC1 goals for poverty reduction by 2015. It could even threaten the future political and economic stability of the islands.
There is an irony in the fact that the consequences of the WTO ruling would in fact rebound on the US by increasing the flow of drugs, and illegal immigrants into the country: issues of primary concern for US foreign policy. There is also potential for an increased influx of drugs to Europe, which could challenge the success of the British Government's initiative on combating the trafficking of illicit drugs in Europe.
The governments and family farms which to respond effectively to the unyielding pressure of global market liberalisation. Governments and farmers are committed to increasing competitiveness, and are making serious attempts to diversify their export base to reduce their dependency on the European banana market.. They are as follows:
¨ Increasing competitiveness
¨ Developing an alternative market for bananas: the Fair Trade Banana
¨ Diversification alternatives
The EU is determined that its banana import regime should be compatible with WTO free-trade rules. However, WTO rules are clearly deficient when dealing with the special circumstances of vulnerable economies
THE MEETING IN DAVOS AND THE ROLE OF WTO
The closest thing to a real row came over the claim - made by many Europeans and (less noisily) Asians - that the United States is turning protectionist. Trade mavens noted the U.S. administration's actions to stem 1998's surge of steel imports, from Russia, Japan and South Korea. They clucked over Washington's threat to revive the controversial Super-301 trade law, by which the administration grants itself the power to unilaterally retaliate if it finds a partner to be in breach of trade laws They worried about the unresolved banana war between the U.S. and the European Union, as part of which punitive tariffs on all sorts of unrelated delights, such as pecorino cheese, were threatened - notwithstanding an agreement last week to shelve the dispute for a while. From France to Japan who took to the podium bemoaned the dreadful threat of an American-provoked trade war.
So: is the U.S. going protectionist?
"No," said David Hale, of Zurich Kemper, adding a few colorful thoughts on those who assert the contrary. "Gimme a break," said Clyde Prestowitz of the Economic Strategy Institute. "No", said Robert Hormats of Goldman Sachs. Hormats added, however, "But there's very little support for more liberalization." And there's the rub. For to listen to the administration's members in Davos, there is simply no policy to which it is more committed than the further liberalization of world trade through a new round of global negotiations. President Clinton made that case in his recent state of the union speech, when he also asked Congress for fast-track" powers to conclude trade deals. "
But no American made the case for the administration's free-trade credentials with such vigor as U.S. Trade Representative Charlene Barshefsky. In a detailed speech outside the Congress Hall, Barshefsky noted that the U.S. trade imbalance was rising to levels never seen before.
But the real point here is not about what may happen in trade talks in the future; it is about the recent past. To anyone who lived through the 1980s- who remembers the real wars, the Toshiba radios smashed on the steps on the Capitol - the noise about trade in America now is no more than a whisper (and this in a year when the deficit in goods may top $300 billion).
. The WTO arbitrators found that the WTO-inconsistent regime has caused $191.4 million in lost U.S. exports of goods and services on an annual basis.
As a result of the arbitrators decision and the EU's ongoing failure to implement a WTO-consistent banana regime, the United States will exercise its WTO right to suspend tariff concessions on a list of selected European products equivalent in value to the loss in U.S. exports caused by the EU's banana regime, as determined by the arbitrators
Background
The U.S. actions to suspend concessions follows a period of over six years during which the United States worked to convince the EU to comply with the rules of the GATT and WTO. Between 1993 and 1998 the EU banana regime was deemed to be inconsistent with the rules of the international trading system by GATT and WTO panels, and by the WTO Appellate Body. The EU responded by making cosmetic changes to the banana regime that only perpetuated its WTO-inconsistent aspects and discrimination against U.S. companies and Latin American countries.
The WTO deadline for the EU to adopt a WTO-consistent banana regime was January 1, 1999. In light of the EU's failure to implement the WTO rulings by this deadline, the United States requested authorization from the WTO to increase duties on selected European products.
