EU trade officials were yesterday examining the 160-page ruling from the World Trade Organisation on the EU's banana regime, the unlikely issue which has sparked a transatlantic trade war. On the face, it would appear that the judgment represents a triumph of sorts for Washington. A WTO arbitrator awarded $191 million in damages to the US while a WTO panel found that some aspects of the EU's banana regime, which give preferential treatment to former colonies in the Caribbean and elsewhere, are illegal. On these points everyone seems agreed. Otherwise, the complex ruling has fuelled a plethora of interpretations. Critically, Sir Leon Brittan, vice-president of the European Commission, insists that Brussels reserves its right to appeal the ruling. US trade officials insist that the arbitrator's decision is final and the EU does not have a right to appeal.
The EU has claimed, with some justification, that the US has won a Pyrrhic victory. The WTO ruled that the damage suffered by US companies was substantially lower than Washington had estimated. The damages imposed ($191 million) were far less than the $520 million claimed by the US. The choice facing the EU now is whether to accept the ruling or to fight on in the knowledge that the US is free to impose some £140 million worth of sanctions. The US will now prepare a revised list of sanctions. The original list included such items as Scottish cashmere, French leather goods and some £3 million in Irish exports. The impact of any new list is, as yet, unclear.
It is to be hoped that the WTO ruling will go to pave the way to a resolution of a long and damaging dispute. Washington could improve matters by delaying any new sanctions, at least until the EU has decided its next move. For its part, the EU has little choice but to accept the thrust of the WTO ruling. Brussels can level charges, not all of them unfounded, about the undue political power of huge US multinationals like the Chiquita brand. And it can raise legitimate questions about the need to shore up poor economies in the Caribbean and elsewhere. But the EU must also respect international trading rules. The reality is that the EU banana regime, as currently constituted, is not credible in the longer term. Indeed, the regime had already been modified after a 1997 WTO ruling that it discriminated against US exporters. With common sense all round, the latest ruling can help to concentrate minds and, at the very least, provide a basis on which the issue can be settled.
The re-working of old battles over the EU's banana regime would serve little purpose at a time when transatlantic trade tensions are already heightened by another rancorous dispute over the EU ban on imports of US hormone-treated beef. On a wider level, the fragile world economy can ill-afford a prolonged trade war over bananas or a new era of protectionism. Both sides would do well to retire from the trenches.