Banana `war' threatens to wreck world trade system

BARRING a last-minute compromise, the US will "go to war" with Britain and the rest of Europe this week over something that may seem ridiculous to the uninitiated - bananas.

Neither side produces them in any great numbers. They are hardly strategic weapons. Few US or European jobs are involved in the fruit. But it is a war which could threaten global trade at a moment when the world financial system is creaking. If there is no agreement on bananas, beef could be next, then cars - then forget the globalisation of world trade and it's protectionism revisited, according to many analysts.

Some victims of the banana war will be workers in European export industries, but the hardest-hit will be poor banana farmers from the Caribbean islands.

On Wednesday, Bill Clinton proposes to launch trade sanctions aimed at discouraging Europe from supporting the vital banana industries in its former colonies. Washington plans to impose crippling 100 per cent tariffs on more than half-a-billion dollars' worth of European goods, from Scottish cashmere sweaters to French handbags.

That could mean major layoffs in Europe, including 1,000 textile jobs on the Scottish borders. But failure to reach a deal could be life or death to entire Caribbean nations, notably the eastern Windward Islands that rely almost solely on banana exports. Without their banana income, farmers and other locals may be tempted to step up marijuana production - or become involved in smuggling Colombian cocaine.

How has it come to this? After the launch of the Common Market, Europe, in a gesture to its former colonies, decided to give preferential prices and quotas to Caribbean bananas. It was also healthy for the European companies that controlled banana exports from the region. But in the early 1990s, as trade globalisation became the norm, the giant US banana corporations questioned the European concessions. Chiquita Brands claimed it faced losses of over $1bn (pounds 625m).

At the behest of the company, based in Cincinnati, Ohio, but conducting its banana production via cheap labour in Central and South America, the US invoked Section 301 of its trade law in protest against the European position. In 1997, the World Trade Organisation (WTO) backed the US. Europe withdrew some of its pro-Caribbean concessions, but for the US it wasn't enough. Hence the threat to impose 100 per cent tariffs on European goods on Wednesday.

Caribbean leaders, who accuse the three big US bananas corporations - Chiquita Brands, Dole and Del Monte - of pure greed, say an end to concessions from Europe could virtually destroy their countries.

"The whole policy is driven by politics in the US," the EU Trade Commissioner, Sir Leon Brittan, recently told the BBC. "It is driven by the fact that Chiquita is a company that gives money to the political parties."

The US banana corporations hardly need a greater share of exports to Europe. They already control two-thirds of the world market. They pay their workers in Ecuador, Guatemala, Honduras, El Salvador, Nicaragua and Costa Rica about a quarter the rate in the Caribbean.

"The banana war is an issue of life and death for Belize," said a spokesman for the Chamber of Commerce in the former British colony. "If the US wins we could see it systematically move against one industry after another. Next may be citrus, then rice, followed by sugar. We believe this new world order should and can be accommodating to all, even small countries who seem to have fallen off the geopolitical map."