THE PROGRESS OF WAR
. Fed up with European intransigence, Washington last week threatened to slap a 100 percent tariff on imports from the European Union ranging from cheese to windshield wipers. Some $1.5 billion worth of sanctions could take effect by next March if Brussels doesn't toe the line banana
For five years the United States has been complaining about EU rules that discriminate against these bananas in favor of those grown in former European colonies in the Caribbean and Africa. Now the Americans say Brussels has failed to comply with a World Trade Organization banana ruling that went in their favor. It seems like
Washington is out to make a point, because the banana precedent is likely to prove important when larger trade disputes ripen. Says Glenys Kinnock, a British member of the European Parliament: "This is all about teaching the EU a lesson."
Our point exactly, says Washington. It is with bananas that the world will determine whether it can sort out trade disputes according to agreed rules. In the bad old days of the General Agreement on Tariffs and Trade, the big players could effectively block any decision that went against them. GATT's successor, the WTO, was meant to be different. "The WTO was set up to see that we had an effective method of enforcement," says Peter Scher of the USTR. "We think it's important to demonstrate it can work." By some measures it's already working: since 1995, member states have brought 150 cases to the WTO. In its 47-year history GATT managed just 300. But the banana battle is different. Never before has a dispute ended in stalemate with neither side satisfied. Says one WTO insider: "This is virgin territory for us." And the landscape's kind of scary. Each side claims the other has misunderstood--and breached--official WTO procedures. Pity. The global economy has enough troubles right now without its two biggest economies going bananas.
THE OFFICIAL VIEWS
EU
The United States and other complainants maintain that this regime still does not comply with WTO procedures. In November 1998, the United States announced its intention to retaliate against the EU byimposing 100 per cent. import duties on selected products.
However, the United States yesterday announced that, with immediate effect, the United States customs service would begin "withholding liquidation" on imports of various EU products, including cashmere knitwear. We are firmly of the view that that prejudges the panel ruling and is contrary to the WTO dispute settlement rules. The United States argues that it will not apply the duties until after the arbitrator has ruled, but the practical effect of the measures is the same as if they applied now, because exporters have to put up a bond to cover possible duties in the future.
I deplore the action which the United States has taken. It is completely unauthorised by any WTO procedures and wholly ignores the arbitrator's appeal for discussions to continue. Even now, it is not too late for the United States to reverse its decision. It should do so, in the interests not only of the EU-US relationship but to safeguard the whole framework of dispute resolution and settlement within the WTO. The United States action is irrational and unacceptable. I have summoned the United States ambassador and will make those points to him later this afternoon. We shall also support an urgent convening of the WTO General Council. The United States action is unacceptable. We shall do all that we can to reverse it. I hope that the measures that I have announced today to support the cashmere industry will be welcomed on both sides of the
US
. U.S. Trade Representative Charlene Barshefsky commented, "I am pleased that the
Appellate Body has upheld the WTO panel's findings confirming that the European Union's banana regime violates many provisions of the WTO agreements on both goods and
services." While upholding the panel's findings of WTO-inconsistency, the Appellate Body also made some refinements in legal interpretation. The US administration has accused the union of setting"unacceptable conditions" for an accelerated WTO review of its new banana licencing system, due to go into effect on January 1 replacing a previous import regime which the WTO ruled illegal.
"We are pleased that the WTO arbitrators concur with our position that the EU banana regime is WTO-inconsistent and continues to damage the U.S. economy. This decision is an important victory for the WTO dispute settlement process and sends a clear message that the WTO cannot be used to engage in endless litigation," said Ambassador Barshefsky.
THE AGENDA OF THE CRISIS
24 November - Will the U.S.A. impose 100 % duties on a large set of European products, including sometextile articles ? The planned sanction is part of a retaliatory threat after the announcement by the European Union of a new banana import regime, from
1 January 1999. For long, the U.S.A. have asked the E.U. to open its market to bananas "made in South America", where U.S. companies have strong interests. After five years of litigation, the WTO appeals body has confirmed on 1 September 1997 that the E.U. trade regulations implemented in the late 1980s were not conform to the international laws. The European Commission has therefore planned other regulations, but Brussels' new banana import regime do not comply with the WTO's judgment, assert U.S. officials Both parties could now agree to ask a new WTO's panel to settle their dispute. As U.S. trade representative wants the Geneva's body to rule by 15 January, the European Commission asks the U.S.A to withdraw their threats of sanctions under the Section301 procedure
On 10 November, the U.S.T.R. had issued a "notice" planning "the imposition of prohibitive (100 per cent ad valorem) duties on selected products from the European Communities". The products effectively taxed could be selected on 15 December from a list published in an annex to the notice. Tweed jackets, cashmere sweaters, as well as women's wool blazers or cotton bed linen are among the 150 products that
28 November 1998 - Is WTO's future threatened by the last trade disputes between European Union and United States ? Each trade giant is now accusing the other of no respect of the Trade Organization rules. In a dramatic move, the European Commission has launched this week a case over the "section 301" of the 1974 U.S. "Trade Act" . This procedure offers the United States the possibility to impose mandatory sanctions to other countries. In order to convince the EU to modify its new banana import regime, US Customs have threatened to slap100 % duties on a large set of goods, including some textiles products, under the Section 301 procedure. For EU trade commissioner Leon Brittan, no one except WTO's dispute settlement body has the right to impose trade sanctions. US envoy in Geneva Rita Hayes has rejected the European accusation of unilateralism", explaining U.S. won't give up their right to retaliate.
The European Union has also published this and investment. "Unilateralism in US trade legislation week its fourteenth annual report on US trade barriers Commission, "particularly in the light of the recent US to trade remains a serious concern", explains the EU threat to introduce unilateral sanctions against the EU in the ongoing banana dispute. The EU is firmly committed to addressing these issues through the appropriate bilateral or multilateral channels, and in a comprehensive new round of WTO".
EU has also requested last week a WTO panel over US 1916 Anti-Dumping Act, following a complaint made in January 1997 by the European Confederation of Iron and Steel. The 1916 Act allows US courts to impose criminal penalties on importers, in contradiction with WTO's rules, EU officials say. Some days ago, EU has launched a case in Geneva about new U.S. Rules of Origin on textiles.
5 November 1998 - The European Union has submitted a request for consultations to the WTO, as the U.S.A. failed to implement a former agreement between the two parties on the textiles rules of origin. The dispute between the two trade giants erupted two years ago, when the U.S. government changed the rules regarding the origin of textiles products, with dramatic consequences on import regulations especially quota and "made in". For instance, Italian luxury brands were upset, as their silk scarves printed in Italy had to wear a "made in China" label if fabrics had been initially imported from the PRC. Italian trade association "Federtessile" had therefore convinced the European Commission to react firmly to the U.S. new regulation
. At the same time, a world negotiation had begun under the WTO auspices to determine the way rules of origin are to be defined. Until now, each country is free to fix its own rules of origin. Trade officials have nevertheless to obey the WTO's general principle "the originating status of a good should be... the country where the last substantial transformation has been carried out".
Under a 1997 compromise between exempted from the label obligation, and the rules the European Union and the U.S.A., silk fabrics were to be regarding cotton and man made fabrics were to be softened "In order to implement the compromise, a new legislation has to be approved by Congress", have explained this spring U.S. officials to their European colleagues, irritated by successive delays. The "new interpretation" finally proposed on 15 June by U.S. Customs was criticized by the EU Commission : some home finished fabrics were not exempted from the new obligations, in contradiction with the agreement As the bill has not yet passed the Congress, the European Commission has decided to seek consultations with U.S. officials, before asking for a WTO panel to settle the dispute. At the same time, U.S. Trade Representative is threatening the European Union to impose 100 % duties on a large set of goods, including textiles products, if South American bananas are not allowed to enter the 15 countries united market.
THE CRUCIAL V?EWS
WTO is acting to end the banana trade war. A proposal to satisfy both sides was due to be considered by EU officials at the weekend.
A European Commission spokesman said that there are a lot of proposals ..... and that does not mean the EU will accept them It is reported that the USA and five Latin American countries will seek Monday to impose100% punitive duties to a wide range of EU exports. The dispute centres on the EU refusing to open its markets to bananas from countries with known
USA owned interests. The EU wants to limit the imports to (mostly) former colonies. Judging by the Olympics city selection fiasco I guess when the correct people have been bribed we will see a resolution the dispute.
Behind the scenes Brussels and Washington are trying to find a solution which prevents the "banana war" from turning into a trade war. But Brussels is also preparing retaliatory measures against European imports from the USA in case these efforts fail.
The Commission claims American action against EU exports is illegal, arguing that if Washington is not satisfied with the EU action it should challenge it before the WTO. But the Americans claim their action is justified by what they call the persistent refusal of the EU to comply with three WTO banana rulings over the last six years. Despite this unpromising background the Washington Summit to launch the Trans-Atlantic Economic Partnership made progress on a veterinary equivalence agreement and conditions for Chinese accession to the WTO
THE REGULATIONS OF WTO AMONG SUBJECT
WTO
The Agreement on Rules of Origin aims at harmonization of non-preferential rules of origin, and to
ensure that such rules do not themselves create unnecessary obstacles to trade.
Article 1 of the Agreement defines rules of origin as those laws, regulations and administrative determinations of general application applied to determine the country of origin of goods except those related to the granting of tariff preferences. Thus, the Agreement covers only rules of origin used in non-preferential commercial policy instruments, such as MFN treatment, anti-dumping and countervailing duties, safeguard measures, origin marking requirements and any discriminatory quantitative restrictions or tariff quotas, as well as those used for trade statistics and government procurement. It is, however, provided that the determinations made for purposes of defining domestic industry or "like products of domestic industry" shall not be affected by the Agreement.The Agreement establishes a Committee on Rules of Origin within the framework of the WTO, open to all WTO Members. It is to meet at least once a year and is to review the implementation and operation of the Agreements (Article 4:1).
A Technical Committee on Rules of Origin is created under the auspices of the World Customs Organization (formerly the Customs Cooperation Council). Its main functions are (a) to carry outthe harmonization work; and (b) to deal with any matter concerning technical problems related torules of origin.
THE PERSONEL VIEWS FROM BOTH SIDES
Trade competition must ensure higher environmental protection--Clinton US President Bill Clinton, in a message to the WTO High-Level Symposium, stressed that trade competition among nations must "never become a race to the bottom", and called for higher levels of environmental protection. He said that the US delegation will call for further progress on transparency and openness at the WTO and propose the reductionof environmentally-damaging subsidies
According to David Jessop, Executive Director of the Caribbean Council for
Europe, "The trans-Atlantic war over bananas is entering a new phase. Under
pressure from the US Congress, the US administration has made clear that if the EU
is not prepared to negotiate a solution, then the United States will take unilateral
retaliatory trade action against the EU.
"The situation now is that the US administration is suggesting that unless the EU's
banana regime is in full compliance with WTO rules, it would announce on December
15 a list of specific retaliatory actions to take effect on February 1," said Jessop.
Paul Taylor argues;
The threatened US trade sanctions are largely targeted at France and Britain, themain former colonial powers concerned, and would hit imports worth up to $1 billion of goods ranging from wine and cheese to cosmetics and sewing machines.
Some U.S. trade negotiators are far from comfortable with the hard line, particularly since the U.S. still mostly dominates the European banana market," says chief James Graff. "But the White House wants to curb the protectionists, and it can't afford for Capitol Hill to paint the WTO as an instrument manipulated by the Europeans." With further battles looming over beef and other agricultural exports, expect a year of sporadic trade battles. And spare a thought for the poor residents of Hawick, a Scottish border town whose cashmere-centered economy is may now collapse because of an entirely extraneous banana battle. Even trade wars have collateral casualties.
the US Trade
Representative Charlene Barshefksy said the US had run out of patience, while the EU Trade Commissioner Sir Leon Brittan accused the Americans of acting purely out of political motives.
The US is threatening to impose punitive sanctions worth more than half-a-billion dollars by the beginning of March on a range of European goods, including cashmere sweators because it says that European Union has refused to comply with the ruling of the World Trade Organisation (WTO) over the preferential import of bananas from the Eastern Caribbean.
The EU says it has made changes, but refuses to be bullied by the United States. The row threatens not just to start a trade war, but to undermine the legitimacy of the WTO itself.
ASPECTS OF TRADE WARS
The US and the EU have continued to trade accusations as the war of words over the banana trade war continues to escalate.
The US is threatening to impose punitive sanctions worth more thanhalf-a-billion dollars by the beginning of March on a range of European goods, including cashmere sweators, because it says that European Uni has refused to comply with the ruling of the World Trade
Organisation (WTO) over the preferential import of bananas from the Eastern Caribbean. The EU says it has made changes, but refuses to be bullied by the United States. The row threatens not just to start a trade war, but to undermine the legitimacy of the WTO itself.
- An improbable U.S.-European scuffle over the banana business has escalated toward a trade war as the Clinton administration moved to impose 100 percent tariffs on an array of European imports ranging from cashmere sweaters to prosciutto.
Consumers would see the prices of the targeted goods double. But more importantly, new obstacles to trade could quickly lead to retaliation and a broad economic slowdown, economists warn.
The United States contends that American banana companies are losing $520 million annually in lost sales to Europe because of illegal trade barriers that favor bananas imported from former European colonies in the Caribbean and Africa.
Chiquita Brands International and Dole, the major U.S. companies involved, grow their
bananas on plantations in Latin America. Europeans say politics is driving the United States to the brink of a trade war with its biggest trading partner. Carl Lindner, the head of Chiquita, is a major campaign contributor to both Democrats and Republicans. Despite the peculiarity of the dispute - the United States grows virtually no bananas and Europe is protecting fruit that its own officials concede is generally inferior - it has become increasingly volatile.
Under the action, which prompted an angry protest by European officials, importers of selected European goods in the United States will have to post bonds to cover burdensome new tariffs that could be collected as early as mid-March. While the U.S. move stopped short of all-out trade sanctions, it could have a swift, chilling effect on trade of the targeted products.
CURRENT SITUATION
Congress is increasingly unhappy with a U.S. trade deficit that soared to a record of nearly $170 billion last year, and the Clinton administration has prodded European leaders to stimulate economic growth on their continent.
U.S. officials contend that Europe has repeatedly flouted trade findings on bananas. They insist that America's hard line is in defense of the global trading system, where other pending major issues include access to Europe for U.S. beef treated with growth hormones.
A panel of the Geneva-based World Trade Organization (WTO), which oversees international commerce, is already studying U.S. claims that protectionist European policies cost American fruit companies millions in lost banana sales.
The United States is awaiting the findings of the panel - expected sometime after March 15 - before imposing the threatened sanctions and collecting the higher duties.
Europeans say the United States has embarked on an inappropriate, unilateral effort outside the WTO. The action yesterday is an unusual one, though not unprecedented. In late May and June of 1995, U.S. officials required importers of Japanese luxury cars to post bond to cover threatened tariffs. The issue was settled before the United States collected the punitive tariffs.
After the Appellate Body of the World Trade Organization (WTO) confirmed that the EU's practices governing the banana trade are inconsistent with its WTO obligations. The Appellate Body's decision ends the process that was initiated last year when the United
States, Honduras, Ecuador, Mexico and Guatemala filed a formal complaint against the European Union on the grounds that its banana-related import rules and licensing requirements violated international trade agreements.
One official explained that the appellate decision, in addition to upholding the WTO panel's ruling, refines the legal interpretation of WTO rules on quota allocations. The official stressed that these "refinements" strengthen the U.S. position in the complaint. According to a statement issued by the office of the U.S. Trade Representative (USTR), EU practices cited as inconsistent with WTO rules include:
assigning import licenses for Latin American bananas to French and British companies;
-- imposing "more burdensome" licensing requirements for imports from the Latin American co-complainants than for other countries' bananas; and
-- assigning import licenses for Latin American bananas to European banana ripening firms.